SUBJECT COMPANY:
COMPANY DATA:
COMPANY CONFORMED NAME: GOLDFIELD CORP
CENTRAL INDEX KEY: 0000042316
STANDARD INDUSTRIAL CLASSIFICATION: WATER, SEWER, PIPELINE, COMM AND POWER
LINE CONSTRUCTION [1623]
IRS NUMBER: 880031580
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: PREC14A
SEC ACT:
SEC FILE NUMBER: 001-07525
FILM NUMBER: 1599671
BUSINESS ADDRESS:
STREET 1: 100 RIALTO PL STE 500
CITY: MELBOURNE
STATE: FL
ZIP: 32901
BUSINESS PHONE: 321-724-1700
MAIL ADDRESS:
STREET 1: 100 RIALTO PLACE
STREET 2: SUITE 500
CITY: MELBOURNE
STATE: FL
ZIP: 32901
FORMER COMPANY:
FORMER CONFORMED NAME: GOLDFIELD CONSOLIDATED MINES CO
DATE OF NAME CHANGE: 19670628
FILED BY:
COMPANY DATA:
COMPANY CONFORMED NAME: eRaider.com Inc.
CENTRAL INDEX KEY: 0001113228
STANDARD INDUSTRIAL CLASSIFICATION: [ ]
IRS NUMBER: 134067023
STATE OF INCORPORATION: DE
FISCAL YEAR END: 0930
FILING VALUES:
FORM TYPE: PREC14A
BUSINESS ADDRESS:
STREET 1: 372 Central Park West
STREET 2: 9M
CITY: New York
STATE: NY
ZIP: 10025
BUSINESS PHONE: 646-505-0216
MAIL ADDRESS:
STREET 1: PO Box 20170
STREET 2: Park West Station
CITY: New York
STATE: NY
ZIP: 10025
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934 (Amendment No. )
Filed by the Registrant |_| Filed by a Party other than the Registrant |X|
Check the appropriate box:
|X| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss.240.14a-12
THE GOLDFIELD CORPORATION
(Name of Registrant as Specified In Its Charter)
eRaider.com Inc.
(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:
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
June 19, 2001
SOLICITATION, VOTING AND REVOCATION OF PROXIES
Shareholder Value Slate
My name is Aaron Brown. I want your proxy for the annual shareholder meeting. I
am writing this proxy statement on behalf of myself and two other participants,
Deborah Pastor and Sam Rebotsky, and filing it under the name of my company,
eRaider.com Inc. For more information on these people, including me, see the
section "Information about Nominees." For information on eRaider.com Inc. and
other people and entities involved in this solicitation, see the section
"Participants in the Solicitation."
I am a shareholder of Goldfield who intends to hold for the long term, 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 significantly increased their
holdings of stock dramatically. An outsider was invited to join the board of
directors. There were other changes to improve governance and oversight. The
Company announced quarterly results that Sottile characterized as the best in
at least eight years. 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 that I dislike to block
election of shareholders to the board. Through a series of rule changes the
Company has set up a winner-take-all situation and estimated it will spend
$290,000 to defeat me (this does not include the expenses of an uncontested
proxy solicitation, nor management and staff time).
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 the fight 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.
I further believe the Company's tactics are illegal, based on a recent
decision. 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."
If management wins through an illegal tactic, the Company's future could be
decided by a court rather than by shareholders. This is not a good idea for
anyone.
If instead all of the Company nominees lose, the new board will inherit a
divided Company with the Chairman/CEO and the Secretary both 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 decided not to try to win everything, but instead to propose a
compromise slate. I thought that was the best chance for everyone to pull
together and spend their energy making money for the Company instead of war on
each other. So I nominated three directors, plus asked for support for CEO John
Sottile, Secretary Dwight Severs and Board nominee Al Marino. I pledged to
avoid all negative campaigning and to minimize expenses. I offered to split the
cost of the proxy mailing with the Company, if information about my nominees
was placed side-by-side with theirs (this would mean the contested solicitation
could be cheaper for shareholders than a normal, uncontested solicitation).
The compromise did not work. The Company refused to split or cap expenses and
objected to everything from my name ("Shareholder Unity Slate") to me
soliciting votes for their candidates. In an attempt to bridge the differences,
Deborah Pastor, Sam Rebotsky, Joe Cocalis and John Sottile had a conference
call. Deborah asked John if he would serve if some or all of my nominees were
elected. He replied clearly, "No ma'am." This was not a casual bluster, but an
important statement that successfully persuaded Joe Cocalis to withdraw his
shareholder resolution and support for my slate, and forced me to go back to
the drawing board on my proxy solicitation. Among other tasks, it forced me to
find qualified directors willing to serve in a contested situation, without
knowing whether or not service would be required. This is no easy task, and it
delayed this proxy filing by almost two weeks.
Not only was the statement considered and unambiguous, it was confirmed in a
fax sent the next day. But cynical shareholders will recall that ten members of
Congress ran in 1992 and 1994 under the promise of voluntary term limits, and
promised not to run in the year 2000. Four of the ten ran anyway. So, without
saying anything about John Sottile, it might be well to keep in mind the
difference between saying something to win an election and actually turning
down a paycheck.
However, cynical or trusting, I have no choice but to consider the possibility
that some or all of my nominees will win, and that the other elected candidates
will refuse to serve. Although John Sottile was not asked if he would also
resign as CEO, I have to consider that possibility as well. Let me begin by
making clear that I do not want this to happen. If some or all of my nominees
are elected, they will make all reasonable efforts to encourage the other
elected directors to serve, and to prevent resignations among Goldfield
management. More important, anyone elected or appointed though the Shareholder
Value Slate will be pledged to represent the best interests of all
shareholders, not just those who voted for it.
Although any future action will depend on circumstance, I would expect my
nominees to try to fill out the board with four people: Professor Martin
Stoller, Professor Paul Zarowin, David Groelinger and Scott Lodin (see
"Information about Nominees" for more information on these individuals). In an
uncertain and contentious situation, I believe it is essential to have a full
board of experienced people of high reputation. Customers, employees and
investors must be reassured that competent people are in charge.
Fortunately, I was able to recruit what I consider to be a top team. David is
an experienced CFO of large public companies, and has serves as a director of
an audit committee. Scott is an experienced General Counsel of a large public
company. These two were recruited to make sure we have adequate corporate
experience on the board. Their main focus will be to reassure employees and
customers, and to advise on the selection of new managers if necessary.
Paul as an accounting professor who can help Deborah (a portfolio manager) and
Sam (a registered representative) reassure investors. Martin is an expert in
crisis communication, which is exactly what we will need. He has advised the
largest companies in the world during far worse crises than this. His
experience will be an invaluable ballast if things get as tense as I think they
might.
In my 19 years of shareholder activism, I have been involved in similar
situations. I offer the following account of Wilshire Financial Services Group
Inc. (WFSG) as a testimony to my experience and also as reassurance that
companies can survive and prosper after events like this.
In August 1999, the board of directors of Wilshire decided to suspend (and
later terminate) the founder (who served as CEO and Chairman of the Board)
along with another director who served as President. Due to financial turmoil,
almost all the stock was held by former creditors of Wilshire, the largest of
which was American Express with about 21 percent of the stock.
The board decided on a sudden ouster, and brought me in for three weeks without
preparation. I had no prior knowledge of the Company. I was appointed at 4:00
PM, after first meeting the board at breakfast that morning and not knowing for
sure how the meeting would come out until I was appointed.
This is not a fun situation. An operating company needs thousands of things
done every day, from locking up the building to making payroll to filing
government forms. Missing even one of them can be a major problem. Companies do
not come with operating manuals and when you step in suddenly you have no idea
who does what, or whether they will continue doing it. Most employees are
shocked to discover that the people they called boss for seven years are
subject to a board of directors they have never met. When someone else they've
never met, who knows nothing about the business, says he's in charge, loyalties
are in doubt.
Wilshire was a particular challenge for reasons that are not relevant here. But
in three weeks the company had stabilized, a new CEO had been hired and
installed and the stock price had gone up 15 percent from $1.20 to $1.375.
Today the stock is at $2.20 and is the object of a bidding war between two
acquirers, one offering $2.50 and the other with an undisclosed offer. The
company is solidly profitable and has addressed almost all the problems that
led to the ouster of former management.
I do not take any credit for this success. The work was done by the new CEO,
Stephen Glennon, and the board and employees of Wilshire. I was a full-time
employee for only three weeks, and a consultant for three months. My point is
that companies can prosper after sudden replacements of board members and
managers.
I repeat that I do not want this to happen. I intend to make any reasonable
concession to avoid it. But if it happens, I have dealt with it before and I
have recruited a great team to help. No sensible shareholder wants sudden
resignations from the board or top management, but I don't believe any
shareholder can let the fear of it allow management to dictate who will
supervise them.
The Insurance Policies
On June 12, 2000, $1,008,311 moved from the Goldfield balance sheet, at least
some of it to the pockets of four top executives (John Sottile, Pat Freeman,
Stephen Wherry and Robert Jones). This is the sort of transaction that I find
frequently in Goldfield's SEC filings. Maybe there's a good explanation for it,
maybe not. But it is certainly true that shareholders were not given one. The
transaction was detailed in Goldfield's annual report filed March 14, 2001. I
wrote a letter to the auditors about it on April 20, 2001. I did not receive an
answer, but the Company filed an amendment to the annual report on April 30,
2001 that appears to confirm my objections to the transactions. Among other
things, the Company restated compensation to the executives for the last three
years (as far back as the 2000 annual report goes). I believe this increase
should go back to 1989. So, if I'm right, the board was paying undisclosed
compensation to management for 12 years, and the auditor raised no objection. I
think this is an excellent example of why we need some knowledgeable
shareholders on the board.
Goldfield's assets included insurance policies worth $498,311. The economic
value of these policies was split between four top executives and the Company,
but the $498,311 should have represented the value of the Company's share only.
On June 12, 2000, the Company may have transferred the economic value of those
policies to the executives, and paid them $510,000 in cash. The Company
reported a net loss of $425,311.
None of this makes 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 and $498,311 value of
the policies is pure compensation and should have been reported as a $1,008,311
expense rather than a $425,311 loss.
Actually, I think the situation is somewhere in between. I believe that the
Company should have been showing an annual compensation expense since 1989 for
the insurance value of the contracts. Given that, when the Company decided not
to continue funding the contracts, the employees were entitled to approximately
$75,000 for their interest in the existing policies, and another $75,000 for
the effective salary reduction in the future. The first value was accrued for
past service, and was due the employees immediately upon the termination of
funding, the second was a promised benefit for future service, and should have
been paid in future installments as long as the employee remained with the
Company. I can see no reason to transfer the entire value of the policies to
the employees, and even less to pay them $510,000 in cash also. This appears to
be an unexplained giveaway of about $850,000 of shareholder assets.
I am not accusing anyone of fraud or any other crime. But I do claim that the
financial statements do not explain why the Company's assets shrunk so much,
and why the executives' grew so much. At the very least, I think we need a
board that explains things like this to shareholders. It may be that we need a
board that prevents them from happening.
Here is the text from the March 14, 2001 10-K (annual report): "During the
second quarter of 2000, the Company entered into Cancellation and Release
Agreements pursuant to which the Company's Employee Benefit Agreements were
terminated for a net expense of $425,311." That was the statement I found
inadequate.
Here is the amended text from April 30, 2001, after our letter: "In 2000, the
Board of Directors reviewed the Benefit Agreements and related insurance
policies and decided it was in the best interest of the Company to terminate
the Benefit Agreements to eliminate the annual insurance premium obligations.
During the second quarter of 2000, the Company entered into Cancellation and
Release Agreements pursuant to which the Benefit Agreements were terminated. In
consideration of terminating the future retirement benefit associated with the
Benefit Agreements, the Company decided to compensate the affected employees.
The net expense to the Company was $425,311. Although the Company does not
anticipate making any further cash premium payments, the Company will continue
to own the policies and has granted each employee the right to name the
beneficiary for the death benefits in excess of premiums previously paid by the
Company, less any outstanding loans."
In addition, compensation expense was increased retroactively through 1998 (the
earliest year shown).
This explanation is quite different. Although it still contains some ambiguity,
I interpret it as separating the past and future compensation. The retroactive
past compensation was represented by a partial interest in the insurance
policies. The employees were granted this interest. That's fine, because they
owned it already. However, it leaves a mystery of why $498,311, which
presumably represented the Company's interest in the insurance policies,
disappeared from the balance sheet. According to this explanation, that
interest was not transferred to employees.
Then employees were paid $510,000 cash in lieu of the future compensation. This
raises two issues. First, why is the appropriate value $510,000, when my
calculations suggest something nearer to $75,000? Second, why is the Company
prepaying salary when it is not certain the employees will remain with the
Company until age 65?
Finally, there is the mystery of the net loss of $425,311. If the insurance
asset shrunk by $498,311 and Goldfield paid $510,000 in cash, there must be a
receipt of $573,000 if the loss is only $425,311. Where is that $573,000? Who
paid it and why?
Shareholders deserve answers to these questions. Even more, shareholders
deserve a board that will ask these questions for them and present transparent
reports that do not need amendment.
The Election
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. 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.
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 two-thirds of the preferred holders is
required. This means that John Sottile can personally block this proposal.
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 Value 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 Value 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 shareholders on the board, I think you should vote for the
Shareholder Value 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." If some or all of my nominees are elected
and some Company nominees agree to serve, a compromise board will result. That
ensures 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.
And finally, whether you vote for or against the Shareholder Value 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.
A Brief History of Goldfield
Goldfield was incorporated in 1906 and became a founding member of the American
Stock Exchange in 1921. At the beginning of 1969, things looked very bright for
the Company. The market capitalization (number of shares outstanding times
price per share) was over $100 million, book value (accounting value of assets
minus liabilities and preferred stock) was over $20 million. The Company's two
main businesses were mining and construction. On August 15, 1971, President
Nixon would take the US, and hence the world, off the gold standard, sending
gold prices from the officially-mandated $35 per ounce to over $800, and silver
from $1.40 to over $50. Although these peaks were brief, metals prices in
general over the last 30 years have averaged four to ten times their 1969
values. The value-added of construction in Florida (receipts for construction
minus costs for subcontracting, materials, components supplies and fuels)
soared from under $1 billion in 1970 to $21 billion in 1997, the largest dollar
increase of any state. Unfortunately, Goldfield was to begin a five-year run of
bad luck that not only cost it these opportunities, it nearly destroyed the
Company.
On December 30, 1969, James Sottile joined the board of Goldfield. Four months
later, his long-time associate Mary Leitner joined and less than a year after
that, his son James Sottile III. To prevent confusion, I will refer to the
father as James II and the son as James III. A younger son, John Sottile, would
join the Company in 1983 and currently serves as Chairman and CEO. Danforth
Leitner, Mary's son, is currently on the board of Goldfield.
From 1970 to 1974, seven major pieces of bad news hit the Company sending the
stock price down 99 percent from $12.25 to $0.125, the market capitalization of
the Company from over $100 million to only a little over $1 million and the
book value from over $20 million to under $6 million.
1. On April 8, 1970 the American Stock Exchange halted trading in Goldfield
stock due to deterioration of financial condition, failure of Goldfield to
advise the exchange of its financial condition and business transactions,
delinquency in filing of reports and issuance of illegal unregistered
common stock by management. This trading halt lasted until 1974.
2. In January 1971 General Host Corporation, which shared some owners and
directors with Goldfield, exercised an option with appeared to deliver
$1.6 million to General Host, apparently without compensation to
Goldfield.
3. Soon thereafter a $1.1 million investment in another company with
overlapping ownership and directors, Li'l General Stores, became
worthless.
4. In 1972, the Internal Revenue Service alleged Goldfield had underpaid its
income tax by $2.4 million.
5. Soon thereafter, a civil suit was filed against certain officers and
directors of Goldfield, and others (but not including James II, James III
nor Mary Leitner), alleging fraud, waste and misuse of Goldfield's assets.
6. This next one is complicated and took place over five years. Indian River
Orange Groves Inc. was a company owned 98 percent by Sottile and Leitner
family members. Two weeks before James II joined the board of Goldfield,
Indian River spun off a package of assets and liabilities to Real Estate
Resources Corporation. The book and tax value of the liabilities exceeded
the assets. Real Estate Resources became insolvent a few months after the
transfer. Most of the assets were deeded to creditors in lieu of
bankruptcy and the remaining assets were sold at public auction for $2.1
million less than their book value. The sale was insufficient to repay all
liabilities. However, Real Estate Resources did not go bankrupt so the
liabilities were still theoretically valid, although there did not appear
to be assets to cover them and the equity value was written down to zero.
On November 8, 1970, Indian River did another spin off of assets and
liabilities, this time to a company called Citrus Growers of Florida Inc.
If you eliminate all the intercompany transactions, Real Estate Resources
was insolvent, Citrus Growers had no assets and $526,629 of liabilities,
and Indian River had $14,041 of assets and $835,502 of liabilities (plus a
disputed IRS bill for $1,078,888 plus interest).
On March 12, 1974, Goldfield merged with all three companies: Real Estate
Resources, Indian River and Citrus Growers. Although it appears on paper
that Goldfield picked up only liabilities in the transaction, the original
owners of Indian River (with Sottile and Leitner family members
representing 98 percent) ended up with 1,270,000 shares of Goldfield
common stock and 1,526,629 shares (the entire issue) of a newly created
preferred stock. Also, Goldfield invested $3,411,050 in Real Estate
Resources, which was written off in 1970, three months after the Indian
River liabilities were assumed. Although that money was not paid to Indian
Grove owners, it can be viewed as an indirect payment since Indian River
transferred liabilities to Real Estate Resources and Goldfield's
investment helped repay them.
The net effect of all these transactions was that Indian River stripped
itself of assets and merged $1,348,090 of liabilities (not including the
disputed tax liability or any net liabilities left in Real Estate
Resources) into Goldfield in return for 25 percent of the capital stock of
Goldfield, plus preferential dividend and liquidation rights, and
controlling voting rights in certain circumstances.
7. In January 1973, the Securities and Exchange Commission filed a civil suit
against several individuals, including two Goldfield directors, alleging
the defendants had defrauded Goldfield. Neither James II, James III nor
Mary Leitner were named.
Event 6 is particularly important, because it represents the source of the
Sottile and Leitner family economic interest in Goldfield. From the merger to
the date eRaider announced its interest, the two families disposed of 44
percent of their common shares (they held 710,417 of the original 1,270,000)
and 78 percent of their preferred shares (they held 334,199 of the original
1,526,629). From 1974 through the end of 2000, the families have been net
sellers of Goldfield securities.
Over this period of time, the Company has issued an additional 16,847,470
shares of common stock for $15,386,367. So since James II joined the board of
Goldfield, common shareholders have seen no cash out in the form of dividends
or share appreciation, but rather have contributed $15.4 million. Over the 30
years between the time James II joined the Goldfield board and when eRaider
took an interest, the Company lost $21,283,254. This is not a case of some
great years and some terrible years, which can be typical of a vibrant company
that makes some mistakes or has some bad luck, the performance has been
consistently negative. There have been some positive quarters, even some
positive years, but no significant sustained positive earnings nor increase in
share price. Through high and low mineral prices, construction booms and busts,
Goldfield has never been successful. However, in the four quarters since Allied
Owners Action Fund started buying shares, the Company has averaged net income
of over $1 million per quarter.
In addition to the transferring liabilities to Goldfield and selling their
stock in the Company, Sottile and Leitner family members have received all the
dividends paid by Goldfield. They also have received salaries from the Company.
Beginning in 1973, members of these families and no other individuals have
received 10-year contracts (in 1973, James II got $105,000 for being Chairman,
James III got $73,000 for being CEO and Mary Leitner got $45,000 for being
Secretary). These contracts contain automatic cost-of-living increases and
other significant benefits. If the employee is terminated, the entire remaining
payments become due immediately. The Company has renewed these contracts
approximately every other year, so they typically cover from 8 to 10 years in
the future.
More money flows from Goldfield to the families in various ways. For example,
in May 1973, James II and James III were each paid $125,000 to guarantee a
surety bond for a $10 million construction project. More recently, on March
26, 2001, John Sottile exercised stock options on 250,000 shares at $0.21875
per share for a $90,313 paper profit at time of exercise. Before that, on June
12, 2000, John Sottile was paid $240,000 in return for giving up a future life
insurance benefit under his contract, but a benefit that had never been
disclosed as compensation (when I questioned this in public, the Company issued
an amended annual report which restated compensation for the last three years).
Furthermore, the purported benefit had been shown on the balance sheet as an
asset owned by shareholders (in the new annual report, it has disappeared from
the balance sheet).
Given this history, I believe Goldfield needs some independent, assertive
directors who are not members of the Sottile or Leitner familes, nor people
selected by them. My goal is not to argue about the past, or to fire or sue
anyone. It is to ensure that in future every major matter is scrutinized and
approved only if it is strict shareholder interest.
Solicitation
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;
(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) AGAINST, a proposal to adjourn the meeting if it appears a majority of
shares represented at the meeting favor proposal 1.
(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.
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 ANY 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. However
you stand on the theoretical issue, I think it is unfair to for the existing
board to change the rules of their own re-election. Therefore I oppose this
proposal for this year on fairness grounds.
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 a single
class of directors, these six are the entire board. I have proposed three large
shareholders. All three of my candidates have consented to be named in this
proxy, and to serve if elected.
If some or all of my nominees are elected, it is possible that the winners
among the board's nominees will refuse to serve. In that case we intend to fill
out the board by appointing Professor Paul Zarowin, Professor Martin Stoller,
David Groelinger and Scott Lodin as discussed above.
Information About Nominees
[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 (jointly with Deborah Pastor) with approximately 10
percent of the shares. He owns no securities of Goldfield, other than
indirectly through the Fund. 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. She
owns no securities of Goldfield, other than indirectly through the Allied
Owners Action Fund (see the previous paragraph). 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.
The following people are not nominees to the board of Goldfield, but may be
asked to serve in the event some or all of the Shareholder Value Slate are
elected, and the winners among the board nominees refuse to serve. All have
consented to have their names used in this solicitation, and all believe at the
time of filing of this document that they would be willing and able to serve as
directors if asked. However, all except Martin Stoller have reserved the right
to reconsider based on the circumstances at the time they are asked.
Scott Lodin, 45, has served as Executive Vice President, General Counsel and
Secretary for Andrx Corporation for the last seven years. He is also a director
of CyBear, Inc.
David Groelinger, 50, has been the Executive Vice President and Chief Financial
Officer of Riddell Sport Inc., a major manufacturer and distributor of athletic
and school spirit products and services for schools and youth organizations,
since 1996. Mr. Groelinger has been a director of AppliedTheory since November
2000. He chairs the audit committee of that Board of Directors. From 1994 to
1995, he was a member of the Board of Directors and Executive Vice President
and Chief Financial Officer of Regency Holdings (Cayman), Inc., which owned and
operated a major international cruise line. Prior to 1994, Mr. Groelinger
served in various senior financial capacities during twelve years at Chiquita
Brands, Inc. Mr. Groelinger holds an MBA from Hofstra University in New York
and a BA from the University of Miami in Florida.
Paul Zarowin, 44, is assistant professor of accounting at the Stern School of
Business, New York University. He has a B.A. from the University of
Pennsylvania and an M.B.A. in finance and a Ph.D. in Business Economics from
the University of Chicago. For the last ten years he has been a full-time
professor at Stern. He is a leading expert in the use of financial statements
to predict securities prices.
Martin Stoller, 44, is currently on leave as a clinical full professor of
Communication at the Kellogg School of Management, Northwestern University. He
holds a B.S. and an M.A. in communication studies and a Ph.D. in rhetoric from
Northwestern University. Dr. Stoller also has been a full-time college
professor for the last ten years but does extensive outside work in corporate
communications and crisis management. Clients have included a number of major
companies including Microsoft, Hyatt Hotels, Apple Computer, Kidder-Peabody,
Bristol-Myers-Squibb, The Boston Consulting Group, Continental Bank, Kraft
General Foods and Abbott Laboratories. He currently serves as a director of and
special advisor to CyBear Inc. and member of the advisory board and special
communications manager for Andrx Pharmaceuticals.
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. Neither Aaron Brown nor Deborah
Pastor bought or sold any securities of Goldfield directly.
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 1.06 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 0.72 7,188.00
20-Oct-00 8,500 0.72 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 0.49 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 0.69 199,854.53
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).
PURCHASES
Date Shares
12-Feb-99 2,000
16-Mar-99 20,000
19-May-99 5,000
24-May-99 4,900
25-May-99 1,000
26-May-99 1,000
24-Jun-99 1,300
16-Jul-99 38,700
19-Aug-99 28,200
16-Feb-00 20,000
18-Feb-00 14,900
22-Feb-00 10,100
17-Mar-00 15,000
20-Mar-00 20,000
31-Mar-00 20,000
18-Apr-00 7,300
19-Apr-00 12,500
11-May-00 20,000
10-Jun-00 2,000
23-Jun-00 5,500
26-Jun-00 3,700
27-Jun-00 5,800
28-Jun-00 1,500
29-Jun-00 200
13-Jul-00 20,000
31-Aug-00 13,600
7-Sep-00 4,700
8-Sep-00 900
13-Sep-00 14,400
13-Nov-00 20,000
SALES
Date Shares
31-Jan-00 6,700
7-Mar-00 20,000
9-Mar-00 20,000
9-Mar-00 20,000
10-Mar-00 15,000
10-Mar-00 15,000
14-Mar-00 15,000
19-Mar-00 20,000
7-Aug-00 20,000
Martin Stoller and Paul Zarowin have interest in Goldfield through the Allied
Owners Action Fund, but neither has bought or sold shares directly. Neither
Scott Lodin nor David Groelinger has ever bought or sold any shares of
Goldfield, except possibly through a diversified mutual fund over which they
had no discretionary control.
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, Sam Rebotsky, Scott Lodin, David Groelinger, Paul
Zarowin and Martin Stoller complied with all filing requirements applicable to
them with respect to transactions during the year ended December 31, 2000.
None of three nominees or four potential appointees 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.
From March 10, 2000 to March 31, 2001, Allied Owners Action Fund was a public
open-end mutual fund. However, it did not attract enough public investment to
cover the costs of running it. Privateer Asset Management (see next paragraph)
contracted to cover the losses for the first year. When that year ended,
Allied's board determined that given the size of the Fund, no management
contract could be obtained at a reasonable cost to Fund shareholders. The board
therefore voted unanimously to liquidate the Fund. The board further determined
that due to the large holdings in relatively small stocks, it was in the
interests of public Fund shareholders for the large shareholders (Aaron Brown,
Martin Stoller and some of their relatives) to take distribution in kind. Aaron
Brown was one of five board members of Allied when it was a public fund,
Deborah Pastor was its portfolio manager, through her position with Privateer.
Aaron Brown owns approximately 45% of Privateer Asset Management Inc., a
registered investment advisor. Martin Stoller owns another 45% and the
remaining approximately 10% is owned by certain contributors to the eRaider
website. Privateer Asset Management acted as the investment advisor to the
Allied Owners Action Fund when it was a public mutual fund. Privateer still has
a close relationship with Allied, although the advisory contract has been
terminated. Privateer shares office space, staff with Allied and supplies
Allied with services including accounting, tax and payroll. Deborah Pastor is
the portfolio manager and head trader of Privateer.
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.
Scott Lodin, Paul Zarowin and David Groelinger have agreed to be listed in this
solicitation, and to serve as directors if asked (subject to circumstances at
time of invitation). None of them are participants in the soliciation. Paul
Zarowin owns Goldfield shares through Allied Owners Action Fund, neither Scott
Lodin nor David Groelinger own shares.
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. He has asked me to make clear
that he is not a participant. I make no assertion either way.
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.
eRaider.com Inc., Allied Owners Action Fund and Privateer Asset Management can
all be reached at PO Box 20170, Park West Station, New York, NY 10025, by email
to info@eRaider.com or by telephone at (646) 505-0215.
I recommend a vote FOR the election of Aaron Brown, Deborah Pastor, Sam
Rebotsky.
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 -- ADJOURNMENT PRIOR TO VOTE ON PROPOSAL 1.
I recommend a vote AGAINST 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. 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.
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.
THE GOLDFIELD CORPORATION PROXY
Annual Meeting of Stockholders to be Held on June 19, 2001
THIS PROXY IS SOLICITED ON BEHALF OF ERAIDER.COM INC., AARON BROWN, DEBORAH
PASTOR AND SAM REBOTSKY, RUNNING AS THE SHAREHOLDER VALUE SLATE. IT IS NOT
SOLICITED ON BEHALF OF THE COMPANY'S MANAGEMENT OR BOARD OF DIRECTORS.
The undersigned hereby appoints Aaron Brown proxy, with full power of
substitution, to vote with the same force and effect as the undersigned at the
Annual Meeting of the Stockholders of The Goldfield Corporation to be held at
Imperial's Hotel & Conference Center (Imperial Room II), 8298 North Wickham
Road, Melbourne, Florida on June 19, 2001 at 9:00 a.m., and any adjournment or
postponement thereof, upon the matters set forth herein and upon such other
matters as may properly come before the meeting, all in accordance with the
notice and accompanying proxy statement for said meeting, receipt of which is
acknowledged. (THIS PROXY REVOKES ALL PRIOR PROXIES GIVEN BY THE UNDERSIGNED.)
This proxy, when properly executed, will be voted in the manner directed
herein. The individual named above is authorized to vote in his discretion on
any other matters that properly come before the meeting, including voting on
any proposal to adjourn the meeting if necessary to tally the votes with
respect to Proposal 1.
Continued and to be signed on the reverse side.
Please date, sign and mail your proxy card back today.
The Shareholder Value Slate recommends a vote FOR Proposal 0.5.
If no direction is given, the proxy will be voted FOR Proposal 0.5.
FOR
AGAINST
ABSTAIN
0.5. POINT OF ORDER: ELECTION OF DIRECTORS SHOULD PRECEED
ANY CHANGING OF THE ELECTION RULES.
/ /
/ /
/ /
The Shareholder Value Slate recommends a vote AGAINST Proposal 1.
If no direction is given, the proxy will be voted AGAINST Proposal 1.
FOR
AGAINST
ABSTAIN
1. AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION
/ /
/ /
/ /
2A. If Proposal 1 to amend the Restated Certificate of Incorporation to
eliminate cumulative voting is adopted, cumulative voting will NOT be available
and the proxy will be voted as directed in this Proposal 2A.
The Shareholder Value Slate recommends a vote FOR Proposal 2A.
If no direction is given, the proxy will be voted FOR Proposal 2A.
FOR
WITHHELD
2A. ELECTION OF DIRECTORS
/ /
/ /
FOR
Nominees
/ /
Aaron Brown
/ /
Deborah Pastor
/ /
Sam Rebotsky
/ / FOR, except vote withheld from the following
nominee(s)_____________________________________________________________
2B. If Proposal 1 to amend the Restated Certificate of Incorporation to
eliminate cumulative voting is NOT adopted, cumulative voting will be available
and the proxy will be voted as directed in this Proposal 2B.
If a vote "FOR; The Maximum Number of the Listed Nominees that Can Be Elected"
is marked, the cumulative votes represented by the proxy will be cast at the
discretion of the proxy named herein in order to elect the maximum number of
the listed nominees as believed possible under the then prevailing
circumstances.
If you do not wish to grant the proxyholder discretion to cumulate your votes,
then you can cumulate your votes yourself. To cumulate your votes for director
yourself, multiply the total number of shares you held as of the record date by
six. Then, you may allocate this number of votes among the nominees by writing
the number of votes you wish to allocate to a nominee in the space next to that
nominee's name.
Please note that if you choose to cumulate votes yourself, this may reduce the
likelihood of one or more of the nominees of your choice being elected. If you
elect to cumulate your votes yourself, the proxyholder will not have
discretionary authority to cumulate your votes.
The Shareholder Value Slate recommends a vote "FOR; The Maximum Number of the
Listed Nominees that Can Be Elected " for Proposal 2B.
If no direction is given, the proxy will be voted "FOR; The Maximum Number of
the Listed Nominees that Can Be Elected" for Proposal 2B.
FOR
WITHHELD
2A. THE MAXIMUM NUMBER OF THE LISTED NOMINEES NOMINEES
THAT CAN BE ELECTED
/ /
/ /
Votes
Nominees
Aaron Brown
Deborah Pastor
Sam Rebotsky
/ / FOR, the Maximum Number of the Listed Nominees that Can Be Elected, except
vote withheld from the following
nominee(s)_______________________________________
The Shareholder Value Slate recommends a vote FOR Proposal 3.
If no direction is given, the proxy will be voted FOR Proposal 3.
FOR
AGAINST
ABSTAIN
3. RATIFICATION OF APPOINTMENT OF ACCOUNTANTS
/ /
/ /
/ /
The Shareholder Value Slate recommends a vote AGAINST Proposal 4.
If no direction is given, the proxy will be voted AGAINST Proposal 4.
FOR
AGAINST
ABSTAIN
4. ADJOURNMENT PRIOR TO VOTE ON PROPOSAL 1
/ /
/ /
/ /
The Shareholder Value Slate recommends a vote FOR Proposal 5.
If no direction is given, the proxy will be voted FOR Proposal 5.
FOR
AGAINST
ABSTAIN
5. REDEEM THE SERIES A PREFERRED STOCK
/ /
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*Note* In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting or at any adjournments or
postponements thereof.
PLEASE SIGN, DATE AND RETURN TODAY IN ENCLOSED ENVELOPE.
DATE -------------------, 2001
Signature ------------------------
Signature ------------------------
Title(s) ------------------------
NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
Footnotes
1 Handout 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.
2 US Term Limits. US Term Limits has not endorsed the Shareholder Value Slate
nor given permission for its name to be used in this solicitation.
3 These are my estimates based on extrapolating from the financial statements
and applying normal mortality assumptions and insurance pricing given the ages
of the covered individuals. There is some guesswork involved in this process,
so the numbers may be off. Also, I find the statements inconsistent, so I might
have misinterpreted things completely.
4 This 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.
5 June 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 Value 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).
6 Based on figures from the Federal Reserve Bulletin, various dates. The
Federal Reserve has not endorsed the Shareholder Value Slate nor given
permission for its name to be used in this solicitation.
7 US Census Bureau, 1997 Economic Census, issued March 2000. The US Census
Bureau has not endorsed the Shareholder Value Slate nor given permission for
its name to be used in this solicitation.
8 Goldfield paid $6 million to buy 437,700 shares of General Host Corporation,
but borrowed $4.9 million of the purchase price from General Host. General Host
had an option to repurchase the shares for $4.4 million. None of the SEC
filings or other documents I can locate explain what General Host gave
Goldfield in return. In January 1971, General Host exercised its option meaning
Goldfield net paid $1.6 million and had no shares to show for it. Had the price
of General Host shares gone down instead of up, Goldfield presumably would have
ended up owning them for the $6 million. It seems like a no win deal for
Goldfield.
9 Real estate assets often have market value far above their book or tax
values, so the fact that the liabilities exceeded the assets on book and tax
basis does not mean the same thing was true on a market basis. The assets might
have been worth more than the liabilities. However, the fact that Real Estate
Resources went insolvent so quickly, the fact that the assets were sold for
less than their book value soon after the transfer, plus an examination of the
effect of the transfer on the income of Indian River and Real Estate Resources,
strongly suggests the contrary.
10 Indian River, Real Estate Resources and Citrus Growers had complex
transactions that inflated all three balance sheets (if company A loans money
to company B, and company B loans the same amount of money back to company A;
assets and liabilities of both companies increase, even though the obligations
offset).
11 It is possible for a company to have value without assets listed on the
balance sheet. Certain intangible assets, for example, may not be listed.
However, I have found no evidence in any SEC filing or other document I have
examined that such off-balance sheet assets existed. Moreover, in light of the
business of Indian Rivers (owning and servicing orange groves) it is hard to
imagine any off-balance sheet asset of significant value they might have had.
Finally, Indian River's history of large operating losses, and Goldfield's
increased operating losses after the merger, make it seem unlikely that
anything of great value was transferred.
12 This represents 2.5 percent of the amount of the contract. While that may
have been a reasonable fee for a surety bond under the circumstances, neither
Sottile was in the business of providing such bonds. Such a transaction is not
necessarily suspicious. It may well have been of considerable benefit to the
Company and represent a sacrifice on the part of the guarantor. But in my
opinion, such transaction prove the need for aggressive, experienced directors
who are truly independent of management. The insiders should want such
directors to avoid the appearance of impropriety, shareholders should demand
such directors to ensure there is no impropriety.