WESTMORELAND COAL CO
DEFC14A, 1999-04-29
BITUMINOUS COAL & LIGNITE MINING
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<PAGE>   1
 
                                  SCHEDULE 14A
                                 (RULE 14a-101)
 
                    INFORMATION REQUIRED IN PROXY STATEMENT
 
                            SCHEDULE 14A INFORMATION
          PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
                     EXCHANGE ACT OF 1934 (AMENDMENT NO.  )
 
     Filed by the Registrant [ ]
 
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     Check the appropriate box:
 
     [X] Preliminary Proxy Statement        [ ] Confidential, for Use of the
                                                Commission Only (as permitted by
                                                Rule 14a-6(e)(2))
 
     [ ] Definitive Proxy Statement
 
     [ ] Definitive Additional Materials
 
     [ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12

                         Westmoreland Coal Company 
- --------------------------------------------------------------------------------
                (Name of Registrant as Specified in Its Charter)

                           Frank E. Williams, Jr.               
- --------------------------------------------------------------------------------
    (Name of Person(s) Filing Proxy Statement if other than the Registrant)
 
Payment of Filing Fee (Check the appropriate box):
 
     [X] No fee required.
 
     [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
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<PAGE>   2
                  Westmoreland Committee to Enhance Share Value

                              2789-B Hartland Road
                              Post Office Box 4004
                              Merrifield, VA 22116
                                 (703) 641-4612

                                 April 28, 1999

                   VOTE FOR CHANGE IN WESTMORELAND MANAGEMENT

Dear Fellow Shareholder:

On behalf of the Westmoreland Committee to Enhance Share Value, I ask for your
support and vote in person or by proxy FOR our proposals to replace
Westmoreland Coal Company's current Board of Directors and to implement our
plan for enhancing the value of our collective shares. Foremost, we think that
now is the best time to sell Westmoreland's remaining Independent Power
Projects (IPPs).

During the past several weeks, we have received numerous unsolicited
expressions of support. Members of the Committee and those who have contacted
us are in unanimity to make the changes necessary to maximize value for
shareholders. I urge you in deciding who has the better plan for the future of
our company to ask yourself: What's in it for me as a shareholder and what's in
it for the current salaried management of Westmoreland. Then, take a look at
management's track record.

Westmoreland Coal Company has scheduled its Special Meeting for 8 am, May 12,
in Colorado Springs, CO. If it is not possible for you to attend in person to
support our proposals, it is vitally important to us that you promptly sign and
date our enclosed BLUE proxy card, indicating your vote FOR our proposals, and
return it in the enclosed envelope. I urge you not to sign any proxy cards you
receive from Westmoreland Coal Company. In the event that you have already done
so, you have the right to cancel that vote by subsequently signing, dating, and
returning our BLUE proxy card. Please call DF King & Co. toll free at
1-800-628-8538 if you require assistance.

Let's move forward to enhance share value. I invite you to contact me or other
members of the Committee. We look forward to discussing our Proxy Statement
with you.

                                                 Sincerely,

                                                 /s/ FRANK E. WILLIAMS, JR.
                                                 Frank E. Williams, Jr.
                                                 Chairman

<PAGE>   3
 
         1999 SPECIAL MEETING IN LIEU OF ANNUAL MEETING OF STOCKHOLDERS
                          OF WESTMORELAND COAL COMPANY
 
       PLEASE VISIT OUR WEB SITE AT HTTP://WWW.FREEDOMFORSHAREHOLDERS.COM
 
                               PROXY STATEMENT OF
                 WESTMORELAND COMMITTEE TO ENHANCE SHARE VALUE
 
     The enclosed proxy is solicited on behalf of the Westmoreland Committee to
Enhance Share Value (The "Committee") for use at the 1999 Special Meeting in
Lieu of Annual Meeting of shareholders of Westmoreland Coal Company, a Delaware
corporation (the "Company"), to be held at 8:00 am, local time, on Wednesday,
May 12, 1999 at the Antlers Adam's Mark Hotel, 4 South Cascade Avenue, Colorado
Springs, Colorado 80903. It is anticipated that this Proxy Statement and BLUE
Proxy card will be mailed to shareholders on or about April 28, 1999. The
purpose of our solicitation is to elect a new board of directors opposed to the
present management of the Company.
 
     The Committee is a direct outgrowth of the experience of three of its
members who served as members (one of whom served as co-chairman) of the
Official Committee of Equity Security Holders (the "Equity Committee") while the
Company was recently under the jurisdiction of the Federal Bankruptcy Court.
Through that experience they became convinced that the present board of
directors should be replaced by persons willing and able to carry out the
Committee's plan for the future direction of the Company.
 
                PLEASE JOIN US, WE NEED YOUR VOTES AND SUPPORT.
 
THE COMMITTEE'S PLAN
 
     The following are the four principal elements of the Committee's plan:
 
     X Sale of all IPPs.  The Committee proposes selling Westmoreland's
       remaining Independent Power Projects (IPPs) as soon as practicable,
       consistent with obtaining fair market value for the assets. We believe
       that the current, but probably temporary, market environment of under-
       capacity in the electricity sector has escalated IPP market valuations to
       the point that very favorable selling prices can be obtained. We have
       also retained the expert advice of Bodington & Company -- a management
       and financial consulting firm serving the electric power industry to
       develop a strategy for obtaining maximum revenues possible for
       Westmoreland's remaining IPP assets.
 
       The federal Coal Act in effect makes any purchaser of an IPP liable for
       any existing claims the affected Funds might have against the Company
       which are related to that property. This liability to the purchaser may
       be waived by the affected Funds. Since it is unlikely that a prospective
       purchaser will purchase an IPP without this waiver, any sale of the IPPs
       will require the approval of the affected UMWA Funds (please see
       "Solicitation Expenses" later in this proxy statement for information
       concerning the relationship of the Funds to the Company) and the
       Committee has no assurance that the approval will be granted. The
       Committee believes that the Funds support a corporate strategy of the
       sale of the IPPs, assuming that the terms and conditions for such sale
       are favorable, but their express consent has not been obtained.
 
     X Expansion of surface mining operations.  The Committee proposes
       substantially increasing production and marketing of Westmoreland's coal
       assets in the Powder River Basin near Hardin, Montana and attempting to
       negotiate lower rail transportation rates.
 
     X Closing executive headquarters.  The Committee would reduce overhead
       costs by reducing the number of Westmoreland's salaried executives in
       Colorado Springs, relinquishing the headquarters space, and managing the
       company through its subsidiaries. There are no Westmoreland operations in
       or near Colorado Springs, Colorado.
 
     X  Electing a Board to implement our plan.  The Committee has recruited a
        proposed Board of Directors which it believes has the individual and
        combined expertise in the operational skills and judgment necessary to
        enhance the value of Westmoreland's assets and shareholders' equity. As
        evidenced by their resumes, their skills and experience include asset
        valuation, mergers, acquisitions, consolidations, sales, marketing,
        management, and labor relations, as well as extensive experience in the
        energy power sector.
<PAGE>   4
 
                             ELECTION OF DIRECTORS
 
VOTING PROCEDURES
 
     Holders of Common Stock have one vote for each share with respect to all
matters to be considered at the Special Meeting, except that they will have no
vote on the election of the two directors who are nominated to serve as
representatives of the holders of the Preferred Stock (each such share of
Preferred Stock being evidenced by four Depositary Shares). Holders of
Depositary Shares have one vote for each Depositary Share on all matters to be
considered, except for the election of the at-large directors.
 
     While no mention of this exclusion was made in the Prospectus employed in
the sale of the Depositary Shares, the Company's Articles of Incorporation
(which was filed as an exhibit to the registration statement of which the
Prospectus was a part) provide that when the dividends on the Preferred Stock
are in default, such that the holders of the Depositary Shares have the right to
elect two directors, they have no vote on the remaining directors. In spite of
the fact that the exclusionary provision was not described in the Prospectus, it
appears to have been validly adopted under Delaware law. In view of this, the
Committee reluctantly accepts that the holders of the Depositary Shares will be
able to vote only on the two Preferred Stock directors.
 
     The Company's By-laws, filed as an Exhibit to the annual report for the
Fiscal Year Ended December 31, 1998, on Form 10K/A, provide that there shall be
six directors. The Company has, however, seven directors and has nominated seven
persons as directors in its proxy material filed with the Securities and
Exchange Commission for the 1999 Meeting. If the Committee succeeds in electing
its At-large nominees, it intends that the directors will amend the By-laws to
provide for seven, rather than six, directors. Consequently, it has nominated
the seven persons named below.
 
     No shareholder is permitted to cumulate votes at the meeting or by proxy.
Directors will be elected by an affirmative vote of a plurality of the shares
present in person or by proxy and entitled to vote on the nominees. The two
nominees for the Preferred Stock directorships who receive the most votes of the
Depositary Shareholders will be elected and the At-large nominees who receive
the most votes of the Common Stockholders will be elected.
 
     The Committee is presenting the nominees in the form of two proposals.
Proposal Number 1 is that the five persons named below as the Committee's
At-large Nominees be elected by the holders of Common Stock to serve as
Directors. Proposal Number 2 is that the two Preferred Stock Nominees be elected
by the holders of Depositary Shares as Directors to serve as representatives of
the Preferred Stockholders.
 
     If you own Common Stock, you will find enclosed a BLUE proxy containing
means for you to vote FOR or withhold authority to vote for Proposal Number 1.
If you own Depositary Shares you will find enclosed a BLUE proxy containing
means to vote FOR or withhold authority to vote for Proposal Number 2. If you
own both Depositary Shares and Common Stock, you will find enclosed both BLUE
proxies.
 
         THE COMMITTEE URGES YOU TO VOTE FOR THE COMMITTEE'S PROPOSALS.
                            YOUR VOTE IS IMPORTANT.
                               PLEASE ACT TODAY.
 
 THE COMMITTEE URGES YOU TO SIGN, DATE AND MAIL THE ENCLOSED BLUE PROXY CARD OR
                 CARDS, VOTING "FOR" THE COMMITTEE'S NOMINEES.
 
     We urge you not to sign any proxy card sent to you by Westmoreland Coal
Company. If you have already done so, you have the right to change your vote and
vote for the election of the Committee's nominees simply by signing, dating, and
mailing the BLUE proxy in the ENCLOSED RETURN ENVELOPE or express mailing it to
the following address:
 
    DF King & Company, Inc.
     77 Water Street
     20th Floor
     New York, NY 10005
<PAGE>   5
 
     Please call DF King & Co., Inc., toll free at 1-800-628-8538 if you require
assistance or have any questions.
 
     Alternatively, you may send your BLUE proxy to the Secretary of the Company
at the company's executive offices or you may vote in person at the Special
Meeting, May 12.
 
     The BLUE proxy must be dated after any other proxy you may have already
submitted to the company. REMEMBER, ONLY YOUR LATEST DATED PROXY WILL COUNT IN
THE ELECTION .
 
                            THE COMMITTEE'S NOMINEES
 
     Information about the Committee's nominees follows. Each nominee has
consented to being named as such. None of the nominee nor any of their
associates has any arrangement or understanding with any person with respect to
future employment with the Company nor with respect to any future transactions
to which the Company or any of its affiliates will be a party, except, of
course, as the nominees, if elected intend to implement their plans as outlined
in this proxy statement. Other than Messrs. Williams, Obus and Offutt entering
into the Master Agreement, as members of the Equity Committee, no nominee is, or
was within the past year, a party to any contract, arrangements or
understandings with any person with respect to any securities of the Company,
including, but not limited to, joint ventures, loan or option arrangements, puts
or calls, guarantees against loss or guarantees of profit, division of losses or
profits, or the giving or withholding of proxies.
 
AS AT-LARGE NOMINEES
 
     William J. Sim, age 54, is Group Vice President -- Generation of Potomac
Electric Power Company (Pepco), Washington DC (since 1997). At Pepco, Mr. Sim
has full profit and loss responsibility for all generation activities. In
addition, he manages the Generation Business Unit, including fuels procurement
(coal, oil, and gas), operations and maintenance of generating plants, the
Central Engineering and Maintenance Organization, the Business Planning, and the
Power Marketing Business. Previously, he was Group Vice President, Power Supply
and Delivery, Pepco (1994 to 1997), where he managed generation, transmission,
and distribution operations including: generating plants, overhead and
underground systems, substations, the Consolidated Control Center, and the
Environment Group In addition, he worked as Vice President, Operations and
Construction, Pepco (1991 to 1994) where he managed operation, maintenance, and
construction of Generating, Transmission, Distribution, and Substations
facilities and the Consolidated Control Center. Mr. Sim also served previously
as President and COO of the American Energy Division of Potomac Capital
Investment Corporation, American Energy & American Recovery Corporation, a
division of Potomac Capital Investment Corporation (PCI), the non-regulated
subsidiary of Pepco. In that position, he managed operations involved in the
ownership, design, construction, and operations of energy facilities, including:
solar, hydro, waste-to-energy, co-generation projects, and waste recycling. Mr.
Sim serves as a Member, Board of Directors, Williams Industries, Falls Church,
VA. Loyola College -- MBA. University of Glasgow, Scotland -- BSc, Civil
Engineering. University of Michigan -- Public Utility Executive Program. Mr. Sim
owns 100 Depository Shares, which he purchased on March 26, 1999, after being
asked to serve as a Committee nominee.
 
     Robert F. Fowler, age 55, is the Managing Member of Robert Fowler &
Associates, LLC (management consulting company, specializing in divestitures and
mergers, serving as owner-representative), Atlanta, GA (since 1977). Currently,
Mr. Fowler is serving as temporary CFO for the Boomershine Auto Group (a $250
million annual revenue, multi-dealership), with operations in Atlanta, where he
is winding down all facets of the corporation and selling off its assets. He is
past Chairman of the Board of Signal Point Systems (a full service telecom
contractor) and a past Member of the Board of EMCUS, Inc. (union industrial
electrical contractor holding company). Previously, Mr. Fowler worked as Senior
Consultant, FMI Corporation (management consulting company that is a leading
advisor in corporate divestitures and mergers), Raleigh, NC, and Corporate
Planner -- Holding Company, NationsBank, Charlotte, NC.
Wharton -- MBA -- International Business and Finance. Virginia Military
Institute -- BS -- Civil Engineering and Mathematics. Mr. Fowler owns 100 shares
of Common Stock, which he purchased on April 8, 1999, after being asked to serve
as a Committee nominee.
<PAGE>   6
 
     Nelson Obus, age 52, is President of Wynnefield Capital, LLC (a private
partnership with assets over $150 million, specializing in undervalued
publicly-traded small companies), New York, NY (since 1992). Mr. Obus served as
a Member of the Westmoreland Official Committee of Equity Security Holders (June
1998 to February 1999). Previously, he was Research Director for Schaffer
Capital Management and earlier was with Lazard Freres Brothers, LLC
(institutional equity sales) as Director of Research, Institutional Salesman,
and Research Analyst (in succession). Prior to his positions on Wall Street, Mr.
Obus worked for more than a decade in natural resources management with the
Massachusetts Audubon Society, the Appalachian Mountain Club, and the Department
of Environmental Management of the Commonwealth of Massachusetts. New York
University -- BA. Brandeis University -- MA, ABD -- political science.
 
     R. Bentley Offutt, age 60, is Founder and President of Offutt Securities,
Inc., a member of the NASD (institutional research brokerage firm which
specializes in value investing and focuses its coverage on companies with a
market capitalization between $60 million to $1 billion), Baltimore, MD (since
1987). Previously, he was Director, Institutional Research and Marketing, Legg
Mason. Mr. Offutt served as a Member of the Westmoreland Official Committee of
Equity Security Holders (June 1998 to February 1999). In addition, he is a
Member of the Board, Williams Industries, Inc., Falls Church, VA (since 1994).
Previously, he was Vice Chairman, Franklin Square Hospital, MD. George
Washington University -- MBA. Lehigh University -- BA.
 
     Matthew S. Sakurada, age 47, is President of EmPower Resources, Inc.
(management consulting and investment company), Sanford, NC (since 1996).
Previously, he was President, Vice President and General Manager, and Vice
President -- Project Development (in succession), Westmoreland Energy, Inc.,
Charlottesville, VA (1988 to 1996). There, he led corporate and project
development and was responsible for site selection, fuel procurement,
permitting, financing, construction, coal marketing, and operation of eight
power-generating facilities owned in partnership with other leading companies.
Prior to holding those positions, he was Manager of Material, Engineering and
Human Resources, Engineering Manager, and Civil Engineer (in succession),
Colorado Westmoreland, Inc., Paonia, CO. There, Mr. Sakurada was responsible for
the material management, engineering, and human resources departments. In
addition, he worked as Engineer -- Structural Mechanics, Engineer -- Structural
Division, and Structural Designer (in succession), Stone & Webster Engineering
Corp., Boston, MA, and Denver, CO, where he engineered and designed coal-fired,
hydro-electric, nuclear, and natural gas powered generation facilities. James
Madison University -- MBA. University of Colorado at Denver -- Master of
Engineering. Colorado State University -- BS -- Civil Engineering. Mr. Sakurada
owns 110 shares of Common Stock, 100 of which he purchased on March 19, 1999.
 
AS PREFERRED STOCKHOLDER NOMINEES
 
     Guy O. Dove, III, age 61, is a Personal Investor, Washington, DC (since
1989). He also serves as Chairman of Pinnacle Oil Company (exploration and
production of natural gas and oil), with assets mainly in Oklahoma (since 1972).
Previously, Mr. Dove was Partner and Chief Investment Officer, The Clarendon
Group, London, UK, where he was responsible for all facets of investment
management of a $3 billion reinsurance group. Prior positions included: First
Vice President, Schroder Capital Management, Inc., Washington, DC, and Bond
Manager responsible for the National Fixed Income Department, having more than
$100 MM in funds under management; Vice President, Equitable Trust Company,
Baltimore, MD, and Senior Bond Manager in the Pension Fund Department
responsible for fixed income portfolios, managing more than $400 MM in funds;
and Financial Consultant, Federal Energy Administration, Washington, DC.
Projects with FEA included evaluating financial problems relating to the
electric utility industry and the impact of financial markets of various policy
options. Trinity College -- BA.
 
     Frank E. Williams, Jr., age 64, is Founder, Chairman, and CEO of Williams &
Beasley Co. (steel erection), Dallas, TX (since 1996). He is also Chairman of
Williams Enterprises of Georgia, Inc. (steel fabrication and erection of
structural steel and miscellaneous iron) and its five subsidiaries, Atlanta, GA
(since 1967). He served as Co-Chairman of the Westmoreland Official Committee of
Equity Security Holders (June 1998 to February 1999). Previously, he was
President, CEO, and Chairman, of Williams Industries, Inc. (construction
services), Falls Church, VA (1961 to 1995). He also served as a Director
<PAGE>   7
 
and Chairman of the Board, Capital Bank NA, Washington, DC. Georgia Institute of
Technology -- Bachelor of Civil Engineering.
 
               THE WESTMORELAND COMMITTEE TO ENHANCE SHARE VALUE
 
     The Committee is an outgrowth of the Official Committee of Equity Security
Holders (the "Equity Committee") that was formed on June 29, 1998, when the
Office of the United States Trustee granted certain shareholders' request to
appoint a committee to represent the rights and interests of common and
preferred shareholders. Following the dismissal of the bankruptcy case, the
Equity Committee was dissolved February 4, 1999. In early March 1999, three of
the former members of the Equity Committee, Frank E. Williams, Jr., Nelson Obus,
and R. Bentley Offutt joined with a fourth shareholder, Guy O. Dove III, to form
the Westmoreland Committee to Enhance Share Value. More detailed information
about each of these persons is set forth below.
 
     Frank E. Williams, Jr., 2789 Hartland Road, Falls Church, VA 22043. His
principal occupation is Chairman of the Board of Williams Enterprises of
Georgia, whose principal business is steel construction and whose address is
1285 Hawthorne Ave., P.O. Box 756, Smyrna, GA 30081. Mr. Williams beneficially
owns, directly and indirectly, 211,000 shares of Common Stock and 14,308
Depository Shares. Under Securities and Exchange Commission rules, the 14,308
Depository Shares are considered to constitute beneficial ownership of 24,438
shares of Common Stock into which they are convertible ("Equivalent Shares"),
giving Mr. Williams a total beneficial ownership of 235,438 shares of Common
Stock. Mr. Williams owns no shares of stock of record which he does not also
beneficially own. Certain of the shares set forth as being beneficially owned by
Mr. Williams are owned by his wife, father, a family charitable foundation, and
a family trust. No associates of Mr. Williams, other than the members of the
Committee and the family members, own any of the Company's securities. All of
these shares have been purchased during the past two years as follows:
 
<TABLE>
<CAPTION>
                         DATE                            NUMBER OF SHARES   TYPE OF SECURITY
                         ----                            ----------------   ----------------
<S>                                                      <C>                <C>
April 28, 1997.........................................       20,000        Common
April 30, 1997.........................................        5,000        Common
May 1, 1997............................................       10,000        Common
February 19, 1998......................................        5,000        Common
April 2, 1998..........................................       12,000        Common
April 28, 1998.........................................        5,000        Common
April 29, 1998.........................................       16,000        Common
June 12, 1998..........................................      135,000        Common
July 27, 1998..........................................        4,000        Depositary
October 1, 1998........................................       34,000        Depositary
</TABLE>
 
     On September 3, 1998, Mr. Williams sold 15,000 shares of Common Stock. As
of April 14, 1999, Mr. Williams sold 23,692 Depositary Shares.*
 
     R. Bentley Offutt, Offutt Securities, Inc., 11350 McCormick Road, Executive
Plaza III, Suite 901, Hunt Valley, MD 21030. His principal occupation is
President of Offutt Securities, Inc., a member firm of the National Association
of Securities Dealers (NASD), acting primarily as an institutional research
brokerage firm specializing in companies with market capitalization between $60
million to $1 billion. Mr. Offutt beneficially owns 199,400 shares of Common
Stock and no Depositary Shares. Of these, 40,000 shares were purchased on
November 10, 1997; the remainder were purchased more than two years ago. Of this
Common Stock, 149,400 shares are owned by his wife, with whom Mr. Offutt shares
voting and dispositive power, and 50,000 shares are owned by Offutt Securities.
Mr. Offutt owns no Westmoreland securities of record which he does not also
beneficially own. No associates of Mr. Offutt, other than the members of the
Committee and his wife, own any of the Company's securities.
 
- ---------------
 
* Indicates shares purchased by the Company pursuant to its recent tender offer.
<PAGE>   8
 
     Nelson Obus, One Penn Plaza, Suite 4720, New York, NY 10119. Mr. Obus'
principal occupation is managing investments as President of Wynnefield Capital
Management, LLC, of that address. Wynnefield Capital Management, LLC is a
private limited liability company organized under the laws of New York. Mr. Obus
is the indirect owner of 693,900 shares of Common Stock and 19,155 Depositary
Shares, through the following entities: Wynnefield Partners Small Cap Value LP
I, a Delaware limited partnership ("Partnership I") -- 229,947 shares of Common
Stock and 7,647 Depositary Shares; Wynnefield Partners Small Cap Value LP, a
Delaware limited partnership ("Partnership") -- 332,253 shares of Common Stock
and 6,373 Depositary Shares; Wynnefield Small Cap Offshore Fund Ltd., a
partnership organized under the laws of the Cayman Islands ("Offshore
Fund") -- 131,700 shares of Common Stock and 5,135 Depositary Shares. Wynnefield
Capital Management, LLC is the general partner of Partnership and Partnership I,
and Wynnefield Capital, Inc., a Delaware corporation is the general partner of
Offshore Fund. Mr. Obus, Joshua H. Landes and Robert Melnick are the members of
the Wynnefield Capital Management, LLC, and Messrs. Obus and Landes are the
stockholders, directors and officers of Wynnefield Capital, Inc. All of these
persons and entities share the address set forth above. Mr. Obus is not the
record owner of any Westmoreland securities of which he is not also a beneficial
owner. During the past two years, shares have been purchased as follows:
 
     PARTNERSHIP I
 
<TABLE>
<CAPTION>
                         DATE                            NUMBER OF SHARES   TYPE OF SECURITY
                         ----                            ----------------   ----------------
<S>                                                      <C>                <C>
April 11, 1997.........................................       17,345        Common
March 9, 1998..........................................       64,500        Common
September 2, 1998......................................       20,400        Depositary
</TABLE>
 
     On September 2, 1998, Partnership I sold 19,000 Common Shares. As of April
14, Partnership I sold 12,753 Depositary Shares.*
 
     PARTNERSHIP
 
<TABLE>
<CAPTION>
                         DATE                            NUMBER OF SHARES   TYPE OF SECURITY
                         ----                            ----------------   ----------------
<S>                                                      <C>                <C>
April 1, 1997..........................................       32,655        Common
September 2, 1998......................................       13,100        Depositary
September 3, 1998......................................        3,900        Depositary
</TABLE>
 
     On September 2, 1998, the Partnership sold 15,000 Common Shares. As of
April 14, 1998, the Partnership sold 10,627 Depository Shares.*
 
     OFFSHORE FUND
 
<TABLE>
<CAPTION>
                         DATE                            NUMBER OF SHARES   TYPE OF SECURITY
                         ----                            ----------------   ----------------
<S>                                                      <C>                <C>
April 11, 1997.........................................      131,700        Common
June 1, 1998...........................................        4,700        Depositary
September 4, 1998......................................        9,000        Depositary
</TABLE>
 
     The Fund sold 8,300 Common Shares on September 2, 1998. In addition, the
Fund sold 8,565 Depositary Shares as of April 14, 1999.*
 
     Guy O. Dove, III, 10 Jay Street, Middleburg, VA 20118. Mr. Dove's
occupation is Personal Investor and Chairman of the Board of Directors of
Pinnacle Oil Company of the same address, with assets mainly in Oklahoma. Mr.
Dove is the beneficial owner of 198,000 shares of Common Stock and 20,123
Depositary Shares, giving Mr. Dove a total beneficial ownership of 232,370
Equivalent Shares of Common Stock. He owns no Westmoreland securities of record
which he does not beneficially own. 0,000 Depositary Shares set forth above are
owned by his adult children, whom Mr. Dove advises as to voting and dispositive
powers. 184,000 shares of Common Stock and 10,123 Depositary Shares are owned
directly by
 
- ---------------
 
* Indicates shares purchased by the Company pursuant to its recent tender offer.
<PAGE>   9
 
him, and 14,000 shares of Common Stock and 1,875 Depositary Shares are owned by
Pinnacle Oil. Purchases by Mr. Dove during the last two years are as follows:
 
<TABLE>
<CAPTION>
                         DATE                            NUMBER OF SHARES   TYPE OF SECURITY
                         ----                            ----------------   ----------------
<S>                                                      <C>                <C>
October 28, 1998.......................................       35,000        Common
November 11, 1998......................................        3,000        Common
November 12, 1998......................................        1,000        Common
December 21, 19998.....................................       40,000        Common
January 13, 1999.......................................        5,000        Common
November 13, 1998......................................        2,000        Depositary
April 14, 1999.........................................        1,000        Depositary
April 15, 1999.........................................        3,500        Depositary
</TABLE>
 
     As of April 14, 1999, he sold 9,377 Depositary Shares.* Other than the
associates set forth above, no associates of Mr. Dove own any Westmoreland
securities.
 
     The Committee as a group directly and indirectly owns 1,302,300 shares of
Common Stock and 39,278 Depositary Shares, or 1,369,387 Equivalent Shares of
Common Stock. No member of the Committee nor any of their associates has any
arrangement or understanding with any person with respect to future employment
with the Company nor with respect to any future transactions to which the
Company or any of its affiliates will be a party, except, of course, as the
members of the Committee itself intend to implement its plans as outlined in
this proxy statement. Other than their entering into the Master Agreement, as
members of the Equity Committee, no member of the Committee is, or was within
the past year, a party to any contract, arrangements or understandings with any
person with respect to any securities of the Company, including, but not limited
to, joint ventures, loan or option arrangements, puts or calls, guarantees
against loss or guarantees of profit, division of losses or profits, or the
giving or withholding of proxies.
 
                                THE SOLICITATION
 
     This proxy statement is first being given or sent to shareholders on or
about April 28, 1999. Any shareholder who executes and delivers a proxy for use
at the Special Meeting has the right to revoke it any time by filing with the
Committee through DF King & Company, 20th Floor, 77 Water Street, New York, NY
10005 or with the Secretary of the Company at its principal offices, an
instrument revoking it or a duly executed proxy bearing a later date, or by
appearing in person and voting at the Special Meeting. The principal executive
offices of the Company are located at 2 North Cascade Avenue, 14th Floor,
Colorado Springs, CO 80903, phone number (719) 442-2600.
 
     March 23, 1999 was the record date for the Common Stock; April 12, 1999 was
the record date for the Depository Shares. Shareholders of record, as
applicable, on those respective dates are entitled to vote by proxy or in person
at the Special Meeting.
 
     According to the Company's proxy statement, on April 12, 1999, the record
date for Depository Shares, there were 1,247,369 Depository Shares outstanding.
On March 23, 1999, the record date for Common Stock, there were 7,059,663 shares
of Common Stock outstanding.
 
     If record shareholders entitled to cast a majority or more of the total
shares are present in person or by proxy at the Special Meeting a quorum will
exist for purposes of electing the nominees for the Board of Directors.
Abstentions are counted as present, and broker non-votes may be counted as
present, to establish a quorum. Withholding authority to vote for a nominee, and
broker non-votes will not affect the outcome of the election of directors.
 
- ---------------
 
* Indicates shares purchased by the Company pursuant to its recent tender offer.
<PAGE>   10
 
SOLICITATION EXPENSES
 
     The Committee has retained DF King & Co., Inc. to assist in the
solicitation of proxies and for related services. The Committee has agreed to
pay that organization a fee estimated at $25,000, and to reimburse it for
reasonable out-of-pocket expenses. The Committee will indemnify DF King against
certain liabilities and expenses. Approximately 20 persons will be used by DF
King in its solicitation efforts. In addition to the use of mails, proxies may
be solicited by the Committee and the director nominees by telephone, telegram,
and personal solicitation, for which no additional compensation will be paid to
those persons engaged in such solicitation. Proxies will also be solicited
through the Committee's website at http://www.freedomforshareholders.com Banks,
brokerage houses and other custodians, nominees and fiduciaries will be
requested to forward solicitation material to the beneficial owners of the
Common Stock and Preferred Stock that such institutions hold of record. The
Committee will reimburse such institutions for their reasonable out-of-pocket
expenses.
 
     The expense of preparing and mailing this Proxy Statement and any other
soliciting material and the total expenditures relating to the solicitation of
proxies (including, without limitation, costs, if any, related to advertising,
printing, fees of attorneys, financial advisors, solicitors, consultants, public
relations, transportation, and litigation) will be borne partly by the UMWA
Combined Fund (the "Funds"), which have agreed to pay $125,000, with the
Committee bearing the remaining expenses. The Funds are entities created and
existing under the Federal Coal Industry Retirement Health Benefit Act of 1992.
The Funds agreed to pay this amount as part of the negotiations which led to the
Master Agreement and the dismissal of the bankruptcy cases.
 
     During those negotiations, an impasse had arisen between the Company and
the Equity Committee over the Equity Committee's insistence that the Company
bear the expense of this proxy contest. In order to break that impasse so that
the bankruptcy case might be dismissed, the Funds agreed to provide $125,000
towards this proxy contest. There are no other arrangements or understandings
between the Committee and the Funds.
 
     The Funds own no equity securities of the Company, but hold a Contingent
Promissory Note in the original principal amount of $12 million, decreasing to
$6 million in 2002, issued in 1999 to secure certain of the Company's
obligations under the Master Agreement entered into among the Company, the Funds
and the Equity Committee as a condition to the dismissal of the Chapter 11
bankruptcy cases.
 
     In addition, (1) the Company must make payments of approximately $6.6
million per year to the Funds, (2) UMWA, an affiliate of the Funds, is currently
involved in arbitration proceedings with the Company, seeking $13.8 million from
the Company, (3) under the Master Agreement, the Company must maintain medical
plans at a cost of approximately $8.7 million, and (4) with respect to the $12
million note, the Company must maintain certain financial ratios, has deposited
$6 million to secure its obligations to the Funds, and the Funds have a security
interest in the cash flow from the Company's Roanoke Valley I Project (a project
which the Committee proposes to sell.
 
     Neither the Funds nor any of their associates have purchased or sold any
other Company securities within the past two years, nor have they been a party
to any contract, arrangements or understandings with any person with respect to
any securities of the Company, including, but not limited to joint ventures,
loan or option arrangements, puts or calls, guarantees against loss or
guarantees of profit, division of losses or profits, or the giving or
withholding of proxies. Neither the Funds nor their associates have any
arrangement or understanding with any person with respect to future employment
by the Company or its affiliates nor with respect to any future transactions to
which the Company or any of its affiliates will or may be a party, other than
the Company's obligations to the Funds as required by the Master Agreement.
 
     The Committee estimates that its total expenditures relating to the
solicitation of proxies will be approximately $200,000. Total cash expenditures
to-date relating to this solicitation have been approximately $25,000. It is the
Committee's position that its actions with respect to the solicitation of
proxies will enhance the value of the Company for the benefit of its
stockholders. While the Committee presently intends to seek reimbursement from
the Company for its reasonable expenses in connection with this solicitation,
the Committee does not expect to submit such matter to a vote of security
holders, unless required by law.
<PAGE>   11
 
HOW TO CONTACT US
 
                        WE ARE RECRUITING YOUR SUPPORT.
                                    JOIN US.
 
     To offer your support or learn how you can help, please contact us:
 
<TABLE>
<S>                                 <C>             <C>                   <C>
Frank Williams....................  (703) 641-4612  (703) 641-9082 (fax)
Nelson Obus.......................  (212) 760-0134  (212) 760-0824 (fax)  [email protected]
Bentley Offutt....................  (410) 584-9600  (410) 584-7044 (fax)  [email protected]
Guy Dove..........................  (540) 687-6351  (540) 687-6714 (fax)
Robert Fowler.....................  (770) 618-7284  (770) 618-7142 (fax)
Matthew Sakurada..................  (919) 776-9985  (919) 776-9985 (fax)  [email protected]
William Sim.......................  (202) 872-2211  (202) 331-6181 (fax)  [email protected]
</TABLE>
 
          PLEASE VISIT OUR WEBSITE AT HTTP://WWW.FREEDOMFORSHAREHOLDERS.COM
 
     The website will publish the Bodington & Company analysis for obtaining
maximum revenues possible from the sale of Westmoreland's IPPs. In addition, the
website will include selected SEC filings, and indications of further support
for our cause to remove Westmoreland management.
 
                               VOTING PROCEDURES
 
     Carefully review this proxy statement. YOUR PROXY IS IMPORTANT.
 
     IF YOU ARE UNABLE TO ATTEND THE ANNUAL MEETING, YOUR PROXY IS THE ONLY
MEANS AVAILABLE FOR YOU TO VOTE. Please return the enclosed BLUE proxy card in
time to be voted at the Special Meeting, May 12. No matter how many or how few
shares you own, please vote FOR the Committee's nominees for director and
promptly sign, date, and return the enclosed BLUE proxy.
 
     If you own shares of the Company, but your stock certificate is held for
you by a brokerage firm, bank, or other institution, it is very likely that the
stock certificate is actually in the name of such institution. If so, only that
institution can execute a BLUE proxy for your shares of stock and only on
receipt of your specific instructions. Accordingly, please contact the person
responsible for your account at such entity and instruct the person to execute
and return the BLUE proxy card on your behalf. You should also sign, date, and
return the BLUE proxy card when you receive it from your broker or banker.
Please do this for each account you maintain to ensure that all your shares are
voted.
 
     Please call DF King & Co., Inc., toll free at 1-800-628-8538 if you require
assistance or have any questions.
 
                                VOTE FOR CHANGE
<PAGE>   12
                           WEST MORELAND COAL COMPANY

     PROXY SOLICITED BY THE WEST MORELAND COMMITTEE TO ENHANCE SHARE VALUE

                                  COMMON STOCK

   SPECIAL MEETING IN LIEU OF ANNUAL MEETING OF SHAREHOLDERS -- MAY 12, 1999

The undersigned hereby appoints Frank E. Williams, Jr., Nelson Obus and Bentley
Offutt (the "Proxy Committee"), and each of them, with the power of
substitution, proxies for the undersigned and authorizes them to represent and
vote all of the shares of stock of the Company which the undersigned may be
entitled to vote at the Special Meeting of Shareholders to be held on May 12,
1999 (the "Meeting"), and at any adjournments, postponements, rescheduling or
continuations thereof, as indicated on the reverse side of this card with
respect to Proposal 1 and with discretionary authority as to any other matters
that may properly come before the Meeting, in accordance with and as described
in the Proxy Statement for the Meeting.

PROXIES WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED FOR PROPOSAL 1, AND ON ANY OTHER MATTERS WHICH MAY COME BEFORE THE
MEETING AT THE DISCRETION OF THE PROXY COMMITTEE.

              IMPORTANT: TO BE SIGNED AND DATED ON THE REVERSE SIDE

                            (Continued on other side)
<PAGE>   13

                 THE COMMITTEE RECOMMENDS A VOTE "FOR" PROPOSAL 1

PROPOSAL 1.   AUTHORITY TO VOTE FOR [ ]    WITHHOLD AUTHORITY TO VOTE FOR [ ]

Westmoreland Committee to Enhance Share Value Nominees as At-large Directors
Robert A. Fowler, Nelson Obus, R. Bentley Offutt, Matthew S. Sakurada, William
J. Sim

If you wish to withhold authority to vote for one of the above, you may do so
by circling his name.

                                     Date
                                         --------------------------------
                                     Signature(s)
                                                 ------------------------

                                      -----------------------------------

                                      -----------------------------------

                                      PLEASE SIGN THIS PROXY EXACTLY AS NAME(S)
                                      APPEAR ABOVE. JOINT OWNERS SHOULD EACH
                                      SIGN PERSONALLY. If signing as attorney,
                                      executor, administrator, trustee, or
                                      guardian, please include your full title.
                                      Corporate proxies should be signed by an
                                      authorized officer. If a partnership,
                                      please sign in partnership name by an
                                      authorized partner.


<PAGE>   14



                           WESTMORELAND COAL COMPANY

     PROXY SOLICITED BY THE WESTMOREL AND COMMITTEE TO ENHANCE SHARE VALUE

                               DEPOSITARY SHARES

   SPECIAL MEETING IN LIEU OF ANNUAL MEETING OF SHAREHOLDERS -- MAY 12, 1999

The undersigned hereby appoints Frank E. Williams, Jr., Nelson Obus and Bentley
Offutt (the "Proxy Committee"), and each of them, with the power of
substitution, proxies for the undersigned and authorizes them to represent and
vote all of the shares of stock of the Company which the undersigned may be
entitled to vote at the Special Meeting of Shareholders to be held on May 12,
1999 (the "Meeting"), and at any adjournments, postponements, rescheduling or
continuations thereof, as indicated on the reverse side of this card with
respect to Proposal 2 and with discretionary authority as to any other matters
that may properly come before the Meeting, in accordance with and as described
in the Proxy Statement for the Meeting.

PROXIES WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED FOR PROPOSAL 2, AND ON ANY OTHER MATTERS THAT MAY COME BEFORE THE MEETING
AT THE DISCRETION OF THE PROXY COMMITTEE.


               IMPORTANT: PLEASE SIGN AND DATE ON THE REVERSE SIDE

                            (Continued on other side)
<PAGE>   15

                THE COMMITTEE RECOMMENDS A VOTE "FOR" PROPOSAL 2

Proposal 2.    AUTHORITY TO VOTE FOR [ ]  WITHHOLD AUTHORITY TO VOTE FOR [ ]

Westmoreland Committee to Enhance Share Value Nominees as Preferred Stock
(Depository Share) Directors Guy O. Dove, III, Frank E. Williams, Jr.

If you wish to withhold authority to vote for one of the above, you may do so
by
circling his name.

                                     Date
                                         --------------------------------
                                     Signature(s)
                                                 ------------------------

                                      -----------------------------------

                                      -----------------------------------

                                      PLEASE SIGN THIS PROXY EXACTLY AS NAME(S)
                                      APPEAR ABOVE. JOINT OWNERS SHOULD EACH
                                      SIGN PERSONALLY. If signing as attorney,
                                      executor, administrator, trustee, or
                                      guardian, please include your full title.
                                      Corporate proxies should be signed by an
                                      authorized officer. If a partnership,
                                      please sign in partnership name by an
                                      authorized partner.



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