<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 [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
ZEIGLER COAL HOLDING COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(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)(4) 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 computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary 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 or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
ZEIGLER COAL HOLDING COMPANY
50 JEROME LANE
FAIRVIEW HEIGHTS, IL 62208
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 6, 1997
------------------------
To the Stockholders of Zeigler Coal Holding Company:
The Annual Meeting of Stockholders of Zeigler Coal Holding Company (the
"Company" or "Zeigler") will be held in the Michigan Room at the Metropolitan
Club, 233 South Wacker Drive, 66th Floor, Chicago, Illinois, on Tuesday, May 6,
1997, at 10:00 a.m., local time, for the following purposes:
1. To select five directors of the Company to serve for a term
expiring at the next Annual Meeting of Stockholders;
2. To ratify the selection of Deloitte & Touche LLP as auditors of the
Company's 1997 financial statements; and
3. To transact such other business as may properly come before the
Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 14, 1997,
as the record date for determining the stockholders entitled to notice of and to
vote at the Meeting or any adjournment thereof.
YOUR REPRESENTATION AT THIS MEETING IS IMPORTANT. If you cannot be present
at the Meeting, please date, sign and return the enclosed proxy. An envelope is
enclosed for your convenience which, if mailed in the United States, requires no
postage. To help us plan for the Meeting, please mark the appropriate box on
your proxy card telling us if you will be attending.
A copy of the Company's Annual Report for the year ended December 31, 1996,
and a Proxy Statement accompany this notice.
By order of the Board of Directors,
Brent L. Motchan
Brent L. Motchan
Secretary
April 4, 1997
<PAGE> 3
ZEIGLER COAL HOLDING COMPANY
50 JEROME LANE
FAIRVIEW HEIGHTS, IL 62208
MAILING DATE
APRIL 4, 1997
------------------------
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
------------------------
TO BE HELD ON MAY 6, 1997
GENERAL INFORMATION
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Zeigler Coal Holding Company (the
"Company") for use at the Annual Meeting of Stockholders (the "Meeting") to be
held on May 6, 1997, and at any adjournment thereof. Costs of solicitation will
be borne by the Company. Following the original solicitation of proxies by mail,
certain of the officers and regular employees of the Company may solicit proxies
by correspondence, telephone, or in person, but without extra compensation. The
Company will reimburse brokers and other nominee holders for their reasonable
expenses incurred in forwarding the proxy materials to the beneficial owners.
The Company has retained D.F. King & Co., Inc. to aid in the solicitation of
proxies for a fee estimated at $5,000 plus out of pocket expenses.
Unless otherwise indicated thereon, when you sign and return the enclosed
proxy properly executed, the shares represented thereby will be voted for the
election of each of the nominees for directors as described herein, the
ratification of selection of Deloitte & Touche LLP as auditors of the Company's
1997 financial statements and, as to any other business as may properly be
brought before the Annual Meeting and any adjournments or postponements thereof,
in the discretion of the proxy holders. Each holder of record giving the proxy
enclosed with this Proxy Statement may revoke it at any time prior to the voting
thereof at the Meeting, by (i) delivering to the Company a written revocation of
the proxy, (ii) delivering to the Company a duly executed proxy bearing a later
date or (iii) voting in person at the Meeting. Attendance by a stockholder at
the Meeting will not in itself constitute the revocation of a proxy.
VOTING SECURITIES
The holders of record of the Common Stock of the Company at the close of
business on March 14, 1997, will be entitled to vote at the Meeting. On such
record date, there were outstanding 28,403,961 shares of Common Stock. Each
holder of Common Stock is entitled to one vote per share held by such
stockholder in the election of directors and with respect to each other matter
to come before the Meeting. The five nominees receiving the highest number of
votes will be elected as directors, and the selection of Deloitte & Touche LLP,
as auditors for 1997 will be ratified if approved by a majority of the shares
voting on the matter. The enclosed proxy provides space for each stockholder to
vote for, or to withhold authority to vote for, any or all of the Company's
nominees for Directors (Item 1). The proxy also provides space for stockholders
to vote for, against, or to abstain from voting on, the ratification of the
selection of Deloitte & Touche LLP, as auditors of the Company's 1997 financial
statements (Item 2).
The presence, in person or by proxy, of holders of Common Stock
representing a majority of the shares outstanding on the record date is
necessary to constitute a quorum to transact business at the Meeting. Shares as
to which authority to vote on Item 1 is withheld, and broker non-votes (where a
broker submits a proxy but does not have authority to vote a customer's shares
on one or more matters) on either Item will be considered present at the Meeting
for purposes of establishing a quorum. With respect to the election of Directors
(Item 1), neither shares as to which authority to vote has been withheld (to the
extent withheld) nor broker
<PAGE> 4
non-votes will be considered affirmative votes. Broker non-votes will be
considered not entitled to vote on Item 2 and thus will not be counted in
determining whether Item 2 has received the requisite votes.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information as of January 31, 1997, (unless
otherwise noted) with respect to beneficial ownership of the Company's Common
Stock by any person who is known to the Company to be the beneficial owner of
more than 5% of the outstanding shares, each director, each nominee for
director, the five named executive officers and all directors and executive
officers as a group. Unless otherwise indicated, each beneficial owner possesses
sole voting and investment power with respect to the shares listed in this
table.
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES PERCENTAGE
---- ---------------- ----------
<S> <C> <C>
Kinman Limited Partnership(1).................... 6,001,738 21.1%
Neuberger & Berman, LLC(2)....................... 2,554,400 9.0%
Michael K. Reilly(3)............................. 1,617,550 5.7%
Chand B. Vyas(4)(7).............................. 945,495 3.3%
Roland E. Casati(5).............................. 2,560,000 9.0%
Robert W. Ericson................................ 2,000 *
John F. Manley(6)................................ 6,001,738 21.1%
W.D. Blackburn, Jr.(7)........................... 53,811 *
James W. Mahler(7)............................... 43,102 *
David M. Young(7)................................ 31,010 *
John C. Willson(7)............................... 14,386 *
All directors and executive officers as a group
(20 persons)(3)(4)(5)(6)(7).................... 11,601,967 40.4%
</TABLE>
- ------------
* Represents less than 1%
(1) The address of the Kinman Limited Partnership ("Kinman") is c/o Chicago City
Capital Group, Suite 9300, Sears Tower, Chicago, Illinois 60606. Mr. Manley,
a director of the Company, is the sole general partner of, and as such
effectively controls Kinman.
(2) The source of this information is the Schedule 13G of Neuberger & Berman,
LLC dated February 10, 1997 filed with the Securities and Exchange
Commission. The address of Neuberger & Berman, LLC is 605 Third Avenue, New
York, New York 10158. Neuberger & Berman, LLC reported that it had shared
power of disposition with respect to 2,554,400 shares, shared power to vote
1,702,000 shares and sole power to vote 245,900 shares.
(3) Includes 541,100 shares held by MKR Investments L.P., a family partnership.
Does not include shares of Common Stock owned by Mr. Reilly's children and
trusts for the benefit of Mr. Reilly's grandchildren as to which Mr. Reilly
disclaims beneficial ownership. The address of Mr. Reilly is c/o Zeigler
Coal Holding Company, 50 Jerome Lane, Fairview Heights, Illinois 62208.
(4) Includes 639,920 shares held through a trust for Mr. Vyas and 150,400 shares
owned by trusts for Mr. Vyas' children for which Mr. Vyas acts as trustee.
Mr. Vyas disclaims beneficial ownership of the shares owned by trusts for
his children.
(5) Includes 384,000 shares owned by a trust for the benefit of Mr. Casati's
daughters. The address of Mr. Casati is 255 Green Bay Road, Lake Forest,
Illinois 60045.
(6) Reflects 6,001,738 shares held of record by Kinman. Mr. Manley is the sole
general partner of Kinman and, as such, may be deemed to own beneficially
shares owned by Kinman.
(7) Includes shares which may be acquired upon exercise of options granted under
the Company's Stock Option Plan which were exercisable within 60 days of
April 4, 1997, as follows: Mr. Vyas--152,160 shares; Mr. Blackburn--34,800
shares; Mr. Mahler--25,400 shares; Mr. Young--20,400 shares; Mr.
Willson--6,200 shares; and all directors and executive officers as a
group--331,880 shares.
2
<PAGE> 5
The Company and certain stockholders are parties to a Registration
Agreement under which such stockholders in certain circumstances can require the
Company, subject to certain limitations, to file a registration statement with
the Securities and Exchange Commission covering the offering and sale of the
shares of Zeigler Common Stock. In connection with any such registration, the
Company, among other things, pays certain costs of the offering and agrees to
indemnify the selling stockholders against certain claims in connection with the
offering. Shares of Common Stock beneficially owned by Messrs. Vyas, Reilly,
Casati and Kinman are covered by such agreement.
MATTERS TO BE VOTED ON AT THE MEETING
1. ELECTION OF DIRECTORS
Five directors are to be elected at the Meeting to hold office until the
next Annual Meeting of Stockholders or until his successor is chosen and
qualified. Set forth below under "Nominees for Directors" is the name, age,
principal business experience during the last five years and other information
regarding each of the five nominees. The Board intends to cause the nominations
of each nominee listed and all proxies received from holders of Common Stock
will be voted for the election of such nominees, except to the extent that
persons giving such proxies withhold authority to vote for such nominees. The
Company believes that each of the nominees for Director will be able to serve.
If any of the nominees would be unable to serve, the enclosed proxy confers
authority to vote in favor of such other person or persons as the Board of
Directors at the time recommends to serve in place of the person or persons
unable to serve.
Each of the nominees listed below has been a Director of the Company since
January 1985. The Board held twelve meetings (including six by telephone
conference) in 1996. Each person who served as a Director in 1996 attended at
least 75% of the aggregate number of meetings in 1996 of the Board of Directors
and the committees on which he served.
NOMINEES FOR DIRECTORS
Michael K. Reilly. Age 64. Mr. Reilly has been Chairman of the Board since
1985, and from 1985 until December 31, 1994, was Chief Executive Officer of the
Company. Mr. Reilly was President of the Company from its organization in 1983
until 1991. Mr. Reilly was President of Zeigler Coal Company from 1980 until its
acquisition by the Company in 1985. Mr. Reilly is also a past chairman of the
Bituminous Coal Operators Association ("BCOA"), past chairman of the Illinois
Coal Association, a past director and past chairman of the National Coal
Association, a past director of the National Mining Association and is currently
a director of Newmont Mining Corporation and Newmont Gold Company.
Chand B. Vyas. Age 52. Mr. Vyas has been President and Chief Executive
Officer of the Company since January 1, 1995. Prior to his election as President
and Chief Executive Officer, Mr. Vyas held the following positions with the
Company: 1991-1994 President and Chief Operating Officer; 1989-1991 Executive
Vice President; February 1989 to November 1989 Senior Vice President--Finance
and Administration; 1985-1988 Vice President and Chief Financial Officer. Mr.
Vyas joined Zeigler Coal Company in 1982 as a Director and Vice
President--Finance. He is currently a director of the Center for Energy and
Economic Development.
Roland E. Casati. Age 66. Mr. Casati has been a real estate developer and
has also been active in venture capital investments for more than the last five
years.
Robert W. Ericson. Age 48. Mr. Ericson has been a Partner of the law firm
of Winston & Strawn since 1983.
John F. Manley. Age 46. Mr. Manley has been President of Chicago City
Capital Group and the General Partner for the Kinman Limited Partnership, a
private investment partnership, for more than the last five years.
3
<PAGE> 6
COMMITTEES OF THE BOARD
The Company has established standing Audit and Compensation Committees.
The Audit Committee reviews and makes recommendations to the Board of
Directors regarding internal accounting and financial controls and accounting
principles, auditing practices, the engagement of independent public accountants
and the scope of the audit to be undertaken by such accountants. The members of
the Audit Committee in 1996 were Messrs. Casati and Ericson. The Audit Committee
held two meetings in 1996.
The Compensation Committee has the authority of the Board of Directors with
respect to the compensation, benefit and employment policies and arrangements
for all officers of the Company. The Committee also administers the Company's
Stock Appreciation Plan and its Stock Option Plan and has authority to grant
options to eligible employees of the Company and of its subsidiaries. The
members of the Compensation Committee in 1996 were Messrs. Manley and Reilly.
The Compensation Committee held two meetings in 1996.
DIRECTORS' COMPENSATION
Directors who are not employees of the Company receive a quarterly retainer
of $5,000 for their service as directors and receive a fee of $2,000 for each
Board meeting and each meeting of the Audit Committee or Compensation Committee
they attend. The Directors who are also employees of the Company do not receive
any additional compensation for serving on the Board of Directors or attending
board or committee meetings.
EXECUTIVE COMPENSATION
The following table sets forth the annual and long-term compensation during
the last three fiscal years paid or granted by the Company or its subsidiaries
to, or accrued for, the Chief Executive Officer and the four highest paid
executive officers of the Company and its subsidiaries during 1996:
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------------- ------------------------------
NAME AND PRINCIPAL OTHER ANNUAL AWARDS LTIP ALL OTHER
POSITION DURING 1996 YEAR SALARY ($) BONUS ($) COMPENSATION OPTIONS/SAUS (#) PAYOUTS ($) COMPENSATION ($)
-------------------- ---- ---------- --------- ------------ ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Chand B. Vyas-- 1996 425,000 600,000 10,500 100,000 -- --
President and Chief 1995 425,000 250,000 10,500 -- -- --
Executive Officer 1994 367,361 225,000 15,000 253,600 -- --
W.D. Blackburn, Jr.-- 1996 189,583 188,650 3,950 40,000 -- --
Senior Vice President 1995 175,000 65,000 17,678 -- -- --
Operations(1) 1994 84,280 40,000 5,057 70,000 -- --
James W. Mahler-- 1996 150,000 112,500 8,100 35,000 -- --
President Americoal 1995 150,000 60,000 8,100 -- -- --
Development Company 1994 143,750 54,000 12,225 34,000 -- --
David M. Young-- 1996 166,211 120,000 37,099 10,000 -- --
President Mountaineer 1995 160,000 30,000 4,231 -- -- --
Coal Development 1994 150,398 10,000 11,320 34,000 -- --
Company
John C. Willson-- 1996 158,333 120,000 47,113 15,000 -- --
President Triton Coal 1995 125,000 37,500 3,000 16,000 -- --
Company(2) 1994 -- -- -- -- -- --
</TABLE>
- ------------
(1) Mr. Blackburn's employment commenced in June 1994.
(2) Mr. Willson's employment commenced in March 1995.
EMPLOYMENT AGREEMENTS
Mr. Vyas has an employment agreement with the Company, dated as of February
24, 1993, as amended, which provides for his employment by the Company as
President and, if so elected, Chief Executive Officer at
4
<PAGE> 7
an annual salary and bonus to be determined by the Board of Directors. Mr. Vyas'
employment may be terminated by him or the Company on 30 days' notice. If he is
terminated for other than cause, or he terminates his employment as a result of
an unacceptable change in his duties, a change of control of Zeigler or other
"Good Reason" (as defined therein), Mr. Vyas would be entitled to severance
payments for three years following termination in an amount equal to three times
his Average Compensation as well as certain other benefits related to his
supplemental retirement payments and acceleration of vesting of his stock
options. In the event of Mr. Vyas' death, his estate is entitled to receive two
times his Average Compensation. The employment agreement provides that upon
retirement, Mr. Vyas would be entitled to supplemental retirement payments equal
to the excess, if any, of (i) the amount he would receive under the Company's
pension plan (described below) if effect were not given to limitations imposed
by the Internal Revenue Code and if his compensation included his bonuses over
(ii) the annual amount payable to Mr. Vyas under such pension plan plus annual
social security benefits payable to him. The estimated annual supplemental
retirement payment payable to Mr. Vyas upon his normal retirement date was
$295,000 as of December 31, 1996. Mr. Vyas' employment agreement also provides
that he will not compete with the Company during the employment term and for a
period of one year following termination.
STOCK APPRECIATION AND STOCK OPTION PLANS
Stock Appreciation Plan. Certain key employees of the Company and its
subsidiaries have been granted stock appreciation units ("SAUs") under the
Company's Stock Appreciation Plan (the "Stock Appreciation Plan"). Each
participant in the Stock Appreciation Plan is entitled to receive a cash payment
at "maturity" for each SAU which has become vested based upon the increase in
fair value (as defined) of a share of the Company's Common Stock from the
effective date of the award of the SAU. Vested SAUs mature on the earliest of
the termination of the participant's employment with the Company, the sixth
anniversary of the date of grant, the sale of the Company or the written
election of the participant. The Stock Appreciation Plan is administered by the
Compensation Committee of the Board of Directors. There were 284,320 SAUs
outstanding as of December 31, 1996, all of which were granted in 1990, 1991 and
1992. The SAUs vest in annual increments over five years. Under the Stock
Appreciation Plan, "fair value" is based on the "market price" of the Company's
Common Stock.
Stock Option Plan. In 1994 the Company's Board of Directors and
stockholders adopted its Stock Option Plan (the "Option Plan"). A total of
2,560,000 shares of Common Stock were reserved for issuance upon exercise of
options granted under the Option Plan. The purpose of the Option Plan is to
attract and retain qualified personnel and to provide additional incentive to
executive and other key employees of the Company and its subsidiaries. The
Option Plan is administered by the Compensation Committee (the "Committee")
which determines the terms of the options granted under the Option Plan,
including the exercise price, number of shares subject to the option and
exercisability. Generally, options may be transferred by the optionees by will
or the laws of descent or distribution or to such transferees and on such terms
and conditions as the Committee approves. Each option may be exercised, during
the lifetime of the optionee, only by the optionee. The exercise price of all
options granted under the Option Plan must equal at least the fair market value
of the Common Stock of the Company on the date of grant.
Unless the Committee specifies otherwise in the option grant, options
granted will vest and become exercisable with respect to 20% of the Common Stock
issuable upon exercise thereof on each anniversary of the grant date, and the
remainder shall vest on the fifth anniversary of the grant date. At the
discretion of the Committee, options may be made exercisable in one or more
installments upon (i) occurrence of certain events, (ii) passage of time, (iii)
fulfillment of certain conditions, or (iv) achievement of corporate performance
goals. In the event of the Sale of the Company (as defined therein), the
Committee may provide, in its discretion, that (i) outstanding options shall
become immediately exercisable and shall terminate if not exercised as of the
date of the Sale of the Company or any other designated date, or (ii) that such
options shall only provide the right to receive the excess of the consideration
per share of Common Stock offered in such Sale of the Company over the exercise
price of such options.
5
<PAGE> 8
OPTION/SAU GRANTS, EXERCISES AND YEAR-END VALUE TABLE
The following table sets forth, for the named executive officers, the
number and value of options granted during 1996.
<TABLE>
<CAPTION>
PERCENT OF TOTAL
NUMBER OF SECURITIES OPTIONS GRANTED GRANT DATE
UNDERLYING OPTIONS TO EMPLOYEES IN EXERCISE PRICE PRESENT VALUE
NAME GRANTED (#) FISCAL YEAR ($/SH) EXPIRATION DATE ($)(1)
---- -------------------- ---------------- -------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Chand B. Vyas 100,000 14.53% $14.00 2/27/06 492,691
W.D. Blackburn, Jr. 40,000 5.81% $14.00 2/27/06 197,076
James W. Mahler 35,000 5.09% $14.00 2/27/06 172,442
David M. Young 10,000 1.45% $14.00 2/27/06 49,269
John C. Willson 15,000 2.18% $14.00 2/27/06 73,904
</TABLE>
- ------------
(1) The present value of options at date of grant was estimated using the
Black-Scholes model with the following assumptions: 1) expected life of 7
years; 2) risk-free interest rate of 6.25%; 3) volatility of 29.9%; and 4)
dividend yield of 2.1%.
None of the named executive officers was granted any SAUs during 1996.
The following table sets forth, for the named executive officers, the
number and value of exercised options and SAUs during 1996 and the number and
value of unexercised options and SAUs as of December 31, 1996.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SAUS AT OPTIONS/SAUS AT
FY-END (#) FY-END ($)(1)
--------------------------- ---------------------------
SHARES ACQUIRED VALUE REALIZED VESTED OR UNVESTED OR VESTED OR UNVESTED OR
NAME ON EXERCISE ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Chand B. Vyas Options -- -- 132,160 221,440 900,752 1,679,668
SAUs 327,040 4,177,701(2) -- -- -- --
W.D. Blackburn, Jr. Options 7,600 60,800 26,800 75,600 180,140 596,860
SAUs -- -- -- -- -- --
James W. Mahler Options -- -- 18,400 50,600 117,680 370,745
SAUs 48,000 546,489(3) -- -- -- --
David M. Young Options -- -- 18,400 25,600 117,680 186,370
SAUs -- 26,233(4) 44,800 3,200 801,284 60,327
John C. Willson Options -- -- 3,200 27,800 27,200 219,425
SAUs -- -- -- -- -- --
</TABLE>
- ------------
(1) Based on the closing price on the New York Stock Exchange on December 31,
1996 of $21.375 per share.
(2) Includes $95,874 in non-preferential dividends paid in 1996 on vested but
unexercised SAUs.
(3) Includes $20,943 in non-preferential dividends paid in 1996 on vested but
unexercised SAUs.
(4) Consists of non-preferential dividends paid in 1996 on vested but
unexercised SAUs.
RETIREMENT PLANS
All non-union employees of Zeigler Coal Holding Company and its
subsidiaries are eligible to participate in the Mining Companies Pension Plan, a
defined benefit pension plan intended to qualify under Section 401(a) of the
Code (the "pension plan"). The pension plan is a cash balance plan whereby each
participant's benefit is determined based upon the assumed cash balance credits
and earnings which are credited to the participant's nominal account. The cash
balance credits range from 5% to 6.5% of the participant's annual compensation.
Each account is credited with assumed earnings equal to the 5-year Treasury note
rate, subject to a 5% minimum and a 12% maximum rate. The normal retirement age
under the
6
<PAGE> 9
pension plan is age 60. Certain participants under this plan may be entitled to
a minimum benefit under the pension plan equal to the amount which would have
been provided under a prior defined benefit formula.
Compensation under the pension plan generally refers to the base salary (up
to $150,000 for 1996, as limited by the Code) for services rendered to the
Company and its subsidiaries including pre-tax deferrals, but excluding items
such as bonuses, the value of stock awards and employer contributions to
retirement plans at December 31, 1996. As of December 31, 1996, the estimated
annual benefit (assuming a 7.5% return on each participant's nominal account)
payable to Messrs. Vyas, Blackburn, Mahler, Young and Willson upon their normal
retirement date was $53,738, $27,770, $31,755, $37,337, and $20,146,
respectively. As of December 31, 1996, Messrs. Vyas, Blackburn, Mahler, Young
and Willson had approximately 15, 2, 6, 12, and 1 years of credited service,
respectively, under the pension plan. Benefits are computed on a straight life
annuity basis and payable under several actuarially determined alternatives.
All non-union employees of Zeigler Coal Holding Company are also eligible
to participate in either the Zeigler Salaried Employees Savings Plan or the
Mining Companies Pay Deferral Plan, defined contribution 401(k) plans intended
to qualify under Section 401(a) of the Code (the "savings plan"). Participants
may contribute to the savings plan on a pre-tax basis. The Company matches a
portion of the amount contributed under the Zeigler Salaried Employees Savings
Plan. The Company's matching contribution equals $.50 for each dollar
contributed (not to exceed 3% of compensation), plus an additional match (not to
exceed another 3% of compensation) if the Company meets certain performance
criteria. The compensation which may be considered for this purpose is limited
by the Code to $150,000 in 1996. There is generally no Company matching under
the Mining Companies Pay Deferral Plan.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS:
Indebtedness of Management. During 1996, the Company made two (2)
short-term loans for personal purposes to W.D. Blackburn, Jr., Senior Vice
President--Operations of the Company. The first loan, the largest aggregate
amount outstanding of which was approximately $128,000 (including accrued
interest), bore interest at the rate of 10% per annum and was paid in full prior
to December 31, 1996. The second loan, the largest aggregate amount outstanding
of which was $105,000, was a 30-day non-interest bearing loan and was also paid
in full prior to December 31, 1996.
During 1996, the Company made a short-term loan for personal purposes to
Paul D. Femmer, Controller of the Company. This loan, the largest aggregate
amount outstanding of which was approximately $106,000 (including accrued
interest), bore interest at the rate of 10% per annum and was paid in full prior
to December 31, 1996.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of Zeigler's Board of Directors has
responsibility for establishing the compensation (including employee benefits
not generally available to salaried employees) of the Company's principal
executive officers and other higher paid personnel. The Compensation Committee
also serves as the committee established under Zeigler's Stock Option Plan with
authority to fix the terms of, and grant options under, such plan. The
Compensation Committee is comprised solely of non-employee directors.
In general, the Compensation Committee strives to meet the following
objectives in making compensation decisions for executive personnel: (1) provide
overall compensation that enables the Company to attract and retain highly
qualified personnel; (2) to authorize compensation that is fair to Zeigler
employees, fair to Zeigler shareholders, and fair comparing the different
organizational levels; and (3) to design compensation that creates both
substantial incentives but also alignment with shareholder short and long term
interests.
In general, the Committee does not intend to approve compensation to the
Company's executive officers in excess of $1,000,000, unless such compensation
meets the performance based standards set forth in Section 162(m)(4)(C) of the
Internal Revenue Code of 1986, as amended, or the Committee determines that such
compensation is otherwise appropriate in the specific instance. The Committee
consults with tax advisors as necessary to avoid any unintended result.
7
<PAGE> 10
There are currently three principal components of senior executive
compensation: (i) base salaries, (ii) annual cash bonuses and (iii) stock
options. Salaries are determined primarily on the basis of industry standards as
applied to each executive's background, responsibilities and overall performance
with the Company and are adjusted every 12 to 24 months. In general, the
Committee's policy has been to have the incentive based components of
compensation (i.e., bonuses and stock related plans) constitute a higher
proportion of an executive's overall compensation. In its review, the Committee
takes into account high growth goals for the Company balanced by the
complexities of transitioning from a pure coal mining company. The Committee has
also reviewed the compensation plans of high growth companies in a number of
industries. Details of this review include the dollar amounts of salaries and
bonuses; the relationship of stock options and bonuses to salaries, company
size, total shareholder return and shares outstanding; the alignment of
compensation between organizational levels; and the breadth of incentive plans.
Annual bonuses are considered to represent the short-term incentive portion
of executive compensation and are based on actual financial performance as
compared to the Company's financial plan as well as the assessment of the
executive's overall performance during the year. Financial performance is
measured principally by operating income cash flow of the Company and total
return to shareholders. In the case of officers responsible for a particular
business unit, the performance of that unit is a principal measure. Targeted
bonus amounts are set for each executive officer. For Mr. Vyas, the target bonus
for 1996 was 90% of base salary. With respect to 1996, the Committee determined,
based on Zeigler's financial performance and the Committee's assessment of
individual performance, that the bonus for Mr. Vyas would be 141% of Mr. Vyas'
base salary. For the other named executives the Committee approved bonuses
ranging from 72% to 100% of their base salaries.
Long-term incentives for executives are provided by Zeigler's Stock Option
Plan. Stock option grants under the Stock Option Plan are intended to provide
rewards which are earned by executives over a substantial period of employment
and which reflect growth in the value of stockholder equity and align the
interests of key personnel with those of stockholders. Zeigler's experience as a
company with substantial employee stock ownership has demonstrated the long-term
benefits to stockholders of providing key employees with opportunities for
meaningful equity ownership. The policy of the Compensation Committee is to
consider option grants for executives annually and has been to provide option
vesting in annual increments over a number of years. In making individual
grants, the Committee also considers the amount and terms of prior option grants
to each individual. The Committee granted Mr. Vyas options for 100,000 shares in
February, 1996.
By the Compensation Committee:
John F. Manley (Chairman)
Michael K. Reilly
8
<PAGE> 11
PERFORMANCE GRAPH
The following graph compares the cumulative total return on $100 invested
on September 30, 1994 (the first day of public trading of the Common Stock)
through December 31, 1996 in (i) the Common Stock of the Company, (ii) the S&P
500 Index, (iii) a market weighted peer company index of Addington Resources,
Inc., Ashland Coal, Inc., Cyprus Amax Minerals Co., Pittston Minerals Group and
Westmoreland Coal Company (the "Peer Companies") and (iv) the S&P 400 Mid-Cap
Index.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG
ZEIGLER COAL HOLDING COMPANY, S&P 500 INDEX,
S&P 400 MID-CAP INDEX AND PEER COMPANIES
<TABLE>
<CAPTION>
MEASUREMENT PERIOD ZEIGLER COAL S&P 500 PEER S&P 400 MID-
(FISCAL YEAR COVERED) COMPANIES (1) CAP (2)
<S> <C> <C> <C> <C>
9/30/94 100 100 100 100.00
12/31/94 76.13 99.98 86.59 97.42
12/29/95 91.41 137.56 85.00 125.33
12/31/96 142.99 169.15 89.11 149.40
</TABLE>
<TABLE>
<CAPTION>
PEER S&P 400
DATE ZEIGLER COAL S&P 500 COMPANIES(1) MID-CAP(2)
---- ------------ ------- ------------ ----------
<S> <C> <C> <C> <C>
9/30/94 100.00 100.00 100.00 100.00
12/31/94 76.13 99.98 86.59 97.42
12/29/95 91.41 137.56 85.00 125.33
12/31/96 142.99 169.15 89.11 149.40
</TABLE>
(1) The Peer Companies index reflects trading activities of Addington Resources,
Inc. through December 19, 1996, the last day such company's stock was traded
prior to the acquisition of such company by Republic Industries, Inc. (a
diversified company operating in several industries other than coal mining).
(2) The S&P 400 Mid-Cap Index has been added to the performance graph in this
Proxy Statement because management believes the capitalization of the
companies in this index is generally more comparable to the Company's
capitalization and thus provides a more meaningful comparison than the S&P
500 Index.
9
<PAGE> 12
2. RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors has selected Deloitte & Touche LLP to serve as the
Company's independent certified public accountants for the fiscal year ending
December 31, 1997 based on a recommendation of the Audit Committee. The
accounting firm (or its predecessors) has served as the Company's independent
certified public accountant since 1985. A representative of that firm will be
present at the Annual Meeting with the opportunity to make a statement if he
desires to do so and to respond to questions of stockholders. The selection of
the auditors will be submitted for ratification by the stockholders at the
Annual Meeting and the Board of Directors recommends such ratification.
COMPLIANCE WITH THE SECURITIES EXCHANGE ACT
The Company's executive officers and directors are required under the
Securities Exchange Act of 1934 to file reports of ownership and changes of
ownership of common stock of the Company with the Securities and Exchange
Commission and the New York Stock Exchange. Copies of these reports must also be
furnished to the Company.
Based solely on a review of the copies of reports furnished to the Company
and written representations that no other reports were required, the Company
believes that during 1996 all executive officers and directors complied with all
applicable filing requirements.
FUTURE STOCKHOLDER PROPOSALS
In order to be considered for inclusion in the proxy statement for the next
Annual Meeting of Stockholders, stockholder proposals must be submitted to the
Company on or before December 5, 1997.
OTHER BUSINESS
As of the date hereof, the foregoing is the only business which management
intends to present, or is aware that others will present, at the Meeting. If any
other proper business should be presented at the Meeting, the proxies will be
voted in respect thereof in accordance with the discretion and judgment of the
person or persons voting the proxies.
By order of the Board of Directors
Brent L. Motchan
Brent L. Motchan
Secretary
Zeigler Coal Holding Company
YOUR VOTE IS IMPORTANT.
PLEASE PROMPTLY COMPLETE AND SIGN THE ENCLOSED
FORM OF PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE
10
<PAGE> 13
REVOCABLE PROXY REVOCABLE PROXY
ZEIGLER COAL HOLDING COMPANY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The holder of shares of Common Stock (the "Common Stock") of Zeigler Coal
Holding Company (the "Company") whose signature appears on the reverse side
hereof hereby constitutes and appoints each of Michael K. Reilly and Chand B.
Vyas, with full power of substitution, as proxies to vote all of the shares of
Common Stock held of record by such holder on March 14, 1997 at the Annual
Meeting of Stockholders of the Company to be held in the Michigan Room at the
Metropolitan Club, 233 South Wacker Drive, 66th Floor, Chicago, Illinois, on
Tuesday, May 6, 1997, at 10:00 o'clock a.m., local time, and any adjournments
thereof, as directed on the following matters proposed by the Company:
PLEASE SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY,
USING THE ENCLOSED ENVELOPE.
(Please sign and date on reverse side.)
ZEIGLER COAL HOLDING COMPANY
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. /X/
<TABLE>
<S><C>
1. Election of Directors For All
Nominees: Michael K. Reilly, Chand B. Vyas, Roland For Withheld Except _______________________________________________
E. Casati, Robert W. Ericson, John F. Manley / / / / / / Nominee Exception
For Against Abstain 3. In their discretion, the proxies are
2. To elect Deloitte & Touche LLP as auditors for the / / / / / / authorized to vote upon such other business
Company for the ensuing year. as may properly come before the meeting or any
adjournment thereof.
This Proxy, when properly completed and returned,
will be voted in the manner directed herein by
the undersigned stockholder. IF NO DIRECTION IS
GIVEN, THIS PROXY WILL BE VOTED "FOR" THE ABOVE
ITEMS.
In addition, to help the Company plan for the
meeting, please check the appropriate box below:
I / / plan to attend the annual meeting.
/ / do not plan
Dated: _______________________, 1997
Signature(s) ____________________________________
_________________________________________________
Please date and sign exactly as your name
appears. All joint owners should sign. When
signing as a fiduciary, representative or
corporate officer, give full title as such. If
you receive more than one proxy card, please sign
and return all cards received.
</TABLE>
