SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a)
of the Securities
Exchange Act of 1934
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Westmoreland Coal Company
(Name of Registrant as Specified In Its Charter)
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2 North Cascade Avenue, 2nd2nd Floor
Colorado Springs, Colorado 80903
![[i10835002.gif]](https://capedge.com/proxy/DEF 14A/0001447572-10-000007/i10835002.gif)
March 29, 2010
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To theWestmoreland Stockholders:
The Annual Meeting of Stockholders of Westmoreland Coal Company will be held at our corporate offices located at 2 North Cascade Avenue, 2nd2nd Floor, Colorado Springs, Colorado, 80903 on Thursday, May 14, 200920, 2010 at 8:30 a.m. Mountain Daylight Time, for the following purposes:
1.
The election by the holders of Common Stock of threefour directors to the Board of Directors to serve for a one-year term;
2.
The election by the holders of Series A Convertible Exchangeable Preferred Stock, each share of which is represented by four Depositary Shares, of two additional directors to the Board of Directors to serve for a one-year term;
3.
The ratification of the appointment by the Audit Committee of Ernst & Young LLP as principal independent auditor for fiscal year 2010; and
4.
To transact such other business as may properly come before the meeting or any postponement or adjournment thereof.
Only stockholders of record at the close of business on April 1, 2009March 26, 2010 will be entitled to notice of and to vote at the meeting and any postponement or adjournment thereof.
YOUR VOTE IS IMPORTANT.Whether or not you plan to attend the annual meeting, we hope you will vote as soon as possible. You may vote by proxy over the Internet or by telephone, or, if you received paper copies of the proxy materials, you can also vote by mail by following the instructions on the proxy card or voting instruction card. Voting over the Internet, by telephone or by written proxy or voting instruction card will ensure your representation at the annual meeting regardless of whether you attend in person.
This proxy statement, the annual report to stockholders and the proxy voter card are being mailed on or about March 29, 2010.
By Order of the Board of Directors,
Vice President, Corporate Relations
/s/ Morris W. Kegley
Morris W. Kegley
General Counsel and Secretary
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON MAY 20, 2010. This notice, the accompanying proxy statement and Westmoreland Coal Company’s Annual Report to stockholders for the fiscal year ended December 31, 2009 are available atwww.proxyvote.com. |
PROXY MATERIALSSTATEMENT
FOR THE STOCKHOLDER MEETING TO BE HELD ON MAY 14, 2009.
Page
General Information about the 2010 Annual Meeting of Stockholders | ||||
Proposal 1 — Election of Directors by the Holders of Common Stock | ||||
WESTMORELAND COAL COMPANY
2 North Cascade Avenue, 2nd2nd Floor
Colorado Springs, Colorado 80903
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
To be held May 14, 200920, 2010
This proxy statement is being furnished by the Board of Directors of Westmoreland Coal Company to holders of our common stock and depositary shares in connection with the solicitation This proxy statement of proxies by and on behalf of the Board of Directors (the “Board”)of proxies to be voted at the Annual Meeting of Stockholders of Westmoreland Coal Company a Delaware corporation (“we,” “us,” or the “Company”), for use at our Annual Meeting of Stockholders to be held at our corporate offices located at 2 North Cascade Avenue, 2nd2nd Floor, Colorado Springs, Colorado, 80903 on Thursday, May 14, 200920, 2010 at 8:30 a.m., Mountain Daylight Time, (MDT),for the purposes set forth in the accompanying Notice of Annual Meeting of Stockholders and at any and all postponements or adjournments thereof (collectively referred to herein as the “Meeting”). 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 givenand made available to stockholders on our stockholderswebsite on or about April 14, 2009.
Who can vote at the Only What constitutes a quorum for the 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 How do I vote? · 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 20092010 ANNUAL MEETING OF STOCKHOLDERSWhat 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.Meeting?meeting?The Board set the close of business on April 1, 2009 as the record date for the Meeting. 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, 2010 are entitled to vote. However, when six or more quarterly dividends are accumulatedEach holder of common stock is entitled to one vote per share. Each holder of depositary shares is entitled to one vote per share. The common stock and unpaid, as is presently the case, the holders of the Series A Preferred Stockdepositary shares will vote separately from the common stockholders to elect two directors. As such, only common stockholderson Proposal No. 1 (only common) and Proposal No. 2 (only depositary), but will vote together as a single class on Proposal 1 and only Series A Preferred Stockholders will vote on Proposal 2. At the close of business on April 1, 2009, thereNo. 3. There were 9,641,77310,619,309 shares of common stock outstanding and entitled to vote on Proposal 1 and 640,515 depositary shares outstanding and entitled to vote on Proposal 2.Meeting?meeting?Meeting,meeting, shall constitute a quorum to conduct business at the Meeting.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.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
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We encourage you to register your vote via the Internet. If you attend the 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 Meeting,meeting. Whether your proxy is submitted by the Internet, by phone or by mail, if it is properly completed and submitted and if you will needdo not revoke it prior to obtain a proxy card from the institution that holdsmeeting, 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 meeting in the manner set forth in this proxy card relevant to your type of equity ownership. However, if you own both common stock and depositary shares, you will be sent both proxy cards and you should complete both proxy cards if you wish to vote your respective interests on Proposals 1 and 2.
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 Meeting.meeting. The powers of the proxy holders will be suspended if you attend the Meetingmeeting in person and so request. However, attendance at the Meetingmeeting 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 Meetingmeeting to be effective.
What vote is required to approve each item?
The election of directors (Proposals 1 and 2) requires that each director receive the affirmative vote of a plurality of the votes cast is required forwith respect to that director at the annual meeting. This means that, with respect to each Proposal, 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. The affirmative vote of all stockholders, having a majority of the votes present in person or represented by proxy at the meeting and entitled to vote on the matter, are necessary to ratify the appointment of Ernst & Young LLP (Proposal 3). Abstentions will have the same effect as a vote against this proposal. Cumulative voting is not permitted for any of the proposals included in this proxy statement.
How are broker non-votes treated? What is the electioneffect of directors. Asnot casting my vote?
Morris W. Kegley and Jennifer S. Grafton were named by our Board of Directors (the “Board”) as proxy holders. They will vote all proxies, or record an abstention or withholding, in accordance with the directions on the proxy. If no contrary direction is given, the shares will be voted as recommended by the Board. If you hold your shares in street name through a result, withholding authoritystockbroker, bank or other nominee rather than directly in your own name, your broker or nominee is not permitted to vote for a director nomineeexercise voting discretion with respect to the election of directors willdirectors. If you do not affect the outcome of the election of directors.
If you hold your shares in street name, it is critical that you cast on proposals presentedyour vote if you want it to stockholders. However, forcount in the election of directors abstentions(Proposals 1 and 2). In the past, if you held your shares in street name and you did not indicate how you wanted your shares voted in the election of directors, your bank or broker was allowed to vote those shares on your behalf in the election of directors as they felt appropriate. However, recent changes in stock exchange rules removed the ability of your bank or broker to vote your uninstructed shares in the election of directors on a discretionary basis. Thus, if you hold your shares in street name and you do not instruct your bank or broker how to vote in the election of directors, no votes will not affectbe cast on your behalf. Your bank or broker will, however, continue to have discretion to vote any uninstructed shares on the outcome.
How are you handling solicitation of votes?
The accompanying proxy is solicited on behalf of our Board. 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 meeting?
We will announce preliminary general voting results at the meeting and publish final detailed voting results on a Form 8-K that we will file within four business days after the meeting.
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How do I submit a stockholder proposal for the 2011 annual meeting?
Any proposal that a stockholder wishes to be considered for inclusion in our proxy statement and proxy card for the 2011 Annual Meeting of Stockholders (the “2011 Annual Meeting”) must be submitted to the Secretary at our offices, 2 North Cascade Avenue, 2nd Floor, Colorado Springs, Colorado 80903, no later than December 7, 2010. 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 2011 Annual Meeting, but does not wish to have the proposal considered for inclusion 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 21, 2011 and no later than February 20, 2011, and the stockholder must comply with the provisions of our bylaws.
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:
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If you vote online, you may sign up for electronic delivery at that time; or
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You may sign up at any time by visitinghttp://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 20082009 Annual Report are available at www.edocumentview.com/WLB.
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Name | Age | Director/ Executive Officer Since | Position |
Keith E. Alessi | 55 | 2007 | Director; President and Chief Executive Officer |
Thomas J. Coffey | 57 | 2000 | Director –Independent |
Michael R. D’Appolonia | 61 | 2008 | Director– Independent |
Richard M. Klingaman | 74 | 2006 | Director– Independent |
William M. Stern | 64 | 2000 | Director– Independent |
Frank T. Vicino Jr. | 46 | Nominee | Director Nominee– Independent |
Morris W. Kegley | 62 | 2007 | General Counsel and Secretary |
Todd A. Myers | 46 | 2002 | Vice President of Coal Sales |
John V. O’Laughlin | 59 | 2005 | Vice President of Coal Operations |
Kevin A. Paprzycki | 39 | 2008 | Chief Financial Officer |
Director Information
All our directors bring to our Board a wealth of leadership experience derived from their service as executives of corporations. Certain individual qualifications and Corporate Governance Committeeskills of our directors that contribute to the Board’s effectiveness as a whole are described in the following paragraphs.
Keith E. Alessi currently serves as a director and our President and Chief Executive Officer. Since he began working for us in 2007, he has recommended thatassumed various roles including Executive Chairman and Interim President and Interim Chief Executive Officer. In addition to his work with us, Mr. Alessi has been an adjunct lecturer at the three individuals named below be nominated for electionRoss School of Business at the University of Michigan since March 2002. Prior to Westmoreland, Mr. Alessi was Chief Executive Officer of Lifestyle Improvement Centers, LLC from April 2003 to May 2006. Mr. Alessi currently serves as directors (the “Common Stockholder Nominees”). The Board has approved such recommendation and directed that the three individuals named below be designated as nominees for the Board. Eacha member of the nomineesboard of directors of Town Sports International Holdings, Inc., H&E Equipment Services, Inc. and MWI Veterinary Supply, Inc.
Mr. Alessi’s wealth of experience in turnaround management, including his roles as Vice-Chairman of Farm Fresh and Chief Executive Officer of Jackson Hewitt and Telespectrum Worldwide, Inc., gives him unique insights into the hurdles, challenges and opportunities we face and provides him the necessary leadership experience to lead us during this integral transition period. In addition, Mr. Alessi has extensive public company board experience, including chairing numerous audit committees and serving on compensation, corporate governance and nominating committees.
Thomas J. Coffeyhas been a Partner of B2B CFO Partners, LLC, a professional financial services organization, since 2005. Prior to 2005, Mr. Coffey was Vice President-Finance, Global Infrastructure Services from 1999 to 2005 and Vice President-Operations Analysis from 1998 to 1999 of Unisys Corporation, a technology services company.
Mr. Coffey has over 25 years of financial and operational management experience working with both public and private companies. He has served as the Chief Financial Officer of a public company, worldwide divisional Chief Financial Officer of a global technology company and a Partner with a Big 4 accounting firm. His extensive experience is nowinvaluable to our Board’s responsibility for financial and accounting issues.
Michael R. D’Appolonia is President and Chief Executive Officer of Kinetic Systems, Inc., a directorglobal provider of process and mechanical solutions to the electronics, solar and biopharmaceutical industries. From 1986 to 2006, Mr. D’Appolonia was President of Nightingale & Associates, LLC, a global management consulting firm providing financial and operational restructuring services. Mr. D’Appolonia is a member of the Company. Each person elected atboard of directors of Exide Technologies, Inc. In addition, he was a member of the Meeting shall hold office untilboard of directors of The Washington Group International, Inc. from 2001 to 2007.
Mr. D’Appolonia’s experience as Chief Executive Officer of a large global organization brings to our Board the next annual meetingperspective of stockholders, or until his death, resignation, or removal, if earlier.
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.
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Mr. Klingaman’s decades of experience in the mining and energy industries, including as Senior Secured Convertible Note Purchase Agreement dated March 4, 2008,Vice President of a large natural resources company, provides him with an intimate knowledge of our operations and our industry. In addition, he brings knowledge of coal by-products and non-aqueous coal beneficiation techniques.
William M. Sternhas been Executive Vice President of Stern Brothers & Company, a broker-dealer since 1999, and has been employed in various capacities, including as long as Tontine ownsa senior executive, in the banking industry for several decades.
Mr. Stern’s current leadership of a broker-dealer, past senior management experience with various banking organizations and expertise in financial markets and financial analysis is valuable to our Board’s discussions and oversight of the Company’s capital and liquidity needs. In addition, Mr. Stern vice-chaired the Equity Committee during the Fremont General Company bankruptcy.
Frank T. Vicino, Jr.is the President of F. Vicino Drywall Inc. and F. Vicino and Co. Inc., contracting and construction companies located in South Florida.
Mr. Vicino is the largest individual shareholder of our depositary shares at least 10%17.0% of the outstanding shares of Common Stock (includingshares. As such, he is uniquely qualified to represent the shares issuable upon conversiondepositary shareholders as one of the Senior Notes on an as-converted basis), Tontine has the rightpreferred stock directors due to designate two individuals for election to our Board who are reasonably acceptablehis commitment to the Board. Asgoal of maximizing stockholder value.
Executive Officer Information
Keith E. Alessi, our President and Chief Executive Officer, is discussed above under “Director Information.”
Kevin A.Paprzycki joined Westmoreland as Controller and Principal Accounting Officer in June 2006 and was named Chief Financial Officer in April 2008. Prior to Westmoreland, he 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.
Morris W. Kegley joined Westmoreland in October 2005 as Assistant General Counsel and was named General Counsel in August 2007. Prior to Westmoreland, he worked in the legal department of Peabody Energy Company from 2004 to 2005. He is a member of the datebar of this proxy statement, Tontine has not designated any individualsIndiana, Illinois, Wyoming, and Colorado.
Todd A. Myers joined Westmoreland in January 2000 as Vice President, Marketing and Business Development and, in 2002, became Vice President, Sales and Marketing, a position that is now called Vice President, Coal Sales. Prior to serve on our Board.
John V. O’Laughlin joined Westmoreland in February 2001 as Vice President, and was promoted to being namedVice President of Coal Operations in May 2005. Prior to Westmoreland, Mr. O’Laughlin was Vice President of Mine Operations for Washington Group International, formerly known as Morrison-Knudsen Co.
We are committed to maintaining the highest standards of business conduct and corporate governance, which we believe are essential to serve if elected. If any Common Stockholder Nominee should decline or be unable to serve,running our business efficiently, serving our stockholders and maintaining our integrity in 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 Common Stockholder Nominee will decline or be unable to serve.
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| 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 | ||||||||
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| 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) | ||||||||
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Board Structure and Risk Oversight
The Board separated the positions of Chairman of the Board and Committees
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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 and weather conditions. 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 that full and open communication between management and the Board is essential for effective risk management and oversight. Our Chairman talks regularly with our CEO to discuss strategy and the risks facing us. Senior management attend the quarterly board meetings and are 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 has held fifteen meetings during 2008, including four meetings held jointlya strategic planning session with senior management to discuss strategies, key challenges, and risks and opportunities for us.
While the Board is ultimately responsible for our risk oversight, our Audit Committee and one meeting held jointly with the Compensation and Benefits Committee 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 compliance with legal and regulatory requirements. The Compensation and Benefits Committee assists the Board in fulfilling its oversight responsibilities with respect to the management of risks arising from our compensation policies and programs, as well as succession planning for our directors and executive officers.
Committees of the Board of Directors
As of the date of this proxy statement, our Board has five directors and the following five standing committees: (1) Audit; (2) Compensation and Benefits; (3) Nominating and Corporate Governance Committees. All director nominees attended our 2008 annual meetingGovernance; (4) Pricing; and (5) Executive. The current committee membership, the number of stockholders. Resolutionsmeetings during the last fiscal year and the function of each of the standing committees are described below. Each of the standing committees, except for the Pricing and Executive Committee, operate under a written charter adopted by the Board. Allof the committee charters are available on our website at www.westmoreland.com. During fiscal year 2009, the Board provideheld eight meetings. Each director serving during fiscal year 2009 attended at least 75% of the aggregate of all Board and applicable standing committee meetings held during the period that directorshe served as a director. Directors are expected to attend the annual me eting of stockholders. All directors attended the last annual meeting of stockholders. No director, during his period of service, attended fewer than 75% of the total number of meetings of the Board and committees on which he served.
Name of Director |
| Audit |
| Compensation and Benefits |
| Nominating and Corporate Governance |
| Pricing |
| Executive |
Non-Employee Directors: |
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Thomas J. Coffey |
| Chair |
| Member |
| Member |
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Michael R. D’Appolonia |
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| Chair |
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| Member |
Richard M. Klingaman |
| Member |
| Member |
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| Member |
| Member |
William M. Stern |
| Member |
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| Chair |
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Employee Director |
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Keith E. Alessi |
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| Mem ber |
| Chair |
Number of Meetings in Fiscal 2009 |
| 5 |
| 5 |
| 3 |
| 0(1) |
| 0 |
(1)The Pricing Committee acted only by unanimous written consent in fiscal year 2009.
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, Nominating and Corporate Governance Committees and the Board.financial reporting practices. The committee is comprisedexercises its oversight obligations through regular meetings with management, the director of Messrs. Coffey (Chairman), Sterninternal controls 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, Director of Internal Controls, 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 is an “audit committee financial expert” as defined in Item 407(d)(5) ofRegulation S-K.
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Audit Committee Report
Management is responsible for our internal controls and the financial reporting process. Ernst & Young LLP is our independent registered public accounting firm and is responsible for performing an independent audit of our consolidated financial statements in accordance with generally accepted auditing standards and for issuing audit reports on the consolidated financial statements and the assessment of the effectiveness of internal controls over financial reporting. The Audit Committee’s responsibility is to monitor and oversee these processes on behalf of the Board.
In this context, the committee has discussed with Ernst & Young the matters required by Statement of Auditing Standards No. 114,The Auditors Communication With Those Charged With Governance,and has received from and discussed with Ernst & Young the written disclosures and the letter required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant's communications with the audit committee concerning independence, and discussed with Ernst & Young their independence from Westmoreland and its management.
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 internal controls and the overall quality of our financial reporting. The Audit Committee also has also determined that each member ofreviewed and discussed the audited financial statements with management.
Based on the reviews and discussions described above, the Audit Committee including Mr. Coffey, is “independent” underrecommended to the NYSE Amex listing standards, Section 10ABoard 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 Exchange Act of 1934, as amended, or the Exchange Act, andRule 10A-3 thereunder. A copy of thefiscal year ended December 31, 2009. The Audit Committee Charter can be found in the Investor Relations section ofhas selected Ernst & Young LLP as our website at www.westmoreland.com.
Thomas J. Coffey, Chairman
Richard M. Klingaman
William M. Stern
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 incentivizing imprudent risk-taking, as well as overseeing succession planning. In accordance with its charter, the committee may retain and procedures followed by our Compensationterminate outside counsel, compensation consultants, or other experts or consultants, as it deems appropriate, form and Benefits Committee in consideringdelegate authority to subcommittees and determining executive and director compensation are described below under the heading “— Executive and Director Compensation Processes.” A copy of the Compensation and Benefits Committee Charter may be found on the Investor Relations section of our website at www.westmoreland.com.
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During 2008,2009, each of Messrs. Robert E. Killen (who served as a director until May 2008), Klingaman, Stern, Coffey and D’Appolonia served on our Compensation and Benefits Committee. None of these directors was a current or former officer or employee of the Company,our company, and none had any related person transaction involving the Company.our company. During 2008,2009, 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.
Compensation Committee Risk Assessment
In early 2010, utilizing various risk assessment tools provided by Buck Consulting, the committee thoroughly reviewed our compensation policies and practices for all employees, including executive officers. As part of the risk assessment, the committee reviewed our compensation programs for certain design features that have been identified by experts as having the potential to encourage excessive risk-taking such as compensation mix overly weighted toward annual incentives and unreasonable goals or thresholds. The committee determined that, for all employees, our compensation programs do not encourage excessive risk and instead encourage behaviors that support sustainable value creation. The committee, with the assistance of Buck Consulting, intends to continue, on an on-going basis, a process followedof thoroughly reviewing our compensation policies and programs to determine if any risk mitigation programs should be put into place to further discourage imprudent risk-ta king activities.
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Compensation 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
Richard M. Klingaman
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. 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 that 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 selected candidatesemploys the same process for evaluating all can didates, 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 through current Board members, professional search firms, stockholders or other persons.
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 Board.
In considering whether to recommend any particular candidate 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 divers e viewpoints. 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.
On March 1, 2010, the Board adopted a retirement policy for directors mandating that directors elected to the Board at our annual meeting will be required to retire from the Board at the first annual meeting of stockholders following the director’s 75th birthday. The Board grandfathered all current directors who will turn 75 prior to the 2010 annual meeting, making the new retirement policy only applicable to current and future directors who will turn 75 following our 2010 annual meeting.
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, Colorado Springs, CO 80903. 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 candidatecan didate and recommends his or her election, then his or her name will be included in our proxy statement for the next annual meeting.
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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 thethese procedures set forth in the bylaws will not be included in our proxy statement for the next annual meeting.
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Other Committees
Director Independence
The NYSE Amex listing standards generally define an “independent director” as a non-employee director who is affirmatively determined by the Board not to have a material relationship with the listed company that would interfere with the exercise of independent judgment. Our Board has determined that each of our directors, with the exception of our Chief Executive Officer, is independent as defined by the NYSE Amex. 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. The Board considered Mr. Vicino’s 17% ownership of our depositary shares as a factor when considering his independence and did not feel such ownership would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Each member of the Audit Committee must, in addition to the independenc e requirements of the NYSE Amex, meet the heightened independence standards required for audit committee members under the NYSE Amex listing standards, Section 10A of the Securities Exchange Act of 1934, and Rule 10A-3 thereunder. The Board has determined that Messrs. Coffey, Klingaman and Stern each meet 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.
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DIRECTOR COMPENSATION FOR 2009
Name(1) | Fees Earned Or Paid In Cash($) | Stock Awards($)(2) | Total Compensation($) |
Thomas J. Coffey | 56,000 | 29,992 | 85,992 |
Michael R. D’Appolonia | 42,800 | 29,992 | 72,792 |
Richard M. Klingaman | 81,038 | 29,992 | 111,030 |
William M. Stern | 40,000 | 29,992 | 69,992 |
(1) | Mr. Alessi, who is our Chief Executive Officer and a director, does not receive any additional compensation for his services as a director. |
(2) | 3,631 shares of common stock were awarded to each non-employee director re-elected to the Board in May 2009. Sale of the shares is restricted until May 2010. The grant date fair value of these awards was $8.26 per share. |
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Annual Retainer and BenefitsMeeting Fees
Our non-employee directors, except for our Chairman of the Board and our Chairman of the Audit Committee, generally reviewsreceive an annual cash retainer of $30,000 paid quarterly. Our Chairman of the Board receives a cash retainer of $90,000 and our Chairman of the Audit Committee receives a cash retainer of $41,000. All retainers are prorated in any quarterly period in which the individual is not a director compensation every other year.and/or the Chairman for the entire quarterly period. Each non-employee director also receives $1,000 per meeting attended of the Board and of each committee of which he is 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 2006 and prior years,addition, the Company engaged Mercer to assist in its evaluationChairman 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. AtAudit Committee receives an additional $750 per meeting, the requestChairman of the Compensation and Benefits Committee Mercer updated its 2005 report in 2006 and providedreceives an additional report regarding director compensation in December 2006. Also in 2006, our human resources department provided$650 per meeting an d all other committee chairmen receive an additional $500 per meeting attended and chaired. Should multiple meetings of the full Board or a committee with information basedoccur on the National Associationsame day, we pay each director only one meeting fee plus a chairperson fee, if applicable.
Long-Term Compensation
Pursuant to the 2007 equity plan, each non-employee director is entitled to receive, upon his or her election/ re-election to the Board, a grant of Corporate Directors’ 2006 reportrestricted stock equal to $30,000 in value with a one-year restriction on directors’ compensation. In 2008,resale. Under the human resources department obtained2007 plan, each non-employee director has historically received, as an initial grant upon his or her first joining the Board, equity equal to $60,000 in value. However, in 2010, the Board amended the 2007 plan to eliminate the initial equity award as peer and survey data did not demonstrate comparable initial director grants and the Board did not feel that such an initial grant was necessary to incentivize new directors.
2009 Outstanding Equity Awards at Fiscal Year-End for executive compensation within the mining industry from the Hay Group. This survey data will serve as the foundation for the Compensation and Benefits Committee to use in 2009, along with proxy data from applicable competitors.
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| Option Awards | Stock Awards | ||||
Name | Securities Underlying Unexercised Options (#) Exercisable | Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Shares that have not vested (#)(1) | Market value of shares that have not vested as of 12/31/09($)(2) |
Thomas J. Coffey | 10,000 | 0 | 18.00 | 5/31/11 |
|
|
5,000 | 0 | 15.31 | 5/24/12 |
|
| |
1,762 | 0 | 25.13 | 6/23/16 |
|
| |
Michael R. D’Appolonia |
|
|
|
| 1,458 | 12,991 |
Richard M. Klingaman | 3,733 | 0 | 23.98 | 2/27/16 |
|
|
William M. Stern | 5,000 | 0 | 18.00 | 5/31/11 |
|
|
5,000 | 0 | 15.31 | 5/24/12 |
|
| |
1,762 | 0 | 25.13 | 6/23/16 |
|
| |
(1) | Mr. D’Appolonia received an initial grant of 2,916 shares upon being elected as a director on July 23, 2008. These shares vest over a two-year period. |
(2) | Market value of unvested restricted stock was determined by multiplying the closing price of $8.91 on December 31, 2009 by the number of shares. |
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The following table sets forth certain information, as of March 1, 2010, concerning beneficial ownership by: holders of more than 5% ofany class of our voting securities; directors and director nominees; each of the named executive officers listed in the Summary Compensation Table; and all directors and executive officers as a group. The information provided in the table is based on our records, information filed with the SEC and 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 the entity or individual has sole or shared voting power or investment power and also any shares that the entity or individual has the right to acquire withi n 60 days of March 1, 2010 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, or upon the exercise or conversion of other rights. Unless otherwise indicated, each person has sole voting and investment power with respect to persons knownthe shares set forth in the table. The percentage calculations set forth in the table are based on 10,541,556 shares of common stock outstanding and 640,516 depositary shares outstanding on March 1, 2010.
Name of Beneficial Owner | Common | % of | Depositary | % of Depositary |
5% or Greater Equity Holders |
|
|
|
|
Jeffrey L. Gendell (1) | 3,276,751 | 26.7% | 4,300 | * |
Stephen D. Rosenbaum (2) | 131,404 | 1.2% | 60,000 | 9.4% |
T. Rowe Price (3) | 757,700 | 7.2% | — | — |
BlackRock, Inc. (4) | 585,263 | 5.5% | — | — |
Officers, Directors and Director Nominees | ||||
Frank T. Vicino, Jr. (5) | 185,711 | 1.7% | 108,730 | 17.0% |
William M. Stern (6) | 67,453 | * | 7,850 | 1.2% |
Thomas J. Coffey (7) | 48,795 | * | — | — |
Richard M. Klingaman (8) | 7,442 | * | — | — |
Michael R. D’Appolonia (9) | 6,547 | * | — | — |
Keith E. Alessi (10) | 53,601 | * | — | — |
John V. O’Laughlin (11) | 44,733 | * | — | — |
Todd A. Myers (12) | 40,862 | * | — | — |
Morris W. Kegley (13) | 3,763 | * | — | — |
Kevin A. Paprzycki (14) | 3,657 | * | — | — |
Delbert L. Lobb | 0 | * | — | — |
Directors and Executive Officers as a Group (9 persons) | 276,853 | 2.5% | 7,850 | 1. 2% |
* Percentages of less than 1% are indicated by the management of the Company to own beneficially more than five percent (5%) of any class of the voting securities of the Company as of March 31, 2009.
| 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 | ||||||||||||||||
(1) | ||
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| 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. According to a Schedule 13D/A filed | ||
(2) | The total for Mr. | |
| issuable upon conversion of depositary shares. The depositary shares are convertible into 102,480 shares of common | ||
(3) | According to a Schedule 13G/A filed on February |
11T. Rowe Price is 100 East Pratt St., Baltimore, Maryland 21289.
| 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 | % | ||||||||||
(4) | According to a report on Schedule 13G filed on January 29, 2010, BlackRock Inc. (a) is | |
(5) | According to a Schedule 13D/A filed on February 19, 2010, Mr. Frank Vicino Jr., a director nominee, beneficially owns 108,730 depositary shares of which he has sole voting and sole dispositive power | |
(6) | Includes 10,000 common | |
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(7) | Includes 15,000 common shares that may be purchased upon exercise of options and 3,631 common shares for which sale is restricted until May 2010. | |
(8) | Includes 3,631 common shares for which sale is restricted until May 2010. | |
(9) | Includes 1,458 restricted common shares | |
(10) | Includes 3,046 common shares | |
(11) | Includes 3,834 common shares held through the 401(k) plan and 39,299 common shares that may be purchased upon exercise of options under equity plans. | |
(12) | Includes 3,678 common shares | |
(13) | Includes 1,430 common shares held through the 401(k) plan and 2,333 common shares that may be purchased upon exercise of options under the 2007 plan. | |
(14) | Includes 1,324 common shares held through the 401(k) plan and 2,333 common shares that may be purchased upon exercise of options under the 2007 plan. |
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Section 16(a) of the Securities Exchange Act of 1934 requires the Company’sour 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. 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,2009, was a director, officer, or beneficial owner of more than ten percent ownerof any class of equity securities of Westmoreland Coal Company failed to file on a timely basis reports required by Section 16(a) of the Company’s depositary shares has notified us that it has failedSecurities Exchange Act of 1934 during the most recent fiscal year, except for late Form 4 filings for Messrs. Alessi, Kegley, Myers, O’Laughlin and Paprzycki relating to timely file Section 16 reports for the year ended December 31, 2008. While we anticipate sucha July 2009 grant of restricted stock units and late reports to be filed soon, they have not been filed to date.
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As of December 31, 2008, the Company2009, we had stock options and stock appreciation rights (“SARs”) outstanding from three stock plans for employees that were approved by stockholders, one stockholder-approved plan for employees and non-employee directors 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.
| 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) | |||||
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 | 276,224(1) | $ 19.71 | 422,722(3) |
Equity plans not approved by security holders | 75,000(2) | $ 15.85 | 0 |
Total | 351,224 | $ 18.89 | 422,722 |
(1) | Excludes SARs to acquire 139,267 shares of common stock | |
(2) | Excludes SARs to acquire 16,067 shares of common stock with exercise prices above $8.91, the closing price of a share of our common stock as reported on the NYSE Amex on December 31, 2009. At December 31, | |
(3) | Number of securities remaining available for future issuance reflects the reservation of 95,100 shares for issuance to |
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COMPENSATION DISCUSSION AND ANALYSIS
Westmoreland Coal Company has experienced dramatic changes since its inception in 1854. 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 the executive officersWest and purchased five surface coal mining operations. Since 2001, we have dramatically refocused our energies on becoming an energy company focused on niche coal markets where we 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 our business environment over the last several years and the recent struggles that we have faced. We believe that fully understanding who we are as a company and the steps we have taken over the last several years to position ourselves to forge ahead into the next decade will provide insight into our past compensation practices and the steps we intend to take in the future to align the pay of our executives with creating long-term stockholder value.
Business Environment
Our business is unusual in that a high proportion of our revenues, and therefore cash flows, are contractually set or limited by contractual relationships. For example, our ROVA power facility is under contract to provide electricity to its sole customer under contracts that run through 2019. Under the terms of the Company.
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customer should suffer an unexpected event that prevents them from accepting coal deliveries, we have nowhere to sell the committed coal. Coupled with these long-term contracts, we have been burdened by substantial post-retirement health care liabilities to retirees, and have struggled to generate enough cash at our operating subsidiaries to fund the cost of corporate overhead and these post-retirement liabilities. Our lack of liquidity has limited our opportunity to consider options that might grow the business.
In 2007, we hired Mr. Keith E. Alessi was electedas Interim Chief Executive Officer at a difficult time in our history when we were not producing cash flows sufficient to fund our operations. Shortly after Mr. Alessi’s arrival, it was discovered that we were facing our second major accounting restatement in two years. The Board charged Mr. Alessi with standardizing our operations, implementing procedures and President effectivecontrols, reducing corporate overhead, stabilizing cash flow and setting a new, focused strategic vision. From 2007 through the end of 2008, management radically overhauled the business through staffing changes, elimination of unnecessary perquisites and compensation structures, settling of numerous outstanding litigations, consolidating and leveraging benefits across all business units, standardizing and streamlining financial and business reporting and restructuring all of our major debt arrangements. Additionally, a new long-term contract was entered into with our sole customer at the Jewett mine.
The Compensation and Benefits Committee (the “Committee”) recognized the unique difficulties presented by our business model and the transition period we were undergoing with new leadership and understood the complexity of implementing substantive business growth in troubled economic times that include very tight credit markets. As such, the Committee sought to put into place a compensation structure that recognized the difficulty of the tasks that management would face. The Committee did not feel that traditional incentive measurements, such as earnings or cash flow, were appropriate drivers of January 27, 2009.incentive compensation, as these measurements could not be realistically improved in the short term. Therefore, individual project-based accountabilities for senior managers were set and up to 45% of their incentive bonuses were tied to achievement of these goals.
Fiscal 2009 – The Year in Review
In 2009, a number of severe and adverse business conditions arose that could not have been anticipated when we set our fiscal year 2009 budgets. First, there was a catastrophic failure at our largest customer’s power plant that resulted in the plant being shut down for over six months. In the same time period, a second large customer also experienced extended down time at its power facility. Finally, at the end of the third quarter, our ROVA I power plant experienced an unanticipated outage following a scheduled outage, resulting in lost power sales. These outages combined with overall reduced volume as a result of general economic conditions resulted in significant reductions in revenues and cash flows. In addition, Mr. Alessi currently serves as a directordue to the outages, general economic conditions, and Chairmanatypical weather conditions that lowered overall coal sales in 2009, we faced several covenant violations of our major debt instruments in 2009, which required the paym ent of penalties and resulted in all of our outstanding debt being reclassified to current. Despite these adverse conditions, our management team was able to:
·
Mitigate potential debt-related issues through the negotiation of reasonable covenant waivers with our WML lenders and the refinancing of our revolving and term debt with First Interstate Bank;
·
Freeze the pension plans and eliminate retiree health care benefits for non-union employees, while implementing an enhanced 401(k) plan to minimize the effects of the Board. From May to August 2007, Mr. Alessi served as the Company’s interim Chief Executive Officer and President and served as its Chief Executive Officer and President from August 2007 to April 2008. Mr. Alessi was also Chief Executive Officerpension freeze;
·
Achieve significant cost containment 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. and MWI Veterinary Supply, Inc.
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·
Implement administrative and pension obligations require a significant outlayhealthcare network improvements for our retiree population resulting in substantial cost savings and reduced retiree medical liabilities;
·
Successfully implementing the Indian Coal Production Tax Credit transaction; and
·
Continue standardization of cash on anprocesses and procedures to eliminate redundancies and costs, such as transitioning all non-union employees to the same health, welfare and paid leave plans.
These measures that management implemented during 2009 were taken into account when the individual performance component of annual basis. As a result,incentive compensation was considered.
Fiscal 2010 – The Year Ahead
In light of the unique nature of our business, the fact that we have been cash constrained.
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General Compensation Practices and Philosophy
Our current philosophy is to compensate executives with competitive market for talent.
· Design a program that is simple, easy to understand, incents performance and aligns with long-term stockholder interests by using equity awards; · Target compensation levels that are competitive with our industry and the markets in which we compete for executive talent; · Structure compensation to reflect our business situation; · Link pay to performance by making a substantial percentage of total | ||
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Provide a compensation program takes into considerationthat emphasizes direct compensation as opposed to perquisites and other benefits.
The Committee is responsible for setting the total mix of components that encompass our compensation program, which currently includes base salary, annual incentive and long-term compensation. As has been our historical practice, in general, our compensation components are targeted as follows: 60% base salary, 25% incentive compensation and 15% long-term compensation in the form of equity. This compensation mix has been appropriate due to our past economic hardships and the transitional nature of the business. In 2009, utilizing peer and survey data, we analyzed and determined that our total cash compensation program was competitive with said data and felt that maintaining the current mix of cash components was appropriate at that time. Due to the methodologies for evaluating equity and the poor performance of our stock, we were unable to perform a solid analysis of the available data, which might have resulted in an adjustment of our long - -term equity compensation component. While we feel that the components are the proper mix of compensation for attracting and retaining key executives, increasing our long-term profitability and building stockholder value, the Committee, with the assistance of Buck Consultants, will be analyzing our compensation components to determine if our current allocation of components is the most appropriate for meeting our objectives and business situation, the marketplacestrategy.
Compensation Methodology
Peer Comparisons and Survey Data
In 2009, compensation was evaluated using national, broad-based industry survey data, internal equity for similar positions and proxy data of a meaningful peer group for benchmark analysis. In creating our past practices,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 two factors in mind, we benchmarked ourselves relative to a peer group of companies with similar revenue and employee base. Revenue and employee base are used as reference points to determine the composition of the peer group because they provide a reasonable basis for comparing like positions and scopes of responsibilities. 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 2009 Annual Report to Stockholders. We felt that t he companies listed in the compensation peer group more closely represent the employment markets in which we compete for executive talent. In 2009, our peer group consisted of the following companies, as compared to our coal segment:
Name | Business | Revenues in Millions ($) | Employees |
Westmoreland Coal Company | Coal Mining (Coal Segment Only) | 420 | 1118 |
Atheros Communications Inc. | Wireless/wire communication products | 472 | 1079 |
PMC-Sierra, Inc. | Semiconductor solutions | 525 | 1064 |
James River Coal Company | Coal Mining | 568 | 1750 |
Rhino Resources Partners, L.P. (as of 12/31/2007) | Coal Mining | 403 | 875 |
Horsehead Holding Corp. (as of 12/31/2007) | Zinc producer | 546 | 1080 |
Affymetrix, Inc. | Genetic analysis businesses | 410 | 1128 |
Zeeco Instruments, Inc. | Solutions for HB-LED and solar | 442 | 1195 |
Northwest Pipe | Large diameter steel pipeline systems | 439 | 1217 |
Churchill Downs, Inc. | Pari-Mutuel wagering properties | 430 | 1000 |
USANA Health Sciences, Inc. | Science-based personal care/ nutrition | 429 | 948 |
Maidenform Brands, Inc. | Intimate apparel | 413 | 1120 |
California Water Service Group | Treatment and distribution of water | 410 | 929 |
Calgon Carbon Corporation | Water and air purifiers | 400 | 943 |
Reddy Ice Holdings | Packaged ice manufacturer | 329 | 1400 |
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In 2009, we used Economic Research Institute, CompAnalyst and Hay Group market data as additional comparison points. Total market data was compared with individual pay for each position, and “compa-ratios” were determined. Compa-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 compa-ratio for that individual would be 125%, meaning such person is earning 25% greater than the average of the market.
Internal Pay Equity
The Committee considers internal pay equity when making compensation decisions. 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 talentsresponsibility. Mr. Alessi’s total cash compensation was 4.52 times greater than the average of our four other named executive officers, which differential includes his 2009 special discretionary bonus. We feel that each individual executive bringsMr. Alessi’s cash compensation for 2009 as compared to the Company. Our Compensationother named executive officers is appropriate based on his significant contributions in refocusing our business since 2007 and Benefits Committee consiststhe relatively modest cash compensation of three independent directors who administer our executive compensation program. The team. Since joining us in 2007, Mr. Alessi has received no base pay increases, modest special discretionary bonuses and has forfeited over 60% of his initial equity grant. Our next highest paid named executive officer makes 1.29 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 Benefitsthe Role of Management in Determining Executive Compensation
The 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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While the Committee has the responsibility to monitor and approve all compensation program in achieving desired results.
Role of Compensation and BenefitsConsultants
The Committee expectshas the authority to evaluateretain consultants directly; however, 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.
Components of the Executive Compensation Program
Our executive compensation program which consists of three main elements:
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In determining base salaries, the Compensation and Benefits Committee considers each executive’s role and responsibility, applicable experience, unique skills, past performance, future potential with the Company,us, salary levels for similar positions in our target market,(compa-ratios), and internal pay equity. Our compensation philosophy is to target base salaries at market levels, based onequity are considered. Starting in 2010, the executive compensation and benefits surveys obtained by the Company, for each named executive officer.
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Annual Incentive Compensation
The annual incentive plan is intended to provide incentive, at-riskvariable compensation at the median levelawarded for targeted performance levels.
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GOAL | COMPONENTS | PERCENT OF TOTAL BONUS |
Financial | Threshold = Annual budgeted operating income of the mine/ division1 · 50% of goal will be paid out upon meeting the threshold · Between 50% to 100% of goal will be paid out upon exceeding the threshold by 7.5% · Between 100% and 200% of goal will be paid out upon exceeding the threshold by 15% | · 40% for mine operational executives · 55% for corporate office executives |
Safety | Threshold = Annual National Mine Safety and Health Administration (MSHA) average for reportable incident rate for surface mines in the coal industry2 · 50% of goal will be paid out upon meeting the threshold · Between 50% to 100% of goal will be paid out upon exceeding the threshold by 25% · Between 100% and 200% of goal will be paid out upon exceeding the threshold by 50% | · 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 Committee) 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 Committee. | · 30% for mine operational executives · 45% for corporate office executives |
1 In 2009, annual budgeted operating income for Messrs. Alessi, Kegley, and Paprzycki was ($5.416) million. The 2009 actual operating income was ($29.162) million. In 2009, annual budgeted operating income for Messrs. Myers and O’Laughlin was $26.473 million. The 2009 actual operating income was $0.467 million.
2 In 2009, the average national reportable incident rate was 2.11, which is a calculation based on total hours worked and reportable incidents. In 2009, the average reportable incident rate for the mines Mr. O’Laughlin’s bonusO’Laughlin oversaw was 1.38.
In February 2010, the Committee approved annual incentive compensation payouts for performance in fiscal year 2009. As the 2009 financial component threshold was not met, there was no financial component payout. As such, the entire incentive compensation payout was based on the individual performance component, except for Mr. O’Laughlin, whose incentive payout also included a safety component payout.
Target vs. Actual Annual Incentive Bonuses | ||||
Name | Percentage of Total Compensation | Target Cash Incentive Bonus | Percentage of Target Bonus Approved | Total Cash Bonus |
Keith E. Alessi | 70% | $411,923 | 90% | $370,731 |
John V. O’Laughlin | 50% | $112,611 | 71% | $80,535 |
Kevin A. Paprzycki | 40% | $85,230 | 45% | $38,354 |
Morris W. Kegley | 40% | $85,385 | 90% | $76,847 |
Todd A. Myers | 40% | $93,314 | 90% | $83,983 |
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Long-Term Incentive Compensation
Long-term incentive awards are designed to align the interests of our executives with those of our stockholders. In 2009, we moved from options to restricted stock units with a three-year vest to more appropriately incentivize our executives. Long-term equity awards for executives are2009 were made on July 1, 2009 based on a tiered system that provides an identical number of restricted stock units to executives in that tier, structure which targetsawards are between approximately 20% and 40% of such executive’s base salary compensation. To determine the number of restricted stock units awarded to a named executive officer in a given tier, the Committee multiplies the assigned percentage of base salary adjusted for market conditions. The annualized valuecompensation, such as 20%, times the average of the long-term incentive awards for our named executive officersbase salaries of all individuals assigned to such tier. The resulting number is generally intended to be the largest component of our total compensation package. However, as a result of cash constraints and the limited number of stock options, stock grants and stock appreciation rights, or SARs, available to us, award values have frequently been set below the 50th percentile of market and have delivered even less value over most performance periods.
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Long-Term Incentive Awards for 2009 | |||
Name | Long-Term Incentive Tier | Number of Restricted Stock Units | Grant Date Fair Value of RSUs ($) |
Keith E. Alessi | 40% | 30,000 | 245,100 |
John V. O’Laughlin | 30% | 8,400 | 68,628 |
Kevin A. Paprzycki | 20% | 5,600 | 45,752 |
Morris W. Kegley | 20% | 5,600 | 45,752 |
Todd A. Myers | 20% | 5,600 | 45,752 |
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 12 months of health benefits at the grant.
Summary of Named Executive Officer Compensation
Keith E. Alessi: President and Chief Executive Officer | |||||
Total Cash Received for 2009 | 2009 Base Salary | Bonus for 2009 | # of RSUs / Grant Date Fair Value of 2009 RSUs | ||
$1,309,1921 | $600,000 | $720,7312 | 30,000 RSUs/ $245,100 | ||
(1) Mr. Alessi’s actual base salary earnings for 2009 of $588,461 were less than his annualized base salary of $600,000 as he did not accept the role of CEO until the end of January. | |||||
(2) Mr. Alessi’s bonus for 2009 included his annual incentive plan bonus of $370,731, as well as a special discretionary bonus of $350,000. | |||||
Base Salary
The Committee kept Mr. Alessi’s base salary at $600,000 for 2010, noting that such base pay was appropriate in light of available peer group information. With the dateassistance of hireBuck Consulting, the Committee intends to take a holistic look at the CEO’s total compensation package, including his base salary, to determine if Mr. Alessi is receiving not only the proper amount of compensation, but the proper mix of compensation components.
Annual Incentive Compensation
Financial Component: As we failed to meet our 2009 financial component threshold, the Committee awarded no payout for new executives, the timing of long-term incentive compensation awards is typically July 1st and intendedfinancial component.
Individual Component:Mr. Alessi’s individual component performance goals for 2009 were as follows:
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Provide direction to the senior management team;
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Assure adequate liquidity to allow for continued operations;
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Reduce and/or eliminate heritage costs; and
·
Standardize the continuityInformation Technology function.
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The Committee felt Mr. Alessi did an excellent job in all functional areas in fiscal year to2009 and expressed their pleasure with his overall performance navigating the difficulties that arose throughout the year. The CompensationAs such, the Committee awarded Mr. Alessi 200% of his individual component based on the following: his leadership during two unscheduled outages at customer facilities, as well as an unscheduled outage at ROVA; his excellent job in controlling those costs that are controllable; the achievement of certain key milestones in 2009, including those associated with heritage costs, pension and Benefits Committee approvespost-retirement medical liabilities; his performance in managing our liquidity issues throughout the award types, amounts and award terms and conditions for each award to our named executive officers. It delegates administrationyear; the successful closing of the plan to our Human ResourcesIndian Coal Production Tax Credit transaction; and Investor Relations Departments. To achieve continuity,excellent progress in the awards,development of staff and specifically the actual numbersuccession planning.
Safety Component: Not applicable.
Discretionary Bonus
The Committee awarded Mr. Alessi a special discretionary bonus of shares to be awarded to each named executive officer, are approved$350,000 in recognition of his exemplary work since joining us in 2007. As discussed above under “Business Environment,” Mr. Alessi joined Westmoreland at a meetingvery difficult time in our history and has taken great strides to substantially change our landscape, including standardizing our operations, implementing procedures and controls, reducing corporate overhead, stabilizing cash flow and setting a new, focused strategic vision. From 2007 through the end of 2009, Mr. Alessi led a radical overhaul of the Compensationbusiness through staffing changes, elimination of unnecessary perquisites and Benefits Committee held generally in June each year. The grant date, or effective date,compensation structures, settling of each award is set by thenumerous outstanding litigations, consolidating and leveraging benefits across all business units, standardizing and streamlining financial and business reporting and restructuring all of our major debt arrangements.
Long-Term Incentive Compensation and Benefits Committee at July 1st in each year. We do not engage in the practice of timing grants with the release of non-public information.
Mr. Alessi who servedwas awarded long-term equity 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 eacha targeted 40% of the remaining named executives. Awards generally vest overbase salary, which is a period of three years, with one-third becoming exercisable on each anniversary ofhigher tier than 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.
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| Kevin A. Paprzycki: Chief Financial Officer |
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| Total Cash Received for 2009 | 2009 Base Salary | Bonus for 2009 | # of RSUs / Grant Date Fair Value of 2009 RSUs |
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| $245,3541 | $207,000 | $38,354 | 5,600 RSUs/ $45,752 |
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| (1) Mr. Paprzycki’s actual base salary earnings for 2009 of $213,076.95 were more than his annualized base salary due to the extra pay period in 2009. |
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Base Salary
The Committee reservesawarded Mr. Paprzycki a 2.5% merit increase to his base salary for 2010, bringing his base salary to $212,175 effective as of April 1, 2010. Mr. Paprzycki’s 2.5% merit increase was based on a commendable performance rating and a compa-ratio of 102% of peer and survey data. The Committee feels Mr. Paprzycki’s base salary is appropriate given his relative years of experience compared to other chief financial officers and the rightscope of responsibilities, which does not currently include treasury or investor relations.
Annual Incentive Compensation
Financial Component: As we failed to use its judgmentmeet our 2009 financial component threshold, the Committee awarded no payout for the financial component.
Individual Component:Mr. Paprzycki’s individual component performance goals for 2009 were as follows:
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Timely completion of financial closes, operational packages delivered to authorize compensation paymentsmanagement, quarterly board of director packages and SEC filings per target schedule; and
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Improvements to forecasting process, including implementation of rolling forecast for each quarter end, more valuable forecast change information, and system-loaded forecasts that may exceed $1 million when it believes such payments are appropriategenerate financials by the second quarter of 2009.
The Committee approved a 100% individual component payout for Mr. Paprzycki as he timely completed all financial closes and delivered operational packages to management and quarterly board of director packages and SEC filings per the target schedule. In addition, Mr. Paprzycki made improvements to our forecasting process, including implementation of rolling forecast for each quarter end, more valuable forecast change information, and system-loaded forecasts that generate financials by the second quarter of 2009.
Safety Component: Not applicable.
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Long-Term Incentive Compensation
The Committee awarded Mr. Paprzycki 5,400 restricted stock units based on his placement in the best interests20% long-term incentive tier, as discussed above.
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| Morris W. Kegley: General Counsel and Secretary |
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| Total Cash Received for 2009 | 2009 Base Salary | Bonus for 2009 | # of RSUs / Grant Date Fair Value of 2009 RSUs |
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| $290,3101 | $207,375 | $76,847 | 5,600 RSUs/ $45,752 |
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| (1) Mr. Kegley’s actual base salary earnings for 2009 of $213,463.15 were more than his annualized base salary due to the extra pay period in 2009. |
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Base Salary
The Committee awarded Mr. Kegley a 4.0% merit increase to his base salary for 2010, bringing his base salary to $215,671 effective as of April 1, 2010. Mr. Kegley’s 4.0% merit increase was based on an outstanding performance rating and a compa-ratio of 78% of peer and survey data. The Committee feels Mr. Kegley’s base salary is appropriate given his limited experience relating to corporate governance and SEC-related disclosure and compliance for which he has hired an attorney specializing in such areas whom he oversees.
Annual Incentive Compensation
Financial Component: As we failed to meet our 2009 financial component threshold, the Committee awarded no payout for the financial component.
Individual Component:Mr. Kegley’s individual component performance goals for 2009 were as follows:
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Provide legal support for the successful conclusion of employee litigation; and
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Provide legal support for Phase 1 negotiations with the UMWA on retiree health costs.
The Committee approved a 200% individual performance payout for Mr. Kegley due to his exemplary negotiation work with the UMWA. During the second quarter of 2009, Mr. Kegley was able to successfully negotiate a settlement of the CompanyAguilar judgment. In the fourth quarter of 2009, Mr. Kegley successfully completed Phase 1 of the multi-year process to contain costs relating to retiree medical benefits, negotiating a new prescription drug program that is projected to save significant costs and reduce liabilities.
Safety Component: Not applicable.
Long-Term Incentive Compensation
The Committee awarded Mr. Kegley 5,400 restricted stock units based on his placement in the 20% long-term incentive tier, as discussed above.
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| Todd A. Myers: Vice President – Coal Sales |
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| Total Cash Received for 2009 | 2009 Base Salary | Bonus for 2009 | # of RSUs / Grant Date Fair Value of 2009 RSUs |
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| $317,2701 | $226,633 | $83,983 | 5,600 RSUs/ $45,752 |
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| (1) Mr. Myers’s actual base salary earnings for 2009 of $233,286.70 were more than his annualized base salary due to the extra pay period in 2009. |
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Base Salary
The Committee awarded Mr. Myers a 3.0% merit increase to his base salary for 2010, bringing his base salary to $233,432 effective as of April 1, 2010. Mr. Myer’s 3.0% merit increase was based on a commendable performance rating and a compa-ratio of 95% of peer and survey data. The Committee feels Mr. Myers’ base salary is appropriate given his institutional knowledge of the business and our stockholders, after taking into consideration changing business conditionscustomer base and his leadership in strategic efforts and initiatives.
Annual Incentive Compensation
Financial Component: As we failed to meet our 2009 financial component threshold, the Committee awarded no payout for the financial component.
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Individual Component:Mr. Myers’ individual component performance goals for 2009 were as follows:
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Absaloka Coal Private Letter Ruling for Indian Coal Tax Production Credit; and
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Renew expiring coal contracts for Xcel, Western Fuels, and MERC.
The Committee approved a 200% individual performance payout for Mr. Myers due to his continued work and efforts in 2009 to secure the Indian Coal Production Tax Credit for coal produced at WRI. The final IRS Private Letter Ruling was received in 2009, completing the final steps of its employees.
Safety Component: Not applicable.
Long-Term Incentive Compensation
The Committee awarded Mr. Myers 5,400 restricted stock units based on his placement in the 20% long-term incentive tier, as discussed above.
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| John V. O’Laughlin: Vice President – Coal Operations |
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| Total Cash Received for 2009 | 2009 Base Salary | Bonus for 2009 | # of RSUs / Grant Date Fair Value of 2009 RSUs |
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| $305,7571 | $220,007 | $80,535 | 8,400 RSUs/ $68,628 |
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| (1) Mr. O’Laughlin’s actual base salary earnings for 2009 of $225,221.71 were more than his annualized base salary due to the extra pay period in 2009. |
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Base Salary
The Committee awarded Mr. O’Laughlin a 2.5% merit increase to his base salary for 2010, bringing his base salary to $225,508 effective as of April 1, 2010. Mr. O’Laughlin’s 2.5% merit increase was based on a commendable performance rating and a compa-ratio of 100% of peer and survey data. The Committee feels Mr. O’Laughlin’s base salary is appropriate given his scope of responsibilities and a blend of available chief operating officer and vice president of mines base salary comparables from peer group data gathered from proxy statements, which the Committee feels is the more appropriate comparable salary data for Mr. O’Laughlin than survey data that reflects salaries of similarly-positioned individuals at significantly larger companies.
Annual Incentive Compensation
Financial Component: As we failed to meet our named executive officers are established2009 financial component threshold, the Committee awarded no payout for the financial component.
Individual Component:Mr. O’Laughlin’s individual component performance goals for 2009 were as follows:
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Improve safety results at all mines relative to the national average; and
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Ensured continued training for corporate and salaried personnel and offered production and maintenance training to craft employees throughout the year.
The Committee approved a 100% individual performance payout for Mr. O’Laughlin as he met his goals for 2009, which included an improved safety record at all mines relative to the national average, continued training for corporate and salaried personnel and production and maintenance training to craft employees throughout the year.
Safety Component: Mr. O’Laughlin was paid 184% of his safety component due to above average industry safety records at all, but one, of our mines. With direct operational responsibility for all of our mines, Mr. O’Laughlin’s safety component payout is based upon an assessmentaverage of competitive market factors,reportable incident rates at all mine locations. In 2009, the average national reportable incident rate was 2.11, which is a determinationcalculation based on total hours worked and reportable incidents. In 2009, the average reportable incident rate for the mines Mr. O’Laughlin oversaw was 1.38, which is significantly less than the national average.
Long-Term Incentive Compensation
Mr. O’Laughlin was awarded long-term equity at a targeted 30% of whatbase salary, which is neededa higher tier than other named executive officers. The Committee felt such higher tier level was warranted due to attract and retain high caliber executives, and our financial condition. Our primary benefitsMr. O’Laughlin’s direct responsibility for executives include participation in the broad-based plans available to mostoverseeing more employees than any other named executive officer, direct responsibility for a large portion of our other employees including defined benefit retirement plans, 401(k) plans, savings plans, healthcompany’s profits and dental planslosses, and various insurance plans, including disability and life insurance.
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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 20082009 and our three next most highly compensated executive officers (other than our principal executive and financial officers) who were serving as executive officers at December 31, 2008.2009. 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.
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($)(1) | Option Awards ($)(1) | Non-Equity Incentive Plan Compensation ($)(2) | Change in Pension Value Earnings ($) | All Other Compensation ($)(3) | Total ($) |
Keith E. Alessi CEO and President | 2009 | 588,461 | 350,000 | 245,100 | — | 370,731 | 20,044 | 16,643 | 1,590,979 |
2008 | 403,846 | — | — | 710,400 | 242,308 | 3,775 | 12,222 | 1,372,551 | |
2007 | 351,692 | — | — | 1,355,000 | 422,031 | — | 21,157 | 2,149,880 | |
Kevin A. Paprzycki Chief Financial Officer | 2009 | 213,077 | — | 45,752 | — | 38,354 | 3,599 | 12,467 | 313,249 |
2008 | 189,450 | — | — | 82,880 | 34,101 | 8,741 | 7,088 | 322,260 | |
Morris W. Kegley General Counsel and Secretary | 2009 | 213,463 | — | 45,752 | — | 76,847 | 38,224 | 12,472 | 386,758 |
2008 | 200,156 | — | — | 82,880 | 36,028 | 30,301 | 7,411 | 356,776 | |
2007 | 175,154 | — | — | — | 39,410 | 21,494 | 9,421 | 245,479 | |
Todd A. Myers Vice President of Coal Sales | 2009 | 233,287 | — | 93,352 | — | 83,983 | (6,699) | 12,603 | 416,526 |
2008 | 218,568 | — | — | 82,880 | 78,685 | 29,014 | 7,582 | 416,729 | |
2007 | 208,542 | — | — | — | 37,538 | 14,552 | 8,066 | 268,698 | |
John V. O’Laughlin Vice President of Coal Operations | 2009 | 225,222 | — | 68,628 | — | 80,535 | (5,611) | 12,552 | 381,326 |
2008 | 211,374 | — | — | 177,600 | 45,657 | 52,408 | 6,971 | 494,010 | |
2007 | 200,665 | — | — | — | 89,336 | 32,235 | 9,758 | 331,994 | |
Former Named Executive Officer | |||||||||
Delbert Lobb(4) Former CEO and President | 2009 | 67,606 | — | — | — | — | — | 5,500 | 73,106 |
2008 | 326,923 | 200,000 | 1,639,000 | 296,000 | — | — | 59,657 | 2,521,580 | |
| Change in | ||||||||||||||||||||||||||||||||||||
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| Stock | Option | Compensation | All Other | |||||||||||||||||||||||||||||||||
| Name and Principal | Salary | Bonus | Awards(1) | Awards(1) | Earnings(2) | Compensation(3) | Total | |||||||||||||||||||||||||||||
Position | Year | ($) | ($) | ($) | ($) | ($) | ($) | ($) | ||||||||||||||||||||||||||||
| 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 | ||||||||||||||||||||||||||||
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| 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) | Amounts in | |
(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 |
22Plan made during 2009.
(4) | Mr. Lobb resigned | |
Non-Equity Incentive Plan Compensation
Non-equity incentive plan compensationamounts are annual cash incentives under our Annual Incentive Plan (“AIP”). The AIP is funded based on various components, which are unique to each named executive officer, and may include our annual budgeted operating income performance, MSHA average for reportable incident rate for surface mines in the coal industry, and individual performance goals, all of which are discussed above in “Compensation Discussion and Analysis.”
Equity Awards
Values for stock grants in the summary compensation table and numbers included in the grants of plan-based awards table relate to restricted stock and restricted stock units granted to the named executive officers under our stockholder-approved 2007 plan. The plan is administered by the Compensation and Benefits Committee, which has retained the exclusive authority to make awards under the plan. The committee approves all long-term incentive grants to executive officers other than the CEO, whose grants are approved by the Board. The committee also approves the overall grant pool for all other participants. The primary purpose of the long-term incentive plan is to link compensation with the long-term interests of stockholders. Restricted stock units granted to the named executives officers on July 1, 2009 vest over three years beginning 12 months from the grant 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. Awards not yet released are forfeited upon separation.
21
2009 Grants of Plan-Based Awards
Name | Grant Date | Approval Date by Comp. Committee | All Other Stock Awards: Number of Units (#) | Grant Date Fair Value of Stock Awards($)(1) |
Keith E. Alessi | 7/01/2009 | 6/17/2009 | 30,000(1) | 245,100 |
Kevin A. Paprzycki | 7/01/2009 | 6/17/2009 | 5,600(1) | 45,752 |
Morris W. Kegley | 7/01/2009 | 6/17/2009 | 5,600(1) | 45,752 |
Todd A. Myers | 6/03/2009 | 5/13/2009 | 5,000(2) | 47,600 |
7/01/2009 | 6/17/2009 | 5,600(1) | 45,752 | |
John V. O’Laughlin | 7/01/2009 | 6/17/2009 | 8,400(1) | 68,628 |
| All Other | All Other | |||||||||||||||||||||||
| Stock | Option | |||||||||||||||||||||||
| Awards: | Awards: | Grant Date | ||||||||||||||||||||||
| Number of | Number of | Exercise or | Fair Value | |||||||||||||||||||||
| Shares of | Securities | Base Price | of Stock | |||||||||||||||||||||
| Stock or | Underlying | of Option | and Options | |||||||||||||||||||||
| Grant | Approval | Units | Options (1) | Awards | Awards(2) | |||||||||||||||||||
Name | Date | Date | (#) | (#) | ($/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) | The 2009 LTIP award granted by the Compensation and Benefits Committee on June 17, 2009 consisted of restricted stock units with a three-year vest | |
(2) | Mr. Myers was granted a one-time issuance of 5,000 shares with no restrictions or vesting out of the 2007 plan to satisfy a past retirement obligation. The grant date fair value on June 3, 2009 was $9.52 per share. | |
23
2009 Outstanding Equity Awards at Fiscal Year-End
| Option Awards | Stock Awards | ||||
Name | Securities Underlying Unexercised Options (#) Exercisable | Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Units that have not vested (#)(2) | Market value of units that have not vested as of 12/31/09($)(3) |
Keith E. Alessi | 20,000 | 40,000(1) | 21.40 | 7/01/18 |
|
|
30,556 | 0 | 24.12 | 5/02/17 |
|
| |
|
|
|
| 30,000 | 267,300 | |
Kevin A. Paprzycki | 2,333 | 4,667(1) | 21.40 | 7/01/18 |
|
|
1,900 | 0 | 24.41 | 7/01/16 |
|
| |
2,500 | 0 | 29.48 | 6/05/16 |
|
| |
|
|
|
| 5,600 | 49,896 | |
Morris W. Kegley | 2,333 | 4,667(1) | 21.40 | 7/01/18 |
|
|
1,900 | 0 | 24.41 | 7/01/16 |
|
| |
|
|
|
| 5,600 | 49,896 | |
Todd A. Myers | 683 | 0 | 18.09 | 5/29/11 |
|
|
2,517 | 0 | 18.19 | 5/29/11 |
|
| |
6,700 | 0 | 12.86 | 6/24/12 |
|
| |
6,700 | 0 | 18.08 | 6/30/13 |
|
| |
6,700 | 0 | 17.80 | 12/31/13 |
|
| |
12,300 | 0 | 19.37 | 7/01/14 |
|
| |
16,200 | 0 | 20.98 | 7/01/15 |
|
| |
7,900 | 0 | 24.41 | 7/01/16 |
|
| |
2,333 | 4,667(1) | 21.40 | 7/01/18 |
|
| |
|
|
|
| 5,600 | 49,896 | |
John V. O’Laughlin | 20,000 | 0 | 12.04 | 3/05/11 |
|
|
491 | 0 | 18.09 | 5/29/11 |
|
| |
1,809 | 0 | 18.19 | 5/29/11 |
|
| |
4,700 | 0 | 12.86 | 6/24/12 |
|
| |
3,650 | 0 | 18.08 | 6/30/13 |
|
| |
3,650 | 0 | 17.80 | 12/31/13 |
|
| |
9,800 | 0 | 19.37 | 7/01/14 |
|
| |
14,600 | 0 | 20.98 | 7/01/15 |
|
| |
9,900 | 0 | 24.41 | 7/01/16 |
|
| |
5,000 | 10,000(1) | 21.40 | 7/01/18 |
|
| |
|
|
|
| 8,400 | 74,844 | |
| Option Awards | Stock Awards | |||||||||||||||||||||||
| Market | ||||||||||||||||||||||||
| Value of | ||||||||||||||||||||||||
| Shares or | ||||||||||||||||||||||||
| Number of | Number of | Number of | Units of | |||||||||||||||||||||
| Securities | Securities | Shares or | Stock That | |||||||||||||||||||||
| Underlying | Underlying | Units of | Have Not | |||||||||||||||||||||
| Unexercised | Unexercised | Option | Stock That | Vested | ||||||||||||||||||||
| Options | Options | Exercise | Option | Have Not | As of | |||||||||||||||||||
| (#) | (#) | Price | Expiration | Vested | 12/31/08 | |||||||||||||||||||
Name | Exercisable | Unexercisable | ($) | Date | (#) | ($) | ||||||||||||||||||
| Keith E. Alessi | — | 60,000 | (1) | 21.40 | 6/30/18 | — | — | |||||||||||||||||
| 30,556 | (2) | — | 23.93 | 5/01/17 | — | — | ||||||||||||||||||
| Kevin A. Paprzycki | — | 7,000 | (1) | 21.40 | 6/30/18 | — | — | |||||||||||||||||
| 1,266 | (3) | 634 | (3) | 24.41 | 6/30/16 | — | — | |||||||||||||||||
| 1,666 | (4) | 834 | (4) | 29.48 | 6/4/16 | — | — | |||||||||||||||||
| John V. O’Laughlin | 20,000 | (5) | — | 12.04 | 3/04/11 | — | — | |||||||||||||||||
| 4,700 | (6) | — | 12.86 | 6/23/12 | — | — | ||||||||||||||||||
| 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) | These options were awarded by the Compensation and Benefits Committee in June 2008 as part of the annual LTIP award. The options vest in three annual increments beginning 7/1/ | |
(2) | Awards in this column consist of restricted stock units with a grant date of July 1, 2009. Awards of restricted stock units vest in thirds over a three-year period beginning on the first anniversary of the date of grant. | |
(3) | The market value of | |
24
22
Stock Vested in 2009
Name | Shares Acquired on Vesting(#) | Stock Value Realized on Vesting($) |
Todd A. Myers | 5,000 | 47,600 |
2009 Pension Benefits
Name(1) | Plan Name | Number of Years Credited Service (#) | Present Value of Accumulated Benefit as of December 31, 2009 ($)(2) | Payments During LastFiscal Year ($) |
Keith E. Alessi | Westmoreland Retirement Plan (WCC) | 2.08 | 23,819 | — |
Kevin A. Paprzycki | Westmoreland Retirement Plan (WCC) | 3.0 | 21,241 | — |
Morris W. Kegley | Westmoreland Retirement Plan (WCC) | 3.67 | 111,217 | — |
Todd A. Myers | Westmoreland Retirement Plan (WCC) | 9.5 | 102,631 | — |
John V. O’Laughlin | Westmoreland Retirement Plan (BSS) | 9.0 | 200,250 | — |
(1) | ||
Mr. Lobb |
25
| 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) | ||||||||||||||
(2) | Pension economic assumptions are consistent with our SFAS 87 financial reporting for fiscal year |
Effective July 1, 2009, the Board froze 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 the same defined benefit pension plans 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. The pension plan was adopted effective December 1, 1997 and provides for the payment of annualnormal retirement at 65. Early retirement benefits are available at age 55 with 10 years of service, however at reduced benefits. None of the named executives covered under this plan are eligible to eligible employees and also provides for disability benefits and forretire as of December 31, 2009. The executive may choose optional forms of benefit, all reduced benefits upon retirement priorto be actuarially equivalent to the normal retirement age of 65.single life annuity benefit. The optional forms available are 50%, 66 2/3% and 100% joint and survivor options, a 10-year certain and life o ption, and a single life annuity.
In addition, to the main Westmoreland pension plan, provides the following benefits:
26
2009 Pension Benefits Upon Retirement/Termination Disability or Death
Mr. O’Laughlin and Mr. Myers are each vested in the pension plan and are entitled to an annual lifetime benefit payable upon retirement, voluntary or involuntary termination, disability or death (paid for the life of the spouse). Benefits shown for Mr. O’Laughlin and Mr. Myers assume that the event entitling them to benefits occurred on December 31, 2008.2009. The benefits for Mr. Myers are first payable on March 1, 2029.2019. The benefits for Mr. O’Laughlin are first payable on January 1, 2009.
| 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 | |||||||||
| 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 | ||||||||||||||
Name | Type of Termination | Plan | Benefit Amount | Form of Payment | Time or Period of Payment |
John V. O’Laughlin | Retirement/Termination | Pension Plan | $2,005 | Monthly Annuity | Life |
Disability | Pension Plan | $2,005 | Monthly Annuity | Life | |
Death | Pension Plan | $919 | Monthly Annuity | Life of | |
Todd A. Myers | Retirement/Termination | Pension Plan | $1,208 | Monthly Annuity | Life |
Disability | Pension Plan | $2,415 | Monthly Annuity | Life to age 65 | |
Death | Pension Plan | $1,038 | Monthly Annuity | Life of |
23
27
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.
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, 2009. The following tables do not include amounts payable upon termination for pension benefits, as those benefits are estimated to total $331,000.
Name | Type of Compensation | Termination for Cause/ Voluntary Termination | Involuntary Not for Cause | Termination upon Change-in-Control | Retirement | Death |
Keith Alessi | Salary | $0 | $600,000 | $0 | $0 | $0 |
Vested Equity(1)(2) | $0 | $0 | $267,300 | $0 | $267,300 | |
Outplacement Services and health benefits | $0 | $23,125 | $0 | $0 | $0 |
28
Name | Type of Compensation | Termination for Cause/ Voluntary Termination | Involuntary Not for Cause | Termination upon Change-in-Control | Retirement | Death | |
Kevin Paprzycki | Salary | $0 | $207,000 | $0 | $0 | $0 | |
Vested Equity(1)(2) | $0 | $0 | $49,896 | $0 | $49,896 | ||
Outplacement Services and other benefits | $0 | $22,235 | $0 | $0 | $0 | ||
Name | Type of Compensation | Termination for Cause/ Voluntary Termination | Involuntary Not for Cause | Termination upon Change-in-Control | Retirement | Death |
Morris Kegley | Salary | $0 | $207,375 | $0 | $0 | $0 |
Vested Equity(1)(2) | $0 | $0 | $49,896 | $0 | $49,896 | |
Outplacement Services and other benefits | $0 | $18,583 | $0 | $0 | $0 |
Name | Type of Compensation | Termination for Cause/ Voluntary Termination | Involuntary Not for Cause | Termination upon Change-in-Control | Retirement | Death |
Todd Myers | Salary | $0 | $226,633 | $0 | $0 | $0 |
Vested Equity(1)(2) | $0 | $0 | $49,896 | $0 | $49,896 | |
Outplacement Services and other benefits | $0 | $23,143 | $0 | $0 | $0 |
Name | Type of Compensation | Termination for Cause/ Voluntary Termination | Involuntary Not for Cause | Termination upon Change-in-Control | Retirement | Death |
John O’Laughlin | Salary | $0 | $220,007 | $0 | $0 | $0 |
Vested Equity(1)(2) | $0 | $0 | $74,844 | $0 | $74,844 | |
Outplacement Services and other benefits | $0 | $17,404 | $0 | $0 | $0 |
| Fees Earned or | Stock | Option | ||||||||||||||
| Paid in Cash | Awards(2)(3)(4) | Awards(5) | Total | |||||||||||||
Name(1) | ($) | ($) | ($) | ($) | ||||||||||||
| 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) | 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 $8.91, the closing price of our stock on December 31, 2009. There is no intrinsic value in any accelerated options or vested stock options because options with an exercise price greater than $8.91 have zero intrinsic value. | |
(2) | ||
We awarded long-term equity to the | ||
29
CERTAIN TRANSACTIONS
30
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.
· the related person’s interest in | ||
·
the transactions that are excluded byapproximate dollar value of the instructions toamount involved in the SEC’s related person transaction;
·
whether the terms of the transaction disclosure rule, are no less favorable to us than could have been reached with an unrelated third party; and
·
the purpose of, and the potential benefits to us of, the transaction.
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:
31
| compensation to an executive officer if the compensation has been approved, or recommended to the Board for approval | ||
Certain Relationships and Related Transactions with Tontine
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.
32
AUDITORS
33
34
On January 6, 2009, we notified KPMG LLP 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’sour 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 of theForm 8-K/A on March 23, 2009, the Companywe 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 CompanyOur management 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’sour 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:
25
accounting principles.
We 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
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 hasWe did not consultedconsult with Ernst & Young during its two most recentthe fiscal years ended December 31, 2007 and December 31, 2008, or during any subsequent period prior to its appointment as the Company’sour 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 for each of the last two fiscal years.year 2008, and Ernst & Young, for fiscal year 2009. For 2008,2009, 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) |
|
| 2009 |
| 2008 |
Audit Fees(2) | $ | 856,000 | $ | 1,136,000 | |
Total Fees | $ | 856,000 | $ | 1,136,000 | |
(1) | We did not pay any “Audit Related Fees,” “Tax Fees” or “All Other Fees” to either KPMG or Ernst & Young in fiscal years 2008 or 2009. | |
(2) | Audit fees consist of fees for the audit of our financial statements, including fees related to | |
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.
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ELECTION OF STOCKHOLDERS FOR 2010 ANNUAL MEETING
Each of our common stock director nominees is currently a stockholdermember of 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.
The Board of order,Directors recommends that holders of Common Stock vote “FOR” the election of the following nominees whose biographical information can be found above on pages 4 and 5:
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Keith E. Alessi;
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Thomas J. Coffey;
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Michael R. D’Appolonia; and
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Richard M. Klingaman.
ELECTION OF DIRECTORS BY THE HOLDERS OF SERIES A PREFERRED STOCK
The holders of our Series A Preferred Stock are entitled to elect two members to the Board. Each person elected at the meeting shall hold office until the next annual meeting of stockholders, or take other appropriate action with respect to any proposal that does not comply with these and other applicable requirements, including conditions establisheduntil his death, resignation, or removal, if earlier. In addition, if the special voting rights of the Series A Preferred Stock terminate, the terms of office of the directors elected by the SEC. If a stockholder fails to provide timely noticeholders of a proposalthe Series A Preferred Stock will immediately terminate.
The Board recommends that holders of Depositary Shares vote “FOR” the election of the following nominees whose biographical information can be found above on page 5:
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William M. Stern; and
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Frank T. Vicino, Jr.
RATIFICATION OF PRINCIPAL INDEPENDENT AUDITOR
The Audit Committee appointed the firm of Ernst & Young LLP as our principal independent auditor for fiscal year 2010. Ernst & Young LLP served as our principal independent auditor in fiscal year 2009. Representatives of Ernst & Young LLP are expected to be presentedpresent at the 2010 Annual Meeting, the proxies designated by the Boardannual meeting, will have discretionary authoritythe opportunity to make a statement if they desire to do so and will be available to respond to questions.
The Board recommends that you vote on any such proposal.
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 abeneficial owner of such stock entitled to vote at the Annual Meeting, the Company annual meeting, wewill send such person, without charge, a copy of itsour Annual Report onForm 10-K for 2008,2009, 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 NorthCascade Avenue, 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.
The Board has no present intention of bringing any other business before the meeting and has not been informed of any other matters that are to be presented to the meeting. If any other matters properly come before the meeting, however, the persons named in the enclosed proxy will vote in accordance with their best judgment.
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WESTMORELAND COAL COMPANY 2 N. CASCADE AVE., 2ND FLOOR COLORADO SPRINGS, CO 80903 ATTN: JENNIFER S. GRAFTON | VOTE BY INTERNET - Use the Internet to transmit your ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in 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. | ||
![[proxycard002.gif]](https://capedge.com/proxy/DEF 14A/0001447572-10-000007/proxycard002.gif)
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | ||||
M22366-P91502 | ||||
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Important Notice Regarding the listed nominees.
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WESTMORELAND COAL COMPANY
Annual Meeting of Stockholders
May 20, 2010 8:30 AM
This proxy is solicited 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.
The undersigned hereby constitutes and appoints Morris W. Kegley and Jennifer S. Grafton 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 |
| 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 and FOR the ratification of auditors. 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 the shares unless you sign and return this card. | ||||
Continued and to be signed on reverse side |
WESTMORELAND COAL COMPANY 2 N. CASCADE AVE., 2ND FLOOR COLORADO SPRINGS, CO 80903 ATTN: JENNIFER S. GRAFTON | 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 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 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. | |
Annual Meeting - May 14, 2009
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | ||||
M22368-P91502 | ||||
KEEP THIS PORTION FOR YOUR RECORDS | ||||
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6 PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.6
Important Notice Regarding the listed nominees.
www.proxyvote.com.
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WESTMORELAND COAL COMPANY
Annual Meeting of Stockholders
May 20, 2010 8:30 AM
This proxy is solicited 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.
The undersigned hereby constitutes and appoints Morris W. Kegley and Jennifer S. Grafton 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 |
| 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 and FOR the ratification of auditors. 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 the shares unless you sign and return this card. |
Continued and to be signed on reverse side | ||
Annual Meeting - May 14, 2009