PROXY STATEMENT
OF WESTMORELAND COAL
Securities and Exchange Commission
Washington D.C. 20549
SCHEDULE 14a INFORMATION
Proxy Statement Pursuant to Sections 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [ ]
Filed by a party other than the Registrant [X]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Materials
[X ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule
14(a)-12
__________________________________________________________________
Westmoreland Coal Company
__________________________________________________________________
(Name of Registrant as Specified in Its Charter)
Westmoreland Committee To Enhance Share Value
__________________________________________________________________
(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 computer on table below per Exchange Act Rules 14a-6(i)(l)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
__________________________________________________________________
(2) Aggregate number of securities to which transaction
applies:
__________________________________________________________________
(3) Per Unit price or other underlying value of transaction
computer pursuant to Exchange Act Rule 0-11:
__________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
__________________________________________________________________
(5) Total fee paid:
__________________________________________________________________
[ ] Fee paid previously with preliminary proxy materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the Form of Schedule and the
date of its filing.
(1) Amount Previously Paid:
__________________________________________________________________
(2) Form, Schedule or Registration Statement No.:
__________________________________________________________________
(3) Filing Party:
__________________________________________________________________
(4) Date Filed:
__________________________________________________________________
1 Set forth the amount on which the filing fee is calculated and
state how it was determined.
- ------------------------------------------------------------------
The following is added text of a Web Site at
freedomforshareholders.com. It will be contained in the "Concerned
Shareholder Letters" section.
May 1, 1999
THE REAL STORY ABOUT HOW MANAGEMENT NEARLY LOST OUR COMPANY - VOTE
FOR CHANGE -
Dear Fellow Westmoreland Shareholders:
Inasmuch as Westmoreland Management has said quite a bit in the
press and their filings and Annual Report regarding Management's
performance in the recent bankruptcy proceedings, I think it's
important to set the record straight about what really happened.
Along with Guy Dove, Bentley Offutt, and others, I was a member of
your Equity Committee appointed by the Office of the US Trustee to
protect the rights and interests of Westmoreland shareholders
during the bankruptcy proceedings.
In his Annual Report, Chris Seglem unabashedly tells us that "in
granting the Company's motion to dismiss, the court implicitly
acknowledged the success of (Management's) strategy" (in the
bankruptcy case).
Having served as a Co-chairman of your Equity Committee, I can
tell you first-hand about Westmoreland Management's "strategy"
and performance during the bankruptcy case and how Chris Seglem
nearly lost our company to the UMWA Funds.
The following is a history of the bankruptcy case - the second
bankruptcy during Chris Seglem's tenure. You judge whether there
is a sound basis for Chris Seglem's pride and self-congratulatory
assertions.
With cash tight and faced with substantial ongoing obligations due
to the Coal Act Funds, Westmoreland Management made the strategic
decision to file bankruptcy in Denver, in an attempt to find a
means to liquidate or cap its Coal Act liabilities. The strategy
involved treating the current and future Coal Act premiums as
pre-petition unsecured claims, and prosecuting a plan of
reorganization that estimated or limited those claims for
distribution purposes. This effort was reflected in claim
determination proceedings that Management brought before the
Bankruptcy Court, and in Management's plan of reorganization.
Specifically, through claim objections, Management sought to
value the future Coal Act premiums at present figure, and to
treat that present liability favorably under a plan of
reorganization.
Management succeeded in convincing the Bankruptcy Court to treat
the Coal Act liabilities as pre-petition obligations, subject to
treatment under a plan. This was before the Sunnyside
decision (discussed later) issued, however. The strategy
nonetheless failed when the Bankruptcy Court did not adopt
Management's valuation method. Instead, the Judge applied a low
discount rate to the future obligations and rejected Management's
managed care and cost savings assumptions. From a shareholder's
viewpoint, the latter point was particularly disturbing as the
Bankruptcy Court refused to allow Management's expert testimony on
this point, based on a lack of foundation by Management's experts
sponsoring the opinions. This appeared to the Equity Committee to
be a glaring trial mistake - one that Management had difficulty
defending.
The end result of the valuation proceedings was that the Funds
were granted substantial unsecured claims for future premiums to
become due under the Coal Act. This rendered the plan of
reorganization sponsored by Management unconfirmable, as the plan
was premised on the Funds having claims in a substantially lower
amount. As a result, Management admitted its plan was
unconfirmable, and withdrew the plan.
The Funds had also filed their own competing plan of
reorganization, premised on their own claim valuation. As a
result of the Bankruptcy Court's ruling in the claim determination
hearing, the Funds' plan became confirmable, and Management's plan
was rendered unconfirmable. When your Equity Committee was
appointed, the Funds' plan was proceeding forward to confirmation,
and, in our judgment, had a substantial possibility of being
confirmed.
The result would have been an epic disaster for shareholders,
given that the Funds' plan completely wiped out all preferred and
equity interest in Westmoreland as the Debtor, and would have
basically given the company to the Coal Act Funds.
Fortuitously, at about this time the Sunnyside decision issued
from the 10th Circuit, which held that Coal Act premiums are
taxes, incurred and payable in each succeeding year, and do not
constitute pre-petition claims subject to treatment at their
present value under a plan. Specifically, the 10th Circuit held
that Coal Act tax premiums are payable only when incurred, in each
succeeding year, and would continue to remain payable in
bankruptcy until a trustee's final decree is entered closing the
case. The impact of this decision was two-fold:
First, the Bankruptcy Court's orders (which were then on appeal)
classifying the Funds' Coal Act claims as pre-petition claims was
reversed, and an order from the district court to that effect was
entered shortly after the Sunnyside decision issued. This, in
turn, made the Funds plan unconfirmable in that it gave the Funds
substantial pre-petition claims for taxes not yet due. The plan
process returned to square one.
Second, under Sunnyside, Coal Act taxes would terminate when the
bankruptcy case was closed (assuming a liquidation). Your Equity
Committee accordingly filed a motion to convert the case to
Chapter 7. The strategy behind our motion was essentially that,
if the assets of the estate were quickly sold and liquidated and a
final decree issued, a dividend ($100 million or more by our
calculations, based on the counsel of our attorneys and
consultants) would result for the common and preferred
stockholders, even after paying Coal Act premiums incurred during
the liquidation period. The key point of the liquidation argument
was that liquidating now and closing the case would avoid paying
equity's present dividend to the Coal Act funds in the future,
when all projections indicated that our company would be incurring
negative cash flows essentially into perpetuity, principally
relating to Coal Act obligations.
Management then filed a motion to dismiss the case. As the
hearing on the competing motions approached, we entered settlement
discussions with Management and the Funds, and the Master
Agreement resulted. The case was then dismissed pursuant to the
Master Agreement, with the Equity Committee preserving the right
to attempt to take shareholder action to achieve a similar result
as sought in the Chapter 7 liquidation motion.
Based on all of the above, the Equity Committee concluded that
Management had in fact pursued a litigation strategy through
bankruptcy that failed, both in its characterization of the Coal
Act premiums as unsecured claims, and in terms of Management's
ability to value the future premiums favorably and thereafter
discharge the obligation for premiums under a plan. Management
badly lost the claim estimation hearing, had its plan rendered
unconfirmable as a result, and was forced to withdraw the plan.
It is very possible that the Funds' plan would have been
confirmed, and shareholders wiped out completely, had the
fortuitous Sunnyside decision not issued. Pure luck. Given these
facts, we feel that Management completely failed to accomplish
what it sought by filing for bankruptcy, and instead placed
shareholder recoveries in great peril by pursuing its
litigation strategy.
Another point should probably be made. When the tri-party
negotiations over dismissal of the case or liquidation took place
in Denver, the Equity Committee was committed to liquidation of
the Company so as to maximize shareholder value. Late the night
before the hearing we were advised that Management had been in
extensive discussions with the Funds designed to achieve the
dismissal alternative, and then we were later apprised by the
Funds that the "bride's limo was on the way to the church",
meaning that they were very close to an agreement, and the Equity
Committee needed to get on board. It was at this point that we
agreed to negotiate terms of a Master Agreement for dismissal, in
light of the significant litigation risk that a dismissal would
take place with no shareholder protections if we did not get on
board.
This risk was primarily a practical determination of how the
Bankruptcy Court would be inclined to rule with both Management as
Debtor and the major creditor body in agreement, and given the
case law supporting a debtor's right to seek dismissal when a
debtor is financially able to pay claims that are due.
As shareholders, we were astounded and dismayed when we entered
the tri-party negotiations to find that Management had essentially
given the Funds everything the Funds had asked for in order to
obtain their agreement to dismissal, including payment of all Coal
Act premiums with interest, payment of a staggering $4 million
expense reimbursement for which we saw no authority whatsoever, a
contingent promissory note that would pay the Funds up to $12
million additional, a covenant not to exercise Management's
constitutional right to seek redress in the courts, liens and
pledges of assets, and various financial covenants that would
substantially impair the ability of our Company to do
business in the future.
In the opinion of your Equity Committee, the stipulations
Management acceded to in order to buy its way out of bankruptcy
constituted more of a "surrender" to the Funds than a compromise,
in the normal sense of the term. We felt that Management
essentially burdened the future of our Company in order to buy its
way out of bankruptcy and avoid a liquidation alternative that
could have been substantially more favorable to shareholders.
Your Equity Committee finally agreed to these provisions based on
the Company's commitment to hold a shareholder's meeting and the
shareholder rights provisions drafted in the Master Agreement, the
Debtor's agreement to make a substantial tender to the holders of
the preferred stock, and the practical risk shareholders faced of
losing all rights and protections if the Bankruptcy Court granted
a dismissal over our objection.
As evidenced by its consensual Master Agreement, Management gained
nothing for shareholders. All of the provisions in the Master
Agreement that favor shareholders' rights and interests - e.g. the
tender offer, prohibition on anti-shareholder rights actions,
freeze on Company acquisitions, etc. - were only agreed to by
Management at the insistence of your Equity Committee.
YOUR OPPORTUNITY TO ENHANCE SHARE VALUE IS NOW
REMEMBER THE PAST VOTE WITH US FOR CHANGE
If you would like to discuss this, or need any further information
on how management has distorted history regarding the bankruptcy
case and the role of your Equity Committee, please call me, Guy
Dove, or Bentley Offutt.
Sincerely,
Frank E. Williams, Jr.
