8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): June 17, 2010

WESTMORELAND COAL COMPANY

(Exact name of registrant as specified in its charter)

Delaware	001-11155	23-1128670
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

2 North Cascade Avenue, 2nd Floor, Colorado Springs, CO	80903
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (719) 442-2600

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers

Appointment of Executive Vice President

The Board of Directors of Westmoreland Coal Company (the “Company”) promoted Mr. Douglas Kathol, 57, to Executive Vice President, responsible for oversight of various operational divisions of the Company, including mining, power, human resources, information technology and sales and development on June 17, 2010. Mr. Kathol joined the Company in 2003 and has been responsible for leading growth opportunities through new project development or acquisitions as Vice President-Development. In 2008, he was named Treasurer and assumed traditional treasury duties as well as duties relating to risk management and financing and cash management in a credit and cash constrained environment. Prior to joining Westmoreland, Mr. Kathol spent 18 years with Norwest Corporation, an international energy consulting firm. As a principal in Norwest, his final position was as Senior Vice President responsible for the mergers and acquisitions practice of the company. Effective as of June 17, 2010, the Compensation and Benefits (“C&B”) Committee awarded Mr. Kathol the following compensation package for his new role as Executive Vice President: annualized base salary of $275,000, an Annual Incentive Plan (“AIP”) bonus payout targeted at 50% of base salary and an annual long-term equity grant valued at 45% of base salary. Our named executive officers, including Mr. Kathol, are at-will employees and do not have employment agreements.

Mr. Kathol’s wife, Diane Kathol, currently serves as the Company’s Vice President- Mining and Power. In such position, Ms. Kathol has received the following cash compensation from the Company: $246,682 in 2007, $169,536 in 2008 and $198,313 in 2009. Ms. Kathol is expected to earn approximately $200,323 in 2010. Ms. Kathol has held various positions with the Company since 1993, including serving in her current capacity as a Vice President of the Company since the early 2000s.

Appointment of Treasurer; Change in Chief Financial Officer Compensation Package

As part of Mr. Kathol’s transition to Executive Vice President, Mr. Kevin Paprzycki, the Company’s Chief Financial Officer, has been appointed Treasurer. As compensation for Mr. Paprzycki’s increase in responsibilities, the C&B Committee awarded Mr. Paprzycki, effective June 17, 2010, an additional $5,000 in base salary and an increase in his annual long-term equity grant to approximately 34% of base salary.

Change in Chief Executive Officer Compensation Package

As part of the transition of oversight of various operational divisions to Mr. Kathol as Executive Vice President, the Board of Directors has changed the compensation package of Mr. Keith Alessi, the Chief Executive Officer and President. Over the last several years, Mr. Alessi has seen the Company through a period of turnaround activity with a focus on the day-to-day operations of the Company. Mr. Alessi is now turning his focus to long-term strategy and the future growth and development of the Company. To align his compensation with his new strategic focus, the Board of Directors has adjusted Mr. Alessi’s compensation package to have more at-risk and equity compensation and less up-front cash compensation. Effective as of June 21, 2010, Mr. Alessi will receive the following compensation: annualized base salary of $400,000, AIP bonus payout targeted at 100% of base salary and annual long-term equity grant valued at 125% of base salary.

Restricted Stock Unit Awards

On June 17, 2010, the C&B Committee granted long-term incentive restricted Stock Unit (“RSU”) awards pursuant to the Company’s 2007 Equity Incentive Plan for Employees and Non-Employee Directors to a number of Company employees, including named executive officers. The table below sets forth the value of the RSUs that each of the Company’s named executive officers is eligible to receive as of July 1, 2010 (the “Grant Date”). The number of RSUs issued will be determined by dividing the total value of RSUs awarded by the trailing average of the closing prices of the Company’s common stock for the ten days prior to the Grant Date and rounded for ease of administration. The RSUs shall vest in accordance with the following vesting schedule: one-third of the total number of RSUs shall vest on the first anniversary of the Grant Date and one-third of the total number of RSUs shall vest at the end of each successive twelve-month period following the first anniversary of the Grant Date, through and including the third anniversary of the Grant Date.

	Value of
Name	Award
Keith Alessi, Chief Executive Officer	$	500,000
Kevin Paprzycki, Chief Financial Officer	$	74,566
Douglas Kathol, Executive Vice President	$	123,750
John O’Laughlin, Vice President — Coal Ops	$	82,404
Morris W. Kegley, General Counsel	$	54,946

Director Compensation

On June 21, 2010, the Board of Directors adopted a new pay package for the non-employee directors of the Company, effective as of July 1, 2010. Effective as of such date, the non-employee directors will be compensated on a yearly basis as follows:

Retainer fee = $35,000
Chairman of the Board premium = $35,000
Audit Committee Chairman premium = $7,000
C& B Committee premium = $5,000
Nominating and Corporate Governance Committee premium = $3,000
Retainer fee for serving as member of Audit, C&B or Governance Committee = $5,000
Fee for attending meeting of full Board or a Committee telephonically = $1,000
Fee for attending meeting of full Board or a Committee in person = $1,500
Equity valued at $50,000 awarded at the Annual Meeting of Stockholders, beginning May 2011

Amendment of Various Compensation Plans

On June 18, 2010, Mr. Alessi approved various administrative changes to the Company’s Annual Incentive Plan and Severance Policy in order to align such plans to the compensation changes discussed above.

The foregoing description of the changes to the Annual Incentive Plan and Severance Policy is qualified in its entirety by the full text of the Annual Incentive Plan and Severance Policy, each of which is incorporated by reference herein and attached hereto as Exhibit 10.1 and 10.2, respectively.

Item 8.01. Other Events

The information set forth above is incorporated herein by reference to the extent not required pursuant to Item 5.02 of Form 8-K.

Item 9.01. Financial Statements and Exhibits

(d) Exhibits

Exhibit No.	Description
10.1	Annual Incentive Plan
10.2	Severance Policy

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	WESTMORELAND COAL COMPANY
Date: June 23, 2010	By:	/s/ Morris W. Kegley
		Morris W. Kegley, General Counsel and Secretary

EXHIBIT INDEX

Exhibit No.	Description
10.1	Annual Incentive Plan
10.2	Severance Policy

EX-10.1

EXHIBIT 10.1

	Number: GP- 33 Issue/Revision Date:           June 1, 2010
	Supersedes Policy: GP-33 dated 01/01/2009 &
WESTMORELAND COAL COMPANY	Previously Issued Letters and Memos
	Approved Issuing Officer:
Title: Annual Incentive Plan (AIP)	/s/ Keith E. Alessi
	Name: Keith E. Alessi Title: CEO
	Title:   CEO

POLICY STATEMENT

It is the policy of Westmoreland Coal Company and its subsidiaries, hereinafter collectively “the Company,” to compensate designated employees with annual financial incentives for the accomplishment of key strategic goals and objectives intended to promote financial performance, productivity and safety.

ELIGIBILITY

You are an “Eligible Employee” if you meet all the following conditions:

• You are an employee designated by the Company to be eligible as per the addendum;

• You are an active full-time employee of the Company, scheduled to work at least 40 hours per week; and

• You are employed by the Company on October 1 during the plan year.

PROCEDURES

DETERMINATION AND PAYMENT OF AIP PAYMENTS

The Company measures the accomplishments of our employees based on financial, safety and individual components. The “Targeted Amount” of the incentive is based on a percentage of the employee’s base salary relative to the employee’s position within the Company.

• Financial Goals — are based on the Company attaining or exceeding its budgeted operating income goals. Financial Goals have a threshold, target, and double target.

• Safety Goals — are based on the actual Mine Safety & Health Administration (MSHA) Reportable Incident Rate (RIR) for the coal industry (strip mines, preparation plants and independent shops/yards). Safety Goals have a threshold, target, and double target.

• Individual Goals — are based on achievement of individual objectives.

Page 1 of 5

Title: Annual Incentive Plan (AIP) No. GP-33 Date Issued:
June 1, 2010 Supersedes Policy
GP-33 dated
01/01/2009

The components of the Company’s Annual Incentive Plan (“AIP”) — Financial Goals, Safety Goals, and Individual Goals — have different weight and emphasis depending on whether the employee is in Operations or Corporate. Employees have the opportunity to earn more than 100% of their individual goals, based on exemplary performance.

Operations Management

For those eligible employees in Operations, the following guidelines will apply relative to their Annual Incentive Plan:

Financial Goals: The Financial Goal is 40% of Targeted Amount based on the Mine’s/Division’s budgeted Operating Income.

•  Financial Threshold: Financial Threshold is defined as meeting the annual budgeted Operating Income. Fifty percent of the Financial Goal will be paid upon achieving Financial Threshold. Under no circumstances will a payout of the Financial Goal be made if Financial Threshold is not achieved.

•  Financial Target: Financial Target is defined as exceeding Financial Threshold by 7.5%. One hundred percent of the Financial Goal will be paid upon meeting Financial Target. Results that fall between Financial Threshold and Financial Target will result in a prorated calculation between 50% and 100%.

•  Financial Double Target: Financial Double Target is defined as exceeding Financial Threshold by 15%. Two hundred percent of the Financial Goal will be paid upon achieving Financial Double Target. Results that fall between Financial Target and Financial Double Target will result in a prorated calculation between 100% and 200%. 200% is the maximum payout of the Financial Goal even if Financial Double Target is exceeded.

Safety Goals: Thirty percent of Targeted Amount will be based upon achieving the following Safety Goals for each mine.

•  Safety Threshold: Safety Threshold is defined as meeting the annual National MSHA average for Reportable Incident Rate (RIR) for the coal industry (strip mines, preparation plants, and independent shops/yards). Fifty percent of the Safety Goal will be paid upon achieving Safety Threshold. Under no circumstances will a payout of the Safety Goal be made if Safety Threshold is not met.

•  Safety Target: Safety Target is defined as safety experience 25% better than Safety Threshold. One hundred percent of the Safety Goal will be paid upon achieving Safety Target. Results falling between Safety Threshold and Safety Target will result in a prorated calculation between 50% and 100%.

Page 2 of 5

Title: Annual Incentive Plan (AIP) No. GP-33 Date Issued:
June 1, 2010 Supersedes Policy
GP-33 dated
01/01/2009

•  Safety Double Target: Safety Double Target is defined as safety experience 50% better than Safety Threshold. Two hundred percent of the Safety Goal will be paid upon achieving Safety Double Target. Results falling between Safety Target and Safety Double Target will result in a prorated calculation between 100% and 200%. Two hundred percent is the maximum payout of the Safety Goal, even if Safety Double Target is exceeded.

Individual Goals: The Individual Goal is 30% of Targeted Amount and will be based on achievement of certain individual goals.

•  The percentage payout will be evaluated on achievement of certain individual goals established between the employee and his/her manager and will be based on the employee’s overall performance evaluation. For the Individual Goal, employees and their manager will select two goals for the purpose of the AIP. These goals should be defined no later than March 31 of each applicable year (or on the employee’s date of hire if later than March 31). All goals should be “SMART” goals in that they are Specific, Measurable, Aligned, Realistic, and Time-bound. The individual goals will require approval by the Company’s Chief Executive Officer (“CEO”) and VP, Human Resources and Administration.

•  The individual goals cannot be related to safety or financial performance. Further, there will be no payout for individual goals if a person is deemed responsible for a material deficiency relative to the Sarbanes-Oxley Act (SOX).

Corporate Management

If an employee is considered to be an eligible corporate employee, the following guidelines will apply relative to their Annual Incentive Plan:

Financial Goals: The Financial Goal is 55% of Targeted Amount based on the corporate budgeted Operating Income.

•  Threshold: Threshold is defined as meeting the annual budgeted Operating Income. Fifty percent of the Financial Goal will be paid upon achieving Threshold. Under no circumstances will a payout of the Financial Goal be made if Threshold is not achieved.

•  Target: Target is defined as exceeding Threshold by 7.5%. One hundred percent of the Financial Goal will be paid upon meeting Target. Results that fall between Threshold and Target will result in a prorated calculation between 50% and 100%.

•  Double Target: Double Target is defined as exceeding Threshold by 15%. Two hundred percent of the Financial Goal will be paid upon achieving Double Target. Results that fall between Target and Double Target will result in a prorated calculation between 100% and 200%. Two hundred is the maximum payout of the Financial Goal even if Double Target is exceeded.

Page 3 of 5

Title: Annual Incentive Plan (AIP) No. GP-33 Date Issued:
June 1, 2010 Supersedes Policy
GP-33 dated
01/01/2009

Individual Goals: The Individual Goal is 45% of Targeted Amount and will be based on achievement of certain individual goals.

•  The percentage payout will be evaluated on achievement of certain individual goals established between the employee and his/her manager and will be based on the employee’s overall performance evaluation. For the Individual Goal, employees and their manager will select two goals for the purpose of the AIP. These goals should be defined no later than March 31of each applicable year (or on the employee’s date of hire if later than March 31). All goals should be “SMART” goals in that they are Specific, Measurable, Aligned, Realistic, and Time-bound. The individual goals will require approval by the Company’s CEO and VP, Human Resources and Administration.

•  The individual goals cannot be related to financial performance. Further, there will be no payout for individual goals if a person is deemed responsible for a material deficiency relative to the Sarbanes-Oxley Act (SOX).

PROVISIONS

The following are important Plan terms and conditions:

• Any incentive or bonus award may be adjusted either up or down at the sole discretion of the Company’s CEO, based upon individual performance and/or other factors regardless of whether it is earned in accordance with this and/or any other document.

• Awards are capped at two times target for each Financial and Safety goals.

• All incentive awards granted will be calculated based upon the participant’s base salary earned during the 12 months ending on December 31 of the applicable year.

• A participant must be employed by the Company on the date the incentive payments are distributed in order to receive any payment under the Plan, except as approved by the Compensation and Benefits (“C&B”) Committee.

• Incentive award checks will be distributed following completion of the Company’s annual audit and approval of the Company’s C&B Committee, typically at the end of the first quarter of the subsequent year.

• Taxes, deferrals (401(k)) and distributions that are required to be withheld by federal, state or local or other governmental authority shall be deducted from all payments.

• Any incentive award for a newly hired or promoted participant will be based upon the base salary earned from their date of hire to December 31.

• No member of the Board of Directors or the C&B Committee shall be liable for any action taken or determination made in good faith with respect to AIP.

• Receipt of any portion of the incentive award is subject to all terms and conditions described in this document.

• Participation in this Plan is neither a contract nor a guarantee of continuing employment.

• This Plan may be modified, suspended or terminated at any time by the Company.

Page 4 of 5

Title: Annual Incentive Plan (AIP) No. GP-33 Date Issued:
June 1, 2010 Supersedes Policy
GP-33 dated
01/01/2009

ADDENDUM

WESTMORELAND COAL COMPANY ANNUAL INCENTIVE PLAN

FOR NON-UNION EMPLOYEES

Grade	Level		Position or Classification	AIP %
			CEO		*
12		1	•   Executive VP
			•   VP, Coal Operations		50	%
11, 12		2	•   Chief Financial Officer
			•   General Counsel		40	%
			•   Vice Presidents of a Functional Area
			•   Mine Managers
11		3	•   Directors of a Functional Area
			•   Assistant General Counsel		30	%
9, 10		4	Managers of a Functional Area		20	%
8, 9		5	Superintendents		15	%
			All employees AIP eligible as of June 2010 who do not meet the above guidelines are grandfathered into the plan.		15	%

* To be determined by the Company’s C&B Committee.

Page 5 of 5

EX-10.2

EXHIBIT 10.2

WESTMORELAND COAL COMPANY	Number: GP- 04 Issue/Revision Date: June 1, 2010 Supersedes Policy: dated 7/26/04 and GP-04 dated 5/21/07 and 12/31/08
	Approved Issuing Officer:
	/s/ Keith E. Alessi
Title: Severance Policy	Name: Keith E. Alessi
	Title: CEO

POLICY STATEMENT

It is the policy of Westmoreland Coal Company and its subsidiaries, hereinafter collectively “the Company,” to pay severance benefits under certain specific circumstances, as defined by this policy, to certain non-union employees who are involuntarily terminated for reasons other than cause and under certain conditions described herein. The purpose of severance is to aid employees for hardships incurred upon loss of employment. This policy applies to non-union employees of the Company and all of its direct and indirect subsidiaries (each such entity, an “Employer” for its employees, and each such employee, an “Employee” or “you”).

FUTURE OF THE POLICY

Although the Company currently expects to continue the provisions of this policy at its sole discretion, the Company reserves the right to change or amend at any time, any and all terms and conditions of this policy, or to terminate this policy in its entirety, upon six (6) months notice to employees covered under this policy. Furthermore, the Company reserves the right to interpret and construe the provisions of this Policy, including the determination of the eligibility for and amount of benefits under the Policy, to the fullest extent permissible by law.

ELIGIBILITY

You are an “Eligible Employee” if:

• You are an active full-time employee of the Employer, scheduled to work at least 40 hours per week, AND

• Your employment terminates due to:

1.	Involuntary termination that is not for Cause, including but not limited to, permanent layoff, permanent reduction in force, or termination of employment due to lack of work or job elimination; or
2.	The sale of a facility or division or segment of business unless, following such sale, you are subsequently employed by the purchaser of the facility or division or segment of business; or
3.	A position being relocated in which the distance between the relocated place of employment and your residence is at least 50 miles greater than the distance between your former place of employment and your residence, and you do not continue employment at the relocated place of employment;

Page 1 of 6

Title: Severance Policy No. GP-04 Date Issued: June 1, 2010 Supersedes Policy dated 7/26/04 and GP-04 dated 5/21/07 & 12/31/08

• You have a position on the date your employment terminates that is listed in the Position or Classification section of the attached Addendum;

• Within 30 days following your termination with Employer you do not receive an offer of Similar Employment from the Employer or any of its affiliates or subsidiaries, or (i) your employment is terminated by the Employer as a result of or in relation to a sale of the Employer or any of its assets, business unit(s), or divisions(s), subsidiaries or affiliates or the contracting out or outsourcing of any function within the Employer, and (ii) you do not receive an offer of Similar Employment from the purchasing, contracting, or outsourcing party or a successor thereto. “Similar Employment” means a position with pay and Working Conditions that are reasonably comparable to that of your last position with the Company. For purposes of the Policy, “Working Conditions” do not include employee benefits. An Employee is not eligible for severance benefits hereunder, if that an Employee does not accept the Similar Employment; and

• You sign, return to the Company and do not revoke the Release Agreement (“Release Agreement”) within the time frames specified in that document or a letter accompanying same in a form satisfactory to the Company.

INELIGIBILITY

The following are NOT Eligible Employees:

• Employees who are covered by a collective bargaining agreement that does not provide for participation in this Policy;

• Seasonal, Part-time and/or Temporary workers (as reflected in the Employer’s payroll system) and independent contractors;

• Employees whose employment is terminated due to the employee’s resignation, death, or disability (as defined in the Company’s applicable long-term disability Policy);

• Employees whose employment is terminated for Cause, as defined herein.

1. For Cause: Gross or willful misconduct that is injurious to the Company, or its direct or indirect subsidiaries or affiliates, which includes but is not limited to an act or acts constituting embezzlement, misappropriation of funds or property of such entities, larceny, fraud, gross negligence, crime or crimes resulting in a felony conviction, moral turpitude or behavior that brings the Employee into public disrepute, contempt, scandal or ridicule or that reflects unfavorably upon the reputation or high moral or ethical standards of the Company (or the Employer) or violation of Company (or Employer) policy including but not limited to the policies set forth on Code of Business Conduct and Fitness for Duty; willful misrepresentation to the Company’s or an Employer’s directors, officers, managers, supervisors, employees or third parties; or failure to meet the duties of care and loyalty to the Company or the Employer. For purposes of this paragraph, failure to act on the participant’s part shall be considered “willful” if done by the participant without a reasonable belief that the omission was in the best interest of the Company or the Employer;

Page 2 of 6

Title: Severance Policy No. GP-04 Date Issued: June 1, 2010 Supersedes Policy dated 7/26/04 and GP-04 dated 5/21/07 & 12/31/08

• Any Employee who refuses to sign, revokes or subsequently breaches the Release Agreement;

• Any Employee who is in material violation of company policy or in material breach of statutory or common law duties that the Employee owes to the Employer; and

• Any Employee who is not otherwise an Eligible Employee, as provided above.

PROVISIONS

DETERMINATION AND PAYMENT OF SEVERANCE PAYMENTS

If you are an Eligible Employee, you may be eligible to receive severance benefits that consist of three parts: Severance Compensation; Medical, Vision, and Dental Benefit Continuation; and Outplacement Assistance.

•	Severance Compensation. Severance compensation will be calculated based upon your Position or Classification on the date your employment terminates and completed Years of Service as set forth in the attached Addendum.
	For purposes of calculating severance compensation, base pay means your “weekly base pay” in effect for the payroll period during which employment with your Employer is terminated. Overtime, bonuses, commissions, incentive pay and any taxable or nontaxable fringe benefit or payment will be excluded. “Weekly base pay” means 40 hours multiplied by your base hourly rate only for hourly Employees, and your annual base salary divided by 52 for exempt Employees. Your “monthly base pay” is computed by multiplying your “weekly base pay” by 52 and then dividing that number by 12. “Year of Service” means each completed full year of continuous service with the Company or any other Employer from your date of hire. Partial Years of Service will not be included in calculating your severance compensation.
	In addition, your severance benefit under the Severance Policy will be reduced (but not below zero) by all amounts of severance pay or similar pay to which you may be entitled to under any other Company Severance Policy, benefits mandated by state or federal law, payment in lieu of WARN notification or any individual written employment agreement or other written agreement relating to payment upon separation from employment or change of control of the Company.
	Severance payments will be paid in equal installments on the normal payroll schedule or in a lump-sum payment as determined solely by the Employer (except that for payments to a CEO of an Employer, the determination shall be made by the Employer’s board of directors, excluding the CEO if a board member) and shall be net of any tax, medical or other required withholdings. Severance payments shall commence upon the Employee’s “separation of service” within the meaning of Section 409A(a)(2)(A)(i) of the Internal Revenue Code of 1986, as amended (“Code”) from the Employer; provided, however, any payments that would otherwise be made in the case of a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code, within six months after such Employee’s separation from service (but only with respect to payments that would otherwise be subject to additional tax under Code Section 409A), shall be delayed until the date of such Employee’s separation from service or, if applicable, expiration of the six month period (or, if earlier, the date of death of the Employee).
	No severance payments will be made later than two years after the separation from service or without the return of an executed and non-revoked Release Agreement.

Page 3 of 6

Title: Severance Policy No. GP-04 Date Issued: June 1, 2010 Supersedes Policy dated 7/26/04 and GP-04 dated 5/21/07 & 12/31/08

•	Medical, Dental, and/or Vision Benefit Continuation. If you have medical, dental, and/or vision coverage provided by or through the Employer upon your termination of employment, these coverages will terminate at the end of the month following the date your employment terminates. You and your dependents have the right to continue your benefits under COBRA. If you choose to continue your benefits under COBRA, the Employer will share in the cost of the established COBRA rate through the period specified in the attached Addendum based on your Position or Classification on the date your employment terminates. You will be responsible to share the cost of the COBRA rate by paying an equivalent of the established employee premium rate through your specific severance period. The Employer reserves the right to pay you a lump-sum value of the established COBRA rate equal to the length of your specified severance period in lieu of paying the Employer share of cost, in which case you will then be required to pay the full COBRA rate for any continued coverage, and the lump sum payment to you will be taxable income to you. At the end of your specified severance period, you will be responsible for the entire COBRA rate (both employee and Employer portions) through the remaining COBRA period.
	Additionally, the benefit continuation benefit applies only to medical, dental, and vision benefits under Employer-sponsored Plans. It is not provided for the cost of any flexible spending account coverage (which in certain circumstances is also subject to COBRA) or other benefits (for example life insurance or long term disability benefits.) Except for the limited continuation of health coverage discussed here, other employee benefit plans and arrangements of the Employer stop when your employment terminates in accordance with the standard rules of such Plans and arrangements.
•	Outplacement Assistance. You will be able to obtain outplacement assistance services from an outplacement firm selected by the Employer for a specified period of time, as indicated in the Addendum, based on your Position or Classification on the date your employment terminates. You must begin such outplacement assistance within three months of your employment termination to receive this benefit.

CONDITIONS TO PAYMENT OF BENEFITS

As a condition of your entitlement to severance benefits under the Severance Policy, you must agree in writing to release the Company and others associated with the Company from any and all legal claims, except those preserved by public policy, associated with your employment by the Employer by signing and not revoking the Release Agreement.

Your severance benefits will be paid in equal installments or in a lump-sum payment, solely determined by the Company, after the expiration of any applicable waiting periods set forth in the Release Agreement and starting within two pay periods of said waiting period and never to exceed two years (unless payment is delayed as provided in Section 5.1 herein). Your severance benefits will be subject to all applicable tax and other withholdings. No deductions will be made as contributions to the Westmoreland Coal Company Savings and Retirement 401(k) Policy. As

Page 4 of 6

Title: Severance Policy No. GP-04 Date Issued: June 1, 2010 Supersedes Policy dated 7/26/04 and GP-04 dated 5/21/07 & 12/31/08

provided above, you will not be paid severance benefits if you are in material violation of applicable Company policies or you are in violation of any other legal or contractual obligation you may owe the Employer, including without limitation the Release Agreement. To the extent that an Eligible Employee is or has been covered by any other Company or Employer severance Policy(ies) or arrangement(s), this Severance Policy expressly supersedes and replaces any and all such Policy(ies) or arrangement(s) (other than an individual written employment agreement or other written agreement relating to payment upon separation from employment, including change of control agreements) the terms of which will supersede this Policy to the extent such terms are inconsistent herewith.

If you become re-employed with the Company or another Employer in any category of employment prior to your completion of the severance compensation period, your severance benefits under the Severance Policy resulting from the termination will cease, and if you received a lump sum, you will be required to reimburse the Company for the remaining pro-rated amount of severance in accordance with your identified severance period as referenced in the attached Addendum. You again will be subject to the terms of this Policy.

If a court of competent jurisdiction, including without limitation a United States Bankruptcy Court, limits the amount or ability of the Company to pay benefits hereunder, neither the Company, its subsidiaries, affiliates, or successors and their respective employees, officers, directors, shareholders, and agents will have any liability therefore. Likewise, regardless of whether benefits described hereunder are in certain jurisdictions deemed to be wages or compensation, no employee, officer, director, shareholder, or agent of the Company or its subsidiaries, affiliates or successors assumes any liability for the payment of benefits hereunder.

SURVIVABILITY OF PAYMENTS

The commitments under this Policy shall survive, to the extent permissible by law, upon the bankruptcy, insolvency, liquidation or dissolution of the Company.

Page 5 of 6

Title: Severance Policy No. GP-04 Date Issued: June 1, 2010 Supersedes Policy dated 7/26/04 and GP-04 dated 5/21/07 & 12/31/08

ADDENDUM

WESTMORELAND COAL COMPANY SEVERANCE POLICY FOR NON-UNION EMPLOYEES

JUNE 1, 2010

			Position or	Severance	Outplacement	Health Benefit
Grade	Level		Classification	Compensation	Assistance	Cost Share
12 & Above		1	•   CEO •   Chief Financial Officer •   General Counsel •   Vice Presidents of a Functional Area •   Such other positions not listed above that participate in the Annual Incentive Plan at levels 1 and 2 (40% — 100%)	Twelve months of monthly base pay as defined in this document	Nine-month program	Twelve months
11		2	•   Directors of a Functional Area •   Assistant General Counsel •   Such other positions not listed above which participate in the Annual Incentive Plan at Level 3 (30%)	Nine months of monthly base pay; plus one week of base pay for each year of service, not to exceed a maximum of 12 months of monthly base pay as defined in this document.	Six-month program	Nine months
9, 10		3	•   Senior Managers of a Functional Area •   Such other positions not listed above which participate in the Annual Incentive Plan at Level 4 (20%)	Six months of monthly base pay; plus one week of base pay for each year of service, not to exceed a maximum of 12 months of monthly base pay as defined in this document.	Three-month program	Six months
8, 9		4	•   Other Management Personnel or key contributors •   Such other positions not listed above which participate in the Annual Incentive Plan at Level 5 (15%)	One month of monthly base pay as defined in this document plus one week of weekly base pay as defined in this document for each year of service not to exceed 26 weeks	Two-week program	Equal to Severance Compensation
6, 7		5	Other Exempt Salaried Personnel who are Individual Contributors and are grandfathered into the Annual Incentive Plan at level 5 (15%)	One month of monthly base pay as defined in this document + one week of weekly base pay as defined in this document for each year of service not to exceed 26 weeks	Two-day program	Equal to Severance Compensation
5 & Below		6	Non-Exempt or Hourly Personnel	One week of weekly base pay as defined in this document per Year of Service — two-week minimum not to exceed 26 weeks	Two-day program	One month

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