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
Filed by the registrant X
Filed by a party other than the registrant
Check the appropriate box:
Preliminary proxy statement.
X Definitive proxy statement.
Definitive additional materials.
Soliciting material under Rule 14a-12.
______________________________________________________________________________
CHIEF CONSOLIDATED MINING COMPANY (FILE # 1-1761)
(Name of registrant as Specified in its Charter)
__________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if Other than the registrant): N/A
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 0-11: N/A
CHIEF CONSOLIDATED MINING COMPANY
500 Fifth Avenue
New York, New York 10110
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS IN LIEU OF ANNUAL MEETING TO BE
HELD DECEMBER 15, 2000
To the Shareholders of Chief Consolidated Mining Company:
Notice is hereby given that a Special Meeting of Shareholders in Lieu of
Annual Meeting of Chief Consolidated Mining Company will be held at the
Doral Hotel, 70 Park Avenue at 38th Street, (Park Avenue Suite), New York
City, New York 10016 on Friday, December 15, 2000 at 11:00 A.M. New York
City time for the following purposes:
(1) To elect seven (7) directors to serve during the ensuing year.
(2) To consider and act upon a proposal to (i) replace outstanding
nonqualified stock options held by three directors and officers of the
Company and (ii) approve and ratify new nonqualified stock options granted
to two other directors of the Company.
(3) To approve the selection of the firm of Arthur Andersen LLP as
independent public accountants for the Company for the current fiscal year.
(4) To transact such other business as may properly come before the meeting
and any adjournments thereof.
The holder of common and preferred stock of the Company of record at the
close of business on November 14, 2000 will be entitled to notice of and to
vote at this meeting and any adjournments thereof.
By Order of the Board of Directors
Edward R. Schwartz
Secretary
November 15, 2000
WE URGE ALL SHAREHOLDERS TO ATTEND THE MEETING IN PERSON, IF POSSIBLE, IF
NOT, THEY ARE URGED TO DATE, SIGN AND RETURN THE PROXY AS PROMPTLY AS
POSSIBLE IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE
UNITED STATES. The Proxy may be revoked at any time before it is voted,
and shareholders executing proxies may attend the meeting and vote there in
person should they so desire.
Management of the Company desires all shareholders to take an interest in
the affairs of the Company and your interest can best be evidenced by
attendance at the forthcoming meeting. Without a quorum in attendance the
above matters to be taken up cannot be acted upon. Expense of obtaining a
quorum for the meeting can be kept at a minimum if you attend the meeting
either in person or by proxy.
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation by the
management of Chief Consolidated Mining Company ("the Company") of proxies
to be used at the Special Meeting of Shareholders in Lieu of Annual Meeting
of the Company, to be held at the Doral Hotel, 70 Park Avenue at 38th Street
(Park Avenue Suite) New York City, New York 10016 on Friday, December 15,
2000 at 11:00 A.M. New York City time and any adjournment or adjournments
thereof. Proxy material will first be mailed about November 16, 2000.
form of Proxy is solicited on behalf of management of the Company.
Shareholders will vote upon: (1) the election of seven (7) directors to
the Board of Directors of the Company; (2) a proposal to (i) replace
outstanding nonqualified stock options held by three directors and officers
of the Company and (ii) approve and ratify new nonqualified stock options
granted to two other directors of the Company; (3) the approval of the
selection of independent public accountants of the Company; and (4) such
other business as may properly come before the meeting and any adjournments
thereof.
The enclosed Proxy may be revoked at any time before it is exercised by
written notice to the Company bearing a later date than the Proxy, and any
shareholder attending the meeting may vote in person whether or not the
shareholder has previously submitted a Proxy. Each proposal is identified
in the Proxy and the accompanying Notice of Special Meeting of Shareholders
in Lieu of Annual Meeting and is set forth and more fully described and
commented upon under the applicable headings for each proposal in this proxy
statement. of directors is designated as Proposal 1; the proposal to (i)
replace outstanding nonqualified stock options held by three directors
and officers of the Company and (ii) approve and ratify new nonqualified
stock options granted to two other directors of the Company is designated
as Proposal 2; and the approval of the selection of independent public
accountants of the Company is designated as Proposal 3. Where
instructions are indicated, the proxies will be voted in accordance
therewith.
Where no instructions are indicated, the proxiess will be voted FOR the
nominees for directors, FOR the proposal to approve the replacing of
outstanding nonqualified stock options and approve the granting of
nonqualified stock options to directors of the Company, and FOR the
selection of independent public accountants, all as described below, and in
their discretion with respect to any other business as may properly come
before the meeting and any adjournment or adjournments thereof.
The By-laws of the Company provide that the Annual Meeting of the
Shareholders be held on the third Tuesday in May of each year. Since
the forthcoming Shareholders' Meeting is being held on December 15, 2000
in lieu of May 16, 2000 (the third Tuesday in May, 2000), the December
15, 2000 meeting is deemed to be a Special Meeting of Shareholders.
The record date set by the Board of Directors for the determination of
stockholders entitled to vote is November 14, 2000. Shares of the Company's
preferred stock, common stock and convertible common stock all have equal
voting rights on the matters to be voted upon at the meeting. On November
14, 2000, there were 11,168 shares of preferred stock, 8,008,160 shares of
common stock and 3,500,000 shares of convertible common stock outstanding
and entitled to vote. Holders of each class are entitled to one vote per
share with distinction as to class.
The votes of all classes will be counted together in determining the
presence of a quorum and the vote upon each proposal. Upon the election
of directors, shareholders have cumulative voting rights. Under cumulative
voting, shareholders may multiply the number of shares of stock held by them
by the number of positions to be filled and distribute the resulting numbers
of votes among any or all nominees in any manner they see fit. The seven
nominees receiving the greatest number of votes will be elected as directors.
The cumulative vote represented by management proxies will be distributed
among management's seven nominees in management's discretion so as to elect
as many management nominees as possible. Shareholders representing a
majority of the outstanding shares entitled to vote at the meeting must
be present or represented by proxy to constitute a quorum. The shares
represented by a proxy submitted by a shareholder will be counted for the
purpose of determining whether a quorum is present; however, if the
shareholder abstains from voting on a particular proposal,
the proxies will not vote those shares on the proposal.
VOTING SECURITIES AND
PRINCIPAL STOCKHOLDERS
(a) The following table shows as of November 1, 2000, stock ownership of
all persons known to management, to be beneficial owners of more than 5% of
the common stock of the Company.
Name and Address of Amount and Nature of Percentage
Beneficial Owners Beneficial Ownership of Class
Estate of William E. Simon 558,600 shares (1) 6.98% (2)
310 South Street
Morristown, NJ 07962
Robert R. Hermann 492,500 shares 6.15% (2)
7701 Forsyth St.
Clayton, MO 63105
Dimeling, Schreiber & Park, as 3,500,000 shares (3)(4) 30.41%
General Partner of Dimeling,
Schreiber & Park Reorganization
Fund II, LP
1629 Locust Street
Philadelphia, PA 19103
(1) 308,600 shares owned directly by estate of William E. Simon; 250,000
shares owned by a corporation in which the Estate of William E. Simon has
shared power to direct the vote and disposition of the Company's shares held
by the corporation by virtue of his ownership of voting stock in said
corporation.
(2) Percentage based upon current number of the Company's outstanding
shares of common stock, without regard to the Company's outstanding
convertible common stock and the conversion rights of the holder of the
Company's convertible common stock described at footnote (4), below.
If such convertible common shares were converted into shares of common
stock by the holder, the percentage would be reduced below 5%.
(3) William R. Dimeling, Richard R. Schreiber and Christopher A. Arnold
are principals of Dimeling, Schreiber & Park. They are currently directors
of the Company and are nominees for director at the meeting.
(4) Dimeling, Schreiber & Park, in its capacity as General Partner of
Dimeling, Schreiber & Park Reorganization Fund II, LP, a Delaware limited
partnership, owns 3,500,000 shares of the Company's $0.50 par value
convertible common stock. These shares are convertible into a like number
of the Company's common stock at no additional cost. The percentage
shown is based upon the current number of the Company's outstanding shares
of common stock together with the 3,500,000 shares of outstanding
convertible common stock. Dimeling, Schreiber & Park, in its capacity
as General Partner: (i) will receive an additional 280,000 shares of
convertible common stock in December 2000, representing an annual 8%
dividend for the year 2000 on its current holdings of 3,500,000 shares;
and (ii) has the right to purchase an additional 5,000,000 shares of
convertible common stock from the Company, which right to purchase expires
December 31, 2002. If the additional 5,000,000 shares are purchased,
the percentage,including the 280,000 dividend shares, would be increased to
52.30%. In addition, Dimeling, Schreiber & Park, in its capacity as
General Partner, holds warrants to purchase additional shares of
convertible common stock that expire December 31, 2004, however, it may
not make purchases which would, assuming conversion of all convertible
common stock, result in Dimeling, Schreiber & Park, in its capacity as
General Partner, owning more than 68% of the Company's outstanding common
stock. The holder of the convertible common stock has voting rights identical
to the voting rights of the holders of registrant's common stock
See Certain Relationships and Related Transactions", below, for information
concerning the acquisition of the convertible common stock and warrants
by Dimeling, Schreiber & Park, in its capacity as General Partner,
Dimeling, Schreiber & Park Reorganization Fund II, LP and directorships
in the Company held by three principals of Dimeling, Schreiber & Park.
(b) The equity securities of the Company beneficially owned by all
directors, director nominees and officers, and by directors, director
nominees and officers of the Company as a group, as of November 1,
2000, are:
Title
Of Name and Address Amount and Nature of Percentage of
Class of Beneficial Owner of Beneficial Ownership* Common Stock
Common Stock
$0.05 par value:
Christopher A. Arnold** 200(1) 0%
1629 Locust Street
Philadelphia, PA 19103
Thomas Bruderman 49,100 (2) .61%
1573 Bronson Road
Fairfield, CT 06430
William R. Dimeling** 200(1) 0%
1629 Locust Street
Philadelphia, PA 19103
Paul Hines 130,000(3) 1.60%
17 Trachelle Lane
Charleston, SC 29407
Robert E. Poll 150,000 1.87%
225 West 86th Street
New York, NY 10024
Edward R. Schwartz 165,100(4) 2.03%
500 Fifth Avenue
New York, NY 10110
Richard R. Schreiber** 200(1) 0%
1629 Locust Street
Philadelphia, PA 19103
Leonard Weitz 189,010(5)(6) 2.33%
500 Fifth Avenue
New York, NY 10110
Owned by all directors 683,810(7) 8.17%
and officers as a group
Preferred
Stock, $0.50
Par value: None
* Each director and officer has sole voting and investment power with
respect to shares owned.
** Principal of Dimeling Schreiber & Park. See footnote (4) to part (a)
of "Voting Securities and Principal Stockholders," above, and "Certain
Relationships and Related Transactions," below, for information concerning
the purchase of 3,500,000 shares of the Company's voting convertible
common stock by Dimeling, Schreiber & Park, in its capacity as General
Partner of Dimeling, Schreiber & Park Reorganization Fund II, LP ("Fund II").
(1) Does not include any portion of the 3,500,000 shares of the Company's
convertible common stock held by Dimeling, Schreiber & Park in its capacity
as General Partner of Fund II, in which Messrs. Dimeling, Schreiber and
Arnold have shared power to direct the vote and disposition of such shares
by virtue of their positions as principals of Dimeling, Schreiber & Park.
(2) Does not include 6,500 shares of common stock and 6,000 shares of
preferred stock owned by Thomas Bruderman's wife, in which shares Thomas
Bruderman disclaims any beneficial interest.
(3) Includes nonqualified stock options previously approved by the
shareholders to purchase 120,000 shares held by Paul Hines. Also includes
10,000 shares held in IRA account.
(4) Includes nonqualified stock options previously approved by the
shareholders to purchase 120,000 shares held by Edward R. Schwartz. Does
not include 200 shares owned by Edward R. Schwartz's wife, in which shares
Edward R. Schwartz disclaims any beneficial interest.
(5) Includes nonqualified stock options previously approved by the
shareholders to purchase 120,000 shares held by Leonard Weitz. Also
includes 8,000 shares held in IRA account and 40,000 shares owned jointly
with Leonard Weitz's wife.
(6) Does not include 20,000 shares owned by Leonard Weitz's wife, in which
shares Leonard Weitz disclaims any beneficial interest.
(7) Includes options to purchase an aggregate of 360,000 shares as referred
to at footnotes (3), (4) and (5), above. All options may be exercised by
the directors or officers holding same within 60 days.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
At the Special Meeting In Lieu Of Annual Meeting Of Shareholders of
registrant held December 29, 1999 ("the shareholders meeting") , the
shareholders approved, among other things, a stock purchase agreement and
a warrant. Dimeling, Schreiber & Park, in its capacity as General Partner
of Dimeling, Schreiber & Park Reorganization Fund II, LP, pursuant to the
terms of the Stock Purchase Agreement, purchased 3,500,000 shares of the
Company's convertible common stock on December 30, 1999 and has the right to p
shares on or before December 31, 2002. The warrant approved by the
shareholders gives Dimeling, Schreiber & Park, in its capacity as General
Partner, the right to purchase additional shares of the convertible common
stock , provided that its stock ownership does not exceed 68% of the
Company's outstanding shares of common stock (assuming conversion of the
convertible common stock into shares of common stock).
William R. Dimeling, Richard R. Schreiber and Christopher A. Arnold,
current directors and director nominees of the Company, are principals of
Dimeling, Schreiber & Park. Since Dimeling, Schreiber & Park is acting in
the stock purchase transaction in its capacity as the General Partner of
Dimeling, Schreiber & Park Reorganization Fund II, LP, each of the
aforesaid three directors and director nominees has a material interest in
the transaction involving the sale of the convertible common stock by the
Company. As of November 1, 2000 Dimeling, Schreiber & Park Reorganization
Fund II, LP was the beneficial owner of 30.41% of the Company's common
stock (assuming conversion of the convertible common stock into shares
of common stock). See "Voting Securities and Principal stockholders",
above, and "Proposal 1: Election of Directors", below.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
The following information for each of the Company's last three completed
fiscal years is presented concerning the compensation of Leonard Weitz
as Chairman, President and Chief Executive Officer of the Company:
SUMMARY COMPENSATION TABLE
Name and Annual Long-Term
Principal Compensation Compensation All Other
Position YearSalary Awards-Options Compensation
Leonard Weitz* 1999 $175,000(1) - -
1998 $175,000(1) - -
1997 $175,000(1) - -
* President, Chairman and Chief Executive Officer
(1) During the years 1997, 1998 and 1999, Leonard Weitz received annual
base salary of $175,000 under the terms of an employment agreement dated
as of September 1, 1996. Under the terms of that employment agreement,
Leonard Weitz was employed as Chairman, President and Chief Executive
Officer of the Company for a five year period ending August 31, 2001 and
would, in addition to the base salary, receive such bonuses as the Board
of Directors of the Company determined. No bonuses were awarded to
Leonard Weitz during 1997, 1998 or 1999. On February 16, 2000, the Board of
Directors approved a new employment agreement that superceded and
canceled the September 1, 1996 employment agreement. The new employment
agreement between the Company and Leonard Weitz became effective as of
January 1, 2000 and is for a five year term ending December 31, 2004.
Under the terms of the new employment agreement, Leonard Weitz will
continue to be employed as Chairman, President and Chief Executive Officer
of the Company and he will receive an annual base salary of $225,000 and
such bonuses as the Board of Directors of the Company may determine.
On January 21, 2000 the Board of Directors granted to Mr. Weitz, subject
to shareholder approval, a nonqualified option to purchase 60,000 shares
of common stock to replace a 60,000 share option that had been previously
approved by the shareholders of the Company. The 60,000 share option to
be cancelled is exercisable at $7 per share. The exercise price of the
replacement option would be $2.1875 per share, if the shareholders approve.
See Proposal 2 for information concerning the replacement option.
OPTION GRANTS DURING FISCAL YEAR ENDED DECEMBER 31, 1999
No stock options were granted by the Company to Leonard Weitz during the
fiscal year ended December 31, 1999. See Proposal 2, below, for
information concerning a replacement option for 60,000 shares granted on
January 21, 2000 to Mr. Weitz by the Board of Directors, subject to
shareholder approval at the meeting.
OPTION EXERCISES DURING FISCAL YEAR
ENDED DECEMBER 31, 1999 AND OPTION VALUES
ON DECEMBER 31, 1999
The following table contains, with respect to stock options held by Leonard
Weitz, information as to options exercised during the year 1999, the
aggregate dollar value realized upon exercise, the total number of
unexercised options held on December 31, 1999 and the aggregate dollar
value of the in-the-money, unexercised options held on December 31, 1999.
Shares Value of Unexercised
Acquired or Value Number of Unexercised in-the-money options
Name Exercised Realized Options at 12/31/99 at 12/31/99 (3)
Nonqualified:
Leonard Weitz None None 120,000 (1)(2) None
(1) All options held are fully exercisable.
(2) Nonqualified stock options approved by shareholders.
(3) Values are calculated by subtracting the exercise price from the
closing price of the Company's common stock on The Nasdaq Stock Market
on December 31, 1999.
Compensation of Directors
Leonard Weitz, Chairman of the Board and Chief Executive Officer of the
Company, is employed through December 31, 2004 under an employment
agreement dated February 16, 2000. See "Compensation of Directors and
Executive Officers - Summary Compensation Table", above, for further
details concerning Mr. Weitz's employment agreement.
During 1999, each director who was not an officer of the Company received
a quarterly fee of $1,250; no attendance fees were paid. Edward R.
Schwartz, the Secretary-Treasurer of the Company, who was a director
during 1999, did not receive a salary in 1999; he received a $10,000
annual fee in lieu of salary. The Board of Directors set a rate of $750
per day for services performed by each outside director of the Company
that are in addition to services regularly performed by him as a director.
No stock options were granted by the Company to any directors during the
fiscal year ended December 31, 1999 and no director exercised in 1999 any
stock options held by him. See "Voting Securities and Principal
Stockholders," above, for information as to stock options held by
directors. See "Proposal 2" for information concerning replacement
options for 60,000 shares each granted on January 21, 2000 to Leonard
Weitz and Paul Hines, and new options for 60,000 shares each granted on
January 21, 2000 to Thomas Bruderman and Robert E. Poll. All of said
option grants to directors of the Company are subject to shareholder
approval at the meeting.
INFORMATION CONCERNING STOCK OPTIONS HELD BY DIRECTORS AND OFFICERS
As of November 1, 2000, there were outstanding nonqualified stock options
held by three directors and officers of the Company to purchases total of
360,000 shares of the Company's common stock. All of these options had
been previously approved by the shareholders of the Company. Action is to
be taken at this meeting with respect to the approval of replacement options
for 180,000 shares of those previously approved nonqualified options. (See
Proposal 2, below).
Action is also to be taken at this meeting with respect to the approval of
new nonqualified options to purchase a total of 120,000 shares granted by
the Board of Directors, subject to shareholder approval, to two directors
of the Company who do not currently hold nonqualified options. (See Proposal
2, below.)
The following table shows information with respect to all outstanding
nonqualified stock options to purchase a total of 360,000 shares as of
November 1, 2000 with respect to each of the three directors and officers
of the Company to whom such options were granted, all of said options having
previously been approved by the shareholders of the Company: name of
optionee, date of grant, expiration date, number of shares under option and
exercise price per share.
TABLE OF STOCK OPTIONS CURRENTLY OUTSTANDING
Name of Date of Expiration Date No. of Shares Exercise Price
Optionee Grant of Option Under Option Per Share
Nonqualified
Stock Options
Leonard Weitz(1) 12/10/93 12/09/03 30,000 $3.50
09/19/94 09/18/04 30,000 3.50
08/08/96 08/07/06 60,000 7.00
Paul Hines(2) 09/19/94 09/18/04 60,000 $3.50
12/06/95 12/05/05 40,000 6.9375
08/08/96 08/07/06 20,000 7.00
Edward R. Schwartz(3) 09/19/94 09/18/04 60,000 $3.50
12/06/95 12/05/05 40,000 6.9375
08/08/96 08/07/06 20,000 7.00
(1) President, Chairman and Chief Executive Officer
(2) Director
(3) Secretary and Treasurer
PROPOSAL 1: ELECTION OF DIRECTORS.
Seven directors are proposed to be elected at the meeting to serve until
the meeting of shareholders to be held in the year 2001 and until their
successors shall be elected and qualify. The persons named in the enclosed
form of proxy intend to vote such proxy for the election of the seven
nominees named below as directors of the Company. If any nominee shall
become unavailable for election, the proxies will be voted for the election
of such persons, if any, as shall be designated by the Board of Directors
All seven nominees for directors are current directors of the Company.
Each of the nominees was elected to the Board of Directors at the meeting
of shareholders held on December 29, 1999. The past five years business
experience of each of the nominees is set forth below.
In electing directors, holders of common stock have cumulative voting
rights, that is, each holder of record of common stock shall be entitled
to as many votes as shall equal the number of shares owned of record
multiplied by the number of directors to be elected, and may cast all of
such votes for a single director or may distribute them among all or some
of the directors to be voted for, as such holder sees fit. Unless contrary
instructions are given, the persons named on the proxy will have
discretionary votes in the same manner. Certain information for each
nominee for director is set forth below:
Director
Name Age Since Business Experience During Past Five Years
Christopher A. Arnold 30 1999* A principal of Dimeling,
Schreiber & Park, a private investment partnership that makes private equity
investments in a broad range of middle market companies, from September
1999 to present. Various positions with General Electric Capital
Corporation, a diversified financial services company from prior to 1996
Thomas Bruderman 58 1999* Corporate communications
consulting, investment banking transactions and investment management
conducted through Canterbury Companies Inc., as President,
since prior to 1996. Corporate communications consultant for the
Company from 1996 to November, 1999.
William R. Dimeling 59 1999* A principal of Dimeling,
Schreiber & Park, a private investment partnership that makes private equity
investments in a broad range of middle market companies, since prior to 1996.
Paul Hines 63 1994 Financial and management consultant,
sinc prior to 1996.
Robert E. Poll 52 1999* Financial and management
consulting through Poll Financial, LLC, as President, since January
1998; Managing Director of Lazard Freres & Co.prior to 1996 to December
1997. Manager of Public Finance and Municipal Bond Departments and
other investment banking activities; Trustee of Citizens Budget Commission
of New York since 1997.
Richard R. Schreiber 45 1999* A principal of Dimeling,
Schreiber & Park, a private investment partnership that makes private equity
investments in a broad range of middle market companies, since prior to 1996.
Leonard Weitz 71 1967 Chairman and Chief
Executive Officer of the Company since 1971; President from 1971 to December
1993 and August 1996 to present. director by the shareholders of the Company
on December 29, 1999.
PROPOSAL 2: APPROVAL AND RATIFICATION OF NONQUALIFIED STOCK OPTIONS TO
REPLACE OUTSTANDING NONQUALIFIED STOCK OPTIONS HELD BY THREE DIRECTORS
AND OFFICERS AND APPROVAL AND RATIFICATIN OF NONQUALIFIED STOCK OPTIONS
GRANTED BY THE BOARD OF DIRECTORS TO TWO OTHER DIRECTORS OF THE COMPANY.
General.
Although Proposal 2 is comprised of two parts involving nonqualified
options, only one vote will be taken on the entire proposal. Therefore,
a shareholder voting in favor of Proposal 2 will be voting to approve both
the replacement of a portion of outstanding options (part (i)), and the
granting of new options (part (ii)), all as further described below.
Accordingly, both parts (i) and (ii) of Proposal 2 will either be
approved together by the shareholders, or will be rejected together by
the shareholders at the meeting.
(i) Replacement Options.
The Board of Directors recommends the approval and ratification of three
nonqualified stock options to replace certain existing options
("replacement options") for a total of 180,000 shares of common stock.
These replacement options are intended to replace one-half of the
nonqualified stock options currently held by Leonard Weitz, Paul Hines
and Edward R. Schwartz, directors and officers of the Company, that had been
previously approved by the shareholders. Messrs. Weitz and Hines are
nominees for director (see proposal 1). The replacementoptions were
granted by the Board of Directors on January 21, 2000, subject to the
approval of shareholders of the Company at the meeting. Set forth below
is certain information with respect to the replacement options and the
existing options they would replace.
REPLACEMENT OPTIONS
Name of Date of Expiration Date No. of Shares Exercise Price
Optionee Grant of Option Under Option Per Share
Leonard Weitz 1/21/00 1/20/10 60,000 $2.1875
Paul Hines 1/21/00 1/20/10 60,000 $2.1875
Edward R. Schwartz 1/21/00 1/20/10 60,000 $2.1875
Total 180,000
EXISTING OPTIONS TO BE REPLACED
Name of Date of Expiration Date No. of Shares Exercise Price
Optionee Grant of Option Under Option Per Share
Leonard Weitz 08/08/96(1) 08/07/06 60,000 $7.00
Paul Hines 12/06/95(1) 12/05/05 40,000 $6.9375
08/08/96(1) 08/07/06 20,000 7.00
Edward R. Schwartz 12/06/95(1) 12/05/05 40,000 $6.9375
08/08/96(1) 08/07/06 20,000 7.00
Total 180,000
(1) Approved by shareholders on December 10, 1996.
See "INFORMATION CONCERNING STOCK OPTIONS HELD BY DIRECTORS AND OFFICERS",
above, for information concerning all options currently held by Messrs.
Weitz, Hines and Schwartz. This information includes both the existing
options that will be replaced (if Proposal 2 is approved by the shareholders)
and the other existing options that are not affected by Proposal 2.
The total number of nonqualified options that Messrs. Weitz, Hines and
Schwartz will hold shall be 120,000 shares each, whether or not Proposal
rs. Therefore, the principal purpose of Proposal 2, as recommended by the
Board of Directors, is to reduce the exercise price for options held by
each of the above optionees on 60,000 shares from the significantly higher
market price for the Company's shares that existed during December 1995 and
August 1996 when those options were granted. The exercise price for each
of the replacement options was the then current market price for the
Company's common stock on January 21, 2000, the date the options were g
s will also have the effect of extending the time period during which the
options may be exercised by approximately 4 to 4 1/2 years. All the other
provisions of the replacement options will be the same as the provisions of
the existing options that they are intended to replace. As is shown in
the "TABLE OF STOCK OPTIONS CURRENTLY OUTSTANDING", above, the other
currently outstanding nonqualified options for 60,000 shares each held by
Messrs. Weitz, Hines and Schwartz that have an exercise price of $3.50 p
y the results of the shareholders' note on Proposal 2, and those options
shall remain in effect.
If the shareholders approve Proposal 2 at the meeting, Messrs. Weitz,
Hines and Schwartz would surrender those options held by them which are
to be canceled, in exchange for the replacement options approved at the
meeting. If no such approval is given by the shareholders, the replacement
options will be of no force and effect, and all the options listed in the
"TABLE OF STOCK OPTIONS CURRENTLY OUTSTANDING", above, shall continue to be
valid options in the hands of Messrs. Weitz, Hines and Schwartz and exe
ir terms.
Each of the replacement options contains the following significant
provisions: the exercise price is $2.1875 per share; the optionee may
exercise all of a part of the option so long as he continuously remains a
director or officer, but in no event later than January 20, 2010, on which
latter date the option expires without value; if the optionee dies, his
personal representative may exercise the option within twelve months from
the date of death; and payment by the optionee upon exercise of the option
must ise price was the closing price for the Company's common stock on the
Nasdaq small cap market on January 20, 2000. The replacement options were
granted by the Board of Directors on January 21, 2000.
The decision of the Board of Directors at its meeting held January 21, 2000
to propose to shareholders that Messrs. Weitz, Hines and Schwartz each
receive nonqualified options to replace one-half of the options currently
held by them was based upon several considerations. The currently held
options that would be replaced have exercise prices of $6.9375 and $7 per
share, well above the $2.81 closing price for the Company's shares on
November 1, 2000. The Board of Directors believe that this current existi
fect negated the incentive nature of the original grant. It is this
incentive element that constitutes the very essence of stock option grants.
Rather than issue additional stock options to the three optionees, the
Board of Directors determined that a granting of replacement options having
an exercise price of $2.1875 per share in place of these higher priced
options was a preferable course. Providing overall incentive to directors
and officers is consistent with the goals of all the shareholders of the
recent market prices for the Company's shares are also more appropriate in
terms of acknowledging the work of the directors and officers who formulate
future plans for the Company and take on the fiduciary responsibilities
that go with serving on the Board of Directors and being an officer of a
company whose shares are publicly traded.
(ii) New Options.
The Board of Directors recommends the approval and ratification of two new
nonqualified stock options for 60,000 shares each granted by the Board of
Directors, subject to shareholder approval, to Thomas Bruderman and
Robert E. Poll ("new options"). Messrs. Bruderman and Poll were elected
as directors of the Company on December 29, 1999; they are also nominees
for director (see Proposal 1). Neither Mr. Bruderman nor Mr. Poll holds
outstanding options to purchase shares of the Company's stock. The new opt
on January 21, 2000 at an exercise price of $2.1875 per share. The exercise
price was the closing price for the Company's common stock on the Nasdaq
small cap market on January 20, 2000. At the time of granting the new
options, the Board of Directors had considered as an important factor,
Mr. Bruderman's and Mr. Poll's election as directors just one month earlier,
and that it was to the benefit of the Company and its shareholders that Mr.
Bruderman and Mr. Poll have incentive to see that the Company achie
ions to these newly elected directors was commensurate with the fact that
as directors of a publicly held company, they have undertaken fiduciary
and management responsibilities.
The new options granted to Messrs. Bruderman and Poll by the Board of
Directors, for which shareholder approval is sought at the meeting under
Proposal 2, are as follows:
Name of Date of Expiration Date No. of Shares Exercise Price
Optionee Grant of Option Under Option Per Share
Thomas Bruderman 1/21/00 1/20/10 60,000 $2.1875
Robert E. Poll 1/21/00 1/20/10 60,000 $2.1875
In addition to the above stated $2.1875 per share option price, both of
said new options contains the following significant provisions: the optionee
may exercise all or a part of the option so long as he continuously
serves as a director or officer, but in no event later than January 20,
2010, on which latter date the option expires without value; if the
optionee dies, his personal representative may exercise the option within
twelve months from the date of death; and payment by the optionee upon
exercise of the option must be in cash.
Tax and Accounting Treatment of Options.
The Company has been advised by counsel that under the Internal Revenue
Code, the persons to whom the nonqualified stock options were granted
will not be deemed to receive any income for Federal tax purposes at the
time the options were granted, nor will the Company be entitled to a tax
deduction at the time. Upon the exercise of a nonqualified stock option,
the optionee will be deemed to have received income in an amount equal to
the difference between the option price and market price of the shares on
will be allowed an income tax deduction in an amount equal to the income
deemed received by the optionee.
The accounting treatment for the replacement options and for the new
options will differ. The new stock options granted to Mr. Bruderman
and Mr. Poll will be accounted for as a fixed award and neither
the shareholders' approval of Proposal 2 nor the exercise of the option
(if such approval has been given) will have any affect on the Company's
net income. On the other hand, if the shareholders approve Proposal 2,
the replacement options granted to Messrs. Weitz, Hines and Schwartz will
be accounted for un
consistent with the Financial Accounting Standards Board's interpretation
of APB No. 25 that became effective on July 1, 2000. This means that
the Company will be required to recognize compensation expense in its
statement of operations for any increase in the market price of the
Company's common stock above the $3.6875 market price of the common stock
on July 1, 2000. This compensation expense must be recorded on a quarterly
basis until the option is exercised, forfeited or expired. Any subsequent
Company's common stock would result in a reversal of the compensation
expense previously recognized. As an example, if the shareholders approve
Proposal 2 at the meeting, the Company, in its financial statements for
the year ended December 31, 2000, would recognize as compensation expense
the dollar difference between the $3.6875 market price on July 1, 2000 and
the market price for the shares of common stock on December 31, 2000.
Approval of Proposal 2 requires that the votes cast in favor of
Proposal 2 exceed the votes cast against Proposal 2. As stated above,
Proposal 2 is comprised of part (i) "replacement options" and part
(ii) "new options". If proposal 2 is approved by the shareholders,
both the replacement options and the new options will become effective.
If Proposal 2 is not approved, none of the aforesaid options will
become effective. MANAGEMENT INTENDS TO CAST ITS PROXY VOTES IN FAVOR
OF PROPOSAL 2.
PROPOSAL 3: THE SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The accounting firm of Arthur Andersen LLP has been recommended by the
Board of Directors to serve as independent public accountants for
stated in the Notice of Special Meeting of Shareholders in Lieu of Annual
Meeting. If any other matter shall properly come before the meeting,
the persons in the accompanying proxy intend to vote on such matters in
accordance with their best judgment.
By Order of the Board of Directors,
Edward R. Schwartz
Secretary
November 15, 2000
PROXY
CHIEF CONSOLIDATED MINING COMPANY
Special Meeting of Shareholders in Lieu of Annual Meeting December 15, 2000
The undersigned, the holder of common stock, convertible common stock or
preferred stock of Chief Consolidated Mining Company hereby constitutes
and appoints Leonard Weitz and Edward R. Schwartz (the Proxy Committee)
and/or eac
MEETINGS OF THE BOARD OF DIRECTORS AND
INFORMATION REGARDING COMMITTEES
The Board of Directors held four meetings in 1999. All of the persons who
served as directors at the time of each meeting were present at all the
meetings held in 1999.
The Company has an Audit Committee currently comprised of the following
directors: Christopher A. Arnold, Paul Hines and Robert E. Poll. The
principal functions of the Audit Committee are to (i) review financial
reports and other financial information provided by the Company to any
governmental body or the public; (ii) serve as an independent and objective
party to monitor the Company's financial reporting process and internal
control system; (iii) consider independence and effectiveness and approve
fees accountants; (iv) provide an open avenue of communication among the
independent accountants, financial and senior management and the Board of
Directors; and (v) review with the Company's counsel, legal compliance
matters and any legal matter that could have a significant impact on the
Company's financial statements. During 1999, the Audit Committee was
comprised of Mr. Hines and James Callery (a former director who had
resigned in 1999). The Audit Committee held three meetings during the
year 1999.
WITHHOLD VOTE FOR INDIVIDUAL NOMINEE(S): (Write that nominee(s) name in
the space provided below).
2. Approval of the proposal to (i) replace outstanding nonqualified
stock options held by three directors and officers of the Company and
(ii) approve and ratify new nonqualified stock options granted to two
other directors of the Company.
(The Board of Directors recommends a vote FOR).
FOR AGAINST ABSTAIN
3. Ratification of the appointment of ARTHUR ANDERSEN LLP, as
independent public accountants.
(The Board of Directors recommends a vote FOR).
FOR AGAINST ABSTAIN
4. The Proxy Committee in their discretion, considering and acting upon
any other matters which may properly come before the meeting or any
adjournments thereof.
(The Board of Directors recommends a vote FOR).
FOR AGAINST ABSTAIN
The undersigned hereby acknowledges receipt of a copy of the notice and
proxy statement of the Company for the meeting referred to on the reverse
side.
Signature(s) _______________________________________ Dated __________
NOTE: Please sign as name appears, Joint ownership should each sign.
When signing as Attorney, Executor, Administrator, or Guardian, please give
full title as such. If signer is a corporation, partnership or other entity,
please sign, indicating the full name of the organization and title of
person authorized to sign.
