<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 5, 1998
------------------------
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 Illinois Room at the Metropolitan
Club, 233 South Wacker Drive, 67th Floor, Chicago, Illinois, on Tuesday, May 5,
1998, 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 1998 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 13, 1998,
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 on Form 10-K for the year ended
December 31, 1997, and a Proxy Statement accompany this notice.
By order of the Board of Directors,
Brent L. Motchan
Brent L. Motchan
Secretary
April 2, 1998
<PAGE> 3
ZEIGLER COAL HOLDING COMPANY
50 JEROME LANE
FAIRVIEW HEIGHTS, IL 62208
MAILING DATE
APRIL 2, 1998
------------------------
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
------------------------
TO BE HELD ON MAY 5, 1998
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 5, 1998, 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 $7,000 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
1998 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 13, 1998, will be entitled to vote at the Meeting. On such
record date, there were outstanding 28,199,711 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 1998 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 1998 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.
VOTING BY ZEIGLER STOCK FUND PARTICIPANTS
Many Zeigler employees participate in the Zeigler Salaried Employees
Savings Plan or the Mining Companies Pay Deferral Plan (collectively, the
"Plans"), which are retirement plans established under Section 401(k) of the
Internal Revenue Code. One of the funds into which employees may direct their
investments is the Zeigler Stock Fund, which invests in Zeigler Common Stock.
The shares of stock held in that fund are registered in the name of Fidelity
Management Trust Company ("Fidelity"), the investment manager of the Plans. The
participants do not acquire ownership of the shares and therefore are not
eligible to vote the shares directly. However, Zeigler Stock Fund participants
are allocated units in the fund and may instruct Fidelity how to vote the shares
represented by their units. Zeigler Stock Fund shares can be voted only by
signing and returning the enclosed proxy card; they cannot be voted at the
Annual Meeting and prior voting instructions cannot be revoked at the Annual
Meeting.
Zeigler Stock Fund shares will be voted by Fidelity according to each
participant's instructions. Fidelity has advised the Company that if a card is
signed and returned but no voting instructions are given, it intends to vote
such shares in accordance with the recommendations of the Board of Directors.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information as of January 31, 1998, (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).................... 5,801,738 20.6%
Neuberger & Berman, LLC(2)....................... 1,480,700 5.3%
Michael K. Reilly(3)............................. 1,254,350 4.4%
Chand B. Vyas(4)(7).............................. 1,036,307 3.6%
Roland E. Casati(5).............................. 2,176,000 7.7%
Robert W. Ericson................................ 2,000 *
John F. Manley(6)................................ 5,801,738 20.6%
W.D. Blackburn, Jr.(7)........................... 82,611 *
John C. Willson(7)............................... 23,288 *
Coy K. Lane(7)................................... 22,585 *
David M. Young(7)................................ 43,776 *
All directors and executive officers as a group
(20 persons)(3)(4)(5)(6)(7).................... 10,932,557 38.0%
</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 9, 1998 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 1,480,700 shares, shared power to vote
1,175,200 shares and sole power to vote 162,400 shares.
2
<PAGE> 5
(3) Includes 391,100 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.
(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) The address of Mr. Casati is 2700 River Road, Des Plaines, Illinois 60018.
(6) Reflects 5,801,738 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. The address of Mr. Manley is c/o Chicago City
Capital Group, Suite 9300, Sears Tower, Chicago, Illinois 60606.
(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 the
mailing date of this Proxy Statement, as follows: Mr. Vyas--242,880 shares;
Mr. Blackburn--62,800 shares; Mr. Willson--14,400 shares; Mr. Lane--14,400
shares; Mr. Young--31,200 shares; and all directors and executive officers
as a group--577,600 shares.
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 eight meetings (including one by telephone
conference) in 1997. Each person who served as a Director in 1997 attended at
least 75% of the aggregate number of meetings in 1997 of the Board of Directors
and the committees on which he served.
NOMINEES FOR DIRECTORS
Michael K. Reilly. Age 65. 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.
3
<PAGE> 6
Chand B. Vyas. Age 53. 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.
Roland E. Casati. Age 67. 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 49. Mr. Ericson has been a Partner of the law firm
of Winston & Strawn since 1983.
John F. Manley. Age 47. 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.
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 1997 were Messrs. Reilly and Ericson. The Audit Committee
held two meetings in 1997.
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 1997 were Messrs. Manley and Casati.
The Compensation Committee held two meetings in 1997.
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 $2,000 for each
Board meeting and each meeting of the Audit Committee or Compensation Committee
they attend. The Directors who are also employees of the Company do not receive
any additional compensation for serving on the Board of Directors or attending
board or committee meetings.
4
<PAGE> 7
EXECUTIVE COMPENSATION
The following table sets forth the annual and long-term compensation during
the last three fiscal years paid or granted by the Company or its subsidiaries
to, or accrued for, the Chief Executive Officer and the four highest paid
executive officers of the Company and its subsidiaries during 1997:
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
----------------------------------- ----------------------------
NAME AND PRINCIPAL OTHER ANNUAL AWARDS LTIP ALL OTHER
POSITION DURING 1997 YEAR SALARY($) BONUS($) COMPENSATION OPTIONS/SAUs(#) PAYOUTS($) COMPENSATION($)
-------------------- ---- --------- -------- ------------ --------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Chand B. Vyas-- 1997 487,500 -- 10,750 100,000 -- --
President and Chief 1996 425,000 600,000 10,500 100,000 -- --
Executive Officer 1995 425,000 250,000 10,500 -- -- --
W.D. Blackburn, Jr.-- 1997 198,750 -- 3,950 30,000 -- --
Senior Vice President 1996 189,583 188,650 3,950 40,000 -- --
Operations 1995 175,000 65,000 17,678 -- -- --
John C. Willson-- 1997 164,167 25,000 4,500 10,000 -- --
President Triton Coal 1996 158,333 120,000 47,113 15,000 -- --
Company(1) 1995 125,000 37,500 3,000 16,000 -- --
Coy K. Lane-- 1997 143,333 36,250 4,300 10,000 -- --
President Bluegrass Coal 1996 133,333 101,250 27,645 25,000 -- --
Development Company 1995 122,759 35,000 2,602 -- -- --
David M. Young-- 1997 164,231 15,000 5,830 10,000 -- --
President Mountaineer 1996 166,211 120,000 37,099 10,000 -- --
Coal Development 1995 160,000 30,000 4,231 -- -- --
Company
</TABLE>
- ------------
(1) 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 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 $315,000 as of
December 31, 1997. 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.
CHANGE IN CONTROL ARRANGEMENTS
Special Bonus and Severance Pay Plan. In December, 1997, Zeigler announced
that it was reviewing strategic alternatives to increase stockholder value,
including a possible sale of the Company. In connection therewith Zeigler
adopted a special bonus and severance pay plan which provides that certain of
Zeigler's executives and other non-union personnel would receive specified
retention payments if a sale of Zeigler or other change of control (as defined
in the plan) occurred prior to December 31, 1998 and severance payments
5
<PAGE> 8
if the employment of such person were terminated in certain circumstances during
the twelve months following such sale or other change in control. The plan also
provides that any unvested stock options will vest upon a sale of the Company or
other change in control. Any severance payment otherwise due an executive under
this plan would be reduced by severance amounts payable under his or her
employment contract. The amounts of such payments vary based on the
classification of the covered employee and his or her compensation level and
tenure with the Company. The amounts payable to Messrs. Blackburn, Willson, Lane
and Young under the plan, as of the date of this Proxy Statement are:
$220,000.00, $164,983.50, $143,550.00 and $164,983.50 respectively, in the event
of change in control and $440,000.00, $330,016.50, $291,450.00 and $330,016.50,
in the event such individual becomes entitled to severance payments (after
reduction of the amount paid upon a change in control). In addition, if a sale
of the Company occurs during 1998 each of the named individuals would be
entitled to receive a special bonus of $150,000 and possibly other payments
determined in the discretion of Messrs. Manley and Reilly. Change in control
arrangements applicable to Mr. Vyas are discussed in "Employment Agreements"
above.
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 73,600 SAUs
outstanding as of December 31, 1997, all of which are fully vested and mature in
1998. 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.
6
<PAGE> 9
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 1997.
<TABLE>
<CAPTION>
PERCENT OF TOTAL
NUMBER OF SECURITIES OPTIONS GRANTED GRANT DATE
UNDERLYING OPTIONS TO EMPLOYEES IN EXERCISE PRICE EXPIRATION PRESENT VALUE
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE ($)
---- -------------------- ---------------- -------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Chand B. Vyas 100,000 23.0% $23.38 3/21/07 963,895(1)
W.D. Blackburn, Jr. 30,000 6.9% $26.25 2/25/07 330,150(2)
John C. Willson 10,000 2.3% $26.25 2/25/07 110,050(2)
Coy K. Lane 10,000 2.3% $26.25 2/25/07 110,050(2)
David M. Young 10,000 2.3% $26.25 2/25/07 110,050(2)
</TABLE>
- ------------
(1) The present value of options at date of grant was estimated using the
Black-Scholes model with the following assumptions: 1) expected life of 7
years; 2) risk-free interest rate of 5.52%; 3) volatility of 34.98%; and 4)
dividend yield of 1.28%.
(2) The present value of options at date of grant was estimated using the
Black-Scholes model with the following assumptions: 1) expected life of 7
years; 2) risk-free interest rate of 5.52%; 3) volatility of 34.98%; and 4)
dividend yield of 1.14%.
None of the named executive officers was granted any SAUs during 1997.
The following table sets forth, for the named executive officers, the
number and value of exercised options and SAUs during 1997 and the number and
value of unexercised options and SAUs as of December 31, 1997.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SAUS AT OPTIONS/SAUS AT
FY-END (#) FY-END ($)(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 -- -- 202,880 250,720 389,857 400,639
SAUs -- -- -- -- -- --
W.D. Blackburn, Jr. Options -- -- 48,800 83,600 104,094 154,557
SAUs -- -- -- -- -- --
John C. Willson Options -- -- 9,400 31,600 28,942 60,761
SAUs -- -- -- -- -- --
C.K. Lane Options -- -- 9,400 28,400 40,142 60,959
SAUs -- -- -- -- -- --
David M. Young Options -- -- 27,200 26,800 40,804 40,518
SAUs 32,000 748,689 16,000 -- 188,370 --
</TABLE>
- ------------
(1) Based on the closing price on the New York Stock Exchange on December 31,
1997 of $16.31 per share.
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 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.
7
<PAGE> 10
Compensation under the pension plan generally refers to the base salary (up
to $150,000 for 1997, 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, 1997. As of December 31, 1997, the estimated
annual benefit (assuming a 7.5% return on each participant's nominal account)
payable to Messrs. Vyas, Blackburn, Willson, Lane and Young upon their normal
retirement date was $53,657, $27,438, $19,860, $65,680, and $37,155,
respectively. As of December 31, 1996, Messrs. Vyas, Blackburn, Willson, Lane
and Young had approximately 16, 3, 2, 3, and 13 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 1997. There is generally no Company matching under
the Mining Companies Pay Deferral Plan.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1997, 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 $85,000 (including accrued
interest), bore interest at the rate of 10% per annum and was paid in full prior
to December 31, 1997.
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 as well as alignment with short and long term shareholder
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 results.
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
8
<PAGE> 11
options and bonuses to salaries, company size, total shareholder return and
shares outstanding; the alignment of compensation between organization 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 (based primarily on the value of the Company's shares).
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. With respect to 1997, the Committee determined,
based on the significant negative shareholder returns during 1997, that neither
Mr. Vyas nor Mr. Blackburn would receive a bonus. For the other named executive
officers the Committee approved bonuses ranging from 9% to 25% 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. 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 options for
100,000 shares to Mr. Vyas in 1997.
Finally, in 1997, the Compensation Committee participated in the
development of the Special Bonus and Severance Pay Plan described elsewhere in
this Proxy Statement.
By the Compensation Committee:
John F. Manley (Chairman)
Roland E. Casati
9
<PAGE> 12
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, 1997 in (i) the Common Stock of the Company, (ii) the S&P
400 Mid-Cap Index, and (iii) a market weighted peer company index of Ashland
Coal, Inc. (now known as Arch Coal, Inc.), Cyprus Amax Minerals Co. and Pittston
Minerals Group (the "Peer Companies").
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG
ZEIGLER COAL HOLDING COMPANY, S&P 400 MID-CAP INDEX AND PEER COMPANIES
<TABLE>
<CAPTION>
PEER
MEASUREMENT PERIOD COMPANIES S&P 400
(FISCAL YEAR COVERED) ZEIGLER COAL (1) MID-CAP (2)
<S> <C> <C> <C>
9/30/94 100 100 100
12/31/94 76.13 86.85 100.49
12/29/95 91.41 83.83 135.24
12/31/96 142.99 81.58 166.35
12/31/97 110.56 58.30 217.95
</TABLE>
<TABLE>
<CAPTION>
PEER S&P 400
DATE ZEIGLER COAL COMPANIES(1) MID-CAP
---- ------------ ------------ -------
<S> <C> <C> <C>
9/30/94 100.00 100.00 100.00
12/31/94 76.13 86.85 100.49
12/29/95 91.41 83.83 135.24
12/31/96 142.99 81.58 166.35
12/31/97 110.56 58.30 217.95
</TABLE>
(1) The Peer Companies index no longer reflects the trading activities of
Addington Resources, Inc. (the stock of which is no longer traded because of
the acquisition of such company as of December 20, 1996 by Republic
Industries, Inc., a diversified company operating in several industries
other than coal mining) nor the trading activities of Westmoreland Coal
Company (trading in the stock of which was halted by the New York Stock
Exchange on December 23, 1996). In 1997, Ashland Coal, Inc. was merged with
Arch Mineral Corporation, with the surviving corporation now known as Arch
Coal, Inc.
10
<PAGE> 13
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, 1998 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 1997 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 3, 1998.
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
11
<PAGE> 14
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 13, 1998 at the Annual
Meeting of Stockholders of the Company to be held in the Illinois Room at the
Metropolitan Club, 233 South Wacker Drive, 67th Floor, Chicago, Illinois, on
Tuesday, May 5, 1998, 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:
/ / plan to attend the annual
meeting.
/ / do not plan
Dated: ____________, 1998
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>
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