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Message 318 filed on 4/18/01 on eRaider
I'm sorry you're getting discouraged. But I think Sisyphus is not a good
metaphor. It implies that your effort is wasted when the rock rolls
down the hill.
In fact, I think it's more like stretching a pizza crust. You stretch, it
pulls back. You stretch again, it pulls back. But each time it's a little
bigger and if you don't give up you will soon have a treat.
There is 30 years of inertia to overcome here, and highly dissonant
world views to accomodate. Everyone's first reaction is no
compromise is possible. But don't lose sight of the fact that deep
down, we all want exactly the same thing. If GV stock provides a good
long-term return, we all make money, and nothing else matters. If not,
we all lose. Yes, there are conflicting ideas about how to accomplish
the goal, but those will sort themselves out in frank discussion.
Even if your current efforts don't produce an agreement, I think they
are far from wasted. You stretch everyone's mind a little, get them at
least thinking about compromise. Then the minds snap back (as all our
minds are apt to do). But the next time, they stretch a little farther.
One way or another, we will learn to live with each other. eRaider is
not selling its stock. Sam Rebotsky, Moshe Rosen and others have
held their stock for over a quarter century and are not selling. The
Sottile family has run Goldfield for 30 years and John Sottile has a
contract until 2009. In love and war and lawsuits people can stay mad
for 8 years or longer; but in business you quickly learn to work with
the situation you've got. Fights are too expensive.
eRaider is soliciting proxies for Goldfield's annual meeting. Click on
the link to get summarized information on the participants to the proxy
solicitation. Also, eRaider strongly advises all shareholders to read the
proxy statement when it is available on the eRaider.com website. If
you want a free copy of the proxy statement and/or the information on
the participants, please email Aaron Brown or write us at:
Privateer Asset Management
POB 20170
Park West Station
NY, NY 10025
Only the poster is responsible for the content of this message, this
legend does not imply eRaider's agreement or disagreement. Please
read our legal disclaimer for more information.
Aaron Brown
eRaider co-founder
Message 323 posted on eRaider on 4/21
We've been doing some research to try to challenge Goldfield's plan to
have a vote to eliminate cumulative voting, adjourn the meeting, file
the amended certificate of incorporation with the Delaware Secretary
of State, then resume the meeting under the new rules. It's obviously
unfair, but we need to show it's illegal. Last December there was a
major case that should be a big help to us.
Andrew Vollmer and Steven Rosen of Wilmer, Cutler & Pickering,
who represented the State of Wisconsin Investment Board in the case,
wrote:
In December 2000, the Delaware Chancery
Court took an important step in reaffirming
the fundamental importance of voting rights
of shareholders. In State of Wisconsin
Investment Board v. Peerless Systems
Corporation (No. 17637 Del. Ct. Ch. 2000),
the Chancery Court held that, in the absence
of a "compelling justification," management
may not use its control over the shareholder
voting procedures in particular its power to
adjourn shareholder meetings to manipulate
the outcome of a shareholder vote on a
management proposal.1
Goldfield is also a Delaware corporation and plans to adjourn the annual
meeting in order to change the outcome of a vote. So, at first blush, the
Peerless case would seem to apply. However, there are differences.
Goldfield wants a shareholder vote to amend the articles of incorporation
to eliminate cumulative voting as Item 1 on the meeting agenda. Then they
want to recess or adjourn the meeting to file the amended articles. When
the meeting resumes, Item 2 on the agenda is election of directors.
We intend to argue that this violates the Peerless standard because
Goldfield is using its control over the annual meeting (scheduling items,
calling recess or adjournment) to manipulate the outcome of a shareholder
vote (the election of directors). One question concerns the word
"outcome." Peerless tried to change the actual vote totals cast for and
against a management proposal. That clearly changes the outcome.
Goldfield is content to leave the vote totals unchanged, but wants to
manipulate the meaning of those totals. Suppose we get 6 million votes
and Goldfield gets 10. Without the adjournment, we elect two of the six
directors. With the adjournment, and the elimination of cumulative voting,
we get none. So the outcome has changed in the sense of result, but not in
the sense of vote total.
Assuming we can establish that outcome means result, the rest of our case
appears to be stronger than Peerless. Election of directors is more
fundamental than approval of a management proposal. Goldfield's
meddling in the meeting is more extensive than in Peerless. Peerless
offered some "compelling justifications" (all rejected by the court),
basically that they wanted more shareholders to vote. Goldfield clearly is
doing this only to defeat our director candidates. The only reason to
change the articles mid-meeting is to change who gets elected to the
board. The general arguments Goldfield advances against cumulative
voting can be met by eliminating it in the normal fashion, i.e. for future
years.
One factor in Goldfield's favor, relative to Peerless, is that they have
announced their intention clearly in the proxy statement. Presumably,
shareholders who do not support this action can vote against the
elimination of cumulative voting. Peerless apparently decided to adjourn
at the meeting itself and made no announcement other than the
adjournment.
1Handout prepared for Keith Johnson of State of Wisconsin Investment
Board, distributed at the Council for Institutional Investors meeting,
March 19, 2001. None of Andrew Vollmer, Steven Rosen, Keith Johnson,
Wilmer, Cutler & Pickering nor State of Wisconsin Investment Board has
given permission for their names to be used, nor have any of them
reviewed or approved this document. No inference should be drawn that
any of them support the application of the Peerless case to Goldfield.
eRaider is soliciting proxies for Goldfield's annual meeting. Click on the
link to get summarized information on the participants to the proxy
solicitation. Also, eRaider strongly advises all shareholders to read the
proxy statement when it is available on the eRaider.com website. If you
want a free copy of the proxy statement and/or the information on the
participants, please email Aaron Brown or write us at:
Privateer Asset Management
POB 20170
Park West Station
NY, NY 10025
Only the poster is responsible for the content of this message, this legend
does not imply eRaider's agreement or disagreement. Please read our legal
disclaimer for more information
Message 325 posted on 4/21/01
A shareholder called and asked that we add a question to the auditor about
the treatement of operating loss and capital loss carryforwards. These are
significant assets of Goldfield, but their nature is complex. This
shareholder wants to know that they are being used prudently, and not
wasting away.
Of course, the auditor is not responsible for making the company use its
asset, but he or she can explain to us:
1. What assumptions on future earnings underlie the total reported on
the balance sheet,
2. How that total might change under different assumptions,
3. Whether the assumptions have changed over the years,
4. Whether the company's actual performance has been in line with
assumptions,
5. How much, if any, of the assets have been lost in the past, and
6. How much, if any, the value of the assets might go up or down in
the near future, and what profitability levels imply what values.
eRaider is soliciting proxies for Goldfield's annual meeting. Click
on the link to get summarized information on the participants to
the proxy solicitation. Also, eRaider strongly advises all
shareholders to read the proxy statement when it is available on the
eRaider.com website. If you want a free copy of the proxy
statement and/or the information on the participants, please email
Aaron Brown or write us at:
Privateer Asset Management
POB 20170
Park West Station
NY, NY 10025
Only the poster is responsible for the content of this message, this
legend does not imply eRaider's agreement or disagreement. Please
read our legal disclaimer for more information.
Aaron Brown
eRaider co-founder
An article posted on the site on 4/20/01
A representative of the auditor will be available at the annual meeting to
answer questions. I have three questions of my own, I'd be happy to
consider asking questions for others. I always try to send written
background material to the question to the auditor ahead of time, so if
preparation is necessary, it can be done before the meeting. If you have
any comments on these questions, or questions of your own, post them on
the Goldfield message board.
Cash Value Life Insurance Policy Terminations
In the second quarter the Company cashed in life insurance policies it had
bought on four executives (John Sottile, Pat Freeman, Stephen Wherry and
Robert Jones). The policies had a book value of $498,311. On June 12,
2000, the company paid those executives $510,000. On the financial
statements, the $510,000 is subtracted from the cash received from
terminating the policies ($583,000) to report a net loss on disposition of
$425,311 ($583,000 - $510,000 - $498,311).
This doesn't make sense. If the executives owned the policies, the policies
should not have been on Goldfield's books as shareholder assets. If the
executives didn't own the policies, the $510,000 payment is pure
compensation, unrelated to the life insurance termination. The Company
should have reported an $84,689 gain on disposition of the assets and a
special bonus of $510,000 to management. Each annual report carried the
statement: "The Company may terminate the agreements at any time by
giving written notice to the employee." This does not appear to be true
since the company in fact had to pay $510,000 to secure the employees'
agreements. Or, if the statement is true, the contracts attached to the
second-quarter report appear to be window-dressing, with no
consideration supplied by the executives.
Going back over the history of these policies turns up more problems. The
policies were carried on the books at cash surrender value, without any
corresponding liability or contra-asset to show management's claim on
them (nor was any clear or quantitative claim disclosed in a Note). The
cost of the policies was added to general corporate overhead, no portion
was allocated to compensation expense. I think that it incorrect.
Goldfield started buying the insurance policies in 1989 as part of
employment agreements with the executives. Upon termination of the
policies, the Company was supposed to receive the lesser of the total
premiums paid or the cash surrender value of the policy.
Using mortality and interest rate data, plus some assumptions about
pricing based on back-figuring from the data in the financial statements
and prevailing prices on these policies, I estimate that from 1989 to about
1996, the cash surrender value of the policies was less than total premiums
paid. By the time of cancellation, cash surrender value was probably about
15 percent greater than total premiums paid.
If I am correct, from 1989 to 1996, the company effectively provided term
life insurance to the executives. If the executive had died, his estate would
have received the face amount of the policy (minus premiums paid to date,
which would have been less than 10 percent of the benefit even in 1996).
If the executive had quit, he would have received nothing. So the benefit
to the executive was pure life insurance. The portion of the premiums
devoted to mortality charge, probably about ten percent, should have been
shown as compensation expense.
On Goldfield's balance sheet, the policies should have been shown at cash
surrender value minus a charge. Although the company had the right to
terminate at any time, they had contracts promising to keep them in force,
through 2009 in the case of John Sottile. Therefore, the expected net
present value of what they would receive from the premiums paid was
much less than the cash surrender value of the policy. In 1989, for
example, I think that the expected present value of what Goldfield would
receive was no more than 20 percent of the cash surrender value of the
policy. Although it requires assumptions to estimate that expected net
present value, no asset should be carried on the balance sheet at a value far
in excess of what the Company really expects to realize from it. At the
least, the impairment should have been disclosed in a Note.
After 1996, it made even less sense to continue to carry the policies at
cash surrender value. Once cash surrender value exceeded total premiums
paid, Goldfield would never receive the cash surrender value. The
Company would instead get its total premiums repaid, the only unknown
was when. From this point on, policies should have been carried at total
premiums paid, less a present value adjustment as above.
In this period, from the executives point of view the company is paying
them the interest on the cash surrender value of the policy plus whatever
premiums are paid. The cost of the life insurance itself comes of out this
amount, but the life insurance now belongs completely to the executive.
So the loss to the company, and the gain to the employee, is equal to the
sum of interest on the cash surrender value at the crediting rate plus
premiums paid. This should be reported as compensation.
When the policies were terminated, the executives owned the difference
between cash surrender value and total premiums paid. If this was 15
percent of cash surrender value, as I estimate, the executives should have
been paid about $75,000 to give this up. In addition to giving up this
difference, the executives may have given up the right to demand future
premium payments by the Company (although my reading of the original
benefit agreements does not support that). If true, that would justify an
additional payment. But that payment is for future services. Therefore it
should not have been made in a lump sum, but in a regular payment. In
effect, the Company gave the executives a lump sum representing partial
salary for the next twelve years, theirs to keep even after resigning.
Therefore, I think any payment over the $75,000 (or whatever the actual
number is) should not have been netted against the proceeds but listed as
either ordinary compensation or prepaid compensation.
Preferred Stock
We have been frustrated in our efforts to investigate the preferred stock.
Although it is a document shareholders are allowed to inspect,
management claims to be unable to find it. Attempts to get it from the
SEC and AMEX have yielded only partial pages. Moreover, the
documents we can find suggest that the preferred stock had a mandatory
redemption fourteen years ago.
I'd like to know what documents the auditor examined to determine that
the dividend payments to the preferred stock are actually dividends and
not compensation for board service (since the preferred stock was issued
only to board members and related entities).
SAS 82
In February 1997, the American Institute of Certified Public Accountants
issued SAS 82. This provided special guidance for and additional tests to
be performed in certain circumstances. Both the issues above would seem
to raise SAS 82 concerns, the first because an asset listed as belonging to
shareholders appears to have been transferred to management without
clear disclosure, the second because a payment to board members appears
to be inadequately documented. I'd like to know how the auditor evaluated
the SAS 82 factors and responsibilities.
eRaider is soliciting proxies for Goldfield's annual meeting. Click on the
link to get summarized information on the participants to the proxy
solicitation. Also, eRaider strongly advises all shareholders to read the
proxy statement when it is available on the eRaider.com website. If you
want a free copy of the proxy statement and/or the information on the
participants, please email Aaron Brown or write us at:
Privateer Asset Management
POB 20170
Park West Station
NY, NY 10025
Only the poster is responsible for the content of this message, this legend
does not imply eRaider's agreement or disagreement. Please read our legal
disclaimer for more information.
Here's how our proxy looks on the site:
This is a copy of the preliminary proxy statement we have filed with the
SEC, with the proxy itself removed for safety. Please do not act on this
statement. It is provided for information only, until it becomes definitive
we are not soliciting proxies.
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
April [ ] 2001
SOLICITATION, VOTING AND REVOCATION OF PROXIES
Shareholder Unity Slate
My name is Aaron Brown. I want your proxy for the annual shareholder
meeting to vote for a compromise slate of six directors: three directors
chosen by the existing board and three long-term shareholders who will
work hard to make the stock price go up. I will keep this proxy statement
as short and clear as possible, and refrain from any negative comments or
unnecessary argument. I believe Goldfield can thrive only if everyone
works together, and a divisive and expensive proxy fight is bad for
business.
I am a long-term shareholder of Goldfield and I believe the company has
enormous value and potential. However I also believe that the board of
directors needs some long term shareholders on it: people who believe in
the company enough to invest their own money, people who will insist on
sound strategy and careful attention to costs, people who will
communicate with all shareholders and act as ambassadors to help the
company gain new business. In short, people who have no interest other
than making the stock price go up.
I discussed this with other long-term shareholders and discovered the idea
had a lot of support. So I went down to Florida in December to meet with
Chairman and CEO John Sottile. Although he was polite and open in
answering all my questions about the company, he flat-out refused to
consider appointing any shareholder to the board, either one from a list I
had prepared or one of his own choosing. He also refused to consider
redeeming the preferred stock, another thing I consider important to
common shareholder value. So I told him I would nominate some director
candidates and let the shareholders decide.
That touched off a lot of activity on the part of the company, some good,
some bad. On the good side, directors and managers other than John
Sottile began buying significant amounts of stock for the first time. An
outsider was invited to join the board of directors. The board formed an
audit committee to discuss the company's financial statements with the
auditors outside management's presence. I think these are very good both
in themselves and as signs of renewed energy and commitment.
On the bad side, the company has engaged in tactics to block election of
shareholders to the board that I consider unfair, divisive, possibly illegal
and dangerously expensive. I'm not going to complain about them in
detail. That would defeat my purpose. It is enough to say that through a
series of rule changes and legal tricks, the company has set up a winner-
take-all situation.
This is a lose-lose situation for me, and I think for all shareholders. If the
company succeeds in shutting shareholders out of the board, I am afraid
all the good changes we have seen will disappear. Also the cost of these
shenanigans is very high. I pay my costs personally (and I have pledged
not to seek reimbursement from the company), but the company's costs
are paid by all shareholders. Moreover, I think the company would
continue to languish, the board would feel embattled, a substantial
minority of shareholders would feel disenfranchised and we would have to
go through all this again next year.
If instead shareholders win, and take all the board slots, we will inherit a
divided company with the Chairman, CEO and Secretary all defeated
candidates. It is a very hard job to oversee a company in the best of times.
I have no wish to take over with a depleted treasury, an angry shareholder
minority and an unhappy chief executive. A bitter proxy fight can leave
employees uncertain or demoralized, and can affect the company's
business relationships.
Therefore, I have decided not to try to win everything, but instead to
propose a compromise slate. I think this is the best chance for everyone to
pull together and spend their energy making money for the company
instead of war on each other. I pledge to avoid all negative campaigning
and to minimize expenses.
This election is going to be complex. I think the following account is
accurate, but the board has already made three major surprise rule
changes. A prudent person will allow for the possibility they have more
surprises in store. I have no surprises. All the strategies I am currently
considering are fully disclosed here. Even without surprises, the board's
plan for the election is complicated so that the outcome is hard to predict.
It relies on items being brought up in a certain order, defeating points of
order raised from the floor, a mid-meeting recess or adjournment and the
Delaware Secretary of State accepting an amended articles of
incorporation during the break. Their plan also requires the personal
approval of CEO John Sottile and his sister Linda Lonergan. Various court
challenges are possible.
There were 26,854,748 shares of common stock outstanding on December
31, 2000. 21,920,394 votes were cast in last year's election (about 19.1
million for management and 2.8 million opposed). Under cumulative
voting rules with six directors, you get to elect a director for each one-
seventh of the votes you win, that would be 3.1 million votes per director
using last year's total. If cumulative voting is revoked, whichever side gets
more votes names all the directors.
There are some changes to account for this year. First is that 499,999
shares were issued by the company to the four top managers on March 26,
2001 (for $110,000 versus a market price at the time of $275,000; this was
the result of exercise of options issued earlier). These are the first new
common shares at least since 1994. Second is that the total votes cast last
year included in management's totals some of the shareholders who didn't
vote at all. I have stopped the practice of counting non-votes as
management votes this year. Management refuses to disclose how many of
these votes there were but a typical figure is that 45 percent of individual
shareholders vote; that would imply about 8.5 million of management's
19.1 million total were shareholders who did not vote.1
A third important factor is that expensive soliciting efforts, such as calling
all non-voting shareholders and lobbying them, can increase the voting
percentage, typically by 10 percent. I estimate this would increase the vote
total by 2.1 million. If management does this and I do not, we can assume
those votes will go almost all to management.
Finally, there is the preferred stock. The board issued 339,407 shares of
this "to certain members of the board of directors, members of their
families and to a company in which they have an interest." CEO John
Sottile owns 58 percent of this personally. For some issues the preferred
votes like common, for other issues it has supervoting rights (it also gets
all the dividends paid by the company). The main issue for which the
preferred is important is Proposal 1 to overturn cumulative voting.
Consent of 75 percent of the preferred holders is required. This means that
John Sottile can personally block this proposal. Linda Lonergan, one of
John Sottile's sisters, is the only other person who can unilaterally block
this proposal because she holds 27 percent.
Adding all this up means that the top four managers at Goldfield control
about 2.2 million votes. I think they can get about another 2.1 million
through expensive solicitation efforts. I further estimate that there are 11.7
million additional shares that can be expected to vote based on last year's
totals. In an uncontested election last year, I think management got about
76 percent of these votes (8.9 million). If they do the same this year, and
all other votes go to my Shareholder Unity Slate, management would not
have enough to overturn cumulative voting, but they would name five of
the six directors.
It is impossible to predict how many votes the Shareholder Unity Slate
will get. I hope to attract some votes through this proxy statement. It's also
possible that some people have bought the stock based on eRaider's
interest. I expect to get most of these votes. Purely for the sake of
computational example, assume I can reduce management's share of the
votes from 76 percent to 50 percent. Then management would have 10.1
million votes and I would get 5.9 million. Then cumulative voting would
be retained, both shareholder proposals would be defeated, the auditors
would be ratified (this is the one issue we agree on) and I would get to
name two of the six directors.
The preceding analysis is based on assumptions that may be false. The
actual result may be much different. It is included only to give you a
general idea of what your vote might mean. Also, if I feel it necessary to
prevent winner-take- all voting for this year's election, I may engage in
some of the expensive solicitation efforts. I would expect that to move
some of the 2.1 million votes from management's to my column.
If you want serious, long-term shareholders on the board, I think you
should vote for the Shareholder Unity Slate. Even if you prefer the
existing board, you should consider voting with me. In the famous words
of Abraham Lincoln, "a house divided against itself cannot stand."2 A
compromise board will ensure that every opinion is represented, and that
proposals are considered from all perspectives. There will be no
disaffected minorities, and less potential for further divisiveness. The
shareholder-directors have no interests other than making the stock price
go up, all are committed, qualified, serious, hard- working people. They
pledge to keep their minds open, to try to work with everyone and to
represent the interests of all shareholders, not just the ones who voted for
them.
Also, you don't have to vote entirely for the company or the Shareholder
Unity Slate. The attached proxy allows you to make any vote on any issue,
including to vote for all of the company's board candidates, to use your
full cumulative voting rights and to specify your vote on questions I
expect to be raised from the floor. Even if you intend to vote for the
existing board, you may find it easier to make your instructions using my
proxy form. What matters is how you mark your vote, not whether you
send in this proxy or the company's.
And finally, whether you vote for or against the Shareholder Unity
Slate, please make up your mind to support the winners, whoever they
are. The newly- elected board is going to have all the business
challenges facing Goldfield, plus the task of representing all
shareholders.
This solicitation is made on behalf of eRaider.com Inc., Aaron Brown,
Deborah Pastor and Sam Rebotsky. All expenses are paid by Aaron
Brown, and he will not seek reimbursement from the company or anyone
else. eRaider.com Inc. runs a website, http://www.eRaider.com devoted to
organizing shareholders on the Internet. The site includes a public
message board on which anyone can post messages relating to Goldfield
and this proxy contest.
I ask you to sign, date and return the enclosed proxy in the postage-paid
envelope provided. If the proxy is signed with a voting direction indicated,
the proxy will be voted according to the direction given. If no direction is
given with respect to a proposal, the proxy will be voted as follows with
respect to any such proposal (listed in the probable order of presentation
and using the same numbering as Goldfield's proxy materials for ease of
comparison):
(0.5) FOR a point of order, if it is allowed to be raised and voted upon, to
act on the election of directors before considering changes to the election
rules.
(1) AGAINST the proposal relating to the amendment to the Restated
Certificate of Incorporation to eliminate cumulative voting in the election
of directors;
(1.5) FOR a point of order, if it is allowed to be raised and voted upon, to
act on the election of directors without recessing or adjourning for the
purpose of amending the certificate of incorporation to change the election
rules.
(2) FOR the election of the nominees for directors named herein;
(3) FOR the ratification of the appointment of KPMG LLP as independent
certified public accountants for the year 2001;
(4) FOR the stockholder proposal to require prior shareholder approval of
Golden Parachutes; and
(5) FOR a proposal, expected to be made from the floor, to redeem the
Series A preferred stock.
Aaron Brown, Deborah Pastor and Sam Rebotsky intend to vote their
shares of common stock in accordance with the recommendations above.
I do not know at this time whether the election of directors will be held
under cumulative voting rules or not. Therefore, I have allowed you to
mark the proxy under each set of rules. The simplest thing, if you agree
with me, is to leave everything blank and thereby vote as I recommend.
However, you can also specify exactly which directors you wish to vote
for and, if there is cumulative voting, to assign your votes unevenly. If you
do this, you must specify your votes under both types of voting. I will not
use your cumulative votes to guess how you would vote under non-
cumulative if you do not specify that, nor will I guess your cumulative
preferences from your non-cumulative votes. If there is cumulative voting,
and you do not specify an allocation, I will use your votes at my discretion
to elect as many of my candidates as possible. The election of directors is
more fully described in the Goldfield's proxy materials.
Revocation of Proxy
You may revoke the proxy at any time prior to its exercise by duly
executing and returning a later dated proxy, or by revoking it in writing in
a letter sent to eRaider at the same address as the proxy. The proxy will be
revoked if you attend the meeting and vote in person. Finally, you can
send written revocation to:
Dwight Severs Secretary
The Goldfield Corporation
100 Rialto Place, Suite 500
Melbourne, Florida 32901
(321) 724-1700
Item 0.5. Point of Order -- Election of directors should precede and
changing of the election rules.
I intend to raise this point from the floor, I may or may not be allowed to
do so. I think it is basic fair play that elected officials do not change the
voting rules for their own re-election. Even if you support the existing
board, you should want a fair election both for its own sake and to make
sure the losers respect the decision. Anything else is asking for continued
divisiveness and lawsuits.
Item 1. PROPOSAL 1 -- AMENDMENT TO THE RESTATED
CERTIFICATE OF INCORPORATION TO ELIMINATE
CUMULATIVE VOTING
There are good pro and con arguments for cumulative voting. Basically,
cumulative voting gives more representation to minority views, possibly at
the risk of creating a divided and therefore inefficient board. I prefer
cumulative myself, because I believe that lack of diversity is a much
bigger and more common problem than too much diversity, at least for
corporate boards. But read the company's arguments here and vote your
feelings, I make no recommendation (if you don't specify, I will vote
AGAINST eliminating cumulative voting). If you do decide to vote to
eliminate cumulative voting, the company has stated they will try to apply
that decision to this year's election, which I consider unfair. You may or
may not want to weigh that in your decision.
Item 1.5. Point of Order -- The meeting should not be recessed or
adjourned to amend the certificate of incorporation.
I intend to raise this point from the floor, I may or may not be allowed to
do so. A meeting's a meeting and should be held under one set of rules.
The plan to break the meeting into two parts results in complicated proxies
and bases the outcome on legal strategy (and legal expense) rather than
what shareholders' want. Everyone knows how to have a fair election, you
set the rules, then you vote. Period. No games. The State of Wisconsin
Investment Board recently sued Peerless Computer Systems in Delaware
Chancery Court contending that adjourning an annual meeting to
manipulate the vote count is illegal (the case has recently been settled, but
the terms have not yet been released except that Wisconsin prevailed in
overturning the tainted election results). The case is not directly
comparable (Peerless adjourned the annual meeting when it became
apparent the company was going to lose on a vote, and used the
adjournment to lobby employee shareholders who had not voted to vote in
favor of the company) but supports the same general principle.3 I
recommend you vote FOR this point.
Item 2. PROPOSAL 2 -- ELECTION OF DIRECTORS
Six directors will be elected at the annual meeting to serve for one year
terms, or until their successors are elected and qualified. There is only a
single class of directors, these six are the entire board. I have proposed
three long-term shareholders, along with three nominees of the existing
board. All three of my candidates have consented to be named in this
proxy, and to serve if elected. The other three have not consented to be
named in this proxy, and may refuse to serve if elected along with my
candidates. In selecting three candidates recommended by the existing
board, I included John Sottile, because he is CEO of the company, Dwight
Severs, because he is Secretary of the company, and Al Marino, because
he is the largest shareholder (2,066,300 shares, including his father's
holdings) among the candidates. In fact, these are the largest three
shareholders among the directors (counting family shares). None of the
other three candidates nominated by the existing board holds any position
in the company other than director, and they held only 1,700 shares
between them until some last-minute buying on March 22, 2001. I tried to
select the three strongest candidates, the ones that make it most likely the
unity board will represent all segments of shareholder opinion and be
accepted by the largest possible number of shareholders.
Information About Nominees
Information about John Sottile, Dwight Severs and Al Marino can be
found in Goldfield's proxy materials.
Aaron Brown runs Allied Owners Action Fund, a fund that is the largest
institutional holder of Goldfield with 290,000 shares. Aaron is also the
third- largest investor in Allied with approximately 10 percent of the
shares. His principal employment for the last twelve years has been
teaching finance at Yeshiva University. Yeshiva's address is 500 West
185th Street, New York, NY 10033. In the last two years he has also
devoted time to running eRaider and Allied Owners Action Fund. He has
invested professionally in small cap companies for 18 years and takes an
active role in the companies he buys, both lobbying management and
producing analysis for other institutional investors. Mr. Brown is 44 years
old. He holds an undergraduate degree in Applied Mathematics from
Harvard University and an MBA in Finance from the University of
Chicago.
Deborah Pastor is the portfolio manager for the Allied Owners Action
Fund. For the last two years she has been working in the development and
management of eRaider and the Fund. For two years before that she
managed money for wealthy individuals. From August 1993 to May 1997
she was a director and Senior Foreign Exchange Advisor at Bank of
Montreal. For nearly seven years prior to August 1993 she was Vice
President of the foreign exchange department of J. P. Morgan. She is an
expert in the trading and valuation of small cap value companies, and
brings expertise and contacts to help make Goldfield stock attractive to
major institutional investors. Ms. Pastor is 44 years old and married to
Aaron Brown. She holds an undergraduate degree in Near Eastern
Languages from Yale University and an MBA in Finance from the
University of Chicago.
Sam Rebotsky bought his first share of Goldfield in the late 1960s and has
been actively following the company ever since. He currently owns
491,100 shares. His principal occupation for the last five years is a
registered representative specializing in analyzing, valuing and
recommending microcap stocks. Since 2000, he has been employed as
Vice President of Sales for Adolph Komorsky Investments, a brokerage
firm. Their address is 660 White Plains Road, Tarrytown, New York
10591. For the two prior years he was a self-employed financial advisor.
In 1998 he worked for National Securities Corp., another brokerage firm.
For the four years before that he worked for Carlin Equities Corp., another
brokerage firm. He holds Series 7, 24 and 63 licenses. He is a certified
public accountant and a member of the New York State Society of CPA's.
He also has extensive experience in the areas of taxation and has worked
for the IRS. Mr. Rebotsky also worked as assistant controller for a
construction sub-contractor and has expertise in accounting and taxation
issues for construction companies. He is 61 years old and graduated from
City College in New York.
Aaron Brown and Deborah Pastor live at: 215 West 91st Street, #112 New
York, NY 10024
Sam Rebotsky's address is: 10 Holder Place, Suite 3B Forest Hills, NY
11375
The following table lists all purchases (there were no sales) of Goldfield
common stock by Allied Owners Action Fund.
Date
Shares
Price
Cost
10-Mar-00
7,000
1 5/16
9,187.50
16-Mar-00
5,000
1
5,000.00
22-Mar-00
3,000
1.0600
3,180.00
24-Mar-00
5,000
1
5,000.00
28-Mar-00
5,000
15/16
4,687.50
29-Mar-00
5,000
15/16
4,687.50
29-Mar-00
5,000
15/16
4,687.50
7-Apr-00
5,000
15/16
4,687.50
10-Apr-00
10,000
15/16
9,375.00
14-Apr-00
5,000
11/16
3,437.50
17-Apr-00
5,000
5/8
3,125.00
18-Apr-00
5,000
5/8
3,125.00
22-Sep-00
2,000
13/16
1,625.00
25-Sep-00
3,000
13/16
2,437.50
27-Sep-00
5,000
13/16
4,062.50
29-Sep-00
700
13/16
568.75
10-Oct-00
4,000
11/16
2,750.00
11-Oct-00
4,000
11/16
2,750.00
12-Oct-00
20,000
11/16
13,750.00
13-Oct-00
10,000
5/8
6,250.00
16-Oct-00
5,100
3/4
3,818.88
18-Oct-00
15,000
3/4
11,250.00
19-Oct-00
10,000
23/32
7,188.00
20-Oct-00
8,500
0.7169
6,093.65
23-Oct-00
6,100
11/16
4,193.75
24-Oct-00
2,100
11/16
1,443.75
26-Oct-00
2,700
11/16
1,856.25
8-Nov-00
11,000
3/4
8,250.00
13-Nov-00
55,000
0.4943
27,186.50
14-Nov-00
20,000
9/16
11,250.00
15-Nov-00
20,000
9/16
11,250.00
17-Nov-00
20,800
9/16
11,700.00
Total
290,000
0.6892
199,854.53
Sam Rebotsky has bought 334,600 shares of Goldfield at an aggregate
price of $177,593 over the last two years (from March 16, 1999 to
September 13, 2000). He also sold 151,700 shares for $157,227 during
that period (from January 31, 2000 to August 7, 2000).
Section 16(a) of the Securities Exchange Act of 1934 requires that
persons who own more than 10 percent of a registered class of
Goldfield's equity securities file with the Securities and Exchange
Commission and the American Stock Exchange initial reports of
ownership and reports of changes in ownership of common stock and
series A preferred stock of the company. I believe that Aaron Brown,
Deborah Pastor and Sam Rebotsky complied with all filing
requirements applicable to them with respect to transactions during
the year ended December 31, 2000.
None of three nominees listed above: (i) owns of record any securities
of Goldfield that are not beneficially owned by them; (ii) is, or was
within the past year, a party to any contract, arrangement or
understanding with any person with respect to Goldfield or any of its
directors, officers or employees or any shareholder owning more than
5 percent of Goldfield, including, but not limited to, joint ventures,
loan or option agreements, puts or calls, guarantees against loss or
guarantees of profit, division of losses or profits, or the giving or
withholding of proxies; (iii) has any substantial interest, direct or
indirect, by security holdings or otherwise, in any matter to be acted
upon at the Annual Meeting; (iv) beneficially owns any securities of
any parent or subsidiary of the Company; (v) borrowed any funds to
purchase any securities listed above, (vi) has been convicted in a
criminal proceeding, (vii) is a director of any public for-profit
corporation, (viii) has any material interest adverse to Goldfield or
any of its directors, officers or employees, (ix) is a party to a
proceeding against Goldfield or any of its directors, officers or
employees, (x) is an owner of 10 percent or more of Goldfield shares,
(xi) is a family member of any director, officer or employee of
Goldfield, or any shareholder owning more than 5 percent of
Goldfield shares, (xi) a petitioner in state or federal bankruptcy court
within the last five years, (xii) the subject during the past five years of
any order, judgment or decree, not subsequently reversed, of any court
of competent jurisdiction permanently or temporarily enjoining him
from: acting as futures commission merchant, introducing broker,
commodity trading advisor, commodity pool operator or any other
person regulated by the Commodity Futures Trading Commission,
investment advisor, underwriter, broker or dealer in securities,
affiliated person, director or employee of any investment company,
bank, savings and loan association or insurance company, engaging in
any kind of business practice, engaging in any activity in connection
with the purchase or sale of any security or commodity or in
connection with any violation of federal or state securities law or
federal commodities laws. None of the nominees nor any of their
associates has any arrangement or understanding with any person
with respect to future employment by the Company or its affiliates or
with respect to any future transactions to which the Company or any of
its affiliates will or may be a party, nor any material interest, direct or
indirect, in any transaction which has occurred since January 1, 2000
or any currently proposed transaction, or series of similar
transactions, to which the Company or its affiliates was or is to be a
party.
PARTICIPANTS IN THE SOLICITATION
Aaron Brown, Deborah Pastor and Sam Rebotsky are participants in
this solicitation. Participants control 893,100 shares of Goldfield, 3.2
percent of the 27,694,154 shares I estimate will be eligible to vote at
the meeting.
In addition, I have held significant discussions with other shareholders,
and some of them are actively supporting this solicitation. Upon
careful consideration of the rules of the Securities and Exchange
Commission, I feel that none of them are participants. However, I list
them here because I would rather overdisclose than underdisclose.
Although I speak with all these people about Goldfield, none of them
direct eRaider's proxy efforts, and I do not direct any of their actions.
eRaider.com Inc. runs a website devoted to shareholder activism,
http://www.eRaider.com. It was founded is owned by Aaron Brown
and Martin Stoller, and is run by Aaron Brown. eRaider runs message
boards on general shareholder activism topics and also on specific
companies: Comshare, Jameson Inns, Goldfield, Employee Solutions
and Transmedia Asia Pacific. Allied Owners Action Fund, a private
fund managed by Aaron Brown and Deborah Pastor, owns substantial
positions in the first three of these companies. With respect to target
companies, eRaider's goal is to improve the stock price through
informed discussion and active shareholder oversight.
Martin Stoller is Aaron Brown's partner in eRaider, but does not
participate in the business day-to-day. He is also the largest single
investor in Allied Owners Action Fund. He owns no shares of
Goldfield, except indirectly through the Fund.
Joe Cocalis sponsored the Golden Parachute shareholder resolution in
cooperation with eRaider. I asked him to be a candidate for the board
of directors and have had detailed discussions with him about
strategies for change. He holds over 400,000 shares of Goldfield.
James Cocalis, Joe's father, was a candidate for the board of directors
until I decided to run a unity slate instead. He holds approximately
50,000 shares of Goldfield. He is Joe Cocalis' father.
Moshe Rosen was a candidate for the board of directors until I decided
to run a unity slate instead. He holds over 69,000 shares of Goldfield.
Anthony Ford sponsored a shareholder resolution in cooperation with
eRaider, the resolution was subsequently withdrawn. I asked him to be
a director candidate. He owns 2,065,300 shares of Goldfield.
eRaider.com Inc. runs a public Internet message board for discussions
about Goldfield. Several anonymous posters have expressed opinions
and engaged in discussions that suggest general support for eRaider's
efforts (other posters have expressed contrary opinions). I think it
likely that some of these people own Goldfield stock and are
promoting eRaider's side of this proxy fight on other Internet message
boards and elsewhere.
I recommend a vote FOR the election of Aaron Brown, Deborah
Pastor, Sam Rebotsky and make no recommendation concerning the
election of Al Marino and the re-election of John Sottile and Dwight
Severs.
Item 3. PROPOSAL 3 -- RATIFICATION OF APPOINTMENT
OF ACCOUNTANTS
I recommend a vote FOR the ratification of the appointment of KPMG
LLP as independent certified public accountants of the Company.
Item 4. PROPOSAL 4 -- STOCKHOLDER PROPOSAL TO
REQUIRE PRIOR SHAREHOLDER APPROVAL OF GOLDEN
PARACHUTES.
I recommend a vote FOR the Proposal.
Item 5. FLOOR PROPOSAL -- STOCKHOLDER PROPOSAL
TO REDEEM SERIES A PREFERRED STOCK.
I recommend a vote FOR the Proposal.
RECORD DATE / SECURITY OWNERSHIP OF DIRECTORS
AND EXECUTIVE OFFICERS / EXECUTIVE
COMPENSATION / ELECTION OF DIRECTORS
Information on these subjects appears in Goldfield's proxy materials.
ADDITIONAL INFORMATION
I will pay the cost of soliciting proxies and will reimburse all bankers,
brokers and other custodians, nominees and fiduciaries for forwarding
proxies and proxy materials to the beneficial owners of the shares.
eRaider will make efforts to communicate with shareholders and
solicit proxies on the Internet. In addition to solicitation by Internet
and mail, solicitation of proxies may be made personally or by
telephone, facsimile, telegram or other means.
Although no precise estimate can be made at this time, I hope to limit
my expenses in this proxy contest to $100,000. I will attempt to make
an agreement with the company to abide by an expense cap in order to
save money for shareholders. To date, the only expenses have been
routine office expenses with total value under $5,000. The only major
additional expense I anticipate is a mailing to shareholders. The cost of
the solicitation will be much lower for both sides if I can persuade the
company to agree to a single joint mailing, with costs split (this will
also, in my opinion, make things much easier for shareholders and
result in a fairer election).
A major factor influencing the expense is whether I think the company
can get the 13,847,078 votes they need to overturn cumulative voting
(that number is based on the common shares outstanding as of
December 31, 2000, plus preferred shares which vote as common in
this matter, plus 499,000 shares issued for recent option exercises by
management). If so, I will have to engage in expensive tactics to try to
prevent that, including aggressive solicitation and possibly legal
action. If not, I am content to gather the votes I can cheaply and get
two or three of my candidates elected. The main way to cut expenses is
to mail the solicitation only to the larger shareholders.
Footnotes
1This figure is derived by excluding the institutional shares listed on
13G's and D's, assuming that the 5.3 million uncounted votes
represent 55 percent of the individual holders of record, subtracting the
holders of record and assuming 55 percent of the remaining
shareholders did not vote but were counted for management. The
figure is subject to large uncertainty.
2June 17, 1858. Speech before the Republican State Convention,
Springfield, Illinois. Lincoln, of course, was paraphrasing Matthew 25.
Neither Abraham Lincoln nor Matthew has endorsed the Shareholder
Unity Slate, nor has either given permission for the quote to be used.
They were each talking about entirely different things than the
Goldfield board of directors meeting (Lincoln about the country half
slave and half free, Matthew about doctrinal differences among
Pharisees, Sadducees and Essenes).
3None of the State of Wisconsin Investment Board, Peerless Computer
Systems or the Delaware Chancery Court has endorsed the
Shareholder Unity Slate. None has given permission for their name to
be used in this proxy solicitation. The account given is by Aaron
Brown, none of the cited entities has reviewed or approved it. Because
the case was settled rather than decided, it is not a formal legal
precedent and, in any case, differences in facts might make it
irrelevant in court to the Goldfield annual