0000950123-11-056525.txt : 20110603 0000950123-11-056525.hdr.sgml : 20110603 20110603171826 ACCESSION NUMBER: 0000950123-11-056525 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 52 FILED AS OF DATE: 20110603 DATE AS OF CHANGE: 20110603 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WESTMORELAND COAL Co CENTRAL INDEX KEY: 0000106455 STANDARD INDUSTRIAL CLASSIFICATION: BITUMINOUS COAL & LIGNITE SURFACE MINING [1221] IRS NUMBER: 231128670 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-174723 FILM NUMBER: 11893143 BUSINESS ADDRESS: STREET 1: 2 N CASCADE AVE STREET 2: 2ND FLOOR CITY: COLORADO SPRINGS STATE: CO ZIP: 80903-1614 BUSINESS PHONE: 7194422600 MAIL ADDRESS: STREET 1: 2 N CASCADE AVE STREET 2: 2ND FLOOR CITY: COLORADO SPRINGS STATE: CO ZIP: 80903-1614 FORMER COMPANY: FORMER CONFORMED NAME: WESTMORELAND COAL CO DATE OF NAME CHANGE: 19920703 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WCC Land Holding Company, Inc. CENTRAL INDEX KEY: 0001521817 IRS NUMBER: 273965489 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-174723-01 FILM NUMBER: 11893144 BUSINESS ADDRESS: STREET 1: 2 N. CASCADE AVENUE STREET 2: 2ND FLOOR CITY: COLORADO SPRINGS STATE: CO ZIP: 80903 BUSINESS PHONE: 719-442-2600 MAIL ADDRESS: STREET 1: 2 N. CASCADE AVENUE STREET 2: 2ND FLOOR CITY: COLORADO SPRINGS STATE: CO ZIP: 80903 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Westmoreland Power, Inc. CENTRAL INDEX KEY: 0001521932 IRS NUMBER: 841579965 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-174723-02 FILM NUMBER: 11893145 BUSINESS ADDRESS: STREET 1: 2 N. CASCADE AVENUE STREET 2: 2ND FLOOR CITY: COLORADO SPRINGS STATE: CO ZIP: 80903 BUSINESS PHONE: 719-442-2600 MAIL ADDRESS: STREET 1: 2 N. CASCADE AVENUE STREET 2: 2ND FLOOR CITY: COLORADO SPRINGS STATE: CO ZIP: 80903 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Westmoreland Partners CENTRAL INDEX KEY: 0001521933 IRS NUMBER: 330487790 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-174723-10 FILM NUMBER: 11893153 BUSINESS ADDRESS: STREET 1: 2 N. CASCADE AVENUE STREET 2: 2ND FLOOR CITY: COLORADO SPRINGS STATE: CO ZIP: 80903 BUSINESS PHONE: 719-442-2600 MAIL ADDRESS: STREET 1: 2 N. CASCADE AVENUE STREET 2: 2ND FLOOR CITY: COLORADO SPRINGS STATE: CO ZIP: 80903 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Westmoreland - North Carolina Power L.L.C. CENTRAL INDEX KEY: 0001521934 IRS NUMBER: 205102494 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-174723-08 FILM NUMBER: 11893151 BUSINESS ADDRESS: STREET 1: 2 N. CASCADE AVENUE STREET 2: 2ND FLOOR CITY: COLORADO SPRINGS STATE: CO ZIP: 80903 BUSINESS PHONE: 719-442-2600 MAIL ADDRESS: STREET 1: 2 N. CASCADE AVENUE STREET 2: 2ND FLOOR CITY: COLORADO SPRINGS STATE: CO ZIP: 80903 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Westmoreland Coal Sales Company, Inc. CENTRAL INDEX KEY: 0001521935 IRS NUMBER: 231701997 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-174723-11 FILM NUMBER: 11893154 BUSINESS ADDRESS: STREET 1: 2 N. CASCADE AVENUE STREET 2: 2ND FLOOR CITY: COLORADO SPRINGS STATE: CO ZIP: 80903 BUSINESS PHONE: 719-442-2600 MAIL ADDRESS: STREET 1: 2 N. CASCADE AVENUE STREET 2: 2ND FLOOR CITY: COLORADO SPRINGS STATE: CO ZIP: 80903 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Westmoreland Mining Services, Inc. CENTRAL INDEX KEY: 0001521936 IRS NUMBER: 272103673 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-174723-03 FILM NUMBER: 11893146 BUSINESS ADDRESS: STREET 1: 2 N. CASCADE AVENUE STREET 2: 2ND FLOOR CITY: COLORADO SPRINGS STATE: CO ZIP: 80903 BUSINESS PHONE: 719-442-2600 MAIL ADDRESS: STREET 1: 2 N. CASCADE AVENUE STREET 2: 2ND FLOOR CITY: COLORADO SPRINGS STATE: CO ZIP: 80903 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WRI Partners, Inc. CENTRAL INDEX KEY: 0001521937 IRS NUMBER: 262703697 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-174723-04 FILM NUMBER: 11893147 BUSINESS ADDRESS: STREET 1: 2 N. CASCADE AVENUE STREET 2: 2ND FLOOR CITY: COLORADO SPRINGS STATE: CO ZIP: 80903 BUSINESS PHONE: 719-442-2600 MAIL ADDRESS: STREET 1: 2 N. CASCADE AVENUE STREET 2: 2ND FLOOR CITY: COLORADO SPRINGS STATE: CO ZIP: 80903 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Westmoreland Resources, Inc. CENTRAL INDEX KEY: 0001521938 IRS NUMBER: 810364990 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-174723-05 FILM NUMBER: 11893148 BUSINESS ADDRESS: STREET 1: 2 N. CASCADE AVENUE STREET 2: 2ND FLOOR CITY: COLORADO SPRINGS STATE: CO ZIP: 80903 BUSINESS PHONE: 719-442-2600 MAIL ADDRESS: STREET 1: 2 N. CASCADE AVENUE STREET 2: 2ND FLOOR CITY: COLORADO SPRINGS STATE: CO ZIP: 80903 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Westmoreland Roanoke Valley, L.P. CENTRAL INDEX KEY: 0001521939 IRS NUMBER: 232609738 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-174723-06 FILM NUMBER: 11893149 BUSINESS ADDRESS: STREET 1: 2 N. CASCADE AVENUE STREET 2: 2ND FLOOR CITY: COLORADO SPRINGS STATE: CO ZIP: 80903 BUSINESS PHONE: 719-442-2600 MAIL ADDRESS: STREET 1: 2 N. CASCADE AVENUE STREET 2: 2ND FLOOR CITY: COLORADO SPRINGS STATE: CO ZIP: 80903 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WEI-Roanoke Valley, Inc. CENTRAL INDEX KEY: 0001521940 IRS NUMBER: 232544944 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-174723-07 FILM NUMBER: 11893150 BUSINESS ADDRESS: STREET 1: 2 N. CASCADE AVENUE STREET 2: 2ND FLOOR CITY: COLORADO SPRINGS STATE: CO ZIP: 80903 BUSINESS PHONE: 719-442-2600 MAIL ADDRESS: STREET 1: 2 N. CASCADE AVENUE STREET 2: 2ND FLOOR CITY: COLORADO SPRINGS STATE: CO ZIP: 80903 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Westmoreland Energy LLC CENTRAL INDEX KEY: 0001521941 IRS NUMBER: 330487790 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-174723-09 FILM NUMBER: 11893152 BUSINESS ADDRESS: STREET 1: 2 N. CASCADE AVENUE STREET 2: 2ND FLOOR CITY: COLORADO SPRINGS STATE: CO ZIP: 80903 BUSINESS PHONE: 719-442-2600 MAIL ADDRESS: STREET 1: 2 N. CASCADE AVENUE STREET 2: 2ND FLOOR CITY: COLORADO SPRINGS STATE: CO ZIP: 80903 S-4 1 d82642sv4.htm FORM S-4 sv4
As filed with the Securities and Exchange Commission on June 3, 2011
Registration No. 333-          
 
 
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
 
WESTMORELAND COAL COMPANY
(exact name of registrant as specified in its charter)
         
Delaware
(State or Other Jurisdiction of
Incorporation or Organization) 		  1221
(Primary Standard Industrial
Classification Code Number) 		  23-1128670
(I.R.S. Employer
Identification No.)
(FOR CO-REGISTRANTS, PLEASE SEE “TABLE OF CO-REGISTRANTS”
ON THE FOLLOWING PAGE)
     
2 North Cascade Avenue, 2nd Floor
Colorado Springs, Colorado 80903
Telephone: (719) 442-2600
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant’s
Principal Executive Offices) 		  Jennifer S. Grafton
General Counsel and Secretary
Westmoreland Coal Company
2 North Cascade Avenue, 2nd Floor
Colorado Springs, Colorado 80903
Telephone: (719) 442-2600
(Name, Address, Including Zip Code, and
Telephone Number,
Including Area Code, of Agent for Service)
 
With a copy to:

John Elofson
Davis Graham & Stubbs LLP
1550 Seventeenth Street, Suite 500
Denver, Colorado 80202
Telephone: 303-892-9400
 
     Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.
     If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. o
     If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. o
     If this Form is a post effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
             
Large accelerated filer o   Accelerated filer þ   Non-accelerated filer o (Do not check if a smaller reporting company)   Smaller reporting company o
CALCULATION OF REGISTRATION FEE
                             
 
            Proposed Maximum     Proposed Maximum        
  Title of Each Class of Securities     Amount to be     Offering Price     Aggregate     Amount of  
  to be Registered(1)     Registered     per Note     Offering Price(1)     Registration Fee  
 
10.75% Senior Secured Notes due 2018
     $150,000,000     100%     $150,000,000     $17,415  
 
Guarantees(2)(3)
     NA     NA     NA     NA  
 
 
(1)   Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(f) under the Securities Act of 1933.
 
(2)   The guarantors are each of the subsidiaries of Westmoreland Coal Company that have guaranteed the Notes being registered. Those subsidiaries are identified below in the “Table of Co-Registrants.”
 
(3)   No separate consideration will be received for the guarantees, and no separate fee is payable pursuant to Rule 457(n) under the Securities Act of 1933.
     The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
 
 

 

 

TABLE OF CO-REGISTRANTS
                         
                    State or Other  
    Primary Standard             Jurisdiction of  
    Industrial     I.R.S. Employer     Incorporation or  
Exact Name of Co-Registrant as Specified in its Charter   Classification No.     Identification No.     Organization  
Westmoreland Partners
     4991       33-0487790     Virginia
Westmoreland Energy LLC
     4991       61-1409081     Delaware
Westmoreland — North Carolina Power L.L.C.
     4991       20-5102494     Virginia
WEI-Roanoke Valley, Inc.
     4991       23-2544944     Delaware
Westmoreland Roanoke Valley, L.P.
     4991       23-2609738     Delaware
Westmoreland Resources, Inc.
     1221       81-0364990     Delaware
WRI Partners, Inc.
     1221       26-2703697     Delaware
Westmoreland Mining Services, Inc.
     1221       27-2103673     Delaware
Westmoreland Coal Sales Company, Inc.
     1221       23-1701997     Delaware
Westmoreland Power, Inc.
     1221       84-1579965     Delaware
WCC Land Holding Company, Inc.
     1221       27-3965489     Delaware
     Address, including Zip Code, and Telephone Number, including Area Code, of each Co-Registrant’s Principal Executive Offices: 2 North Cascade Avenue, 2nd Floor, Colorado Springs, CO 80903; Telephone: (719) 442-2600
     Name, Address, including Zip Code, and Telephone Number, including Area Code, of each Co-Registrant’s Agent for Service: Jennifer S. Grafton; General Counsel; 2 North Cascade Avenue, 2nd Floor, Colorado Springs, CO 80903; Telephone: (719) 442-2600

 

 

     The information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
Subject to Completion, dated June 3, 2011
PROSPECTUS
(WESTMORELAND COAL COMPANY LOGO)
WESTMORELAND COAL COMPANY
WESTMORELAND PARTNERS
Offer to Exchange
$150,000,000 10.75% Senior Secured Notes due 2018
for $150,000,000 10.75% Senior Secured Notes due 2018
that have been registered under the Securities Act of 1933
Terms of the Exchange Offer
  •   We are offering to exchange up to $150,000,000 of our outstanding unregistered 10.75% Senior Notes due 2018 (“Restricted Notes”) for Exchange Notes with substantially identical terms that have been registered under the Securities Act of 1933, as amended (“Exchange Notes”).
  •   The exchange offer expires at 5:00 p.m., New York City time, on           , 2011, unless we decide to extend the expiration date.
  •   We will exchange for an equal principal amount of Exchange Notes all Restricted Notes that you validly tender and do not validly withdraw before the exchange offer expires.
  •   Tenders of Restricted Notes may be withdrawn at any time prior to the expiration date of the exchange offer.
  •   The exchange of Exchange Notes for Restricted Notes should generally not be a taxable event for U.S. federal income tax purposes.
  •   The terms of the Exchange Notes are identical to the terms of the Restricted Notes, except that the Exchange Notes will be registered under the Securities Act of 1933, as amended (the “Securities Act”) and there are certain differences relating to transfer restrictions, registration rights and payment of additional interest in case of non-registration. We will not list the Exchange Notes on any securities exchange.
     You should carefully consider the risk factors beginning on page 7 of this prospectus before participating in the exchange offer.
     Each broker-dealer that receives Exchange Notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. The letter of transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Notes received in exchange for Restricted Notes where such Restricted Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities if such broker-dealer indicates in the letter of transmittal that it will do so. We have agreed to make this prospectus available until the earlier of 180 days from the completion date of this exchange offer or such time as such broker-dealers no longer hold any Restricted Notes, to any broker-dealer for use in connection with any such resale. See “Plan of Distribution.”
     Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
Prospectus dated      , 2011

 

 

TABLE OF CONTENTS
         
PROSPECTUS SUMMARY
     1  
RISK FACTORS
     7  
SELECTED HISTORICAL FINANCIAL DATA
     26  
RATIO OF EARNINGS TO FIXED CHARGES
     29  
USE OF PROCEEDS
     29  
THE EXCHANGE OFFER
     29  
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
     37  
BUSINESS, PROPERTIES AND LEGAL PROCEEDINGS
     38  
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
     47  
CHANGE IN AUDITORS
     67  
DESCRIPTION OF THE EXCHANGE NOTES
     67  
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
     131  
PLAN OF DISTRIBUTION
     131  
LEGAL MATTERS
     132  
EXPERTS
     132  
WHERE YOU CAN FIND MORE INFORMATION
     133  
INDEX TO FINANCIAL STATEMENTS
     134  
     You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with different information. The information contained in this prospectus is accurate only as of its date. We are not making this exchange offer to, nor will we accept surrenders for exchange from, holders of restricted Notes in any jurisdiction in which the exchange offer would violate securities or blue sky laws or where it is otherwise unlawful.
     In order to ensure timely delivery of the requested documents, requests should be made no later than five business days before the expiration date of this exchange offer. In the event that we extend the exchange offer, we urge you to submit your request at least five business days before the expiration date, as extended. You will not be charged for any of the documents that you request.
Industry and Market Data
     The industry and market data contained in this offering memorandum is based either on our management’s own estimates or on independent industry publications, reports by market research firms or other published independent sources that we believe to be reliable. However, certain industry and market data is subject to change and cannot always be verified with complete certainty due to limits on the availability and reliability of raw data, the voluntary nature of the data gathering process and other limitations and uncertainties inherent in any statistical survey. Accordingly, you should be aware that the industry and market data contained in this offering memorandum, and estimates and beliefs based on such data, may not be reliable. Unless otherwise indicated, all information contained in this offering memorandum concerning the industry in general is based on management’s estimates using internal data, data from industry related publications, consumer research and marketing studies and other externally obtained data. Industry ranking and market data involve risks and uncertainties and are subject to change based on various factors, including those discussed in “Risk Factors.”

i

 

Cautionary Note Regarding Forward-Looking Statements
     This prospectus contains “forward-looking statements,” as that term is defined in the Private Securities Litigation Reform Act of 1995. The use of any statements containing the words “anticipate,” “intend,” “believe,” “estimate,” “project,” “expect,” “plan,” “should” or similar expressions are intended to identify such statements. Forward-looking statements included in this prospectus relate to, among other things, the percentage of 2011 coal tons under currently-existing contracts that will remain under contract through 2019, the estimated life of permitted reserves at each of our mines, expected tons of coal to be delivered pursuant to specified contracts and company-wide, the matters discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2010 under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operation—Significant Anticipated Variances Between 2010 and 2011 and Related Uncertainties,” and statements concerning future cash flows from operations and liquidity. Although we believe that the expectations reflected in such forward-looking statements are reasonable, those expectations may prove to be incorrect. Disclosure of important factors that could cause actual results to differ materially from our expectations, or cautionary statements, are included under the heading “Risk Factors” in this prospectus, in our Annual Report on Form 10-K for the year ended December 31, 2010, a document we refer to as our 2010 10-K. Certain cautionary statements are also included elsewhere in this prospectus including, without limitation, in conjunction with the forward-looking statements. All forward-looking statements speak only as of the date of this prospectus. All forward-looking statements attributable to us, or persons acting on our behalf, including subsequent written and oral forward-looking statements, are expressly qualified in their entirety by the cautionary statements. Except as required by law, we undertake no obligation to update any forward-looking statement. Factors that could cause actual results to differ materially from our expectations include, among others, those factors referenced in the “Risk Factors” section of this prospectus, our 2010 10-K and such things as:
  •   changes in our postretirement medical benefit and pension obligations and the impact of the recently enacted healthcare legislation;
  •   changes in our black lung obligations, changes in our experience related to black lung claims, and the impact of the recently enacted healthcare legislation;
  •   our potential inability to expand or continue current coal operations due to limitations in obtaining bonding capacity for new mining permits;
  •   our potential inability to maintain compliance with debt covenant and waiver agreement requirements;
  •   the potential inability of our subsidiaries to pay dividends to us due to restrictions in our debt arrangements, reductions in planned coal deliveries or other business factors;
  •   risks associated with the structure of ROVA’s contracts with its lenders, coal suppliers and power purchaser, which could dramatically affect the overall profitability of ROVA;
  •   the effect of Environmental Protection Agency inquiries and regulations on the operations of ROVA;
  •   the effect of prolonged maintenance or unplanned outages at our operations or those of our major power generating customers, including the effects of the dispatch of other forms of power, such as hydro;
  •   future legislation and changes in regulations, governmental policies and taxes, including those aimed at reducing emissions of elements such as mercury, sulfur dioxides, nitrogen oxides, particulate matter or greenhouse gases; and
 
  •   other factors, many of which are beyond our control.

ii

 

PROSPECTUS SUMMARY
     The following summary contains basic information about us and this exchange offer. It is likely that this summary does not contain all of the information that is important to you. You should read the entire prospectus, including the risk factors and the financial statements and related notes included elsewhere herein, before making an investment decision. In addition, certain statements include forward-looking information that involves risks and uncertainties. In this prospectus, “Westmoreland,” the “company,” “we,” “our” and “us” refer to Westmoreland Coal Company and its subsidiaries collectively, unless otherwise indicated or the context otherwise requires.
Our Company
     We are an energy company employing approximately 1,100 employees with operations that include five surface coal mines in Montana, North Dakota and Texas and two coal-fired power generating units with a total gross capacity of 230 megawatts, or MW, in North Carolina. On a consolidated basis, we generated sales and Adjusted EBITDA of $506.1 million and $81.6 million, respectively, for the twelve months ended December 31, 2010, and $127.8 million and $23.3 million, respectively, for the three months ended March 31, 2011. For a reconciliation of Adjusted EBITDA to net income (loss), see “— Selected Historical Financial Data.”
     Our four segments include two principal operating segments, coal and power, and two non-operating segments, heritage and corporate:
Coal Segment: For the twelve months ended December 31, 2010, we sold 25.4 million tons of coal and, as of December 31, 2010, we owned or controlled approximately 389.9 million tons of proven or probable coal reserves. We generated revenue of $418.1 million and Adjusted EBITDA of $81.7 million related to the sale of coal for the twelve months ended December 31, 2010, and generated revenue of $104.1 million and Adjusted EBITDA of $21.3 million related to the sale of coal for the three months ended March 31, 2011. We conduct our coal operations primarily through Westmoreland Resources Inc., or WRI, and Westmoreland Mining LLC, or WML, and their respective subsidiaries. We sell substantially all of the coal that we produce to plants that generate electricity. Our mines and coal reserves are strategically located in close proximity to our customers, which reduces transportation costs and thus provides us with a significant competitive advantage with respect to those customers. Three of our five mines are mine mouth operations (where our mine is adjacent to the customer’s property) with conveyor belt delivery systems direct to the customer’s facilities. The remaining two mines utilize efficient rail and truck delivery, on a Free On Board, or FOB, basis. We typically enter into long-term contracts that provide for sales to customers for periods that range from three to 35 years. Our current coal sales contracts have a weighted average remaining term of six years. For the twelve months ended December 31, 2010, approximately 99% of our tons of coal sold were sold under long-term contracts.
Power Segment: For the twelve months ended December 31, 2010, we produced 1.6 million MW hours at our Roanoke Valley facilities and had an average capacity factor of 88%. We generated revenues of $88.0 million and Adjusted EBITDA of $22.7 million related to power sales for the twelve months ended December 31, 2010 and generated revenue of $23.6 million and Adjusted EBITDA of $7.4 million related to power sales for the three months ended March 31, 2011. We conduct our power operations through our subsidiary Westmoreland Energy LLC, or WELLC, and its subsidiaries, which we refer to collectively as ROVA. We purchase coal for ROVA under long-term contracts from coal suppliers located in Central Appalachia that expire in 2014 and 2015. We supply power to Dominion Virginia Power, or Dominion, under long-term contracts that expire in 2019 and 2020. We can extend, by mutual consent, the contracts with Dominion for an additional five-year period on terms to be mutually agreed upon. For the twelve months ended December 31, 2010, the sale of power to Dominion accounted for substantially all of the revenues in our power segment.
Heritage and Corporate Segments: Our heritage segment primarily includes the costs of benefits we provide to former mining operation employees. These costs consist primarily of payments for medical benefits to our retired workers, workers’ compensation benefits, black lung benefits and combined benefit fund premiums to plans for United Mine Workers of America, or UMWA, retirees required by statute. These obligations are funded by Westmoreland Coal Company through distributions it receives from our operating subsidiaries. We have been working over the past several years to reduce our heritage obligations and corresponding expenses. In 2009, we changed our health provider network for our retiree population, resulting in substantial savings and corresponding reduction in heritage liability, eliminated postretirement medical benefits for our non-represented retiree population and entered into an agreement with the UMWA to modernize the method by which prescription drugs are provided to retirees of our former operations. Our efforts to reduce our heritage obligations have resulted, as of the end of fiscal year 2009, in substantial reductions in our postretirement medical benefit obligation.

1

 

     Our corporate segment consists primarily of corporate expenses. In addition, the corporate segment contains our captive insurance company through which we have elected to retain some of our operating risks. Westmoreland Risk Management Ltd., a Bermuda corporation, or WRM, provides our primary layer of property and casualty insurance. By using this insurance subsidiary, we have reduced the cost of our property and casualty insurance premiums and retained some economic benefits due to our excellent loss record. We reduce our major exposure by insuring for losses in excess of our retained limits with a number of third-party insurance companies.
Our Executive Offices
     We are a corporation organized under the laws of the State of Delaware in 1910. Our principal executive offices are located at 2 North Cascade Avenue, 2nd Floor, Colorado Springs, Colorado 80903. The telephone number of our principal executive offices is (719) 442-2600. Our Internet address is http://www.westmoreland.com. Information on our website or available by hyperlink from our website does not constitute part of this prospectus.
Summary of the Terms of the Exchange Offer
     We are offering to exchange $150 million aggregate principal amount of our Exchange Notes for $150 million aggregate principal amount of our Restricted Notes. The following is a brief summary of the terms and conditions of the exchange offer. For a more complete description of the exchange offer, you should read the discussion under the heading “The Exchange Offer.”
     
Exchange Offer
  We are offering to exchange $1,000 principal amount of our 10.75% Senior Secured Notes due 2018 registered under the Securities Act, which we refer to as “Exchange Notes,” for each $1,000 principal amount of our outstanding 10.75% Senior Secured Notes due 2018 issued on February 4, 2011 in a private offering, which we refer to as “Restricted Notes.” In order to exchange a Restricted Note, you must follow the required procedures and we must accept the Restricted Note for exchange. We will exchange all Restricted Notes validly offered for exchange, or “tendered,” and not validly withdrawn. As of the date of this prospectus, there is $150,000,000 aggregate principal amount of Restricted Notes outstanding.
 
    
Expiration Date
  The exchange offer expires at 5:00 p.m. New York City time, on         2011, unless we decide to extend the expiration date.
 
    
Resale of the Exchange Notes
  Based on an interpretation by the staff of the Securities and Exchange Commission (the “SEC”) set forth in no-action letters issued to third parties, we believe that, as long as you are not a broker-dealer, the Exchange Notes issued pursuant to the exchange offer in exchange for Restricted Notes may be offered for resale, resold and otherwise transferred by you (unless you are our “affiliate” within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that:
 
    
 
 
•   you are acquiring the Exchange Notes in the ordinary course of your business;
 
    
 
 
•     at the time of the commencement and consummation of the exchange offer, you have not entered into any arrangement or understanding with any person to participate in the distribution (within the meaning of the Securities Act) of the Exchange Notes in violation of the provisions of the Securities Act; and
 
    
 
 
•   you are not acting on behalf of any person who could not truthfully make the foregoing representations.
 
    
 
  If you are a broker-dealer and receive Exchange Notes for your own account in exchange for Restricted Notes that you acquired as a result of market-making activities or other trading activities, you must acknowledge that you will deliver this prospectus in connection with any resale of the Exchange Notes. See “Plan of Distribution.” However, by so acknowledging and by delivering this prospectus, you will not be deemed to admit that you are an “underwriter” within the meaning of the Securities Act. During the period ending 180 days after the consummation of the exchange offer, subject to extension in limited circumstances, you may use this prospectus for an offer to sell, a resale or other retransfer of Exchange Notes received in exchange for Restricted Notes that you acquired through market-making activities or other trading activities if you indicate in the letter of transmittal that you will do so.

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  Any holder of Restricted Notes who:
 
    
 
 
•   is our affiliate;
 
    
 
 
•   does not acquire Exchange Notes in the ordinary course of its business; or
 
    
 
 
•   tenders its Restricted Notes in the exchange offer with the intention to participate, or for the purpose of participating, in a distribution of Exchange Notes;
 
    
 
  cannot rely on the position of the staff of the SEC enunciated in Morgan Stanley & Co. Incorporated (available June 5, 1991) and Exxon Capital Holdings Corporation (available May 13, 1988), as interpreted in the SEC’s letter to Shearman & Sterling (available July 2, 1993), or similar no-action letters and, in the absence of an exemption therefrom, must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale of the Exchange Notes.
 
    
Consequences If You Do Not Exchange Your Restricted Notes
  As a result of the making of, and upon acceptance for exchange of all validly tendered Restricted Notes pursuant to the terms of the exchange offer, we and the guarantors will have fulfilled a covenant under the registration rights agreement. Accordingly, there will be no increase in the interest rate on the Restricted Notes under the circumstances described in the registration rights agreement. If you do not tender your Restricted Notes in the exchange offer, you will continue to be entitled to all of the rights and limitations applicable to the Restricted Notes as set forth in the Indenture, except we and the guarantors will not have any further obligation to you to provide for the exchange and registration of the Restricted Notes under the registration rights agreement.
 
    
 
  All untendered Restricted Notes will continue to be subject to the restrictions on transfer set forth in the Restricted Notes and in the Indenture. In general, the Restricted Notes may not be offered or sold unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. Other than in connection with the exchange offer, we and the guarantors do not currently anticipate that we will register the outstanding Notes under the Securities Act. If you do not participate or properly tender your Restricted Notes in the exchange offer, upon completion of the exchange offer, the liquidity of the market for your Restricted Notes could be adversely affected.
 
    
Conditions
  The exchange offer is subject to certain customary conditions, which we may waive, as described below under “The Exchange Offer—Conditions to the Exchange Offer.”
 
    
Procedures for Tendering Restricted Notes
  If you wish to accept the exchange offer, the following must be delivered to the exchange agent:
 
    
 
 
•   your Restricted Notes by timely confirmation of book-entry transfer through The Depository Trust Company (the “DTC”);
 
    
 
 
•   an agent’s message from the DTC, stating that the tendering participant agrees to be bound by the letter of transmittal and the terms of the exchange offer; and
 
    
 
 
•   all other documents required by the letter of transmittal.
 
    
 
  These actions must be completed before the expiration of the exchange offer.
 
    
 
  You must comply with DTC’s standard procedures for electronic tenders, by which you will agree to be bound by the letter of transmittal.
 
    
Withdrawal of Tenders
  You may withdraw your tender of Restricted Notes under the exchange offer at any time prior to the expiration date.
 
    
Fees and Expenses
  We will bear all expenses related to the exchange offer. Please refer to the section in this prospectus entitled “The Exchange Offer—Fees and Expenses.”
 
    
Use of Proceeds
  The issuance of the Exchange Notes will not provide us with any new proceeds. We are making this exchange offer solely to satisfy our obligations under the registration rights agreement.
 
    
Tax Consequences
  The exchange of Exchange Notes for Restricted Notes in the exchange offer should generally not be a taxable event for U.S. federal income tax purposes. Please read “Material U.S. Federal Income Tax Consequences.”

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Exchange Agent
  Wells Fargo Bank, N.A. is serving as exchange agent in connection with the exchange offer. You should direct questions and requests for assistance, for additional copies of this prospectus or the letter of transmittal to the exchange agent addressed as follows: Attn: Wells Fargo Bank, National Association, Corporate Trust Operations, MAC N 9303-121, Sixth & Marquette Ave. Minneapolis Minnesota, 52479, telephone number 800-334-5128.
Summary of the Terms of the Exchange Notes
     This exchange offer applies to any and all outstanding Restricted Notes. The terms of the Exchange Notes will be essentially the same as the Restricted Notes, except that (1) the Exchange Notes will not be subject to the restrictions on transfer that apply to the Restricted Notes, (2) the Exchange Notes will not be subject to the registration rights relating to the Restricted Notes, and (3) the Exchange Notes will not contain provisions for payment of additional interest in case of non-registration. The Exchange Notes issued in this exchange offer will evidence the same debt as the Restricted Notes and both series of Notes will be entitled to the benefits of the same indenture and treated as a single class of debt securities. In this document, we sometimes refer to the Restricted Notes and the Exchange Notes together as the “Notes.”
     
Issuers
  Westmoreland Coal Company; Westmoreland Partners.
 
    
Securities
  $150,000,000 in aggregate principal amount of 10.750% Senior Secured Notes due 2018.
 
    
Maturity
  February 1, 2018.
 
    
Interest
  We will pay interest in cash on the principal amount of the Notes semiannually at the rate of 10.750% per year, on February 1st and August 1st of each year, beginning on August 1, 2011.
 
    
Guarantees
  The Exchange Notes will be fully and unconditionally guaranteed, jointly and severally, on a senior secured basis by WELLC and WRI, their respective subsidiaries (other than Absaloka Coal, LLC, or Absaloka Coal) and by certain of our other subsidiaries. Not all of our subsidiaries will be subsidiary guarantors. In particular, WML and its subsidiaries, Absaloka Coal and WRM will be restricted subsidiaries, but do not guarantee the Notes. Basin Resources, Inc. will be an unrestricted subsidiary, but the indenture governing the Notes contains a covenant limiting its activities. Westmoreland Terminal Co., Eastern Coal & Coke Co. and Criterion Coal Co. are unrestricted subsidiaries. These entities have no or nominal assets, conduct no operations and are in the process of dissolution.
 
    
Security
  The Exchange Notes and the guarantees will be secured by (i) first-priority liens on substantially all of our, the guarantors’ and Absaloka Coal’s tangible and intangible assets, (ii) a first-priority lien on certain amounts paid by WML to us, and (iii) a first-priority lien on the equity of WRM, in each case subject to permitted liens and certain exclusions. Subject to certain conditions, we will have the ability to enter into a new revolving credit facility, which we refer to as the Revolving Credit Facility, without the consent of holders of the Notes following this offering (see “— Revolving Credit Facility”). If we do so, the Revolving Credit Facility will be secured by a first-priority lien on our, the guarantors’ and Absaloka Coal’s inventory, accounts receivable and proceeds thereof, or the Revolving Facility First-Priority Collateral, and the Notes will then be secured by a second priority lien on that collateral. Some of our assets are excluded from the collateral as described in “Description of the Notes— Security.”
 
    
Ranking
  The Exchange Notes and the guarantees will be our and the guarantors’ senior secured obligations and:
 
    
 
 
•   will rank equally in right of payment with all of our and the guarantors’ respective existing and future senior indebtedness;
 
    
 
 
•   will rank effectively senior in right of payment to all of our, the guarantors’ and Absaloka Coal’s respective existing and future unsecured indebtedness;

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•   will be effectively subordinated to indebtedness under the Revolving Credit Facility, if we enter into such a facility, to the extent of the value of the Revolving Facility First-Priority Collateral; and
 
    
 
 
•   will be structurally subordinated to all of the existing and future liabilities (including trade payables but excluding intercompany liabilities) of each of our subsidiaries that does not guarantee the Notes.

As of March 31, 2011, we had (i) $125.0 million of outstanding indebtedness under WML’s existing credit agreements, including its term debt agreement, and (ii) $23.1 million of undrawn availability under WML’s revolving credit facility.
 
    
Optional Redemption
  On or after February 1, 2015, we may redeem the Exchange Notes, in whole or in part, at the redemption prices set forth under “Description of the Exchange Notes.”
 
    
 
  Prior to February 1, 2015, we may redeem up to 35% of the aggregate principal amount of Exchange Notes at the redemption price set forth under “Description of the Exchange Notes” with the net cash proceeds of certain equity offerings.
 
    
Change of Control Offer
  If we experience a change of control (as defined in the indenture), the holders of the Exchange Notes will have the right to require us to purchase their Exchange Notes at a price in cash equal to 101% of the principal amount thereof, together with accrued and unpaid interest and additional interest, if any, to the date of purchase. See “Description of the Exchange Notes.”
 
    
Asset Sale Offer or Event of Loss Offer
  We may be required to offer to use a portion of the net proceeds of certain asset sales and events of loss to purchase some of the Exchange Notes at 100% of the principal amount thereof, together with accrued and unpaid interest and additional interest, if any, to the date of purchase. See “Description of the Exchange Notes.”
 
    
Excess Cash Flow Offer
  We may be required to offer to use 75% of our Excess Cash Flow, as defined under “Description of the Exchange Notes,” for each fiscal year, beginning with the fiscal year ended December 31, 2011, to purchase some of the Exchange Notes at 100% of the principal amount thereof, together with accrued and unpaid interest, if any, to the date of purchase. See “Description of the Exchange Notes.”
 
    
Rights Offering
  After June 30, 2015, if the Total Leverage Ratio (as defined in “Description of the Exchange Notes”) equals or exceeds 3.5 to 1.0, we will be required, subject to certain conditions, to provide holders of the Exchange Notes with the right to purchase additional Notes, with the proceeds of such sales to be used to repurchase and/or redeem WML’s term debt.
 
    
Certain Covenants
  The indenture governing the Exchange Notes contains covenants that will restrict our ability and the ability of the co-issuer and our restricted subsidiaries to, among other things:
 
    
 
 
•   incur additional indebtedness and issue preferred stock;
 
    
 
 
•   pay dividends on or make distributions in respect of capital stock or make certain other restricted payments or investments;
 
    
 
 
•   enter into agreements that restrict distributions from restricted subsidiaries;
 
    
 
 
•   enter into transactions with affiliates;
 
    
 
 
•   create or incur liens;
 
    
 
 
•   sell or otherwise dispose of assets;
 
    
 
 
•   enter into sale and leaseback transactions;
 
    
 
 
•   sell or issue capital stock of the co-issuer or the restricted subsidiaries; or
 
    
 
 
•   merge or consolidate with or into other companies.
 
    
 
  These covenants are subject to important exceptions and qualifications that are described in “Description of the Exchange Notes.”

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Absence of a Public Market for the Exchange Notes
  The Exchange Notes generally will be freely transferable, but will also be new securities for which there will not initially be a market. There can be no assurance as to the development or liquidity of any market for the Exchange Notes. We do not intend to apply for listing of the Exchange Notes on any securities exchange or for the quotation of the Exchange Notes in any automated dealer quotation system.
 
    
Risk Factors
  You should refer to the section of this prospectus entitled “Risk Factors” for a discussion of the factors you should carefully consider before deciding to invest in the Notes, including factors affecting forward-looking statements.

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RISK FACTORS
     In addition to the other information set forth elsewhere in this prospectus the following factors relating to the exchange offer and the Notes should be considered carefully in deciding whether to participate in the exchange offer.
Risks Related to the Exchange Offer
If you fail to exchange the Restricted Notes, they will remain subject to transfer restrictions, and it may be harder for you to resell and transfer your Restricted Notes.
     The Restricted Notes were not registered under the Securities Act or under the securities laws of any state. Any Restricted Notes that remain outstanding after this exchange offer will continue to be subject to restrictions on their transfer. Thus, you may not resell the Restricted Notes, offer them for resale or otherwise transfer them unless they are subsequently registered or resold under an exemption from the registration requirements of the Securities Act and applicable state securities laws. If you do not exchange your Restricted Notes for Exchange Notes by this exchange offer, or if you do not properly tender your Restricted Notes in this exchange offer, you will not be able to resell, offer to resell or otherwise transfer your Restricted Notes unless they are registered under the Securities Act or unless you resell them, offer to resell or otherwise transfer them under an exemption from the registration requirements of, or in a transaction not subject to, the Securities Act. After this exchange offer, holders of Restricted Notes will not have any further rights to have their Restricted Notes exchanged for Exchange Notes registered under the Securities Act. The liquidity of the market for Restricted Notes that are not exchanged could be adversely affected by this exchange offer and you may be unable to sell your Restricted Notes.
Late deliveries of Restricted Notes and other required documents could prevent a holder from exchanging its Restricted Notes.
     Holders are responsible for complying with all exchange offer procedures. The issuance of Exchange Notes in exchange for Restricted Notes will only occur upon completion of the procedures described in this prospectus under “The Exchange Offer.” Therefore, holders of Restricted Notes who wish to exchange them for exchange Notes should allow sufficient time for completion of the exchange procedure. Neither we nor the exchange agent is obligated to extend the offer or notify you of any failure to follow the proper procedure or waive any defect if you fail to follow the proper procedure.
Certain persons who participate in the exchange offer must deliver a prospectus in connection with resales of the Exchange Notes.
     We have not requested, and do not intend to request, an interpretation by the staff of the SEC as to whether the Exchange Notes issued pursuant to our exchange offer in exchange for the outstanding Notes may be offered for resale, resold or otherwise transferred by any holder without compliance with the registration and prospectus delivery provisions of the Securities Act. Instead, based on interpretations of the staff of the SEC contained in Exxon Capital Holdings Corp., SEC no-action letter (May 13, 1988), Morgan Stanley & Co. Inc., SEC no-action letter (June 5, 1991) and Shearman & Sterling, SEC no-action letter (July 2, 1993), we believe that you may offer for resale, resell or otherwise transfer the Exchange Notes without compliance with the registration and prospectus delivery requirements of the Securities Act except that broker-dealers receiving the Exchange Notes in the exchange offer will be subject to a prospectus delivery requirement with respect to their resale. We cannot guarantee that the SEC would make a similar decision about our exchange offer. If our belief is wrong, or if you cannot truthfully make the representations mentioned in the section. “The Exchange Offer—Terms of the Exchange Offer” below, and you transfer any Exchange Note issued to you in the exchange offer without meeting the registration and prospectus delivery requirements of the Securities Act, or without an exemption from such requirements, you could incur liability under the Securities Act. Additionally, in some instances described in this prospectus under “Plan of Distribution,” certain holders of Exchange Notes will remain obligated to comply with the registration and prospectus delivery requirements of the Securities Act to transfer the Exchange Notes. If such a holder transfers any Exchange Notes without delivering a prospectus meeting the requirements of the Securities Act or without an applicable exemption from registration under the Securities Act, such a holder may incur liability under the Securities Act. We do not and will not assume, or indemnify such a holder against, this liability.

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There may not be a public market for the Exchange Notes, and you may find it difficult to sell your Notes.
     You may find it difficult to sell your Notes because an active trading market for the Notes may not develop. We do not intend to apply for listing on any securities exchange for the Exchange Notes. We do not know the extent to which investor interest will lead to the development of a trading market or how liquid that market might be.
     If a market for the Exchange Notes does develop, it is possible that you will not be able to sell your Notes at a particular time or that the prices that you receive when you sell will be unfavorable. It is also possible that any trading market that does develop for the Notes will not be liquid. Future trading prices of the Notes will depend on many factors, including:
  •   our operating performance, financial condition and prospects, or the operating performance, financial condition and prospects of companies in the coal and power industries generally;
 
  •   our ability to complete the offer to exchange the Restricted Notes for the Exchange Notes;
 
  •   the interest of securities dealers in making a market for the Notes;
 
  •   prevailing interest rates; and
 
  •   the market for similar securities.
     Historically, the market for non-investment grade debt has been subject to disruptions that have caused volatility in prices. If a market for the Exchange Notes develops, it is possible that the market for the Exchange Notes will be subject to disruptions and price volatility. Any disruptions may have a negative effect on holders of the Exchange Notes, regardless of our operating performance, financial condition and prospects.
Risks Related to the Notes and the Collateral
We have a substantial amount of indebtedness, which may adversely affect our cash flow, our ability to operate our business and our ability to satisfy our obligations under the restricted Notes and the exchange Notes.
     We have a significant amount of indebtedness. As of March 31, 2011, we had $294.4 million of indebtedness outstanding and had approximately $23.1 million available for borrowings under WML’s revolving credit facility. Our substantial amount of indebtedness could have important consequences for you. For example, it could:
  •   increase our vulnerability to adverse economic, industry or competitive developments;
 
  •   result in an event of default if we fail to satisfy our obligations with respect to the Notes or other debt or fail to comply with the financial and other restrictive covenants contained in the indenture governing the Notes or agreements governing our other indebtedness, which event of default could result in all of our debt becoming immediately due and payable and could permit our lenders to foreclose on our assets securing such debt;
 
  •   require a substantial portion of cash flow from operations to be dedicated to the payment of principal and interest on our indebtedness, therefore reducing our ability to use our cash flow to fund our operations, capital expenditures and future business opportunities;
 
  •   make it more difficult for us to satisfy our obligations with respect to the Notes;
 
  •   increase our cost of borrowing;
 
  •   restrict us from making strategic acquisitions or causing us to make non-strategic divestitures;
 
  •   limit our ability to service our indebtedness, including the Notes;
 
  •   limit our ability to obtain additional financing for working capital, capital expenditures, debt service requirements, acquisitions and general corporate or other purposes;
 
  •   limit our flexibility in planning for, or reacting to, changes in our business or the industry in which we operate, placing us at a competitive disadvantage compared to our competitors who are less highly leveraged and who therefore may be able to take advantage of opportunities that our leverage prevents us from exploiting; and

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  •   prevent us from raising the funds necessary to repurchase all Notes tendered to us upon the occurrence of certain changes of control, which failure to repurchase would constitute a default under the indenture governing the Notes.
The occurrence of any one of these events could have a material adverse effect on our business, financial condition, results of operations, prospects or ability to satisfy our obligations under the Notes.
We may not be able to generate sufficient cash to service the Notes or our other indebtedness, and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.
     Our ability to make scheduled payments on our indebtedness, including the Notes, and to fund our operations will depend on our ability to generate cash in the future. Our historical financial results have been, and our future financial results are expected to be, subject to substantial fluctuations, and will depend upon general economic conditions and financial, competitive, legislative, regulatory and other factors that are beyond our control. We may not be able to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal and interest on the Notes or our other indebtedness.
     If our cash flows and capital resources are insufficient to meet our indebtedness service obligations or to fund our other liquidity needs, we may need to refinance all or a portion of our debt, including the Notes, before maturity, seek additional equity capital, reduce or delay scheduled expansions and capital expenditures or sell material assets or operations. We cannot assure you that we would be able to refinance or restructure our indebtedness, obtain equity capital or sell assets or operations on commercially reasonable terms or at all. In addition, the terms of existing or future debt instruments, including the indenture governing the Notes, may limit or prevent us from taking any of these actions. Our inability to take these actions and to generate sufficient cash flow to satisfy our debt service and other obligations could have a material adverse effect on our business, results of operation and financial condition, as well as on our ability to satisfy our obligations in respect of the Notes.
The Notes will be structurally subordinated to indebtedness and other liabilities of our non-guarantor subsidiaries.
     Our operating subsidiaries owned by WML have not guaranteed the Notes. Those non-guarantor subsidiaries had $414.0 million in total assets as of March 31, 2011, representing approximately 53% of our consolidated total assets, $344.6 million in net sales for the year ended December 31, 2010, representing 68% of our consolidated net sales. As of March 31, 2011, those non-guarantor subsidiaries had $446.1 million of indebtedness and other liabilities. Claims of creditors of our non-guarantor subsidiaries, including trade creditors, effectively rank senior and have priority with respect to the assets and earnings of such subsidiaries over our claims or those of our creditors, including holders of the Notes. In the event of a bankruptcy, liquidation or reorganization of any of our non-guarantor subsidiaries, holders of their indebtedness will generally be entitled to payment of their claims from the assets of those subsidiaries before any assets are made available for distribution to us. In addition, the indenture under which the exchange Notes will be issued permits WML to incur additional debt under its existing revolver.
You generally will be required to accrue taxable income attributable to original issue discount on the Notes before you receive cash attributable to such original issue discount. You may be required to continue to accrue such taxable income even if we become unable to satisfy our payment obligations under the Notes. Additionally, in the event we enter into bankruptcy, you may not have a claim for all or a portion of any unamortized amount of the original issue discount on the Notes.
     The restricted Notes were issued with original issue discount for U.S. federal income tax purposes. Accordingly, if you are an individual or entity subject to U.S. tax, you will be required to accrue interest in the form of original issue discount on a current basis in respect of the Notes, including such accrued interest in income and pay tax accordingly, even before you receive cash attributable to that income and regardless of your method of accounting. Additionally, a bankruptcy court may not allow a claim for all or a portion of any unamortized amount of the original issue discount on the Notes.

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We are a holding company, and therefore our ability to repay our indebtedness, including the Notes, is dependent on the cash flow generated by our subsidiaries and their ability to make distributions to us.
     We are a holding company with no significant operations or material assets other than the capital stock of our subsidiaries. As a result, our ability to repay our indebtedness, including the Notes, is dependent on the generation of cash flow by our subsidiaries and their ability to make such cash available to us, by dividend, debt repayment or otherwise.
The indenture governing the Notes contains various covenants limiting the discretion of our management in operating our business and could prevent us from capitalizing on business opportunities and taking some corporate actions.
     The indenture governing the Notes imposes significant operating and financial restrictions on us. These restrictions limit or restrict, among other things, our ability and the ability of our subsidiaries to:
  •   incur additional indebtedness;
 
  •   issue certain preferred stock or redeemable stock;
 
  •   pay dividends on, repurchase or make distributions in respect of our capital stock or make other restricted payments;
 
  •   make certain investments;
 
  •   sell, transfer or otherwise convey certain assets;
 
  •   create or incur liens;
 
  •   designate our subsidiaries as unrestricted subsidiaries;
 
  •   consolidate, merge, sell or otherwise dispose of all or substantially all of our assets;
 
  •   enter into a new or different line of business; and
 
  •   enter into certain transactions with our affiliates.
     A breach of any of the foregoing covenants under our indenture could result in a default. In addition, any debt agreements we enter into in the future may further limit our ability to enter into certain types of transactions.
     The covenants described above are subject to important exceptions and qualifications and, with respect to the Notes, are described under the heading “Description of the Exchange Notes” in this prospectus. Our ability to comply with these covenants may be affected by events beyond our control, including those described in this “Risk Factors” section. As a result, we cannot assure you that we will be able to comply with these covenants.
Notwithstanding our current indebtedness levels and restrictive covenants, we may still be able to incur substantial additional debt or make certain restricted payments, which could exacerbate the risks described above.
     We may be able to incur additional debt in the future. Although the indenture governing the Notes contains restrictions on our ability to incur indebtedness, those restrictions are subject to a number of exceptions. In particular, we may be able to borrow up to $20.0 million from time to time under the Revolving Credit Facility permitted by the Indenture, and expect that WML may be able to borrow up to $25.0 million under its revolving credit facility. Also, we expect to be able to issue additional Notes under the indenture in some circumstances. In addition, if we are able to designate some of our restricted subsidiaries under the indenture as unrestricted subsidiaries, those unrestricted subsidiaries would be permitted to borrow beyond the limitations specified in the indenture governing the Notes and engage in other activities in which restricted subsidiaries may not engage. We may also consider investments in joint ventures or acquisitions that may increase our indebtedness. Also, although the indenture contains restrictions on our ability to make restricted payments, we will be able to make restricted payments in certain circumstances. Adding new debt to current debt levels or making otherwise restricted payments could intensify the related risks that we and our subsidiaries now face.

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Certain of our assets may be subject to senior priority security interests on collateral that secure the Notes on a junior basis. Therefore, your ability to receive payments on the Notes would be subject to the prior satisfaction of all such obligations, to the extent of the value of such collateral.
     Subject to certain conditions, we have the ability to enter into a new revolving credit facility, which we refer to as the Revolving Credit Facility, without the consent of holders of the Notes. If we do so, the Revolving Credit Facility will be secured by a first-priority lien on our, the guarantors’ and Absaloka Coal’s inventory, accounts receivable and proceeds thereof, and the Notes will then be secured by a second priority lien on that collateral. See “Description of the Exchange Notes—Security for the Notes.” Should we enter into the Revolving Credit Facility, any rights to payment and claims by the holders of the Notes will, therefore, be subject to the rights to payment or claims by our lenders under the Revolving Credit Facility with respect to distributions of such collateral. Only when our obligations under the Revolving Credit Facility are satisfied in full will the proceeds of certain assets be available to repay the Notes. As a result, the Notes are effectively subordinated in right of payment to indebtedness under the Revolving Credit Facility, to the extent of the realizable value of such collateral. Furthermore, the collateral securing the Notes and the guarantees will be subject to liens permitted under the terms of the indenture governing the Notes, whether arising before or after the date the Notes are issued. The existence of any permitted liens could adversely affect the value of the collateral securing the Notes and the guarantees, as well as the ability of the collateral trustee to realize or foreclose on such collateral.
There may not be sufficient collateral to pay all or any of the Notes.
     The exchange Notes and the guarantees will be secured by (i) first-priority liens on substantially all of our, the guarantors’ and Absaloka Coal’s tangible and intangible assets, (ii) a first-priority lien on certain amounts paid by WML to us, and (iii) a first-priority lien on the equity of WRM, in each case subject to permitted liens and certain exclusions. Subject to certain conditions, we will have the ability to enter into a new revolving credit facility without the consent of holders of the Notes. If we do so, the Revolving Credit Facility will be secured by a first-priority lien on our, the guarantors’ and Absaloka Coal’s inventory, accounts receivable and proceeds thereof, or the Revolving Facility First-Priority Collateral, and the Notes will then be secured by a second priority lien on that collateral.
     In the event of a foreclosure on the Revolving Facility First-Priority Collateral (or a distribution in respect thereof in a bankruptcy or insolvency proceeding), the proceeds from such Revolving Facility First-Priority Collateral on which the Notes have a second priority lien may not be sufficient to satisfy the Notes because such proceeds would, under an intercreditor agreement, first be applied to satisfy our obligations under the Revolving Credit Facility. Only after all of our obligations under the Revolving Credit Facility have been satisfied will proceeds from the Revolving Facility First-Priority Collateral on which the Notes have a second priority lien be applied to satisfy our obligations under the Notes. To prevent foreclosure, we may be motivated to commence voluntary bankruptcy proceedings, or the holders of the Notes and/or various other interested persons may be motivated to institute bankruptcy proceedings against us. The commencement of such bankruptcy proceedings would expose the holders of the Notes to additional risks, including additional restrictions on exercising rights against collateral. Furthermore, the collateral securing the Notes are subject to liens permitted under the terms of the credit agreement governing the Revolving Credit Facility and the indenture governing the Notes. The existence of any permitted liens (whether senior to or on parity with the liens securing the Notes) could adversely affect the value of the collateral securing the Notes, as well as the ability of the collateral trustee to realize or foreclose on such collateral. In addition, not all of our and the guarantors’ assets secure the Notes. See “Description of the Exchange Notes—Security for the Notes.” To the extent that the claims of the holders of the Notes exceed the value of the assets securing those Notes and other liabilities, those claims will rank equally with the claims of the holders of our outstanding unsecured indebtedness and other obligations ranking pari passu with the Notes. As a result, if the value of the assets pledged as security for the Notes and other liabilities is less than the value of the claims of the holders of the Notes and other liabilities, those claims may not be satisfied in full.
     The collateral may be subject to exceptions, defects, encumbrances, liens and other imperfections. Further, we have not conducted appraisals of all of our or the guarantors’ assets constituting collateral securing the Notes to determine if the value of such collateral upon foreclosure or liquidation equals or exceeds the amount of the Notes or such other obligations secured by such collateral. Accordingly, we cannot assure you that the remaining proceeds from the sale of the collateral would be sufficient to repay holders of Notes all amounts owed under the Notes. The fair market value of the collateral is subject to fluctuations based on factors that include, among others, the condition of our industry, the ability to sell the collateral in an orderly

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sale, general economic conditions, the availability of buyers, our failure to implement our business strategy and similar factors. The amount received upon a sale of the collateral would be dependent on numerous factors, including but not limited to the actual fair market value of the collateral at such time and the timing and the manner of the sale. By its nature, portions of the collateral may be illiquid and may have no readily ascertainable market value. In the event of a foreclosure, liquidation, bankruptcy or similar proceeding, we cannot assure you that the proceeds from any sale or liquidation of the collateral securing our obligations under the Revolving Credit Facility on a first priority basis will be sufficient to pay our obligations under the Notes, in full or at all, after first satisfying our obligations in full under the Revolving Credit Facility. In such an event, we cannot assure you that the collateral securing our obligations with respect to the Notes on a first priority basis, either alone or with any remaining collateral securing our obligations under the Revolving Credit Facility after satisfying the obligations thereunder, will be sufficient to pay our obligations under the Notes in full. There also can be no assurance that the collateral will be saleable, and, even if saleable, the timing of its liquidation would be uncertain. Accordingly, there may not be sufficient collateral to pay all or any of the amounts due on the Notes.
Noteholders cannot rely on assets of WML and its subsidiaries to satisfy obligations under the Notes.
     If we repay or refinance the WML term debt (the debt represented by the WML Notes) prior to its scheduled maturity in March 2018 and at a time when the Notes are outstanding, we will be required under the terms of the indenture governing the Notes to cause WML and its subsidiaries to become guarantors of the Notes and to pledge their assets to secure the Notes on a first-priority basis. This requirement will not apply to the WML revolving credit agreement, which WML is permitted to refinance by any means otherwise permitted under the indenture governing the Notes; indebtedness under the WML revolving credit agreement will continue to be secured on a first-priority basis by all of the assets of WML and its subsidiaries. Since the WML term debt matures after the Notes, holders of the Notes will not have access to the WML assets as collateral for the Notes unless the WML term debt is refinanced or repaid prior to its maturity and at a time when the Notes are outstanding. Neither we nor WML has any obligation to prepay the WML term debt prior to its maturity, and we currently have no intention of doing so. Further, such a prepayment would require a make-whole payment to the holders of the WML term debt. Accordingly, holders of the Notes should not rely on the availability of WML assets to satisfy obligations under the Notes.
We may be unable to repay or repurchase the Notes at maturity.
     At maturity, the entire principal amount of the Notes, together with accrued and unpaid interest, will become due and payable. We may not have the ability to repay or refinance these obligations. If the maturity date occurs at a time when other arrangements prohibit us from repaying the Notes, we would try to obtain waivers of such prohibitions from the lenders and holders under those arrangements, or we could attempt to refinance the borrowings that contain the restrictions. If we could not obtain the waivers or refinance these borrowings, we would be unable to repay the Notes.
Some of our indebtedness is subject to floating interest rates, which would result in our interest expense increasing if interest rates rise.
     Indebtedness under WML’s revolving credit facility bears interest at floating interest rates, as may indebtedness under the Revolving Credit Facility if we enter into such a facility. Accordingly, we may experience a negative impact on earnings as a result of interest rate fluctuations. The actual impact of those fluctuations would depend on the amount of floating rate debt outstanding, which will vary from time to time. Changes in economic conditions could result in higher interest rates, thereby increasing our interest expense and reducing funds available for operations or other purposes.
If we are unable to enter into the Revolving Credit Facility at a time when we require additional financing, our business, financial position, results of operations and liquidity could be negatively impacted.
     The indenture governing the Notes permits us, subject to certain conditions, to enter into the Revolving Credit Facility without the consent of holders of the Notes. The maximum borrowing availability under such facility as permitted by the indenture governing the Notes is $20.0 million. There can be no assurance that we will be able to obtain such a facility on terms acceptable to us or at all. Our ability to enter into the Revolving Credit Facility on acceptable terms would be dependent upon a number of factors, including our future operating performance, general economic and competitive conditions, our ability to provide adequate collateral to secure the facility and financial, business, and other factors, many of which we

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cannot control or predict. Also, in order to enter into the Revolving Credit Facility, either (i) the lender(s) under the facility would be required to enter into an intercreditor agreement in the form described in “Description of the Notes — Security — Intercreditor Agreement to be Entered into in Connection with a Future Revolving Credit Facility” in all material respects or (ii) we would be required to obtain the approval of at least a majority of the holders of the Notes for changes to the form as described, and it is possible that we will not be able to satisfy either condition at the time we seek to enter into such a facility. If we are unable to enter into the Revolving Credit Facility at a time when we require additional financing, our operations, financial condition and liquidity could be materially adversely impacted, and we would be forced to attempt to secure other types of financing. In addition, our borrowing availability under the Revolving Credit Facility may be substantially less than the maximum amount permitted under the indenture governing the Notes and could decline if the value of our borrowing base (which we expect would be calculated based on a percentage of our inventory and accounts receivable) declines. The borrowing base could decline if the value of our inventory or accounts receivable declines due to economic or market conditions, working capital practices or otherwise. If our borrowing availability is less than our outstanding borrowings under the Revolving Credit Facility, we could be required to repay borrowings and/or cash collateralize letters of credit sufficient to eliminate the deficit. A reduction in the borrowing base under the Revolving Credit Facility would adversely affect our liquidity. Also, our liquidity would also be adversely affected if the lender under the Revolving Credit Facility became unwilling or unable to fund amounts under that facility. A similar issue would arise for WML and us if lenders under WML’s revolving credit facility became unwilling or unable to fund amounts under that facility.
U.S. federal and state fraudulent transfer laws may permit a court to void, subordinate or limit the Notes, the guarantees and/or the grant of collateral and, if that occurs, you may not receive any payments on the Notes.
     U.S. federal and state fraudulent transfer and conveyance statutes may apply to the issuance of the Notes and the incurrence of the guarantees of the Notes. Under U.S. federal bankruptcy law and comparable provisions of state fraudulent transfer or conveyance laws, which may vary from state to state, the Notes or the guarantees thereof (or the grant of collateral securing any such obligations) could be voided, subordinated or limited as a fraudulent transfer or conveyance if we or any of the guarantors, as applicable, (i) issued the Notes or incurred the guarantees with the intent of hindering, delaying or defrauding creditors, or (ii) received less than reasonably equivalent value or fair consideration in return for either issuing the Notes or incurring the guarantees and, in the case of (ii) only, one of the following is also true at the time thereof:
  •   we or any of the guarantors, as applicable, were insolvent or rendered insolvent by reason of the issuance of the Notes or the incurrence of the guarantees;
 
  •   the issuance of the Notes or the incurrence of the guarantees left us or any of the guarantors, as applicable, with an unreasonably small amount of capital or assets to carry on its business;
 
  •   we or any of the guarantors intended to, or believed that we or such guarantor would, incur debts beyond our or such guarantor’s ability to pay as they mature; or
 
  •   we or any of the guarantors were a defendant in an action for money damages, or had a judgment for money damages docketed against us or such guarantor if, in either case, after final judgment, the judgment is unsatisfied.
     As a general matter, value is given for a transfer or an obligation if, in exchange for the transfer or obligation, property is transferred or a valid antecedent debt is secured or satisfied. A court would likely find that a subsidiary guarantor did not receive reasonably equivalent value or fair consideration for its guarantee to the extent such guarantor did not obtain a reasonably equivalent tangible benefit directly or indirectly from the issuance of the Notes.
     We cannot be certain as to the standards a court would use to determine whether or not we or the guarantors were insolvent at the relevant time or, regardless of the standard that a court uses, whether the Notes or the guarantees would be subordinated to our or any of our guarantors’ other debt. In general, however, a court would deem an entity insolvent if:
  •   the sum of its debts, including contingent and unliquidated liabilities, was greater than the fair saleable value of all of its assets;

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  •   the present fair saleable value of its assets was less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature; or
 
  •   it could not pay its debts as they became due.
     If a court were to find that the issuance of the Notes, the incurrence of a guarantee or the grant of security was a fraudulent transfer or conveyance, the court could void the payment obligations under the Notes or such guarantee or void the grant of collateral or subordinate or limit the Notes or such guarantee to presently existing and future indebtedness of ours or of the related guarantor, or require the holders of the Notes to repay any amounts received with respect to such guarantee. In the event of a finding that a fraudulent transfer or conveyance occurred, you may not receive any repayment on the Notes or guarantees. Further, the avoidance of the Notes could result in an event of default with respect to our and our subsidiaries’ other debt that could result in acceleration of such debt.
     Each guarantee will contain a provision intended to limit the guarantor’s liability to the maximum amount that it could incur without causing the incurrence of obligations under its guarantee to be a fraudulent transfer. This provision may not be effective to protect the guarantees from being avoided under applicable fraudulent transfer laws or may reduce the guarantor’s obligation to an amount that effectively makes the guarantee worthless.
     Finally, as a court of equity, a bankruptcy court may subordinate the claims in respect of the Notes to other claims against us under the principle of equitable subordination, if the court determines that: (i) the holder of Notes engaged in some type of inequitable conduct, (ii) such inequitable conduct resulted in injury to our other creditors or conferred an unfair advantage upon the holder of Notes and (iii) equitable subordination is not inconsistent with the provisions of the bankruptcy code.
We may not be able to repurchase the Notes upon a change of control.
     Upon the occurrence of specific kinds of change of control events, we are required to offer to repurchase all of the outstanding Notes at 101% of their principal amount, plus accrued and unpaid interest to the purchase date. The Revolving Credit Facility, and other future debt agreements may contain restrictions on our ability to comply with this requirement. In addition, we may have insufficient financial resources to allow us to repurchase the Notes at the required time. Any failure to comply with the repurchase requirement would constitute a default under the indenture governing the Notes, which, in turn, could result in amounts outstanding under other debt agreements being declared due and payable. In the event a change of control occurs at a time when we are prohibited from, or otherwise unable to, offer to purchase the Notes, we could seek consent to offer to purchase the Notes or attempt to refinance the borrowings that contain the relevant prohibition, but such efforts may be unsuccessful. In order to avoid the obligation to repurchase the Notes, we may have to avoid certain change of control transactions that would otherwise be beneficial to us.
     The definition of “Change of Control” under the indenture governing the Notes includes certain events defined as “Prepayment Events” in the WML credit agreements. Those agreements require WML to offer to prepay indebtedness under the agreements in specified circumstances, including events relating to a change of control of us, WML or WML’s subsidiaries. The offer price for the indebtedness would be the principal amount of such indebtedness plus, in the case of the WML term debt, a make-whole amount determined in accordance with the terms of the agreement governing that debt. To the extent accepted, such an offer would reduce the amount of assets available to us to satisfy our obligations with respect to a change of control offer or our other obligations under the indenture governing the Notes.
     In addition, certain important corporate events, such as acquisitions, reorganizations and leveraged recapitalizations, may not, under the indenture governing the Notes, constitute a “change of control” that would require us to repurchase the Notes, notwithstanding the fact that such corporate events could increase the level of our indebtedness or otherwise adversely affect our ability to satisfy our obligations under the Notes.

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     In addition, in a recent decision, the Chancery Court of Delaware raised the possibility that a change of control put right occurring as a result of a failure to have “continuing directors” comprising a majority of a board of directors might be unenforceable on public policy grounds.
Holders of the Notes may not be able to determine when a change of control giving rise to their right to have the Notes repurchased has occurred following a sale of “substantially all” of our assets.
     The definition of change of control in the indenture governing the Notes includes a phrase relating to the sale of “all or substantially all” of our assets. There is no precise, established definition of the phrase “substantially all” under applicable law. Accordingly, the ability of a holder of Notes to require us to repurchase its Notes as a result of a sale of less than all our assets to another person may be uncertain.
In the event of a bankruptcy of us or any of the guarantors, holders of the Notes may be deemed to have an unsecured claim to the extent that our obligations in respect of the Notes exceed the fair market value of the collateral securing the Notes.
     In any bankruptcy proceeding with respect to us or any of the guarantors, it is possible that the bankruptcy trustee, the debtor-in-possession, competing creditors or other parties in interest will assert that the fair market value of the collateral with respect to the Notes is less than the then-current principal amount of the Notes. Upon a finding by the bankruptcy court that the Notes are under-collateralized, the claims in the bankruptcy proceeding with respect to the Notes would be bifurcated between a secured claim in an amount equal to the collateral and an unsecured claim in an amount equal to the excess of the principal amount of the Notes over the value of the collateral, and the unsecured claim would not be entitled to the benefits of security in the collateral. Other consequences of a finding of under-collateralization would be, among other things, a lack of entitlement on the part of holders of the Notes to receive post-petition interest and a lack of entitlement on the part of the unsecured portion of the Notes to receive certain or any “adequate protection” under U.S. federal bankruptcy laws. In addition, if any payments of post-petition interest had been made at the time of such a finding of under-collateralization, those payments could be recharacterized by the bankruptcy court as a reduction of the principal amount of the secured claim with respect to the Notes.
The collateral securing the Notes may be diluted under certain circumstances.
     Some of the collateral that will secure the Notes will also secure our obligations under the Revolving Credit Facility if we enter into such a facility. This and other collateral may also secure additional senior indebtedness, including additional Notes, that we incur in the future, subject to restrictions on our ability to incur debt and liens under the indenture governing the Notes and other debt obligations. Your rights to the collateral would be diluted by any increase in the indebtedness secured by this collateral.
If we enter into the Revolving Credit Facility, the rights of holders of the Notes to the Revolving Facility First-Priority Collateral, in which such holders will have a second-priority lien, will be materially limited by an intercreditor agreement.
     If we enter into the Revolving Credit Facility, the rights of the holders of the Notes with respect to the Revolving Facility First-Priority Collateral will be reduced from a first-priority lien to a second-priority lien on such collateral and will be limited pursuant to the terms of an intercreditor agreement between the collateral agent on behalf of the holders of the Notes and a representative of the holders of a majority of the principal amount outstanding under the Revolving Credit Facility. Under an intercreditor agreement with the terms contemplated in “Description of the Notes — Security — Intercreditor Agreement to be Entered into in Connection with a Future Revolving Credit Facility,” any actions that could be taken in respect of the Revolving Facility First-Priority Collateral (including the ability to commence enforcement proceedings against the Revolving Facility First-Priority Collateral and to control the conduct of such proceedings, and to approve amendments to, releases of that collateral from the lien of, and waivers of past defaults under, the collateral documents) would be at the direction of the holders of a majority of the principal amount outstanding under the Revolving Credit Facility. Under those circumstances, the collateral agent on behalf of the holders of the Notes, with limited exceptions, would not have the ability to control or direct such actions, even if an event of default under the indenture governing the Notes has occurred or if the rights of the holders of the Notes were adversely affected.
     Under an intercreditor agreement with the terms contemplated in “Description of the Notes — Security — Intercreditor Agreement to be Entered into in Connection with a Future Revolving Credit

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Facility”, any release by the lender(s) under the Revolving Credit Facility of the Revolving Facility First-Priority Collateral (other than a termination of the Revolving Credit Facility) on a first-priority basis would also release the second-priority lien securing the Notes on the same collateral (subject to the interest of the holders of the Notes in the proceeds of that collateral), and holders of the Notes would have no control over such release. In addition, because the holders of the indebtedness secured by first-priority liens control the disposition of such collateral, such holders could decide not to proceed against such collateral, regardless of whether there is a default under the documents governing such indebtedness or under the indenture governing the Notes. In such event, the only remedy available to the holders of the Notes would be recourse to collateral for the Notes which is secured on a first-priority basis and to sue for payment on the Notes and the related guarantees. In addition, the proposed intercreditor agreement would give the holders of first-priority liens on the Revolving Facility First-Priority Collateral the right to access and use such collateral to allow those holders to protect such collateral and to process, store and dispose of such collateral.
The waiver in the proposed intercreditor agreement of rights of marshaling may adversely affect the recovery rates of holders of the Notes in a bankruptcy or foreclosure scenario.
     If we enter into the Revolving Credit Facility, the Notes and the guarantees will be secured on a second-priority lien basis by the Revolving Facility First-Priority Collateral. An intercreditor agreement with the terms contemplated in “‘Description of the Notes — Security — Intercreditor Agreement to be Entered into in Connection with a Future Revolving Credit Facility” would provide that, at any time holders of the Notes hold a second-priority lien on the Revolving Facility First-Priority Collateral where a first-priority lien on such collateral exists, the trustee under the indenture governing the Notes and the Notes collateral agent may not assert or enforce any right of marshaling accorded to a junior lienholder as against the holders of such indebtedness secured by first-priority liens in the Revolving Facility First-Priority Collateral. Without this waiver of the right of marshaling, holders of such indebtedness secured by first-priority liens in the Revolving Facility First-Priority Collateral would likely be required to liquidate collateral on which the Notes did not have a lien, if any, prior to liquidating the Revolving Facility First-Priority Collateral, thereby maximizing the proceeds of the Revolving Facility First-Priority Collateral that would be available to repay our obligations under the Notes. As a result of this waiver, the proceeds of sales of the Revolving Facility First-Priority Collateral could be applied to repay any indebtedness secured by first-priority liens in the Revolving Facility First-Priority Collateral before applying proceeds of other collateral securing such indebtedness, and the holders of Notes may recover less than they would have if such proceeds were applied in the order most favorable to the holders of the Notes.
Certain assets will be excluded from the collateral. In order to grant a security interest in certain collateral, the consents of third parties (including the Crow Tribe) may be required and we may be unable to obtain those consents.
     Certain assets will be excluded from the collateral securing the Notes as described under “Description of the Notes — Collateral” including, among other things, any assets held by non-U.S. subsidiaries, as well as other typical exclusions, such as a contract or license if the grant of a lien would violate a contract, license or agreement. Furthermore, in certain instances, in order to grant a security interest in certain collateral to the collateral agent for the benefit of the holders of the Notes, we may be required to obtain the consent of third parties. While we have agreed to attempt to obtain such consents, we may not be able to do so. Failure to obtain such a consent may result in the failure to create a security interest in the relevant collateral by the collateral agent on your behalf, or the inability to enforce such security interest.
     We currently lease, and in the future we may lease certain new facilities or coal estates, or portions thereof, from third party lessors (including the Crow Tribe). The invalidity of, or default or termination under, any such leases may interfere with our ability to use and operate all or a portion of certain of our facilities or mines, which may have an adverse impact on our operations and results.
Your rights in the collateral may be adversely affected by the failure to perfect security interests in certain collateral acquired in the future.
     Applicable law requires that certain property and rights acquired after the grant of a general security interest, such as rights in real property, can only be perfected at the time such property and rights are acquired and identified. There can be no assurance that the trustee or the collateral agent will monitor, or that we will inform the trustee or the collateral agent of, the future acquisition of property and rights that constitute collateral, and that the necessary action will be taken to properly perfect the security interest in such after-

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acquired collateral. The collateral agent for the Notes has no obligation to monitor the acquisition of additional property or rights that constitute collateral or the perfection of any security interest in favor of the Notes against third parties. Failure to perfect any such security interest could result in the loss of such security interest or the priority of the security interest in favor of the Notes against third parties. In addition, under certain circumstances, we may not be required to grant or perfect security interests in assets acquired after the issue date that are excluded from the collateral securing the Notes as described under “Description of the Notes — Collateral.”
Rights of holders of the Notes in the collateral may be adversely affected by the failure to create or perfect security interests in certain collateral on a timely basis, and a failure to create or perfect such security interests on a timely basis or at all may result in a default under the indenture and other agreements governing the Notes. Furthermore, certain liens may be avoidable by a trustee in bankruptcy.
     We have agreed to secure the Notes and the guarantees by granting first-priority liens, subject to permitted liens and certain excluded property, on our, Absaloka Coal’s and the subsidiary guarantors’ principal assets, and to take other steps to assist in perfecting the security interests granted in the collateral. See “Description of the Notes — Collateral.” A failure, for any reason, that is not permitted or contemplated under the security agreement and related documents, to perfect the security interest in the properties included in the collateral package may result in a default under the indenture and other agreements governing the Notes. Additionally, if we, Absaloka Coal or any subsidiary guarantor were to become subject to a bankruptcy proceeding, any liens recorded or perfected after the issue date would face a greater risk of being invalidated than if they had been recorded or perfected on the issue date. Liens recorded or perfected after the issue date may be treated under bankruptcy law as if they were delivered to secure previously existing indebtedness. In bankruptcy proceedings commenced within 90 days of lien perfection, a lien given to secure previously existing debt is materially more likely to be avoided as a preference by a bankruptcy court than if delivered and promptly recorded on the issue date. Accordingly, if we or a subsidiary guarantor were to file for bankruptcy protection, or if an involuntary bankruptcy proceeding were brought against us or a subsidiary guarantor, after the issue date of the outstanding Notes and the liens had been perfected less than 90 days before commencement of such bankruptcy proceeding, or not yet perfected at all, the liens securing the Notes may be especially subject to challenge as a result of having not been perfected before the issue date. To the extent that such challenge succeeded, you would lose the benefit of the security that the collateral was intended to provide and the Notes and the guarantees will effectively rank equally with the unsecured unsubordinated indebtedness of us and the guarantors.
There are circumstances other than repayment or discharge of the Notes under which the collateral securing the Notes and guarantees will be released automatically, without your consent or the consent of the trustee.
     Under various circumstances, collateral securing the Notes will be released automatically, including:
  •   a sale, transfer or other disposal or liquidation of such collateral in a transaction not prohibited under the indenture governing the Notes;
 
  •   with respect to collateral held by a guarantor, upon the release of such guarantor from its guarantee (and its guarantee of any other indebtedness secured equally and ratably with the Notes) in accordance with the indenture governing the Notes, and
 
  •   with respect to collateral that will secure the Revolving Credit Facility on a first-priority basis (if we enter into such a facility), upon any release, sale or disposition (other than in connection with a cancellation or termination of the Revolving Credit Facility) of such collateral pursuant to the terms of the Revolving Credit Facility resulting in the release of the lien on such collateral securing the Revolving Credit Facility.
     In addition, the guarantee of a subsidiary guarantor will be automatically released in connection with a sale of such subsidiary guarantor in a transaction permitted under the indenture governing the Notes. The indenture also permits us to designate one or more of our restricted subsidiaries that is a guarantor of the Notes as an unrestricted subsidiary. If we designate a subsidiary guarantor as an unrestricted subsidiary for purposes of the indenture, all of the liens on any collateral owned by such subsidiary or any of its subsidiaries and any guarantees of the Notes by such subsidiary or any of its subsidiaries will be automatically released under the indenture governing the Notes. Designation of an unrestricted subsidiary will reduce the aggregate value of the collateral securing the Notes to the extent that liens on the assets of the unrestricted subsidiary and its

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subsidiaries are released. In addition, the creditors of the unrestricted subsidiary and its subsidiaries will have a senior claim on the assets of such unrestricted subsidiary and its subsidiaries. See “Description of the Notes.”
We will in most cases have control over the collateral, and the sale of particular assets by us could reduce the pool of assets securing the Notes and the guarantees.
     The indenture governing the Notes and/or the security documents will allow us to remain in possession of, retain exclusive control over, and to freely operate the collateral securing the Notes and the guarantees. Furthermore, so long as no default or event of default under the indenture or other loan agreement to which we may become a party would result therefrom and such transaction would not violate the Trust Indenture Act, we may, among other things, without any release or consent by the collateral agents, conduct ordinary course activities with respect to collateral, such as selling, abandoning or otherwise disposing of collateral and making ordinary course cash payments (including for the scheduled repayment of indebtedness). With respect to such releases, we must deliver to the collateral agents from time to time an officer’s certificate to the effect that all releases and withdrawals occurring during the preceding six-month period (or since the issue date, in the case of the first such certificate) were not prohibited by the indenture governing the Notes.
The collateral is subject to condemnation risks, which may limit the ability of the holders of the Notes to recover as secured creditors for losses to the collateral consisting of real property, and which may have an adverse impact on our operations and results.
     It is possible that all or a portion of the real property securing the Notes and the guarantees may become subject to a condemnation proceeding. In such event, we may be compensated for any total or partial loss of property but it is possible that such compensation will be insufficient to fully compensate us for our losses. In addition, a total or partial condemnation may interfere with our ability to use and operate all or a portion of the affected mine or other operation, which may have an adverse impact on our operations and results.
The collateral is subject to casualty risks and potential environmental liabilities.
     We intend to maintain insurance or otherwise insure against hazards in a manner appropriate and customary for our business. There are, however, certain losses that may be either uninsurable or not economically insurable, in whole or in part. For example, some types of environmental losses are generally not insurable. In addition, insurance proceeds may not compensate us fully for our losses. If there is a complete or partial loss of any of the pledged collateral, the insurance proceeds may not be sufficient to satisfy all of the secured obligations, including the Notes and the guarantees.
     Moreover, the collateral agent may need to evaluate the impact of potential liabilities before determining to foreclose on collateral consisting of real property because secured creditors that hold a security interest in real property may be held liable under environmental laws for the costs of remediating or preventing the release or threatened release of hazardous substances at such real property. Consequently, the collateral agent may decline to foreclose on such collateral or exercise remedies available in respect thereof if it does not receive indemnification to its satisfaction from the holders of the Notes.
Rights of holders of the Notes in the collateral may be adversely affected by bankruptcy proceedings.
     The ability of holders of the Notes to repossess, dispose of and realize upon the collateral securing the Notes will be subject to certain bankruptcy law limitations in the event of our bankruptcy. Under applicable U.S. federal bankruptcy laws, upon the commencement of a bankruptcy case, an automatic stay goes into effect which, among other things, stays:
  •   the commencement or continuation of any action or proceeding against the debtor that was or could have been commenced before the commencement of the bankruptcy case to recover a claim against the debtor that arose before the commencement of the bankruptcy case;
 
  •   any act to obtain possession of, or control over, property of the bankruptcy estate or the debtor;
 
  •   any act to create, perfect or enforce any lien against property of the bankruptcy estate; and

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  •   any act to collect or recover a claim against the debtor that arose before the commencement of the bankruptcy case.
     Thus, upon the commencement of a bankruptcy case, secured creditors are prohibited from, among other things, repossessing their collateral from a debtor, or from disposing of such collateral repossessed from such a debtor, without bankruptcy court approval. Moreover, applicable U.S. federal bankruptcy laws generally permit the debtor to continue to use, sell or lease collateral (and the proceeds, products, rents or profits thereof) in the ordinary course of its business even though the debtor is in default under the applicable debt instruments. Upon request from a secured creditor, the bankruptcy court will prohibit or condition such use, sale or lease of collateral as is necessary to provide adequate protection of the secured creditor’s interest in the collateral. Furthermore, as part of a bankruptcy plan, under certain circumstances, a bankruptcy court may, over the objection of secured creditors, alter the post-bankruptcy timing of payments on account of creditors’ secured claims, and the rate of interest thereon, upon a finding that holders would realize the “indubitable equivalent” of their secured claims and that such treatment would be fair and equitable and would not discriminate unfairly against secured creditors.
     The meaning of the term “adequate protection” may vary according to the circumstances, but is intended generally to protect the value of the secured creditor’s interest in the collateral at the commencement of the bankruptcy case and may include cash payments or the granting of additional security, if and at such times as the court in its discretion determines any diminution in the value of the collateral occurs as a result of the debtor’s use, sale or lease of the collateral during the pendency of the bankruptcy case. In view of the lack of a precise definition of the term “adequate protection” and the broad discretionary powers of a U.S. bankruptcy court, we cannot predict whether payments under the Notes would be made following commencement of and during a bankruptcy case, whether or when the trustee or collateral agent under the indenture governing the Notes could foreclose upon or sell the collateral or whether or to what extent holders of Notes would be compensated for any delay in payment or loss of value as a result of the use, sale or lease of their collateral through the requirement of adequate protection. Furthermore, in the event the bankruptcy court determines that the value of the collateral is not sufficient to repay all amounts due on the Notes, the holders of the Notes would have unsecured “deficiency claims” as to the difference. Upon a showing of “cause,” a creditor may seek relief from the stay from the bankruptcy court to take any of the acts described above that would otherwise be prohibited by the automatic stay. The U.S. bankruptcy court has broad discretionary powers in determining whether to grant a creditor relief from the stay.
The value of the collateral securing the Notes may not be sufficient to secure post-petition interest.
     In the event of a bankruptcy, liquidation, dissolution, reorganization or similar proceeding against us, holders of the Notes will only be entitled to post-petition interest under the bankruptcy code to the extent that the value of their security interest in the collateral is greater than their pre-bankruptcy claim. Holders of the Notes that have a security interest in the collateral with a value equal to or less than their pre-bankruptcy claim will not be entitled to post-petition interest under the bankruptcy code. We cannot assure you that the value of the holders’ interest in the collateral equals or exceeds the principal amount of the Notes.
Risks Related to our Business
Risks associated with being highly leveraged.
     We have outstanding indebtedness of approximately $294.4 million as of March 31, 2011. We may incur additional indebtedness in the future, including indebtedness under our existing revolving credit facility at WML and/or enter into a parent-level revolver collateralized by the accounts receivable and inventory of ROVA and the Absaloka Mine. As a result of our significant indebtedness, we are highly leveraged. Westmoreland’s leverage position may, among other things:
  •   limit our ability to obtain additional debt financing in the future for working capital, capital expenditures, acquisitions, or other general corporate purposes;
 
  •   require us to dedicate a substantial portion of our cash flow from operations to debt service, reducing the availability of cash flow for other purposes; or
 
  •   increase our vulnerability to economic downturns, limit our ability to capitalize on significant business opportunities, and restrict our flexibility to react to changes in market or industry conditions.

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     In addition, there can be no assurance that rating agencies will not downgrade the credit rating on the Notes, which could impede our ability to refinance existing debt or secure new debt or otherwise increase our future cost of borrowing and could create additional concerns on the part of our customers, partners, investors and employees about our financial condition and results of operations.
We may not generate sufficient cash flow at our operating subsidiaries to pay our operating expenses, meet our debt service costs and pay our heritage and corporate costs.
     As a result of significant increases in our operating profits, a decrease in our heritage health benefit costs and the receipt of proceeds from the Notes, we anticipate that our cash from operations, cash on hand and available borrowing capacity through the WML revolver and a potential parent-level revolver will be sufficient to meet our cash requirements for the foreseeable future. However, our expectations in this regard are subject to numerous uncertainties, including uncertainties relating to our operating performance and general market conditions. In addition, our capital needs may be greater than we currently expect if we were to pursue one or more significant acquisitions.
     WML, which owns the Rosebud, Jewett, Beulah and Savage Mines, is subject to a credit facility that limits the ability of the subsidiary to dividend funds to us. Accordingly, WML may not be able to pay dividends to us in the amounts and in the time required for us to pay our heritage health benefit costs and corporate overhead expenses. Ultimately, if WML’s operating cash flows are insufficient to support their operations and provide dividends to us in the amounts and time required to pay our expenses, we would be required to expend cash on hand or further leverage our operations through a parent-level revolver to fund our heritage liabilities and corporate overheard and, if necessary, support activities at our Absaloka Mine. Should we be required to expend cash on hand to fund such activities, such funds would be unavailable to grow the business through strategic acquisitions or ventures or support the business through reclamation bonding, capital and reserve acquisition.
Our dependence on a small group of customers could adversely affect our revenues if such customers reduce or suspend their coal purchases or if they become unable to pay for our coal.
     In 2010, approximately 65% of our total revenues were derived from coal sales to four power plants: Colstrip Units 3&4 (24% of our 2010 revenues), Limestone Generating Station (16%) and Colstrip Units 1&2 (13%) and Sherburne County Station (12%). Interruption in the purchases of coal from our operations by our principal customers could significantly affect our revenues. Unscheduled maintenance outages at our customers’ power plants, unseasonably moderate weather, higher-than-anticipated hydro season or increases in the production of alternative clean-energy generation such as wind power could cause our customers to reduce their purchases. In addition, new environmental regulations could compel our customer of the Jewett Mine to purchase more compliance coal, reducing or eliminating our sales to them. Four of our five mines are dedicated to supplying customers located adjacent to or near the mines, and these mines may have difficulty identifying alternative purchasers of their coal if their existing customers suspend or terminate their purchases. The reduction in the sale of our coal would adversely affect our operating results. In addition, if any of our major customers became unable to pay for contracted amounts of coal, our results of operation and liquidity would be adversely affected.
     Similarly, interruption in the purchase of power by Dominion could also negatively affect our revenues. In 2010, the sale of power by ROVA to Dominion accounted for approximately 17% of our consolidated revenues. Although ROVA supplies power to Dominion under long-term power purchase agreements, if demand for electricity from Dominion’s customers was materially reduced or if Dominion was to become insolvent or otherwise unable or unwilling to pay for the power produced by ROVA in a timely manner, it could have a material adverse effect on our results of operations, financial condition, and liquidity.
If our assumptions regarding our future expenses related to employee benefit plans are incorrect, then expenditures for these benefits could be materially higher than we have assumed. In addition, we may have exposure under those plans that extend beyond what our obligations would be with respect to our own employees.
     We provide various postretirement medical benefits, black lung and worker’s compensation benefits to current and former employees and their dependents. We calculate the total accumulated benefit obligations according to guidance provided by GAAP. We estimate the present value of our postretirement medical, black lung and worker’s compensation benefit obligations to be $210.9 million, $14.1 million and $10.4 million,

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respectively, at December 31, 2010. We have estimated these unfunded obligations based on actuarial assumptions described in the Notes to our consolidated financial statements. If our assumptions do not materialize as expected, cash expenditures and costs that we incur could be materially higher.
     Moreover, regulatory changes could increase our obligations to provide these or additional benefits. Certain of our subsidiaries participate in defined benefit multi-employer funds that were established in connection with the Coal Industry Retiree Health Benefit Act of 1992, or Coal Act, which provides for the funding of health and death benefits for certain UMWA retirees. Our contributions to these funds totaled $3.1 million for the year ended December 31, 2009 and $3.0 million for the year ended December 31, 2010. Our contributions to these funds could increase as a result of a shrinking contribution base due to the insolvency of other coal companies that currently contribute to these funds, lower than expected returns on fund assets or other funding deficiencies.
     We could also have obligations under the Tax Relief and Health Care Act of 2006, or 2006 Act. The 2006 Act authorized up to a maximum of $490 million in federal contributions to pay for certain benefits, including the healthcare costs under certain funds created by the Coal Act for “orphans,” i.e. retirees from companies that subsequently ceased operations, and their dependents. However, if Congress were to amend or repeal the 2006 Act or if the $490 million authorization were insufficient to pay for these healthcare costs, we, along with other contributing employers and certain affiliates, would be responsible for the excess costs.
     We also contribute to a multi-employer defined benefit pension plan, the Central Pension Fund of the Operating Engineers, or Central Pension Fund, on behalf of employee groups at our Rosebud, Absaloka and Savage mines that are represented by the International Union of Operating Engineers. The Central Pension Fund is subject to certain funding rules contained in the Pension Protection Act of 2006, or PPA. Under the PPA, if the Central Pension Plan fails to meet certain minimum funding requirements, it would be required to adopt a funding improvement plan or rehabilitation plan. If the Central Pension Fund adopted a funding improvement plan or rehabilitation plan, we could be required to contribute additional amounts to the fund. As of January 31, 2011, its last completed fiscal year, the Central Pension Fund reported that it was underfunded. If we were to partially or completely withdraw from the fund at a time when the Central Pension Fund were underfunded, we would be liable for a proportionate share the fund’s unfunded vested benefits, and this liability could have a material adverse effect on our financial position.
Recent healthcare legislation contains amendments to the Black Lung Benefits Act that could adversely affect our financial condition and results of operations.
     In March 2010, the Patient Protection and Affordable Care Act, or PPACA, was enacted. PPACA contains an amendment to the Black Lung Benefits Act, or BLBA, that has the effect of reinstating provisions that were removed from the BLBA in 1981. The amendment provides that eligible miners can be awarded total disability benefits if they can prove they worked 15 or more years in or around coal mines and have a totally disabling respiratory impairment. In addition, the amendment also provides for an automatic survivor benefit to be paid upon the death of a miner with an awarded federal black lung claim without the requirement to prove that the miner’s death was due to black lung disease. Both amendments are retroactive and applicable to claims filed as of January 1, 2005 and have and may continue to result in currently pending claimants being awarded benefits back to a start date that may be as far back as January 2, 2005. Through the first nine months of the amendment’s effectiveness, we have experienced an increase in black lung claims over similar periods. However, at a minimum, it takes several months to several years for a claim to be awarded or denied and any liability to be determined. In addition, through the first nine months, we have accepted several survivors’ claims. Given the relatively small number of survivors’ claims and the lack of final adjudication of black lung claims, we have very limited experience from which to determine the overall effect, if any, this increase in claims will have on our costs and liability. In addition, we have incomplete information to determine whether this increase in claims constitutes a one-time spike in claims, or represents a future trend in black lung claims and eventual awards. We believe these amendments could give rise to increases in liabilities for claims from prior periods of time for retroactive costs, an increase in the number of claimants who are awarded benefits resulting in an increase in future funding requirements and an increase in administrative fees, including legal expenses, as a result of reviewing and defending an increased number of benefit claims. In addition, while we periodically perform evaluations of our black lung liability, using assumptions regarding rates of successful claims, discount factors, benefit increases and mortality rates, among others, the limited claims experience from the first nine months of amendment effectiveness is insufficient to determine the potential change in black lung liability due to the application of these new amendments. If the number or severity of claims increases, or we are required to accrue or pay additional amounts because the claims prove to be more severe

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than our current assumptions, our results of operations and liquidity could be immediately impacted.
Inaccuracies in our estimates of our coal reserves could result in decreased profitability from lower than expected revenues or higher than expected costs.
     Our future performance depends on, among other things, the accuracy of our estimates of our proven and probable coal reserves. Our reserve estimates are prepared by our engineers and geologists or by third-party engineering firms and are updated periodically. There are numerous factors and assumptions inherent in estimating the quantities and qualities of, and costs to mine, coal reserves, including many factors beyond our control, including the following:
  •   quality of the coal;
 
  •   geological and mining conditions, which may not be fully identified by available exploration data and/or may differ from our experiences in areas where we currently mine;
 
  •   the percentage of coal ultimately recoverable;
 
  •   the assumed effects of regulation, including the issuance of required permits, taxes, including severance and excise taxes and royalties, and other payments to governmental agencies;
 
  •   assumptions concerning the timing for the development of the reserves; and
 
  •   assumptions concerning equipment and productivity, future coal prices, operating costs, including for critical supplies such as fuel, tires and explosives, capital expenditures and development and reclamation costs.
     As a result, estimates of the quantities and qualities of economically recoverable coal attributable to any particular group of properties, classifications of reserves based on risk of recovery, estimated cost of production, and estimates of future net cash flows expected from these properties may vary materially due to changes in the above factors and assumptions. Any inaccuracy in our estimates related to our reserves could result in decreased profitability from lower than expected revenues and/or higher than expected costs.
If the assumptions underlying our reclamation and mine closure obligations are materially inaccurate, we could be required to expend greater amounts than anticipated.
     The Surface Mining Control and Reclamation Act of 1977, or SMCRA, establishes operational, reclamation and closure standards for all aspects of surface mining as well as most aspects of deep mining. We calculated the total estimated reclamation and mine-closing liabilities according to the guidance provided by Generally Accepted Accounting Principles, or GAAP, and current industry practice. Estimates of our total reclamation and mine-closing liabilities are based upon permit requirements and our engineering expertise related to these requirements. If our estimates are incorrect, we could be required in future periods to spend materially different amounts on reclamation and mine-closing activities than we currently estimate. Likewise, if our customers, some of whom are contractually obligated to pay certain reclamation costs, default on the unfunded portion of their contractual obligations to pay for reclamation, we could be forced to make these expenditures ourselves and the cost of reclamation could exceed any amount we might recover in litigation.
     We estimate that our gross reclamation and mine-closing liabilities, which are based upon projected mine lives, current mine plans, permit requirements and our experience, were $241.6 million (on a present value basis) at December 31, 2010. Of these December 31, 2010 liabilities, our customers have assumed $95.5 million by contract. In addition, we held final reclamation deposits, received from customers, of approximately $72.3 million at December 31, 2010 to provide for these obligations. We estimate that our obligation for final reclamation that was not the contractual responsibility of others or covered by offsetting reclamation deposits was $73.9 million at December 31, 2010. This $73.9 million must be recovered in the price of coal sold. Responsibility for the final reclamation amounts may change in certain circumstances.
     Although our estimated costs are updated annually, our recorded obligations may prove to be inadequate due to changes in legislation, standards and the emergence of new restoration techniques. Furthermore, the expected timing of expenditure could change significantly due to changes in commodity prices that might curtail the life of an operation. These recorded obligations could prove insufficient compared to the actual cost of reclamation. Any underestimated or unidentified close down, restoration and environmental rehabilitation costs could have an adverse effect on our reputation as well as our asset values,

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results of operations and liquidity.
If the cost of obtaining new reclamation bonds and renewing existing reclamation bonds continues to increase or if we are unable to obtain additional bonding capacity, our operating results could be negatively affected.
     Federal and state laws require that we provide bonds to secure our obligations to reclaim lands used for mining. We must post a bond before we obtain a permit to mine any new area. These bonds are typically renewable on a yearly basis and have become increasingly expensive. Bonding companies are requiring that applicants collateralize increasing portions of their obligations to the bonding company. In 2010, we paid approximately $2.6 million in premiums for reclamation bonds and were required to use $1.7 million in cash to collateralize 47% of the face amount of the new bonds obtained in 2010. We anticipate that, as we permit additional areas for our mines in 2011 and 2012, our bonding and collateral requirements will increase significantly. Any capital that we provide to collateralize our obligations to our bonding companies is not available to support our other business activities. If the cost of our reclamation bonding premiums and collateral requirements were to increase, our results of operations could be negatively affected. Additionally, if we are unable to obtain additional bonding capacity due to cash flow constraints, we will be unable to begin mining operations in newly permitted areas, which could hamper our ability to efficiently meet our current customer contract deliveries, expand operations, and increase revenues.
Our coal mining operations are subject to external conditions that could disrupt operations and negatively affect our profitability.
     Our coal mining operations are all surface mines. These mines are subject to conditions or events beyond our control that could disrupt operations, affect production, and increase the cost of mining at particular mines for varying lengths of time. These conditions or events include: unplanned equipment failures, which could interrupt production and require us to expend significant sums to repair our equipment, which is integral to the mining of coal; geological conditions such as variations in the quality of the coal produced from a particular seam, variations in the thickness of coal seams and variations in the amounts of rock and other natural materials that overlie the coal that we are mining; and weather conditions. For example, in our recent past, we have endured: a major blizzard at the Beulah Mine, which interrupted operations; a fire on the trestle at the Beulah Mine that interrupted rail shipment of our coal; and an unanticipated replacement of boom suspension cables on one of our draglines that caused a multi-week interruption of mining. Major disruptions in operations at any of our mines over a lengthy period could adversely affect the profitability of our mines.
     In addition, unplanned outages of draglines and extensions of scheduled outages due to mechanical failures or other problems occur from time to time and are an inherent risk of our coal mining business. Unplanned outages typically increase our operation and maintenance expenses and may reduce our revenues as a result of selling fewer tons of coal. If properly maintained, a dragline can operate for 40 years or longer. The average age of our draglines is 28 years. The dragline at our Absaloka Mine was erected in 1980. As our draglines and other major equipment ages, we may experience unscheduled maintenance outages or increased maintenance costs, which would adversely affect our operating results.
Our operations are vulnerable to natural disasters, operating difficulties and infrastructure constraints, not all of which are covered by insurance, which could have an impact on its productivity.
     Mining and power operations are vulnerable to natural events, including blizzards, earthquakes, drought, floods, fire, storms and the possible effects of climate change. Operating difficulties such as unexpected geological variations could affect the costs and viability of our operations. Our operations also require reliable roads, rail networks, power sources and power transmission facilities, water supplies and IT systems to access and conduct operations. The availability and cost of infrastructure affects our capital expenditures, operating costs, and planned levels of production and sales. Our insurance does not cover every potential risk associated with our operations. Adequate coverage at reasonable rates is not always obtainable. In addition, our insurance may not fully cover our liability or the consequences of any business interruptions such as equipment failure or labor dispute. The occurrence of a significant event not fully covered by insurance could have an adverse effect on our business, results of operations, financial condition and prospects.

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Health, safety, environment and other regulations, standards and expectations evolve over time and unforeseen changes could have an adverse effect on our results of operations and liquidity.
     We operate in an industry that is subject to numerous health, safety and environmental laws, regulations and standards as well as community and stakeholder expectations. We are subject to extensive governmental regulations in all jurisdictions in which we operate. Operations are subject to general and specific regulations governing mining and processing, land tenure and use, environmental requirements (including site-specific environmental licenses, permits and statutory authorizations), workplace health and safety and taxation. Evolving regulatory standards and expectations can result in increased litigation and/or increased costs, all of which can have an adverse effect on our results of operations and liquidity.
Should our Indian Coal Tax Credit transaction be audited by the Internal Revenue Service, or IRS, and the tax results contemplated thereby disallowed, the financial benefits of the transaction would be reduced and we may be required to return payments received from a third party investor.
     In 2008, WRI entered into a series of transactions with an unaffiliated investor, including the formation of Absaloka Coal, in order to take advantage of certain available tax credits for the production of coal on Indian lands and the sale of that coal. We requested and have received a private letter ruling, or PLR, from the IRS providing that certain requirements for the availability of the tax credits have been met under the specific scenario described in the PLR. Even though we have received the PLR, there are certain issues that may be raised by the IRS in a subsequent audit of tax returns of Absaloka Coal. In the event that a subsequent audit results in the disqualification of the tax credits or the disallowance of the allocations of the tax credits, various remedies would minimize the financial benefits of the transaction and we could be required to return to the investor previously received payments. We pay to the Crow Tribe 33% of the expected payments we receive from the investor. The Crow Tribe is only required to reimburse us under very limited circumstances. As a result, in the event that the IRS disallows or disqualifies the tax credits, we would likely be unable to recoup payments already paid to the Crow Tribe.
     Furthermore, the transactions described above will expire in 2012 unless renewed. Renewal would require, among other things, an amendment to the relevant section of the Internal Revenue Code. While we expect to seek to renew the transactions if the relevant section of the Internal Revenue Code is amended, there can be no assurance that we will be successful in doing so or that the relevant section of the Internal Revenue Code will be amended.
Our future success depends upon our ability to continue acquiring and developing coal reserves that are economically recoverable and to raise the capital necessary to fund our expansion.
     Our recoverable reserves will decline as we produce coal. We have not yet applied for the permits required or developed the mines necessary to use all of the coal deposits under our mineral rights, and those permits may not be granted in a timely manner or at all. Furthermore, we may not be able to mine all of our coal deposits as efficiently as we do at our current operations. Our future success depends upon conducting successful exploration and development activities and acquiring properties containing economically recoverable coal deposits. Our current strategy includes increasing our coal reserves through acquisitions of other mineral rights, leases, or producing properties and continuing to use our existing properties. Our ability to further expand our operations may be dependent on our ability to obtain sufficient working capital, either through cash flows generated from operations, or financing activities, or both. As mines become depleted, replacement reserves may not be available when required or, if available, may not be capable of being mined at costs comparable to those characteristic of the depleting mines. These factors could have a material adverse affect on our mining operations and costs, and our customers’ ability to use the coal we mine.
Union represented labor creates an increased risk of work stoppages and higher labor costs.
     At December 31, 2010, either the International Union of Operating Engineers Local 400 or the UMWA represented approximately 52% of our total workforce. Our unionized workforce is spread out amongst four of our surface mines. As a majority of our workforce is unionized, there may be an increased risk of strikes and other labor disputes, and our ability to alter labor costs is subject to collective bargaining. In March 2009, during negotiation over a collective bargaining agreement, our employees at the Rosebud Mine imposed a sixteen-day work stoppage. In April 2009, we entered into a new four-year agreement with the union and the Rosebud Mine resumed full operation. The impact on our operations was minimal as we

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continued to make most of our scheduled coal deliveries. If our Jewett Mine operations were to become unionized, we could be subject to additional risk of work stoppages, other labor disputes and higher labor costs, which could adversely affect the stability of production and our results of operations. The collective bargaining agreement relating to the represented workforce at the Absaloka Mine expires in mid-2011. When the collective bargaining agreement expired in 2008, the represented workforce at Absaloka imposed a 10-day work stoppage before accepting a new agreement. It is possible that a work stoppage could occur in connection with these negotiations with the represented workforce. While strikes are generally a force majeure event in long-term coal supply agreements, thereby exempting the mine from its delivery obligations, the loss of revenue for even a short time could have a material adverse effect on our financial results.
     Legislation has been proposed to enact a law allowing workers to choose union representation solely by signing election cards, which would eliminate the use of secret ballots to elect union representation. While the impact is uncertain, if this proposal is enacted into law, it will be administratively easier for unions to unionize coal mines and may lead to more coal mines becoming unionized.
Our revenues could be affected by unscheduled outages or if scheduled maintenance outages last longer than anticipated.
     Unplanned outages of and extensions of scheduled outages due to mechanical failures or other problems at our mines, our power plants, or the power plants of our customers occur from time-to-time and are an inherent risk of our business. Unplanned outages typically increase our operation and maintenance expenses and may reduce our revenues as a result of selling less tons of coal or fewer megawatt hours. While we maintain insurance, the proceeds of such insurance may not be adequate to cover our lost revenues, increased expenses or liquidated damages payments should we experience equipment breakdown. Any unexpected failure, including failure associated with breakdowns, forced outages or any unanticipated capital expenditures could have an adverse affect on our results of operations and liquidity.
The profitability of ROVA could be severely affected beginning in 2014 due to differences in the termination dates of our coal supply agreements and power purchase agreements.
     We entered into a coal supply agreement for our larger plant on June 21, 1993, and a coal supply agreement for our smaller plant on December 1, 1993, which provide for ROVA’s coal needs for a twenty-year period, terminating on May 29, 2014 and June 1, 2015, respectively. We also entered into power sales agreements with Dominion Virginia Power that provide for the sale of power for a twenty-five year term through May 29, 2019, for our larger ROVA plant and June 1, 2020, for the smaller ROVA plant. The coal supply agreements provide for coal at a price per ton that is significantly less than today’s open market price for Central Appalachia coal. Upon the termination of the coal supply agreements beginning in 2014, we will be required to renegotiate our current contract or find a substitute supply of coal, more than likely at a cost per ton far greater than the price we are paying today. However, the power sales agreements do not provide for a price increase related to an increase in the cost per ton of delivered coal and Dominion Virginia Power’s payment for power after 2014 will not escalate with our increased coal costs. Due to the change in the economics of ROVA at such time, it is projected that ROVA will begin incurring losses in 2014 and may be unable to pay its obligations as they become due. Should ROVA renegotiate its future coal supply contracts prior to 2014 in a manner that results in higher coal prices, reduced margins and an inability to pay obligations could be accelerated.
Permitting issues in Central Appalachia could put ROVA’s coal supply at risk.
     ROVA purchases coal under long-term contracts from coal suppliers with identified reserves located in Central Appalachia. While our coal supply has been relatively stable since the inception of the contracts, potential permitting issues pertaining to the reserves identified as our source of coal in our coal contracts could prove problematic in the coming years. Should regulatory/legal action prevent our coal supplier from continuing to mine the reserves identified as our source of coal or to mine other reserves that could be identified as potential sources of coal, we could be forced to find an alternative source of coal at higher prices. While the cost of cover for substitute coal should be covered by our coal contracts, we would be forced to initially incur the higher costs to secure a coal supply to provide for the continued operations at ROVA. In addition, should issues arise under our coal contracts relating to the cost of cover for substitute coal, the coal suppliers’ guarantee or any other issue, we could be forced to incur significant legal expenses and, potentially, may never recoup our incremental coal or related legal costs.

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We face intense competition to attract and retain employees. Further, managing Chief Executive Officer and key executive succession and retention is critical to our success.
     We are dependent on retaining existing employees and attracting additional qualified employees to meet current and future needs and achieving productivity gains from our investments in technology. We face intense competition for qualified employees, and there can be no assurance that we will be able to attract and retain such employees or that such competition among potential employers will not result in increasing salaries. An inability to retain existing employees or attract additional employees could have a material adverse effect on our business, cash flows, financial condition and results of operations.
     We would be adversely affected if we fail to adequately plan for succession of our Chief Executive Officer and senior management or fail to retain key executives. While we have succession plans in place, these plans do not guarantee that we will not face operational risk upon the exit of our Chief Executive Officer or members of our senior management.
SELECTED HISTORICAL FINANCIAL DATA
     The following table sets forth our summary historical consolidated financial information as of and for the periods ended on the dates indicated below. The historical financial information for each of the years in the five-year period ended December 31, 2010 was derived from our audited financial statements. The audited financial statements for each of the years in the three-year period ended December 31, 2010 are included elsewhere in this prospectus.
     The summary historical consolidated financial information as of March 31, 2011 and for the three-month periods ended March 31, 2011 and 2010 has been derived from our unaudited condensed consolidated financial statements contained in our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2011, or the First Quarter 2011 10-Q, which is included elsewhere in this prospectus. Our unaudited financial statements were prepared on the same basis as the audited financial statements and, in the opinion of management, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the information set forth therein. Our historical results included below and elsewhere in this prospectus are not necessarily indicative of our future performance, and our results of operations for the three-month period ended March 31, 2011, are not necessarily indicative of the operating results to be expected for the full 2011 fiscal year.
     We urge you to read the selected financial information set forth below in conjunction with the audited financial statements included in this prospectus and the information contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

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                    Year Ended                     Three Months Ended  
                    December 31,                     March 31,  
    2006     2007     2008     2009     2010     2010     2011  
                    (Dollars in thousands)                  
Consolidated Statement of Operations Data:
                                                        
Revenues
                                                        
Coal
   $ 393,482     $ 418,870     $ 419,806     $ 361,206     $ 418,058     $ 103,550     $ 104,136  
Power
     50,925       85,347       89,890       82,162       87,999       22,889       23,628  
 
                                          
Total revenues
     444,407       504,217       509,696       443,368       506,057       126,439       127,764  
Cost and expenses:
                                                        
Cost of sales
     340,005       400,346       409,795       373,070       394,827       97,677       97,510  
Depreciation, depletion, and amortization
     29,340       38,123       41,387       44,254       44,690       11,392       11,245  
Selling and administrative
     42,409       44,813       40,513       40,612       39,481       9,976       9,305  
Heritage health benefit expenses
     32,821       27,589       33,452       28,074       14,421       3,915       3,778  
Restructuring charges
     —       4,523       2,009       —       —       —       —  
Gain (loss) on sale of assets
     (4,785 )     (5,295 )     (1,425 )     191       226       71       83  
Other operating income
     —       —       —       (11,059 )     (8,109 )     (1,906 )     (1,597 )
 
                                          
 
     439,790       510,099       525,731       475,142       485,536       121,125       120,324  
 
                                          
Operating income (loss)
     4,617       (5,882 )     (16,035 )     (31,774 )     20,521       5,314       7,440  
Other income (expense):
                                                        
Interest expense
     (19,234 )     (24,638 )     (23,130 )     (23,733 )     (22,992 )     (5,723 )     (6,967 )
Interest expense attributable to beneficial conversion feature
     —       —       (8,146 )     —       —       —       —  
Loss on extinguishment of debt
     —       —       (5,178 )     —       —       —       (17,030 )
Interest income
     6,089       8,152       5,125       3,218       1,747       410       382  
Other income (loss)
     73       243       (284 )     5,991       (2,587 )     (3,836 )     (3,017 )
 
                                          
 
     (13,072 )     (16,243 )     (31,613 )     (14,524 )     (23,832 )     (9,149 )     (26,632 )
 
                                          
Loss from continuing operations before income taxes
     (8,455 )     (22,125 )     (47,648 )     (46,298 )     (3,311 )     (3,835 )     (19,192 )
Income tax (benefit) expense from continuing operations
     2,405       (8,895 )     919       (17,136 )     (141 )     (90 )     (460 )
 
                                          
Loss from continuing operations
     (10,860 )     (13,230 )     (48,567 )     (29,162 )     (3,170 )     (3,745 )     (18,732 )
Income from discontinued operations, net of income tax expense
     406       1,725       —       —       —       —       —  
 
                                          
Net loss
     (10,454 )     (11,505 )     (48,567 )     (29,162 )     (3,170 )     (3,745 )     (18,732 )
Less net income (loss) attributable to noncontrolling interest
     2,244       1,194       —       (1,817 )     (2,645 )     (890 )     (1,121 )
 
                                          
Net loss attributable to Parent Company
     (12,698 )     (12,699 )     (48,567 )     (27,345 )     (525 )     (2,855 )     (17,611 )
Less preferred stock dividend requirements
     1,585       1,360       1,360       1,360       1,360       340       340  
Less premium on exchange of preferred stock for common stock
     791       —       —       —       —       —       —  
 
                                          
Net loss attributable to common shareholders
   $ (15,074 )   $ (14,059 )   $ (49,927 )   $ (28,705 )   $ (1,885 )   $ (3,195 )   $ (17,951 )
Other Consolidated Financial Data:
                                                        
Cash flows provided by (used in):
                                                        
Operating activities
     29,434       82,516       55,245       29,448       45,353       13,296       16,182  
Investing activities
     (33,922 )     (43,259 )     (6,588 )     (38,597 )     (29,180 )     (3,941 )     (5,884 )
Financing activities
     20,010       (46,259 )     (28,452 )     (20,273 )     (20,917 )     (2,114 )     28,911  
Capital expenditures
     20,852       (30,412 )     (31,320 )     (34,546 )     (22,814 )     (4,337 )     (2,923 )
Adjusted EBITDA(2)
     40,482       41,737       38,795       30,301       81,616       21,228       23,284  
Ratio of Total Debt to Adjusted EBITDA
     7.6x       6.5x       6.9x       8.4x       3.0x       11.9x       12.6x  
Other Operating Data:
                                                        
Tons sold by mine:
                                                        
Absaloka
     7,079       7,347       6,418       5,911       5,467       1,293       1,399  
Rosebud
     12,430       12,583       13,026       10,332       12,231       3,139       2,361  
Jewett
     6,798       6,781       6,494       5,080       4,203       906       918  
Beulah
     2,702       2,946       3,046       2,585       2,898       832       782  
Savage
     376       354       359       344       353       91       98  
Power production:
                                                        
Megawatt hours (000s)
     1,639       1,590       1,641       1,486       1,620       435       435  
Capacity Factor
     92 %     86 %     89 %     81 %     88 %     95 %     96 %

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            Year Ended December 31,             As of March 31,  
    2006     2007     2008     2009     2010     2011  
            (Dollars in thousands)             (Unaudited)  
Balance Sheet Data:
                                                
Cash and cash equivalents
   $ 26,738     $ 19,736     $ 39,941     $ 10,519     $ 5,775     $ 44,984  
Working capital(3)
     (66,773 )     (94,674 )     (24,152 )     (74,976 )     (35,793 )     (1,024 )
Property, plant and equipment, net
     431,452       442,426       443,400       456,184       416,955       408,381  
Total assets
     761,382       782,528       812,967       772,728       750,306       787,987  
Total debt(1)
     306,007       271,448       269,153       254,695       242,104       294,362  
Shareholders’ deficit
     (180,431 )     (177,257 )     (217,598 )     (141,799 )     (162,355 )     (173,927 )
 
(1)   Total debt includes revolving lines of credit, long-term debt and current maturities of long-term debt excluding trade and other debt and is shown net of unamortized discounts.
 
(2)   Adjusted EBITDA is defined as net income (loss) before the items set forth in the table below. We present Adjusted EBITDA because we consider it an important supplemental measure of our performance and believe it is frequently used by securities analysts, investors, and other interested parties in the evaluation of high yield issuers, many of which present Adjusted EBITDA when reporting their operating results. This item should be considered in addition to, but not as a substitute for or superior to, operating income, net income, operating cash flow and other measures of financial performance prepared in accordance with GAAP. Management uses Adjusted EBITDA as an internal measure of operating performance, to establish operational goals, to allocate resources and to analyze business trends and financial performance. Other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.
 
(3)   Working capital is current assets minus current liabilities.
                                                         
                    Year Ended                     Three Months Ended  
                    December 31,                     March 31,  
    2006     2007     2008     2009     2010     2010     2011  
                    (Dollars in thousands)                  
Consolidated EBITDA and Adjusted EBITDA Reconciliation:
                                                        
Net loss
   $ (10,454 )   $ (11,505 )   $ (48,567 )   $ (29,162 )   $ (3,170 )   $ (3,745 )   $ (18,732 )
Income from discontinued operations, net of income tax expense
     (406 )     (1,725 )     —       —       —       —       —  
Income tax (benefit) expense from continuing operations
     2,405       (8,895 )     919       (17,136 )     (141 )     (90 )     (460 )
Other (income) loss
     (73 )     (243 )     284       (5,991 )     2,587       3,836       3,017  
Interest income
     (6,089 )     (8,152 )     (5,125 )     (3,218 )     (1,747 )     (410 )     (382 )
Loss on extinguishment of debt
     —       —       5,178       —       —       —       17,030  
Interest expense attributable to beneficial conversion feature
     —       —       8,146       —       —       —       —  
Interest expense
     19,234       24,638       23,130       23,733       22,992       5,723       6,967  
Depreciation, depletion and amortization
     29,340       38,123       41,387       44,254       44,690       11,392       11,245  
Accretion of ARO and receivable
     7,854       9,844       9,528       9,974       11,540       3,003       2,700  
Amortization of intangible assets and liabilities, net
     493       (2,043 )     598       279       590       85       163  
 
                                          
EBITDA
     42,304       40,042       35,478       22,733       77,341       19,794       21,548  
Restructuring charges
     —       4,523       2,009       —       —       —       —  
Customer reclamation claim(1)
     —       —       —       4,825       —       —       —  
(Gain)/loss on sale of assets
     (4,785 )     (5,295 )     (1,425 )     191       226       71       83  
Share-based compensation
     2,963       2,467       2,733       2,552       4,049       1,363       1,653  
 
                                          
Adjusted EBITDA
   $ 40,482     $ 41,737     $ 38,795     $ 30,301     $ 81,616     $ 21,228     $ 23,284  
 
                                          
 
(1)   As a result of a contract dispute at Colstrip Unit 3&4 which occurred in 2008, in the fourth quarter of 2009, we recorded a reduction in revenues by $6.5 million and an offsetting $1.7 million reduction in cost of sales for this claim.

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RATIO OF EARNINGS TO FIXED CHARGES
     The following table sets forth our ratio of earnings to fixed charges for the periods indicated (in thousands):
                                                         
                                             
            Year Ended December 31,             Three Months Ended March 31,
    2006     2007     2008     2009     2010     2010     2011  
Deficiency of Earnings to Fixed Charges
   $ 8,455     $ 22,125     $ 47,648     $ 46,298     $ 3,311     $ 3,835     $ 19,192  
     For purposes of calculating the ratio of earnings to fixed charges:
  •   “earnings” consist of loss from continuing operations before income taxes and fixed charges; and
 
  •   “fixed charges” consist of interest (expensed), amortization of premiums, discounts and deferred financing costs, and an estimate of the interest expense within rental expense.
USE OF PROCEEDS
     We will not receive any proceeds from the exchange offer. In consideration for issuing the Exchange Notes, we will receive Restricted Notes from you in the same principal amount. The Restricted Notes surrendered in exchange for the Exchange Notes will be retired and canceled and cannot be reissued. Accordingly, issuance of the Exchange Notes will not result in any change in our indebtedness.
THE EXCHANGE OFFER
     The following summary of the registration rights agreement and letter of transmittal is not complete and is subject to, and is qualified in its entirety by, all of the provisions of the registration rights agreement and the letter of transmittal, each of which is filed as an exhibit to the registration statement of which this prospectus is part. We urge you to read the entire registration rights agreement carefully.
Purpose and Effect of the Exchange Offer
     In connection with the issuance of the Restricted Notes, we entered into a registration rights agreement with respect to the Notes. Pursuant to the registration rights agreement, we and the subsidiary guarantors agreed that we will, subject to certain exceptions,
  •   by June 4, 2011 (120 days after February 4, 2011), file a registration statement (the “exchange offer registration statement”), with the SEC with respect to a registered exchange offer to exchange each Restricted Note for a new Exchange Note having terms substantially identical in all material respects to such Restricted Note;
 
  •   use our commercially reasonable efforts to cause the exchange offer registration statement to be declared effective under the Securities Act by September 2, 2011 (210 days after February 4, 2011);
 
  •   promptly after the effectiveness of the exchange offer registration statement, offer the Exchange Notes in exchange for the Restricted Notes; and
 
  •   keep the exchange offer open for not less than 20 business days (or longer if required by applicable law) after the date notice of the exchange offer is mailed to the holders of the Notes.
     We have also agreed to include in the exchange offer registration statement a prospectus for use in any resales by any holder of Restricted Notes that is a broker-dealer and to keep such exchange offer registration statement effective for a period beginning when Exchange Notes are first issued in the exchange offer and ending upon the earlier of 180 days from the completion date of this exchange offer or such time as such broker-dealers no longer hold any Restricted Notes.

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            In the event that:
  •   any change in law or in applicable interpretations thereof by the staff of the SEC does not permit us to effect the exchange offer; or
 
  •   or if for any reason the exchange offer is not consummated within 255 calendar days after February 4, 2011,
then, we will, as promptly as practicable, cause to be filed a shelf registration statement under the Securities Act on or prior to the earliest to occur of:
  •   the later of (in the case of change in law or interpretation) (x) the 60th day after the date on which we are no longer permitted to file the exchange offer registration statement and (y) July 4, 2011;
 
  •   in the case the exchange offer is not consummated by October 18, 2011; and
 
  •   in the case such holder is prohibited from participating in the exchange offer, such holder may not resell the Exchange Notes acquired by it in the exchange offer to the public without delivering a prospectus and that the prospectus contained in the exchange offer registration statement is not appropriate or available for such resales, or such holder is a broker-dealer and holds Restricted Notes acquired directly from us, the 45th day after the date on which we receive notice from a holder.
We will use our commercially reasonable efforts to cause the shelf registration statement to be declared effective under the Securities Act on or prior to the later of the 75th day after the shelf registration statement filing obligation arises and September 2, 2011. In addition, we will use our commercially reasonable efforts to keep the shelf registration statement effective until one year from February 4, 2011 (or such shorter period that will terminate when all the Notes covered thereby have been sold pursuant thereto or in certain other circumstances).
           We will pay, as liquidated damages, additional cash interest on the applicable Restricted Notes and Exchange Notes, subject to certain exceptions:
  •   if the exchange offer registration statement is not filed with the SEC on or prior to June 4, 2011; or
 
  •   if the exchange offer registration statement is not declared effective on or prior to September 2, 2011; or
 
  •   if the exchange offer is not consummated on or prior to October 18, 2011; or
 
  •   if a shelf registration statement is not filed or declared effective when required; or
 
  •   if a registration statement is declared effective as required but thereafter fails to remain effective or usable in connection with resales for more than 30 calendar days; or
 
  •   holders are unable to sell under Rule 144 as a result of our failure to meet the adequate current public information requirement of Rule 144(c)(1).
The additional interest will accrue at a per annum rate of 0.25% for the first 90 days of the registration default period, at a per annum rate of 0.50% for the second 90 days of the registration default period, at a per annum rate of 0.75% for the third 90 days of the registration default period and at a per annum rate of 1.0% thereafter for the remaining portion of the registration default period. We will pay such additional interest on regular interest payment dates.
           We may require each person requesting to be named as a selling security holder to furnish to us such information regarding the person and the distribution of the Notes by the person as we may from time to time reasonably require for the inclusion of the person in the shelf registration statement, including requiring the person to properly complete and execute such selling security holder notice and questionnaires, and any amendments or supplements thereto, as we may reasonably deem necessary or appropriate. We may refuse to name any person as a selling security holder who fails to provide us with such information.

30

 

Terms of the Exchange Offer
     Upon the terms and subject to the conditions set forth in this prospectus and the accompanying letter of transmittal, for each $1,000 principal amount of Restricted Notes properly tendered and not withdrawn before the expiration date of the exchange offer, we will issue $1,000 principal amount of Exchange Notes. Holders may tender some or all of their Restricted Notes pursuant to the exchange offer in denominations of $1,000 and integral multiples thereof. The exchange offer is not conditioned upon any minimum aggregate principal amount of Restricted Notes being tendered.
     The form and terms of the Exchange Notes will be the same as the form and terms of the Restricted Notes except that:
  •   the Exchange Notes will have a different CUSIP number from the Restricted Notes;
 
  •   the Exchange Notes will be registered under the Securities Act and, therefore, the global securities representing the Exchange Notes will not bear legends restricting the transfer of interests in the Exchange Notes;
 
  •   the Exchange Notes will not be subject to the registration rights relating to the Restricted Notes; and
 
  •   the Exchange Notes will not contain provisions for payment of additional interest in case of non-registration.
     The Exchange Notes will evidence the same indebtedness as the Restricted Notes they replace, and will be issued under, and be entitled to the benefits of, the same indenture governing the issuance of the Restricted Notes. As a result, the Restricted Notes and the Exchange Notes will be treated as a single series of Notes under the indenture.
     No interest will be paid in connection with the exchange. The Exchange Notes will accrue interest from and including the last interest payment date on which interest has been paid on the Restricted Notes or, if no interest has been paid on the Restricted Notes, from the date of original issue of the Restricted Notes. Accordingly, the holders of Restricted Notes that are accepted for exchange will not receive accrued but unpaid interest on Restricted Notes at the time of tender. Rather, that interest will be payable on the Exchange Notes delivered in exchange for the Restricted Notes on the first interest payment date after the expiration date.
     Under existing SEC interpretations, the Exchange Notes would generally be freely transferable after the exchange offer without further registration under the Securities Act, except that broker-dealers receiving the Exchange Notes in the exchange offer will be subject to a prospectus delivery requirement with respect to their resale. This view is based on interpretations by the staff of the SEC in no-action letters issued to other issuers in exchange offers like this one. We have not, however, asked the SEC to consider this particular exchange offer in the context of a no-action letter. Therefore, the SEC might not treat it in the same way it has treated other exchange offers in the past. You will be relying on the no-action letters that the SEC has issued to third parties in circumstances that we believe are similar to ours. Based on these no-action letters, you must meet the following conditions in order to receive freely transferable Exchange Notes:
  •   you are not an “affiliate” of ours, as defined in Rule 405 of the Securities Act (or if you are such an “affiliate”, you must comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable);
 
  •   you are not engaged in and do not intend to engage in, and have no arrangement or understanding with any person to participate in, a distribution of Exchange Notes to be issued in the exchange offer;
 
  •   you acquired the Exchange Notes issued in the exchange offer in the ordinary course of your business;

31

 

  •   you are not a broker-dealer that acquired the Restricted Notes from us or in market-making transactions or other trading activities; and
 
  •   you are not acting on behalf of any person who could not truthfully and completely make the foregoing representations.
     By tendering your Restricted Notes as described in “—Procedures for Tendering,” you will be representing to us that you satisfy all of the above listed conditions. If you do not satisfy all of the above listed conditions:
  •   you cannot rely on the position of the SEC set forth in the no-action letters referred to above; and
 
  •   you must comply with the applicable registration and prospectus delivery requirements of the Securities Act in connection with a resale of the Exchange Notes.
     The SEC considers broker-dealers that acquired Restricted Notes directly from us, but not as a result of market-making activities or other trading activities, to be making a distribution of the Exchange Notes if they participate in the exchange offer. Consequently, these broker-dealers must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a resale of the Exchange Notes.
     A broker-dealer that has bought Restricted Notes for market-making or other trading activities must comply with the prospectus delivery requirements of the Securities Act in order to resell any Exchange Notes it receives for its own account in the exchange offer. Broker-dealers may use this prospectus to fulfill their prospectus delivery requirements with respect to the Exchange Notes if they indicate in the letter of transmittal that they will do so. We have agreed in the registration rights agreement to send a prospectus to any broker-dealer that requests copies in the notice and questionnaire included in the letter of transmittal accompanying the prospectus until the earlier of 180 days from the completion date of this exchange offer or such time as such broker-dealers no longer hold any Restricted Notes.
     Unless you are required to do so because you are a broker-dealer, you may not use this prospectus for an offer to resell, resale or other retransfer of Exchange Notes. We are not making this exchange offer to, nor will we accept tenders for exchange from, holders of Restricted Notes in any jurisdiction in which the exchange offer or the acceptance of it would not be in compliance with the securities or blue sky laws of that jurisdiction.
     Holders of Notes do not have appraisal or dissenters’ rights under state law or under the indenture in connection with the exchange offer. We intend to conduct the exchange offer in accordance with the applicable requirements of Regulation 14E under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Expiration Date
     The exchange offer will expire at 5:00 p.m. New York City time on         , 2011, unless, in our sole discretion, we extend the expiration date. If we so extend the expiration date, the term “expiration date” shall mean the latest date and time to which we extend the exchange offer.
Extensions, Delays in Acceptance, Termination or Amendment
     We reserve the right, in our sole discretion to:
  •   delay accepting for exchange any Restricted Notes,
 
  •   extend the exchange offer,
 
  •   terminate the exchange offer, or
 
  •   to amend the terms of the exchange offer in any way we determine.

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     We will give oral or written notice of any delay, extension or termination to the exchange agent. In addition, we will give, as promptly as practicable, oral or written notice regarding any delay in acceptance, extension or termination of the offer to the registered holders of Restricted Notes. If we amend the exchange offer in a manner that we determine to constitute a material change, or if we waive a material condition, we will promptly disclose the amendment or waiver in a manner reasonably calculated to inform the holders of Restricted Notes of the amendment or waiver, and extend the offer if required by law.
     We intend to make public announcements of any delay in acceptance, extension, termination, amendment or waiver regarding the exchange offer prior to 9 a.m., Denver time, on the next business day after the previously scheduled expiration date.
Conditions to the Exchange Offer
     We will not be required to accept for exchange, or to exchange Exchange Notes for, any Restricted Notes, and we may terminate the exchange offer as provided in this prospectus at or before the expiration date, if:
  •   any law, statute, rule or regulation shall have been proposed, adopted or enacted, or interpreted in a manner, which, in our reasonable judgment, would impair our ability to proceed with the exchange offer;
  •   any action or proceeding is instituted or threatened in any court or by or before the SEC or any other governmental agency with respect to the exchange offer which, in our reasonable judgment, would impair our ability to proceed with the exchange offer;
  •   we have not obtained any governmental approval which we, in our reasonable judgment, consider necessary for the completion of the exchange offer as contemplated by this prospectus;
  •   any change, or any condition, event or development involving a prospective change, shall have occurred or be threatened in the general economic, financial, currency exchange or market conditions in the United States or elsewhere that, in our reasonable judgment, would impair our ability to proceed with the exchange offer;
  •   any other change or development shall have occurred, including a prospective change or development, that, in our reasonable judgment, has or may have a material adverse effect on us, the market price of the Exchange Notes or the Restricted Notes or the value of the exchange offer to us; or
  •   there shall have occurred (i) any suspension or limitation of trading in securities generally on the New York Stock Exchange or the over-the-counter market; (ii) a declaration of a banking moratorium by United States federal or New York authorities; or (iii) a commencement or escalation of a war or armed hostilities involving or relating to a country where we do business or other international or national emergency or crisis directly or indirectly involving the United States.
     The conditions listed above are for our sole benefit and we may assert them regardless of the circumstances giving rise to any of these conditions. We may waive these conditions in our sole discretion in whole or in part at any time and from time to time. A failure on our part to exercise any of the above rights shall not constitute a waiver of that right, and that right shall be considered an ongoing right which we may assert at any time and from time to time.
     If we determine in our reasonable judgment that any of the events listed above has occurred, we may, subject to applicable law:
  •   refuse to accept any Restricted Notes and return all tendered Restricted Notes to the tendering holders and terminate the exchange offer;
  •   extend the exchange offer and retain all Restricted Notes tendered before the expiration of the exchange offer, subject, however, to the rights of holders to withdraw these Restricted Notes; or

33

 

  •   waive unsatisfied conditions relating to the exchange offer and accept all properly tendered Restricted Notes which have not been withdrawn. If this waiver constitutes a material change to the exchange offer, we will disclose this change by means of a prospectus supplement that will be distributed to the registered holders of the Restricted Notes. If the exchange offer would otherwise expire, we will extend the exchange offer for five to ten business days, depending on how significant the waiver is and the manner of disclosure to registered holders.
     Any determination by us concerning the above events will be final and binding.
     In addition, we reserve the right in our sole discretion to:
  •   purchase or make offers for any Restricted Notes that remain outstanding subsequent to the expiration date; and
  •   purchase Restricted Notes in the open market, in privately negotiated transactions or otherwise.
     The terms of any such purchases or offers may differ from the terms of the exchange offer.
Procedures for Tendering
     Except in limited circumstances, only a participant with The Depository Trust Company (the “DTC”) listed on a DTC securities position listing with respect to the Restricted Notes may tender Restricted Notes in the exchange offer. To tender Restricted Notes in the exchange offer:
  •   you must instruct DTC and a DTC participant by completing the form “Instructions to DTC Participant From Beneficial Owner” accompanying this prospectus of your intention to tender your Restricted Notes for Exchange Notes; and
  •   DTC participants in turn need to follow the procedures for book-entry transfer as set forth below under “—Book-Entry Transfer” and in the letter of transmittal.
     By tendering, you will make the representations described below under “—Representations on Tendering Restricted Notes.” In addition, each broker-dealer that receives Exchange Notes for its account in the exchange offer, where the Restricted Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of the Exchange Notes. See “Plan of Distribution.” The tender by a holder of Restricted Notes will constitute an agreement between that holder and us in accordance with the terms and subject to the conditions set forth in this prospectus and in the letter of transmittal.
     The method of delivery of the form “Instructions to DTC Participant From Beneficial Owner” or transmission of an agent’s message and all other required documents, as described under "—Book-Entry Transfer,” to the exchange agent is at the election and risk of the tendering holder of Restricted Notes. Instead of delivery by mail, we recommend that holders use an overnight or hand delivery service. In all cases, sufficient time should be allowed to assure timely delivery to the exchange agent prior to the expiration date. Delivery of documents to DTC in accordance with its procedures does not constitute delivery to the exchange agent.
     We will determine in our sole discretion all questions as to the validity, form, eligibility, including time of receipt, and acceptance and withdrawal of tendered Restricted Notes, and our determination shall be final and binding on all parties. We reserve the absolute right to reject any and all Restricted Notes not properly tendered or any Restricted Notes whose acceptance by us would, in the opinion of our counsel, be unlawful. We also reserve the right to waive any defects, irregularities or conditions of tender as to any particular Restricted Notes either before or after the expiration date. Our interpretation of the terms and conditions of the exchange offer, including the instructions in the letter of transmittal, will be final and binding on all parties. Unless waived, holders must cure any defects or irregularities in connection with tenders of Restricted Notes within a period we determine. Although we intend to request the exchange agent to notify holders of defects or irregularities relating to tenders of Restricted Notes, neither we, the exchange agent nor any other person will have any duty or incur any liability for failure to give this notification. We will not consider tenders of Restricted Notes to have been made until these defects or irregularities have been cured or

34

 

waived. The exchange agent will return any Restricted Notes that are not properly tendered and as to which the defects or irregularities have not been cured or waived to the tendering holders, unless otherwise provided in the letter of transmittal, promptly following the expiration date.
Book-Entry Transfer
     We understand that the exchange agent will make a request promptly after the date of this prospectus to establish accounts with respect to the Restricted Notes at DTC for the purpose of facilitating the exchange offer. Any financial institution that is a participant in DTC’s system may make book-entry delivery of Restricted Notes by causing DTC to transfer such Restricted Notes into the exchange agent’s DTC account in accordance with DTC’s electronic Automated Tender Offer Program procedures for such transfer. The exchange of Exchange Notes for tendered Restricted Notes will only be made after timely:
  •   confirmation of book-entry transfer of the Restricted Notes into the exchange agent’s account; and
  •   receipt by the exchange agent of an “agent’s message” and all other required documents specified in the letter of transmittal.
     The confirmation, agent’s message and any other required documents must be received at the exchange agent’s address listed below under “—Exchange Agent” on or before 5:00 p.m., New York City time, on the expiration date of the exchange offer.
     As indicated above, delivery of documents to DTC in accordance with its procedures does not constitute delivery to the exchange agent.
     The term “agent’s message” means a message, transmitted by DTC and received by the exchange agent and forming part of the confirmation of a book-entry transfer, which states that DTC has received an express acknowledgment from a participant in DTC tendering Restricted Notes stating:
  •   the aggregate principal amount of Restricted Notes that have been tendered by the participant;
  •   that such participant has received an appropriate letter of transmittal and agrees to be bound by the terms of the letter of transmittal and the terms of the exchange offer; and
  •   that we may enforce such agreement against the participant.
     Delivery of an agent’s message will also constitute an acknowledgment from the tendering DTC participant that the representations contained in the letter of transmittal and described below under “Representations on Tendering Restricted Notes” are true and correct.
Representations on Tendering Restricted Notes
     To exchange your Restricted Notes for transferable Exchange Notes in the exchange offer, you will be required to represent to the effect that you:
  •   are not an “affiliate” of ours, as defined in Rule 405 of the Securities Act (or if you are such an “affiliate”, you must comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable);
  •   are not engaged in and do not intend to engage in, and have no arrangement or understanding with any person to participate in, a distribution of Exchange Notes to be issued in the exchange offer;
  •   acquired the Exchange Notes issued in the exchange offer in the ordinary course of your business;
  •   are not a broker-dealer that acquired the Restricted Notes from us or in market-making transactions or other trading activities; and

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  •   are not acting on behalf of any person who could not truthfully and completely make the foregoing representations.
     If you are a broker-dealer and you will receive Exchange Notes for your own account in exchange for Restricted Notes that were acquired as a result of market-making activities or other trading activities, you will be required to acknowledge in the letter of transmittal that you will comply with the prospectus delivery requirements of the Securities Act in connection with any resale of the Exchange Notes. The letter of transmittal states that, by complying with their obligations, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act. See also “Plan of Distribution.” If you fail to indicate in the letter of transmittal or otherwise inform us that you are a broker-dealer, you will be deemed to have represented to us that you are not a broker-dealer.
Withdrawal of Tenders
     Your tender of Restricted Notes pursuant to the exchange offer is irrevocable except as otherwise provided in this section. You may withdraw tenders of Restricted Notes at any time prior to 5:00 p.m., New York City time, on the expiration date.
     For a withdrawal to be effective for DTC participants, holders must comply with their respective standard operating procedures for electronic tenders and the exchange agent must receive an electronic notice of withdrawal from DTC.
     Any notice of withdrawal must specify the name and number of the account at DTC to be credited with the withdrawn Restricted Notes and otherwise comply with the procedures of DTC. We will determine in our sole discretion all questions as to the validity, form and eligibility, including time of receipt, for such withdrawal notices, and our determination shall be final and binding on all parties. Any Restricted Notes so withdrawn will be deemed not to have been validly tendered for purposes of the exchange offer and no Exchange Notes will be issued with respect to them unless the Restricted Notes so withdrawn are validly re-tendered. Any Restricted Notes which have been tendered but which are withdrawn or not accepted for exchange will be returned to the holder without cost to such holder promptly after withdrawal, rejection of tender or termination of the exchange offer. Properly withdrawn Restricted Notes may be re-tendered by following the procedures described above under “—Procedures For Tendering” at any time prior to the expiration date.
Fees and Expenses
     We will bear the expenses of soliciting tenders with respect to the exchange offer. The principal solicitation is being made by mail; however, we may make additional solicitation by telephone or in person by our officers and regular employees and those of our affiliates.
     We have not retained any dealer manager in connection with the exchange offer and will not make any payments to broker-dealers or others soliciting acceptances of the exchange offer. We will, however, pay the exchange agent reasonable and customary fees for its services and reimburse it for its related reasonable out of pocket expenses.
     We will pay the cash expenses to be incurred in connection with the exchange offer. They include:
  •   SEC registration fees;
  •   fees and expenses of the exchange agent and trustee;
  •   accounting and legal fees and printing costs; and
  •   related fees and expenses.
Transfer Taxes
     Holders who tender their Restricted Notes for exchange will not be obligated to pay any transfer taxes. If, however, a transfer tax is imposed for any reason other than the exchange of Restricted Notes in

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connection with the exchange offer, then the tendering holder must pay the amount of any transfer taxes due, whether imposed on the registered holder or any other persons. If the tendering holder does not submit satisfactory evidence of payment of these taxes or exemption from them with the letter of transmittal, the amount of these transfer taxes will be billed directly to the tendering holder.
Accounting Treatment
     We will record the Exchange Notes in our accounting records at the same carrying value as the Restricted Notes. This carrying value is the aggregate principal amount of the Restricted Notes less any bond discount, as reflected in our accounting records on the date of exchange. Accordingly, we will not recognize any gain or loss for accounting purposes in connection with the exchange offer.
Consequences of Failure to Properly Tender Restricted Notes in the Exchange
     We will issue the Exchange Notes in exchange for Restricted Notes under the exchange offer only after timely confirmation of book-entry transfer of the Restricted Notes into the exchange agent’s account and timely receipt by the exchange agent of an agent’s message and all other required documents specified in the letter of transmittal. Therefore, holders of the Restricted Notes desiring to tender Restricted Notes in exchange for Exchange Notes should allow sufficient time to ensure timely delivery. We are under no duty to give notification of defects or irregularities of tenders of Restricted Notes for exchange or waive any such defects or irregularities. Restricted Notes that are not tendered or that are tendered but not accepted by us will, following completion of the exchange offer, continue to be subject to the existing restrictions upon transfer under the Securities Act.
     Participation in the exchange offer is voluntary. In the event the exchange offer is completed, we will generally not be required to register the remaining Restricted Notes. Remaining Restricted Notes will continue to be subject to the following restrictions on transfer:
  •   holders may resell Restricted Notes only if an exemption from registration is available or, outside the United States, to non-U.S. persons in accordance with the requirements of Regulation S under the Securities Act; and
  •   the remaining Restricted Notes will bear a legend restricting transfer in the absence of registration or an exemption.
     To the extent that Restricted Notes are tendered and accepted in connection with the exchange offer, any trading market for remaining Restricted Notes could be adversely affected.
     Neither we nor our board of directors make any recommendation to holders of Restricted Notes as to whether to tender or refrain from tendering all or any portion of their Restricted Notes pursuant to the exchange offer. Moreover, no one has been authorized to make any such recommendation. Holders of Restricted Notes must make their own decision whether to tender pursuant to the exchange offer and, if so, the aggregate amount of Restricted Notes to tender, after reading this prospectus and the letter of transmittal and consulting with their advisors, if any, based on their own financial position and requirements.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
     We are exposed to market risk, which includes adverse changes in commodity prices and interest rates.
Commodity Price Risk
     We manage our price risk for coal sales, electricity and steam production through the use of long-term agreements, rather than through the use of derivatives. We estimate that almost 100% of our coal and our electricity production are sold under long-term agreements. These coal contracts typically contain price escalation and adjustment provisions, pursuant to which the price for our coal may be periodically revised. The price may be adjusted in accordance with changes in broad economic indicators such as the consumer price index, commodity-specific indices such as the PPI-light fuel oils index, and/or changes in our actual costs.

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     For our contracts which are not cost plus, we have exposure to price risk for supplies that are used in the normal course of production such as diesel fuel and explosives. We manage these items through strategic sourcing contracts in normal quantities with our suppliers and may use derivatives from time to time. At March 31, 2011, we had fuel supply contracts outstanding with a minimum purchase requirement of 4.1 million gallons of diesel fuel per year. These contracts qualify for the normal purchase normal sale exception under hedge accounting.
Interest Rate Risk
     Our exposure to changes in interest rates results from our debt obligations shown in the table below that are indexed to either the prime rate or LIBOR. Based on balances outstanding as of March 31, 2011, a change of one percentage point in the prime interest rate or LIBOR would increase or decrease interest expense on an annual basis by the amount shown below:
         
    Effect of 1% increase  
    or 1% decrease  
    (In thousands)  
WML’s revolving line of credit
   $ —  
BUSINESS, PROPERTIES AND LEGAL PROCEEDINGS
Overview
     Westmoreland Coal Company began mining in Westmoreland County, Pennsylvania in 1854 as a Pennsylvania corporation. In 1910, we incorporated in Delaware and continued our focus on underground coal operations in Pennsylvania and the Appalachian Basin. We moved our headquarters from Philadelphia, Pennsylvania to Colorado Springs, Colorado in 1995 and fully divested ourselves of all Eastern coal operations.
     Today, Westmoreland Coal Company is an energy company employing 1,081 employees whose operations include five surface coal mines in Montana, North Dakota and Texas, and two coal-fired power generating units with a total capacity of approximately 230 megawatts in North Carolina. We sold 25.2 million tons of coal in 2010. Our two principal operating segments are our coal and power segments. Our two non-operating segments are heritage and corporate. Our heritage segment primarily includes the costs of benefits we provide to former mining operation employees and our corporate segment consists primarily of corporate administrative expenses.
     We are subject to two major debt arrangements: (1) $125.0 million senior secured notes at Westmoreland Mining, LLC, or WML, that is collateralized by all assets of WML, Westmoreland Savage Corporation, or WSC, Western Energy Company, or WECO, and Dakota Westmoreland Corporation, or DWC, referred to herein as the WML Notes; and (2) $150.0 million senior secured notes (issued February 4, 2011) at the parent level that are largely collateralized by the assets of the parent, the Absaloka Mine and the ROVA power facility, referred to herein as the Parent Notes.
Coal Segment
     General
     Our coal segment’s focus is on niche coal markets where we take advantage of customer proximity and rail transportation advantages. Approximately two-thirds of our coal production is mine mouth, governed by long-term coal contracts with neighboring power plants. The remaining coal production is sold in the open market where we take advantage of being the closest coal producer to our open market customers via rail transportation. Currently, two-thirds of our produced coal is non-compliance sub-bituminous coal from the Northern Powder River Basin, while the remaining third is lignite. We project that almost 50% of our contracted tons in 2011 will remain under contract through 2019. Our relationship with the Crow Tribe allows us to, among other things, continue to monetize certain Indian Coal Tax Credits as described below in “Properties.”

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In 2010, we sold 25.2 million tons of coal compared to 24.3 million in 2009. Our increase in tons sold resulted from 2009 customer shutdowns at our Rosebud and Beulah Mines, whereas comparable shutdowns did not occur during 2010.
     The following table provides summary information regarding our principal mining operations as of December 31, 2010:
                                     
                            Total Cost of        
                Tons Sold   Property, Plant and        
Mining               (In thousands)   Equipment   Employees/Labor    
Operation   Prior Operator   Manner of Transport   Machinery   2008   2009   2010   ($ in millions)   Relations(1)   Coal Seam
MONTANA
                                    
Rosebud
   Entech, Inc., a   • Conveyor belt   • 4 drag-lines   13,026   10,332   12,231   $140.9   383 employees;   • Rosebud
 
   subsidiary of   • BNSF Rail   • Load-out facility                   297 represented    
 
   Montana Power,   • Truck                       by Local 400 of    
 
   Purchased 2001                           the IUOE    
Absaloka
   Washington Group   • BNSF Rail   • 1 drag-line   6,418   5,911   5,467   $135.1   170 employees; 131   • Rosebud-McKay
 
   International, Inc.   • Truck   • Load-out facility                   represented by Local    
 
   as contract                           400 of the IUOE    
 
   operator, Ended                                
 
   contract in 2007                                
Savage
   Knife River   • Truck   • 1 dragline   359   344   353   $4.6   13 employees; 11   • Pust
 
   Corporation, a                           represented by Local    
 
   subsidiary of MDU                           400 of the IUOE    
 
   Resources Group,                                
 
   Inc., Purchased                                
 
   2001                                
TEXAS
                                    
Jewett
   Entech, Inc., a   • Conveyor belt   • 4 drag-lines   6,494   5,080   4,203   $32.1   327 employees   • Wilcox Group
 
   subsidiary of                                
 
   Montana Power,                                
 
   Purchased 2001                                
NORTH DAKOTA
                                
Beulah
   Knife River   • Conveyor belt   • 2 drag-lines   3,046   2,585   2,898   $61.8   149 employees; 118   • Schoolhouse
 
   Corporation, a   • BNSF Rail   • Load-out facility                   represented by Local   • Beulah-Zap
 
   subsidiary of MDU                           1101 of the UMWA    
 
   Resources Group,                                
 
   Inc., Purchased                                
 
   2001                                
TOTALS
                                    
 
               29,343   24,252   25,152   $374.5   1,042 employees    
 
(1)   557 employees, or approximately 52% of our total employees, are represented by collective bargaining agreements. The labor agreement at the Absaloka Mine, which covers 12% of our workforce, expires during 2011.
Properties
     We had an estimated 389.9 million tons of proven and probable coal reserves as of December 31, 2010. Montana, Texas, and North Dakota each use a permitting process approved by the Office of Surface Mining. Our mines have chosen to permit coal reserves on an incremental basis and given the current rates of mining and demand, have sufficient permitted coal to meet production for the periods shown in the table below. We secure all of our final reclamation obligations by bonds as required by the respective state agencies. We perform contemporaneous reclamation activities at each mine in the normal course of operations and coal production.
     Our mines control coal reserves and deposits through long-term leases. Coal reserves are that part of a mineral deposit that can be economically and legally extracted at the time of the reserve determination. Coal deposits do not qualify as reserves until we conduct a final comprehensive economic evaluation and conclude it is legally and economically feasible to mine the coal. We base our estimate of the economic recoverability of our reserves upon a comparison of potential reserves to reserves currently in production in a similar geologic setting to determine an estimated mining cost. We compare these estimated mining costs to existing market prices for the anticipated quality of coal. We only include reserves expected to be economically mined in our reserve estimates.

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     Our engineers and geologists generally prepare our reserve estimates. We periodically engage independent mining and geological consultants to review the models and procedures we use in preparing our internal estimates of coal reserves according to standard classifications of reliability. Norwest Corporation, a third-party consultant, was retained to provide an estimate of our reserves as of September 30, 2010. Reserves shown in the table below reflect the conclusions set forth in Norwest’s report, updated to reflect internal estimates of the effect of fourth quarter 2010 activity and other adjustments. Total recoverable reserve estimates change over time to reflect mining activity, analysis of new engineering and geological data, information obtained from our ongoing drilling program, changes in reserve holdings and other factors. We compile data from individual drill holes in a database from which the depth, thickness and the quality of the coal are determined. We classify reserves as either proven or probable based on the density result of the drill pattern.
     The following table provides information about our mines as of December 31, 2010:
                     
    Absaloka Mine   Rosebud Mine   Jewett Mine   Beulah Mine   Savage Mine
Owned by
   Westmoreland   Western Energy   Texas Westmoreland   Dakota Westmoreland   Westmoreland Savage
 
   Resources, Inc.   Company   Coal Co.   Corporation   Corporation
Location
       Rosebud and   Leon, Freestone and        
 
       Treasure Counties,   Limestone Counties,   Mercer and Oliver    
 
   Big Horn County, MT   MT   TX   Counties, ND   Richland County, MT
Coal reserves (thousands of tons)(1)
                    
Proven
   66,976   200,333   44,842   45,248   13,117
Probable
   —   —   —   19,394   —
Permitted reserves (thousands of tons)
   61,290   115,642   44,842   21,682   1,023
2010 production (thousands of tons)
   5,466   12,254   4,171   2,895   352
Estimated life of permitted reserves(2)
   2020   2019   2022   2015   2013
Lessor
   • Crow Tribe   • Federal Government   • Private parties   • Private parties   • Federal Government
 
   • Private parties   • State of MT   • State of TX   • State of ND   • Private parties
 
       • Great Northern       • Federal Government    
 
          Properties            
Lease term
   Through exhaustion   Varies   Varies   Varies   Varies
Current production capacity (thousands of tons)
   7,500   13,300   7,000   3,400   400
Coal type
   Sub-bituminous   Sub-bituminous   Lignite   Lignite   Lignite
Major customers
   • Xcel Energy   • Colstrip 1&2 owners   • NRG Texas Power LLC   • Otter Tail   • MDU
 
   • Western Fuels Assoc.   • Colstrip 3&4 owners       • MDU   • Sidney Sugars
 
   • Midwest Energy           • Minnkota    
 
   • Rocky Mountain Power           • Northwestern    
 
                  Public Service    
Delivery method
   Rail / Truck   Truck / Rail / Conveyor   Conveyor   Conveyor / Rail   Truck
Approx. heat content (BTU/lb.)(3)
   8,571   8,534   6,652   7,002   6,380
Approx. sulfur content (%)(4)
   0.66   0.64   0.78   0.76   0.50
Year current complex opened
   1974   1968   1985   1963   1958
Total tons mined since inception (thousands of tons)
   172,602   431,931   183,263   102,251   14,493
 
(1)   The SEC Industry Guide 7 defines reserves as that part of a mineral deposit, which could be economically and legally extracted or produced at the time of the reserve determination. Proven and probable coal reserves are defined by SEC Industry Guide 7 as follows:
 
    Proven (Measured) Reserves — Reserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes; grade and/or quality are computed from the results of detailed sampling and (b) the sites for inspection, sampling and measurement are spaced so close and the geographic character is so well defined that size, shape, depth and mineral content of reserves are well-established.

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    Probable (Indicated) Reserves — Reserves for which quantity and grade and/or quality are computed from information similar to that used for proven (measured) reserves, but the sites for inspection, sampling and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven (measured) reserves, is high enough to assume continuity between points of observation.
 
(2)   Approximate year in which permitted reserves would be exhausted, based on current mine plan and production rates. Our Jewett Mine’s permit is expected to be renewed in 2011 while the other permit expires in 2014, but effectively they cover all of the Mine’s reserves for the entire life of the mine. The Absaloka Mine permits expire in 2013 and 2014.
 
(3)   Approximate heat content applies to the coal mined in 2010.
 
(4)   Approximate sulfur content applies to the tons mined in 2010.
     With the exception of the Jewett Mine, where we control some reserves through fee ownership, we lease all of our coal properties. We are a party to coal leases with the federal government, state governments, and private parties at our Rosebud, Beulah, Savage and Jewett Mines. Each of the federal and state government leases continue indefinitely provided there is diligent development of the property and continued operation of the related mines. Federal statute generally sets production royalties on federal leases at 12.5% of the gross proceeds of coal mined and sold for surface mines. At the Beulah and Savage Mines, we have received reductions in the federal royalty rate due to the quality of the lignite coal mined. Our private leases run for an average term of twenty years and have options for renewal. We believe that we have satisfied all lease conditions in order to retain the properties and keep the leases in force.
     We are a party to two leases with the Crow Tribe covering 18,406 acres of land at our Absaloka Mine. In 2008, and in order to take advantage of certain available tax credits for the production of coal on the leased Crow Tribe land, Westmoreland Resources, Inc., or WRI, entered into a series of transactions, including the formation of Absaloka Coal, LLC with an unaffiliated investor. In 2010, the tax credit was equal to $2.20 per ton and will increase annually based on an inflation-adjustment factor. We received a private letter ruling from the IRS providing that the Indian Coal Tax Credits are available to us. As part of such transaction, WRI subleased its leases with the Crow Tribe to Absaloka Coal, LLC, granting it the right to mine specified quantities of coal through September 2013, with WRI as contract miner. We will pay to the Crow Tribe 33% of the expected payments we will receive from the investor. All of WRI’s property has been fully encumbered by a first lien under the Parent Notes agreement completed in February 2011. The Parent Notes allow us to enter into a revolving line of credit collateralized, in part, by the accounts receivable and inventory at WRI. In addition, WML fully encumbered all of its property at our Rosebud, Beulah and Savage mines pursuant to the WML Notes and revolving line of credit.
     Customers
     We sell almost all of the coal that we produce (99% in 2010) to plants that generate electricity. In 2010, we derived approximately 65% of our total revenues from coal sales to four power plants: Colstrip Units 3&4 (24% of our 2010 revenues), Limestone Generating Station (16%), Colstrip Units 1&2 (13%) and Sherburne County Station (12%). We sell more than 80% of our tons under contracts with remaining supply obligation terms of three years or more. We provide transportation for our mine-mouth customers, but sell coal and lignite on a Free On Board, or FOB, basis to our other customers. The purchaser of coal normally bears the cost of transportation and risk of loss from load out to its final destination. Our coal revenues include amounts earned by our coal sales company from sales of coal produced by mines other than ours. In 2010, 2009, and 2008, such amounts were $0.4 million, $0.8 million, and $1.2 million, respectively.
     Rosebud. The Rosebud Mine has two contracts with the adjacent Colstrip Station power generating facility. Effective January 1, 2010, a new cost-plus agreement commenced with Colstrip Units 1&2 with a projected term through at least 2019 and expected tons of 3.0 million per year. A second agreement at Units 3&4 covers approximately 7.0 million tons per year and is set to expire at the end of 2019. This contract is also cost-plus, but with provisions for specific returns on capital investment.
     Absaloka. The Absaloka Mine operates primarily in the open market and has several three- to five-year contracts with various parties that totaled roughly 5.5 million tons in 2010 and decline to zero by the end of 2015. Approximately 80% of all tons sold in 2010 were to the rail-served Sherburne County Station in Minnesota under multiple contracts.
     Savage. The Savage Mine supplies approximately 0.3 million tons per year to the local Lewis & Clark Station under an agreement that expires at the end of 2012. Prices under this agreement are based upon certain actual mine costs and certain inflation indices for such items as diesel fuel.

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     Jewett. The Jewett Mine has a cost-plus agreement with NRG Texas Power’s adjacent Limestone Generating Station, which commenced January 1, 2008, and replaced various prior agreements in place since 1985. NRG Texas Power is obligated to pay all mine costs of production plus a margin and the mine’s capital and reclamation expenditures. The agreement has a term through 2018, which may be extended by NRG Texas Power for up to an additional ten years or until the mine’s reserves are exhausted. NRG has the option to determine volumes to be delivered, which currently average approximately 4.2 million tons per year, and to terminate the agreement at its discretion.
     Beulah. The Beulah Mine supplies approximately 2.5 million tons per year to the adjacent Coyote Station via conveyor belt under an agreement that expires in May 2016. It also supplies approximately 0.5 million tons per year to the rail-served Heskett Station under an agreement that expires during 2011. Prices under these agreements are based upon certain actual mine costs and certain inflation indices for such items as diesel fuel.
     Competition
     While the coal industry is intensely competitive, we focus on niche coal markets where we take advantage of long-term coal contracts with neighboring power plants and rail transportation. For our open market coal sales, we compete with many other suppliers of coal to provide fuel to power plants. Additionally, coal competes for electrical power generation with other fuels such as nuclear energy, natural gas, hydropower, petroleum and wind. Costs and other factors such as safety, environmental and regulatory considerations relating to these alternative fuels affect the overall demand for coal as a fuel.
     We believe that our mines have a competitive advantage based on three factors:
  •   all of our mines are the most economic suppliers to each of their respective principal customers, a result of a transportation advantage over our competitors in that market;
  •   nearly all of the power plants we supply were specifically designed to use our coal; and
  •   the plants we supply are among the lowest cost producers of electric power in their respective regions and are among the cleaner producers of power from solid fossil fuels.
  •   As a result of the foregoing, we believe that our current customers are more likely to be dispatched to produce power and to continue purchasing coal extracted from our mines.
     The principal customers of the Rosebud, Jewett, and Beulah Mines are located adjacent to the mines; the coal for these customers is delivered by conveyor belt instead of more expensive means such as truck or rail. The customers of the Savage Mine are located approximately 20 to 25 miles from the mine so that coal can be transported most economically by truck.
     The Absaloka Mine faces a different competitive situation. The Absaloka Mine sells its coal in the rail market to utilities located in the northern tier of the United States that are served by BNSF. These utilities may purchase coal from us or from other producers. We compete with other producers on the basis of price and quality, with the purchasers also taking into account the cost of transporting the coal to their plants. The Absaloka Mine enjoys an approximately 300-mile rail advantage over its principal competitors from the Southern Powder River Basin in supplying customers located in the northern tier. Rail rates have increased over the last several years by 50 to 100%, which increases our competitive advantage. We also believe that the next most economic suppliers to Absaloka’s northern tier customers could be our other mines.
     Material Effects of Regulation
     We are subject to extensive regulation with respect to environmental and other matters by federal, state and local authorities. Federal laws to which we are subject include the Surface Mining Control and Reclamation Act of 1977, or SMCRA, the Clean Air Act, the Clean Water Act, the Toxic Substances Control Act, the Endangered Species Act, the Comprehensive Environmental Response, Compensation and Liability Act, the Emergency Planning and Community Right to Know Act and the Resource Conservation and Recovery Act. The United States Environmental Protection Agency, or EPA, and/or other authorized federal or state agencies administer and enforce these laws. Non-compliance with these laws and regulations could

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subject us to material administrative, civil or criminal penalties or other liabilities, including suspension or termination of operations. In addition, we may be required to make large and unanticipated capital expenditures to comply with applicable laws. Our reclamation obligations under applicable environmental laws will be substantial. Our coal sales agreements contain government impositions provisions that allow the pass-through of compliance costs in some circumstances. The following summarizes certain legal and regulatory matters that we believe may significantly affect us.
     Mine Safety and Health. One of our core values is uncompromised safety. We work towards this core value through: constant training of employees in safe work practices; establishing, following and improving safety standards; participating in mine rescue performance evaluations and other company and industry-sponsored mine safety activities and conferences; and recording, reporting and investigating all accidents, incidents and losses to avoid reoccurrence. A portion of the annual performance incentives for mine supervisory employees at our mines is tied to their safety performance.
     We received state and industry safety awards during the year, including both the large and small mine Governor’s Safety and Health Award from the state of Montana. During 2010, we continued to maintain reportable and lost time incident rates significantly below national averages as indicated in the table below.
                 
    2010  
    Lost Time Rate     Reportable Rate  
     
WCC Mines
     0.88       1.31  
National Surface Mines
     1.23       1.83  
     Following passage of The Mine Improvement and New Emergency Response Act of 2006 (The Miner Act), the U.S. Mine Safety and Health Administration (MSHA), significantly increased the enforcement of safety and health standards and imposed safety and health standards on all aspects of mining operations. There has also been a dramatic increase in the dollar penalties assessed for citations issued over the past two years. Most of the states in which we operate have inspection programs for mine safety and health. Collectively, federal and state safety and health regulations in the coal mining industry are perhaps the most comprehensive and pervasive systems for protection of employee health and safety affecting any segment of U.S. industry.
     Surface Mining Control and Reclamation Act. SMCRA establishes minimum national operational, reclamation and closure standards for all surface coal mines. SMCRA requires that comprehensive environmental protection and reclamation standards be met during the course of and following completion of coal mining activities. Permits for all coal mining operations must be obtained from the Federal Office of Surface Mining Reclamation and Enforcement, or OSM, or, where state regulatory agencies have adopted federally approved state programs under SMCRA, the appropriate state regulatory authority. States that operate federally approved state programs may impose standards that are more stringent than the requirements of SMCRA and OSM’s regulations and, in many instances, have done so. Permitting under SMCRA has generally become more difficult in recent years, which adversely affect the cost and availability of coal purchased by ROVA, especially in light of significant permitting issues affecting the Central Appalachia region. This difficulty in permitting also affects the availability of coal reserves at our coal mines.
     We do not believe there are any matters that pose a material risk to maintaining our existing mining permits or materially hinder our ability to acquire future mining permits. It is our policy to comply in all material respects with the requirements of the SMCRA and the state and tribal laws and regulations governing mine reclamation.
     Clean Air Act and Related Regulations. The federal Clean Air Act and similar state laws and regulations affect coal mining, coal handling and processing and energy production primarily through permitting and/or emissions control requirements. For example, regulations relating to fugitive dust and coal combustion emissions could restrict our ability to develop new mines or require us to modify our operations. The Clean Air Act also extensively regulates the air emissions of coal fired electric power generating plants such as ROVA and plants operated by our coal customers. Coal contains impurities, such as sulfur, mercury and other constituents, many of which are released into the air when coal is burned. The Clean Air Act and similar legislation regulate these emissions and therefore affect demand for our coal. In particular, our mines do not produce “compliance coal” for purposes of the Clean Air Act. Compliance coal is coal containing 1.2 pounds or less of sulfur dioxide per million British thermal unit, or Btu. This restricts our ability to sell coal to

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power plants that do not utilize sulfur dioxide emission controls and otherwise leads to a price discount based, in part, on the market price for sulfur dioxide emission allowances under the Clean Air Act. Our coal also contains about fifty percent more ash content than our primary competitors, which can translate into a cost disadvantage where post-combustion coal ash must be land filled.
     While new regulations under the Clean Air Act or similar statutes could increase market prices for sulfur dioxide emission allowances and therefore the price discount applied to our coal, they could also cause power plants to retrofit sulfur dioxide emission controls, therefore expanding our market potential. Higher costs for complying with coal ash regulations could also result in a higher price discount for our open market coal.
     We are at particular risk of changes in applicable environmental laws with respect to the Jewett Mine, whose customer, the NRG Texas Power-Limestone Station, blends our lignite with compliance coal from Wyoming. Tightened nitrogen oxide and new mercury emission standards could result in an increased blend of the Wyoming coal to reduce emissions. Further, increased market prices for sulfur dioxide emissions and increased coal ash costs could also favor an increased blend of the lower ash Wyoming compliance coal. In such a case, NRG Texas Power has the option to increase its purchases of other coal, reduce purchases of our coal, or to terminate our contract. If NRG terminates the contact, sales of lignite would end and the Jewett Mine would commence final reclamation activities. NRG would pay for all reclamation work plus a margin.
     Bonding Requirements. Federal and state laws require mine operators to assure, usually through the use of surety bonds, payment of certain long-term obligations, including the costs of mine closure and the costs of reclaiming the mined land. The costs of these bonds have fluctuated in recent years, and the market terms of surety bonds have generally become more unfavorable to mine operators. Surety providers are requiring greater percentages of collateral to secure a bond, which has required us to provide increasing quantities of cash to collateralize bonds to allow us to continue mining. These changes in the terms of the bonds have been accompanied, at times, by a decrease in the number of companies willing to issue surety bonds. As of December 31, 2010, we have posted an aggregate of $230.4 million in surety bonds for reclamation purposes, with approximately $27.5 million of cash collateral.
     Resource Conservation and Recovery Act. We may generate wastes, including ''solid’’ wastes and ''hazardous’’ wastes that are subject to the federal Resource Conservation and Recovery Act, or RCRA, and comparable state statutes, although certain mining and mineral beneficiation wastes and certain wastes derived from the combustion of coal currently are exempt from regulation as hazardous wastes under RCRA. The EPA has limited the disposal options for certain wastes that are designated as hazardous wastes under RCRA. Furthermore, it is possible that certain wastes generated by our operations that currently are exempt from regulation as hazardous wastes may in the future be designated as hazardous wastes, and therefore be subject to more rigorous and costly management, disposal and clean-up requirements.
     Comprehensive Environmental Response, Compensation, and Liability Act. Under the Comprehensive Environmental Response, Compensation, and Liability Act, also known as CERCLA or Superfund, and similar state laws, responsibility for the entire cost of cleanup of a contaminated site, as well as natural resource damages, can be imposed upon current or former site owners or operators, or upon any party who released one or more designated ''hazardous substances’’ at the site, regardless of the lawfulness of the original activities that led to the contamination. CERCLA also authorizes the EPA and, in some cases, third parties to take actions in response to threats to public health or the environment and to seek to recover from the potentially responsible parties the costs of such action. In the course of our operations, we may have generated and may generate wastes that fall within CERCLA’s definition of hazardous substances. We may also be an owner or operator of facilities at which hazardous substances have been released by previous owners or operators. We may be responsible under CERCLA for all or part of the costs of cleaning up facilities at which such substances have been released and for natural resource damages. We have not, to our knowledge, been identified as a potentially responsible party under CERCLA, nor are we aware of any prior owners or operators of our properties that have been so identified with respect to their ownership or operation of those properties. We also must comply with reporting requirements under the Emergency Planning and Community Right-to-Know Act and the Toxic Substances Control Act.
     Climate Change Legislation and Regulations. Numerous proposals for federal and state legislation have been made relating to greenhouse gas, or GHG, emissions (including carbon dioxide) and such legislation could result in the creation of substantial additional costs in the form of taxes or required acquisition or trading of emission allowances. Many of the federal and state climate change legislative proposals use a “cap and

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trade” policy structure, in which GHG emissions from a broad cross-section of the economy would be subject to an overall cap. Under the proposals, the cap would become more stringent with the passage of time. The proposals establish mechanisms for GHG sources such as power plants to obtain “allowances” or permits to emit GHGs during the course of a year. The sources may use the allowances to cover their own emissions or sell them to other sources that do not hold enough emissions for their own operations.
     In addition, the EPA has issued a notice of finding and determination that emissions of carbon dioxide, methane and other GHGs present an endangerment to human health and the environment, which allows the EPA to begin regulating emissions of GHGs under existing provisions of the federal Clean Air Act. The EPA has begun to implement GHG-related reporting and permitting rules.
     The impact of GHG-related legislation and regulations, including a “cap and trade” structure, on us will depend on a number of factors, including whether GHG sources in multiple sectors of the economy are regulated, the overall GHG emissions cap level, the degree to which GHG offsets are allowed, the allocation of emission allowances to specific sources and the indirect impact of carbon regulation on coal prices. We may not recover the costs related to compliance with regulatory requirements imposed on us from our customer due to limitations in our agreements.
     Passage of additional state or federal laws or regulations regarding GHG emissions or other actions to limit carbon dioxide emissions could result in fuel switching from coal to other fuel sources by electricity generators and thereby reduce demand for our coal or indirectly the prices we receive in general. In addition, political and regulatory uncertainty over future emissions controls have been cited as major factors in decisions by power companies to postpone new coal-fired power plants. If these or similar measures, such as controls on methane emissions from coal mines, are ultimately imposed by federal or state governments or pursuant to international treaties, our operating costs may be materially and adversely affected. In addition, alternative sources of power, including wind, solar, nuclear and natural gas could become more attractive than coal in order to reduce carbon emissions, which could result in a reduction in the demand for coal and, therefore, our revenues. Similarly, some of our customers, in particular smaller, older power plants, could be at risk of significant reduction in coal burn or closure as a result of imposed carbon costs. The imposition of a carbon tax or similar regulation could, in certain situations, lead to the shutdown of coal-fired power plants, which would materially and adversely affect our coal and power plant revenues.
Power Segment
     General
     We own two coal-fired power-generating units in Weldon, North Carolina with a total capacity of approximately 230 megawatts, which we refer to collectively as ROVA. ROVA, which commenced operations in 1994, was built as a Public Utility Regulatory Policies Act co-generation facility with long-term power purchase agreements with Dominion Virginia Power. While we initially structured the project as a joint venture where we owned a 50% interest in the partnership that owned ROVA, we acquired the other 50 percent partnership interest in ROVA in 2006, bringing our ownership interest in the ROVA project to 100 percent. ROVA was reclassified as an Electric Wholesale Generator, a Federal Energy Regulatory Commission classification created by the Energy Policy Act of 1992. Westmoreland Partners has fully encumbered all property pursuant to the Parent Notes. The Parent Notes also allow us to enter into a revolving line of credit collateralized, in part, by the accounts receivable and inventory at ROVA.
     The following table shows megawatt hours produced and average annual capacity factors achieved at ROVA for the last three years:
                 
Year   Megawatt Hours     Capacity Factor  
2010
     1,620,000       88 %
2009
     1,486,000       81 %
2008
     1,641,000       89 %

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     In 2009, ROVA experienced a planned major maintenance outage, which occurs every five years.
     Coal Supply
     ROVA purchases coal under long-term contracts from coal suppliers with identified reserves located in Central Appalachia, with contracts expiring in 2014 and 2015.
     Customer
     ROVA supplies power to Dominion Virginia Power under long-term contracts, which expire in 2019 and 2020. We can extend, by mutual consent, the contracts with Dominion Virginia Power for five-year terms at mutually agreeable pricing. In 2010, the sale of power to Dominion Virginia Power accounted for approximately 17% of our consolidated revenues.
     Material Effects of Regulation
     For a thorough discussion of the extensive regulation with respect to environmental and other matters by federal, state and local authorities affecting our power segment, see Item 1 under “Coal Segment -Material Effects of Regulation.”
     With respect to our power segment, ROVA is among the newer and cleaner coal-fired power plants in the United States. Under Title IV of the Clean Air Act, it is exempted from, but may opt-in to receive allocations of sulfur dioxide emission allowances. The plants are among the lowest coal-fired emitters of mercury in the country. We are evaluating whether ROVA could be a net consumer or seller of mercury allowances under new and pending regulations. Currently, ROVA is a consumer of sulfur dioxide allowances and nitrogen oxide credits, and we expect an increase in costs associated with nitrogen oxide allowances at ROVA. With regard to coal ash regulations, ROVA both remarkets and landfills its combustion waste. Landfills are lined and meet strict North Carolina Department of Solid Waste regulations.
     An important factor relating to the impact of GHG-related legislation and regulations on our power segment will be our ability to recover the costs incurred to comply with any regulatory requirements that are ultimately imposed. We may not recover the costs related to compliance with regulatory requirements imposed on us due to limitations in our power purchase agreements. If we are unable to pass through such costs incurred by ROVA to Dominion Virginia Power or recoup them in another manner such as through allowances, it could have a material adverse effect on our results of operations at ROVA.
Heritage Segment
     Our heritage segment costs consist primarily of payments for various types of postretirement medical benefits. Distributions from our operating subsidiaries fund these collective heritage obligations.
     As we modernized in 2010 how we provide prescription drug benefits to retirees, we significantly reduced our heritage health benefit expenditures.
     We continue to explore ways to further reduce or eliminate other portions of our benefits costs incurred as a consequence of our former operations.
Corporate Segment
     The corporate segment consists primarily of costs for our corporate administrative expenses. In addition, the corporate segment contains our captive insurance company.
     We have elected to retain some of the risks associated with operating our company through a wholly owned, consolidated insurance subsidiary, Westmoreland Risk Management Ltd., or WRM. WRM, a Bermuda corporation, provides our primary layer of property and casualty insurance. By using this insurance subsidiary, we have reduced the cost of our property and casualty insurance premiums and retained some economic benefits due to our excellent loss record. We reduce our major exposure by insuring for losses in excess of our retained limits with a number of third-party insurance companies. In January 2011, the board of directors of the captive voted to redomesticate the captive to the state of Montana. We are currently in the process of completing such redomestication.

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     Except for the assets of WRM, all of our assets are located in the United States. We had no export sales and derived no revenues from outside the United States during the five-year period ended December 31, 2010.
Legal Proceedings
     We are subject, from time-to-time, to various proceedings, lawsuits, disputes, and claims (“Actions”) arising in the ordinary course of our business. Many of these Actions raise complex factual and legal issues and are subject to uncertainties. We cannot predict with assurance the outcome of Actions brought against us. Accordingly, adverse developments, settlements, or resolutions may occur and negatively impact income in the quarter of such development, settlement, or resolution. However, we do not believe that the outcome of any current Action would have a material adverse effect on our financial results.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
     The following discussion should be read in conjunction with the historical financial statements and other financial information appearing elsewhere in this prospectus, including “Selected Historical Financial Data.” The following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this prospectus, particularly in “Risk Factors.” All references to years relate to the calendar year ended December 31 of the particular year.
Overview
     Westmoreland Coal Company is an energy company employing 1,081 employees whose operations include five surface coal mines in Montana, North Dakota and Texas and two coal-fired power-generating units with a total capacity of approximately 230 megawatts in North Carolina. We sold 25.2 million tons of coal in 2010. Our two principal operating segments are our coal segment and our power segment, in addition to two non-operating segments.
     We are a holding company and conduct our operations through subsidiaries, which generally have obtained separate financing. As a holding company, we have significant cash requirements to fund our ongoing heritage health benefit costs, pension contributions, and corporate overhead expenses. The principal sources of cash flow to us are distributions from our principal operating subsidiaries. Following the Parent Notes offering discussed below, we now have cash on hand in excess of $45 million. The Parent Notes offering permits us to enter into a revolving credit facility at the Parent.
Recent Developments
     In February 2011, we completed a private placement of $150.0 million of senior secured notes due in 2018. The net proceeds from the offering of the Parent Notes were used to pay all dividend arrearages on our Series A preferred stock, to repay all outstanding term and revolving line of credit debt at ROVA and WRI, to retire approximately $2.5 million of the outstanding principal owed on the senior secured convertible notes (the remaining principal balance of the senior secured convertible notes was converted to common stock) and for general corporate purposes.
Legislation Enacted
     On July 21, 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act. The legislation, among other matters, requires mining companies to provide specific detailed information on health and safety violations on a mine-by-mine basis, and will require disclosure of payments made to foreign governments and the Federal Government to further the commercial development of minerals. Regulations regarding government payment disclosures have not yet been adopted.
Healthcare Reform
     In March 2010, the Patient Protection and Affordable Care Act, or PPACA was enacted, potentially impacting our costs to provide healthcare benefits to our active and retired employees and benefits related to

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black lung. The PPACA has both short-term and long-term implications on healthcare benefit plan standards. Implementation of this legislation is planned to occur in phases, with plan standard changes taking effect beginning in 2010, but to a greater extent with the 2011 benefit plan year and extending through 2018. Beginning in 2018, the PPACA will impose a 40% excise tax on employers to the extent that the value of their healthcare plan coverage exceeds certain dollar thresholds. As a result, we have increased our postretirement medical benefit obligation at December 31, 2010 by $6.9 million with a corresponding increase in Accumulated other comprehensive loss.
     The PPACA reduces the tax benefits available to an employer that receives the Medicare Part D subsidy beginning in years ending after December 31, 2010. As a result of the PPACA, employers that receive the Medicare Part D subsidy will recognize the deferred tax effects of the reduced deductibility of the postretirement prescription drug coverage in the period in which the PPACA was enacted. Also in March 2010, a companion bill, the Reconciliation Act, was signed into law. The Reconciliation Act reduces the effect of the PPACA on affected employers by deferring for two years (until years ending after December 31, 2012) the reduced deductibility of the postretirement prescription drug coverage. Accounting for income taxes requires that the effect of adjusting the deferred tax asset for the elimination of this deduction be included in income from continuing operations. However, entities that have a full valuation allowance for this deferred tax asset would recognize a related decrease in the valuation allowance. As we have a full valuation allowance against the related deferred tax asset, this change in tax law regarding the Medicare Part D subsidy will not have an effect on our income from continuing operations. In addition, this change in the tax deduction does not affect the pre-tax expense or corresponding liability for postretirement prescription drug benefits.
     The PPACA also amended previous legislation related to black lung disease, providing automatic extension of awarded lifetime benefits to surviving spouses and providing changes to the legal criteria used to assess and award claims. Since the legislation passed on March 23, 2010, we have experienced a significant increase in claims filed compared to the corresponding period in prior years. However, we have not been able to determine what, if any, additional impact may result from these claims due to lack of claims experience under the new legislation and court rulings interpreting the new provisions.
We will continue to evaluate the impact of the PPACA in future periods as additional information, interpretations, guidance and claims experience becomes available.
Results of Operations — Three Months Ended March 31, 2011 Compared to Three Months Ended March 31, 2010
Items that Affect Comparability of Our Results
     For the three months ended March 31, 2011 and 2010, our results have included items that do not relate directly to ongoing operations. The expense components of these items were as follows:
                 
    Three Months Ended  
    March 31,  
    2011     2010  
    (In thousands)  
Loss on extinguishment of debt
   $ (17,030 )   $ —  
Fair value adjustment on derivatives and related amortization of debt discount
     (3,215 )     (4,824 )
 
            
Impact
   $ (20,245 )   $ (4,824 )
 
            
     Items recorded in the three months ended March 31, 2011
  •   As a result of the Parent Notes offering, we recorded $17.0 million of loss on extinguishment of debt. The loss included a $9.1 million make-whole payment for ROVA’s debt and $7.9 million of non-cash write-offs of unamortized discount on debt and related capitalized debt costs and convertible debt conversion expense.
 
  •   Upon the retirement of our convertible debt, we recorded an expense of $3.1 million resulting from the mark-to-market accounting for the conversion feature in the notes with $0.1 million of interest expense of a related debt discount.

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     Items recorded in the three months ended March 31, 2010
  •   We recorded an expense of $4.5 million resulting from the mark-to-market accounting of the conversion feature in our convertible notes with $0.3 million of interest expense of a related debt discount.
Three Months Ended March 31, 2011 Compared to Three Months Ended March 31, 2010
     Summary
     Our first quarter 2011 revenues increased to $127.8 million compared with $126.4 million in the first quarter of 2010. This increase was partly driven by an increase in our coal segment revenues due to stronger tonnage sales at our Absaloka Mine which offset the expiration of an unprofitable coal contract at our Rosebud Mine. In addition, our power segment revenues increased primarily from contractual price increases.
     Our first quarter 2011 net loss applicable to common shareholders increased to $18.0 million compared with a $3.2 million loss in the first quarter of 2010. Excluding $20.2 million of first quarter 2011 expenses and $4.8 million of first quarter 2010 expenses discussed in Items that Affect Comparability of Our Results, our net loss decreased by $0.6 million. The primary factors, in aggregate, driving this decrease in net loss were:
         
    Three Months
    Ended
    March 31, 2011
    (In millions)
Increase in our coal segment operating income primarily driven by the expiration of an unprofitable coal contract at our Rosebud Mine
  $ 1.5  
 
        
Increase in interest expense primarily due to higher overall debt levels resulting from the Parent Notes offering
    (1.4 )
 
        
Decrease in other income primarily due to gains on sales of securities during the first quarter of 2010
    (0.6 )
 
        
Increase in our power segment operating income resulting primarily from contractual price increases
    0.4  
 
        
Increase in income tax benefit related to lower taxable income
    0.4  
 
        
Increase due to other factors
    0.3  
 
       
 
  $ 0.6  
 
       

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     Coal Segment Operating Results
     The following table shows comparative coal revenues, operating income (loss) and sales volume and percentage changes between periods:
                                 
            Three Months Ended March 31,          
                    Increase / (Decrease)  
    2011     2010     $     %  
     
Revenues (in thousands)
   $ 104,136     $ 103,550     $ 586       0.6 %
Operating income (in thousands)
     8,819       7,352       1,467       20.0 %
Adjusted EBITDA (in thousands)1
     21,285       20,237       1,048       5.2 %
Tons sold — millions of equivalent tons
     5.6       6.3       (0.7 )     (11.1 )%
Operating income per ton sold
   $ 1.57     $ 1.17     $ 0.40     $ 34.9 %
 
1)   Adjusted EBITDA is defined and reconciled to net loss at the end of this “Results of Operations” section.
     Our first quarter 2011 coal segment revenues increased to $104.1 million compared with $103.6 million in the first quarter of 2010. This $0.6 million increase was primarily due to stronger tonnage sales at our Absaloka Mine which offset the expiration of an unprofitable coal contract at our Rosebud Mine.
     Our coal segment operating income was $8.8 million in the first quarter of 2011 compared to $7.4 million in the first quarter of 2010. This $1.5 million increase was primarily driven by the expiration of an unprofitable coal contract at our Rosebud Mine discussed above.
     We expect that coal tons delivered over the remainder of 2011 may decrease as a result of favorable hydropower condition, which may displace our customers’ coal-generated power.
     Power Segment Operating Results
     The following table shows comparative power revenues, operating income, production and percentage changes between periods:
                                 
    Three Months Ended March 31,  
                    Increase / (Decrease)  
    2011     2010     $     %  
    (In thousands)  
Revenues
   $ 23,628     $ 22,889     $ 739       3.2 %
Operating income
     4,619       4,172       447       10.7 %
Adjusted EBITDA1
     7,352       6,881       471       6.8 %
Megawatts hours
     435       435       —       —  
 
1)   Adjusted EBITDA is defined and reconciled to net loss at the end of this “Results of Operations” section.
     Our first quarter 2011 power segment revenues increased to $23.6 million compared to $22.9 million in first quarter 2010. This $0.7 million increase is primarily from contractual price increases.
     Our power segment operating income increased to $4.6 million in the first quarter of 2011 compared to $4.2 million in the first quarter of 2010. This $0.4 million increase was primarily from the contractual price increases discussed above.

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     Heritage Segment Operating Results
     The following table shows comparative detail of the heritage segment’s operating expenses and percentage changes between periods:
                                 
    Three Months Ended March 31,  
                    Increase / (Decrease)  
    2011     2010     $     %  
            (In thousands)  
Health care benefits
   $ 2,454     $ 2,676     $ (222 )     (8.3 )%
Combined benefit fund payments
     686       756       (70 )     (9.3 )%
Workers’ compensation benefits
     158       136       22       16.2 %
Black lung benefits
     480       347       133       38.3 %
 
                        
Total heritage health benefit expenses
     3,778       3,915       (137 )     (3.5 )%
 
                                
Selling and administrative costs
     392       340       52       15.3 %
 
                        
Heritage segment operating loss
   $ 4,170     $ 4,255     $ (85 )     (2.0 )%
 
                        
     Our first quarter 2011 heritage operating expenses of $4.2 million was comparable to $4.3 million in the first quarter of 2010.
     Corporate Segment Operating Results
     Our corporate segment operating expenses for the first quarter of 2011 of $1.8 million was comparable to $1.9 million in the first quarter of 2010.
     Nonoperating Results (including interest expense, other income (expense) and income tax benefit)
     Our interest expense for the first quarter of 2011 increased to $7.0 million compared with $5.7 million for the first quarter of 2010. This increase was primarily due to the higher overall debt levels resulting from the Parent Notes offering.
     Our other expense for the first quarter of 2011 decreased to $3.0 million compared with $3.8 million of expense for the first quarter of 2010. Excluding the $1.4 million impact of the fair value adjustment on derivatives discussed in Items that Affect Comparability of Our Results, our other expense increased $0.6 million primarily due to gains on sales of securities during the first quarter of 2010.
     Our income tax benefit for the first quarter of 2011 increased to $0.5 million compared with $0.1 million for the first quarter of 2010. This increase was due to lower taxable income.
     Reconciliation of Adjusted EBITDA to Net Loss
     The discussion in “Results of Operations” in 2011 and 2010 includes references to our Adjusted EBITDA results. EBITDA and Adjusted EBITDA are supplemental measures of financial performance that are not required by, or presented in accordance with, GAAP. EBITDA and Adjusted EBITDA are key metrics used by us to assess our operating performance and we believe that EBITDA and Adjusted EBITDA are useful to an investor in evaluating our operating performance because these measures:
  •   are used widely by investors to measure a company’s operating performance without regard to items excluded from the calculation of such terms, which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired, among other factors; and
 
  •   help investors to more meaningfully evaluate and compare the results of our operations from period to period by removing the effect of our capital structure and asset base from our operating results.

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     Neither EBITDA nor Adjusted EBITDA is a measure calculated in accordance with GAAP. The items excluded from EBITDA and Adjusted EBITDA are significant in assessing our operating results. EBITDA and Adjusted EBITDA have limitations as analytical tools, and should not be considered in isolation from, or as a substitute for, analysis of our results as reported under GAAP. For example, EBITDA and Adjusted EBITDA:
  •   do not reflect our cash expenditures, or future requirements for capital and major maintenance expenditures or contractual commitments;
 
  •   do not reflect income tax expenses or the cash requirements necessary to pay income taxes;
 
  •   do not reflect changes in, or cash requirements for, our working capital needs; and
 
  •   do not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on certain of our debt obligations.
     In addition, although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements. Other companies in our industry and in other industries may calculate EBITDA and Adjusted EBITDA differently from the way that we do, limiting their usefulness as comparative measures. Because of these limitations, EBITDA and Adjusted EBITDA should not be considered as measures of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results and using EBITDA and Adjusted EBITDA only as supplemental data.
     The tables below show how we calculate EBITDA and Adjusted EBITDA, including a breakdown by segment for Adjusted EBITDA.
                 
    Three Months Ended March 31,  
    2011     2010  
    (In thousands)  
Reconciliation of Adjusted EBITDA to net loss
                
Net loss
   $ (18,732 )   $ (3,745 )
 
                
Income tax benefit from continuing operations
     (460 )     (90 )
Other loss
     3,017       3,836  
Interest income
     (382 )     (410 )
Loss on extinguishment of debt
     17,030       —  
Interest expense
     6,967       5,723  
Depreciation, depletion and amortization
     11,245       11,392  
Accretion of ARO and receivable
     2,700       3,003  
Amortization of intangible assets and liabilities
     163       85  
 
            
EBITDA
     21,548       19,794  
 
                
Loss on sale of assets
     83       71  
Share-based compensation
     1,653       1,363  
 
            
Adjusted EBITDA
   $ 23,284     $ 21,228  
 
            
                 
    Three Months Ended March 31,  
    2011     2010  
    (In thousands)  
Adjusted EBITDA by Segment
                
Coal
   $ 21,285     $ 20,237  
Power
     7,352       6,881  
Heritage
     (4,170 )     (4,255 )
Corporate
     (1,183 )     (1,635 )
 
            
Total
   $ 23,284     $ 21,228  
 
            

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Results of Operations — Years Ended December 31, 2010, 2009 and 2008
     Items that Affect Comparability of Our Results
     For 2010 and each of the prior two years, our results have included items that do not relate directly to ongoing operations. The income (expense) components of these items were as follows:
                         
Year Ended December 31,   2010     2009     2008  
            (In thousands)          
Fair value adjustment on derivative and related amortization of debt discount
   $ (4,840 )   $ 5,076     $ —  
Heritage legal claim settlement
     —       756       —  
Reclamation claim
     —       (4,825 )     —  
Beneficial conversion feature interest expense
     —       —       (8,146 )
Loss on extinguishment of WML debt
     —       —       (3,834 )
Loss on extinguishment of ROVA debt
     —       —       (1,344 )
Settlement of coal royalty dispute
     —       —       (2,635 )
Gain on sale of interest in Ft. Lupton power project
     —       —       876  
Restructuring charges
     —       —       (2,009 )
 
                  
Impact (pre-tax)
   $ (4,840 )   $ 1,007     $ (17,092 )
 
                  
 
                        
Tax effect of other comprehensive income gains
   $ —     $ 17,062     $ —  
 
                  
     Items recorded in 2010
  •   We recorded expense of $3.4 million resulting from the mark-to-market accounting of the conversion feature in our convertible notes, primarily due to an increase in our stock price during 2010, with $1.4 million of interest expense of a related debt discount.
     Items recorded in 2009
  •   We recorded an income tax benefit of $17.1 million related to a tax effect of other comprehensive income gains, primarily related to a decrease in our postretirement medical obligations.
 
  •   We recorded income of $6.1 million resulting from the mark-to-market accounting of the conversion feature in our convertible notes and a decrease in the value of our warrant offset with $1.0 million of interest expense of a related debt discount.
 
  •   We recorded a gain of $0.8 million related to a settlement of past heritage claims, as a result of efforts to reduce our heritage costs.
 
  •   We recorded $4.8 million in net expense related to the settlement of the reclamation claim at our Rosebud Mine. This included a $6.5 million reduction in revenue, offset with a $1.7 million reduction in cost of sales.
     Items recorded in 2008
  •   We recorded $8.1 million of expense related to the beneficial conversion feature in the convertible notes we issued in March 2008, as the conversion price was lower than the fair market value of our common stock at the time of issuance.
 
  •   We refinanced both our WML and ROVA debt during 2008 and as a result recorded losses of $3.8 million and $1.3 million, respectively, for the extinguishment of debt.
 
  •   We recorded $2.6 million in net expense related to two coal royalty claims as we reached an agreement with the U.S. Minerals Management Service and the Montana Department of Revenue

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      to settle two long-standing disputes. This included $12.8 million of cost of sales, offset with $10.2 million of revenue.
 
  •   On July 2, 2008, we received $0.9 million for our royalty interest in the gas-fired Ft. Lupton project and recognized a gain of $0.9 million on the sale.
 
  •   In 2007, we initiated a restructuring plan in order to reduce the overall cost structure of the Company. As a result, in 2008 we recorded restructuring charges of $2.0 million. Most of the restructuring charges related to termination benefits, outplacement costs, and lease costs related to the consolidation of corporate office space.
     2010 Compared to 2009
     Summary
     Our revenues for 2010 increased to $506.1 million compared with $443.4 million in 2009. This increase was primarily driven by a $56.9 million increase in our coal segment revenues due to price increases under existing coal supply agreements and the commencement of new agreements including the new cost-plus contract with our Rosebud Mine’s Unit 1&2 buyers. Additionally in 2009, we experienced customer shutdowns at our Rosebud and Beulah Mines, whereas comparable shutdowns did not occur during 2010. We refer to these shutdowns as “the 2009 customer shutdowns.” In addition, our power segment revenues increased $5.8 million related to an increase in megawatt hours sold as a result of a planned major maintenance outage, which occurs every five years, and a significant unplanned outage, both of which occurred in 2009. No comparable outages occurred in 2010.
     Our net loss applicable to common shareholders for 2010 decreased to $1.9 million compared with a $28.7 million loss in 2009. Excluding the $4.8 million of expense in 2010 and the $18.1 million of income in 2009 discussed in Items that Affect Comparability of Our Results, our net loss decreased by $49.7 million during 2010. The primary factors, in aggregate, driving this decrease in net loss were:
         
    2010  
    (In millions)  
Increase in coal segment operating income driven by price increases, new agreements, 2009 customer shutdowns, and strong cost management performance at several mines
   $ 27.6  
Decrease in heritage segment operating costs primarily due to the agreement we entered into to modernize how we provide prescription drug benefits to retirees
     16.6  
Increase in our power segment operating income due to increased megawatt hours sold and decreased maintenance expenses due to planned and unplanned maintenance outages, with no comparable outages occurring in 2010
     4.0  
Increase in the noncontrolling interest adjustment to reduce losses from a partially owned consolidated coal segment subsidiary
     0.8  
Gain on sale of securities
     0.7  
 
      
Total
   $ 49.7  
 
      

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     Coal Segment Operating Results
     The following table shows comparative coal revenues, operating income and sales volume, and percentage changes between periods:
                                 
    Year Ended December 31,  
                    Increase / (Decrease)  
    2010     2009     $     %  
    (In thousands)  
Revenues
   $ 418,058     $ 361,206     $ 56,852       15.7 %
Operating income
     32,922       476       32,446       6816.4 %
Adjusted EBITDA(1)
     81,681       51,207       30,474       59.5 %
Tons sold — millions of equivalent tons
     25.2       24.3       0.9       3.7 %
Operating income per ton sold
   $ 1.31     $ 0.02     $ 1.29       6568.9 %
 
(1)   Adjusted EBITDA is defined and reconciled to net loss at the end of this “Results of Operations” section.
     Our coal segment revenues for 2010 increased to $418.1 million compared with $361.2 million in 2009. This $56.9 million increase occurred primarily from the 0.9 million increase in tons sold due to the 2009 customer shutdowns, price increases under existing coal supply agreements, and the start of new agreements including the new cost-plus contract with our Rosebud Mine’s Unit 1&2 buyers.
     Our coal segment operating income increased to $32.9 million in 2010 compared to $0.5 million in 2009. Excluding the $4.8 million related to the 2009 reclamation claim discussed in Items that Affect Comparability of Our Results, our coal segment operating income increased by $27.6 million. This increase was primarily driven by the factors increasing revenue described above as well as strong cost management performance by several of our mines.
     Power Segment Operating Results
     The following table shows comparative power revenues, operating income and production and percentage changes between periods:
                                 
    Year Ended December 31,  
                    Increase / (Decrease)  
    2010     2009     $     %  
    (In thousands)  
Revenues
   $ 87,999     $ 82,162     $ 5,837       7.1 %
Operating income
     11,721       7,672       4,049       52.8 %
Adjusted EBITDA(1)
     22,664       18,117       4,547       25.1 %
Megawatts hours
     1,620       1,486       134       9.0 %
 
(1)   Adjusted EBITDA is defined and reconciled to net loss at the end of this “Results of Operations” section.
     Our power segment revenues for 2010 increased to $88.0 million compared to $82.2 million in 2009. This $5.8 million increase occurred primarily from an increase in megawatt hours sold as a result of a planned major maintenance outage, which occurs every five years, and a significant unplanned outage, both of which occurred in 2009. No comparable outages occurred in 2010.
     Our power segment operating income increased to $11.7 million in 2010 compared to $7.7 million in 2009. This $4.0 million increase was primarily from increased megawatt hours sold and decreased maintenance expenses as a result of the planned and unplanned maintenance outages discussed above.

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     Heritage Segment Operating Results
     The following table shows comparative detail of the heritage segment’s expenses and percentage changes between periods:
                                 
    Year Ended December 31,  
                    Increase / (Decrease)  
    2010     2009     $     %  
    (In thousands)  
Health care benefits
   $ 9,927     $ 22,490     $ (12,563 )     (55.9 )%
Combined benefit fund payments
     2,953       3,132       (179 )     (5.7 )%
Workers’ compensation benefits (credits)
     81       (485 )     566       116.7 %
Black lung benefits
     1,460       2,937       (1,477 )     (50.3 )%
 
                        
Total heritage health benefit expenses
     14,421       28,074       (13,653 )     (48.6 )%
 
                                
Selling and administrative costs
     1,547       3,696       (2,149 )     (58.1 )%
 
                        
Heritage segment operating loss
   $ 15,968     $ 31,770     $ (15,802 )     (49.7 )%
 
                        
     Our heritage segment operating expenses for 2010 were $16.0 million compared to $31.8 million in 2009. Excluding the heritage legal claim settlement of $0.8 million in 2009 discussed in Items that Affect Comparability of Our Results, our heritage segment operating expenses decreased by $16.6 million. This decrease was primarily due to the agreement we entered into to modernize how we provide prescription drug benefits to our retirees. In addition, while we continue to work towards further heritage cost reductions, selling and administrative costs decreased due to reduced cost containment expenses. Finally, we experienced a favorable change in the valuation of our Black Lung liabilities due to changes in discount rates.
     Corporate Segment Operating Results
     Our corporate segment operating expenses for 2010 remained consistent with expenses for 2009.
Nonoperating Results (including other income (expense), income tax benefit, and net loss attributable to noncontrolling interest)
     Our other expense for 2010 increased to $23.8 million compared with $14.5 million of expense for 2009. This is primarily due to the $9.9 million impact of the fair value adjustment on derivatives and related amortization of debt discount discussed in Items that Affect Comparability of Our Results.
     Our income tax benefit was $0.1 million in 2010 compared with $17.1 million in 2009. Excluding the $17.1 million tax effect of other comprehensive income gains discussed in Items that Affect Comparability of our Results, our income tax benefit remained consistent with 2009.
     Our net loss attributable to noncontrolling interest in 2010 was $2.6 million compared to $1.8 million in 2009. This increase was due to an increase in the noncontrolling interest adjustment to reduce losses from a partially owned consolidated coal segment subsidiary.
     2009 Compared to 2008
     Summary
     Our revenues for 2009 decreased to $443.4 million compared with $509.7 million in 2008. This decrease was primarily driven by a $58.6 million decrease in our coal segment revenues, which includes approximately $41.9 million as a result of reduced tonnages sold due to the customer outages and unfavorable current energy market conditions, approximately $6.5 million of revenue reversed related to a reclamation claim, and approximately $10.2 million of 2008 revenue recognized related to the settlement of coal royalty claims. In addition, our power segment revenues decreased $7.7 million related to a decrease in megawatt hours sold.

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     Our net loss applicable to common shareholders for 2009 decreased to $28.7 million compared with a $49.9 million loss in 2008. Excluding $18.1 million of income in 2009 and the $17.1 million of expenses in 2008 discussed in Items that Affect Comparability of Our Results, our net loss increased by $13.9 million. The primary factors, in aggregate, driving this increase in net loss were:
         
    2009  
    (In millions)  
Decrease in coal segment operating income driven by reduced tonnages sold due to the 2009 customer shutdowns and unfavorable energy market conditions, partially offset with income from Indian Coal Tax Credit monetization transaction, and losses from a partially owned consolidated subsidiary
   $ (12.7 )
Decrease in our power segment operating income due to reduced megawatt hours sold, increased maintenance expenses due to a planned major maintenance outage and a significant 2009 unplanned outage
     (8.3 )
Decrease in heritage costs due to elimination of postretirement medical benefits for non-represented employees’ costs in the third quarter of 2009, reduced workers compensation expenses due to changes in interest rates and favorable claims experience, offset by an increase in cost containment efforts and unfavorable changes in the valuation of Black Lung benefit’s trust assets and liabilities due to changes in interest rates
     2.9  
Decrease in corporate expenses due to cost control efforts and a reduction in stock compensation expense
     2.7  
Favorable noncontrolling interest adjustment due to losses from a partially owned consolidated subsidiary
     1.8  
Decrease in interest income partially offset with a decrease in interest expense due to debt refinancing and an increase in other income
     (1.3 )
Decrease in income taxes driven by lower state taxable income due to customer outages
     1.0  
 
      
Total
   $ (13.9 )
 
      
     Coal Segment Operating Results
     The following table shows comparative coal revenues, operating income and sales volume, and percentage changes between periods:
                                 
    Year Ended December 31,  
                    Increase / (Decrease)  
    2009     2008     $     %  
    (In thousands)  
Revenues
   $ 361,206     $ 419,806     $ (58,600 )     (14.0 )%
Operating income
     476       15,211       (14,735 )     (96.9 )%
Adjusted EBITDA(1)
     51,207       57,743       (6,536 )     (11.3 )%
Tons sold — millions of equivalent tons
     24.3       29.3       (5.0 )     (17.1 )%
Operating income per ton sold
   $ 0.02     $ 0.52     $ (0.50 )     (96.2 )%
 
(1)   Adjusted EBITDA is defined and reconciled to net loss at the end of this “Results of Operations” section.
     Our coal revenues for 2009 decreased to $361.2 million, compared with $419.8 million in 2008. This decrease occurred primarily from a decrease of 5.0 million tons sold as a result of the customer outages, the reclamation claim recorded in 2009 and settlement of coal royalty claims recorded in 2008. Additionally, due to unfavorable current economic and energy market conditions, our Absaloka and Jewett Mine’s deliveries decreased in 2009.
     Our coal segment’s operating income decreased to $0.5 million in 2009, compared to $15.2 million in 2008. Excluding the $4.8 million related to the anticipated settlement of the reclamation claim, the $2.6 million coal royalty dispute settlement and $0.2 million of restructuring charges discussed in Items that Affect Comparability of Our Results, our coal segment operating income decreased by $12.7 million. Of this decrease, approximately $20.3 million was due to reduced tonnages sold as a result of the customer outages

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and unfavorable current economic and energy market conditions. This decrease was partially offset with approximately $7.6 million of earnings recognized from our Indian Coal Tax Credit monetization transaction.
     Power Segment Operating Results
     The following table shows comparative power revenues, operating income and production and percentage changes between periods:
                                 
    Year Ended December 31,  
                    Increase / (Decrease)  
    2009     2008     $     %  
    (In thousands)  
Revenues
   $ 82,162     $ 89,890     $ (7,728 )     (8.6 )%
Operating income
     7,672       16,920       (9,248 )     (54.7 )%
Adjusted EBITDA(1)
     18,117       26,493       (8,376 )     (31.5 )%
Megawatts hours
     1,486       1,641       (155 )     (9.4 )%
 
(1)   Adjusted EBITDA is defined and reconciled to net loss at the end of this “Results of Operations” section.
     Our power segment revenues for 2009 decreased to $82.2 million compared to $89.9 million in 2008. This decrease was primarily driven by decreased megawatt hours sold as a result of a planned major maintenance outage, which occurs every five years, and a significant unplanned outage, both of which occurred in the fourth quarter of 2009.
     Our power segment’s operating income decreased to $7.7 million in 2009 compared to $16.9 million in 2008. Excluding the 2008 gain on sale of interest in the Ft. Lupton power project of $0.9 million discussed in Items that Affect Comparability of Our Results, our power segment operating income decreased by $8.3 million. This decrease was primarily from reduced megawatt hours sold and increased maintenance expenses as a result of a planned major maintenance outage, which occurs every five years, and a significant unplanned outage, both of which occurred in the fourth quarter of 2009.
     Heritage Segment Operating Results
     The following table shows comparative detail of the heritage segment’s expenses and percentage changes between periods:
                                 
    Year Ended December 31,  
                    Increase / (Decrease)  
    2009     2008     $     %  
    (In thousands)  
Health care benefits
   $ 22,490     $ 25,588     $ (3,098 )     (12.1 )%
Combined benefit fund payments
     3,132       3,470       (338 )     (9.7 )%
Workers’ compensation benefits (credits)
     (485 )     4,417       (4,902 )     (111.0 )%
Black lung benefits (credits)
     2,937       (23 )     2,960       12,869.6 %
 
                        
Total heritage health benefit expenses
     28,074       33,452       (5,378 )     (16.1 )%
 
                                
Selling and administrative costs
     3,696       2,045       1,651       80.7 %
Gain on sale of assets
     —       (25 )     25       (100.0 )%
 
                        
Heritage segment operating loss
   $ 31,770     $ 35,472     $ (3,702 )     (10.4 )%
 
                        
     Our heritage expenses for 2009 were $31.8 million compared to $35.5 million in 2008. Excluding the heritage legal claim settlement of $0.8 million in the second quarter of 2009 discussed in Items that Affect Comparability of Our Results, our heritage segment expenses decreased by $2.9 million. This decrease was primarily driven by a revaluation due to the elimination of postretirement medical benefits for our non-represented employees during the third quarter of 2009 and reduced workers compensation expenses due to changes in interest rates and favorable claims experience. These decreases were partially offset with an increase in cost containment expenditures and unfavorable changes in the valuation of our Black Lung benefit’s trust assets and liabilities due to changes in interest rates.

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     Corporate Segment Operating Results
     Our corporate segment’s operating expenses totaled $8.1 million in 2009 compared to $12.7 million in 2008. Excluding the restructuring charge of $2.0 million in 2008 discussed in Items that Affect Comparability of Our Results, our corporate segment operating expenses decreased by $2.7 million. This decrease related to cost control efforts and a reduction in our stock compensation expense.
Nonoperating Results (including other income (expense), income tax benefit (expense), and net loss attributable to noncontrolling interest)
     Our other expense for 2009 decreased to $14.5 million compared with $31.6 million of expense in 2008. Excluding the $5.1 million impact of the fair value adjustment on derivative and related amortization of debt discount, $8.1 million of interest on the beneficial conversion feature associated with our convertible debt issued in 2008, the $3.8 million loss on the extinguishment of our WML debt, and the $1.3 million loss on the extinguishment of our power debt discussed in Items that Affect Comparability of Our Results, our other expense increased $1.3 million. This increase was driven by a $1.9 million decrease in interest income, which was partially offset with a $0.4 million decrease in interest expense as a result of our debt refinancing and a $0.2 million increase in other income.
     Our 2009 income tax benefit was $17.1 million compared with $0.9 million of expense in 2008. Excluding the $17.1 million tax effect of other comprehensive income gains discussed in Items that Affect Comparability of our Results, the remaining $1.0 million decrease resulted primarily from lower state taxable income primarily driven by the customer outages.
     Reconciliation of Adjusted EBITDA to Net Loss
     The discussion in “Results of Operations” in 2010, 2009 and 2008 includes references to our Adjusted EBITDA results. EBITDA and Adjusted EBITDA are supplemental measures of financial performance that are not required by, or presented in accordance with, GAAP. EBITDA and Adjusted EBITDA are key metrics used by us to assess our operating performance and we believe that EBITDA and Adjusted EBITDA are useful to an investor in evaluating our operating performance because these measures:
  •   are used widely by investors to measure a company’s operating performance without regard to items excluded from the calculation of such terms, which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired, among other factors; and
 
  •   help investors to more meaningfully evaluate and compare the results of our operations from period to period by removing the effect of our capital structure and asset base from our operating results.
     Neither EBITDA nor Adjusted EBITDA is a measure calculated in accordance with GAAP. The items excluded from EBITDA and Adjusted EBITDA are significant in assessing our operating results. EBITDA and Adjusted EBITDA have limitations as analytical tools, and should not be considered in isolation from, or as a substitute for, analysis of our results as reported under GAAP. For example, EBITDA and Adjusted EBITDA:
  •   do not reflect our cash expenditures, or future requirements for capital and major maintenance expenditures or contractual commitments;
 
  •   do not reflect income tax expenses or the cash requirements necessary to pay income taxes;
 
  •   do not reflect changes in, or cash requirements for, our working capital needs; and
 
  •   do not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on certain of our debt obligations.

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     In addition, although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements. Other companies in our industry and in other industries may calculate EBITDA and Adjusted EBITDA differently from the way that we do, limiting their usefulness as comparative measures. Because of these limitations, EBITDA and Adjusted EBITDA should not be considered as measures of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results and using EBITDA and Adjusted EBITDA only as supplemental data.
     The tables below show how we calculated Adjusted EBITDA and includes a breakdown by segment.
                         
    December 31,  
    2010     2009     2008  
    (In thousands)  
Reconciliation of Adjusted EBITDA to Net Loss
                        
Net Loss
   $ (3,170 )   $ (29,162 )   $ (48,567 )
 
                        
Income tax (benefit) expense from continuing operations
     (141 )     (17,136 )     919  
Other (income) loss
     2,587       (5,991 )     284  
Interest income
     (1,747 )     (3,218 )     (5,125 )
Loss on extinguishment of debt
     —       —       5,178  
Interest expense attributable to beneficial conversion feature
     —       —       8,146  
Interest expense
     22,992       23,733       23,130  
Depreciation, depletion and amortization
     44,690       44,254       41,387  
Accretion of ARO and receivable
     11,540       9,974       9,528  
Amortization of intangible assets and liabilities
     590       279       598  
 
                  
EBITDA
     77,341       22,733       35,478  
 
                        
Restructuring charges
     —       —       2,009  
Customer reclamation claim
     —       4,825       —  
(Gain)/loss on sale of assets
     226       191       (1,425 )
Share-based compensation
     4,049       2,552       2,733  
 
                  
Adjusted EBITDA
   $ 81,616     $ 30,301     $ 38,795  
 
                  
                         
    December 31,  
    2010     2009     2008  
    (In thousands)  
Adjusted EBITDA by Segment
                        
Coal
   $ 81,681     $ 51,207     $ 57,743  
Power
     22,664       18,117       26,493  
Heritage
     (15,968 )     (31,770 )     (35,497 )
Corporate
     (6,761 )     (7,253 )     (9,944 )
 
                  
Total
   $ 81,616     $ 30,301     $ 38,795  
 
                  
Significant Anticipated Variances between 2010 and 2011 and Related Uncertainties
     We expect a number of factors to result in differences in our results of operation, financial condition and liquidity in 2011 relative to 2010:
  •   We expect significantly higher overall levels of cash and liquidity throughout 2011 as a result of the issuance of the Parent Notes, as well as increased coal operating profits and decreased heritage health benefit expenditures;
 
  •   We expect to take a charge to our earnings in 2011 of approximately $20.0 million as a result of the issuance of the Parent Notes and the mark-to-market accounting of the conversion feature in our convertible notes;

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  •   We expect an increase in the repayments of long-term debt resulting from our WML Notes as well as from the various debt paid off with the proceeds of the Parent Notes;
 
  •   We expect significantly higher overall levels of debt and interest expense throughout 2011 as a result of the issuance of the Parent Notes;
 
  •   We expect to pay approximately $21.0 million of preferred stock dividends in 2011;
 
  •   We expect our overall coal tons delivered to decrease due to the December 31, 2010 expiration of a long-term coal supply contract at our Rosebud Mine. While this decrease will drive a decrease in overall tonnage sold, we expect the expiration of the contract to increase our profits and cash flow as our cost per ton sold was significantly greater than the fixed price per ton we were receiving under the contract;
 
  •   We expect our power operating profit to increase slightly due to the significant maintenance expenses incurred in 2010 relating to a planned maintenance shutdown. In addition, the ROVA credit agreements required us to perform certain maintenance procedures that were not otherwise required. As a result, we expect the termination of those agreements in connection with the completion of the Parent Notes offering will result in further reductions in 2011 maintenance expenses;
 
  •   We expect an increase in our depreciation, depletion, and amortization expense in 2011 due to increases in our asset reclamation obligation studies driving increased depletion expense as well as slightly increased capital spending levels in 2011;
 
  •   We expect to make additional capital investments during 2011 in the range of $40.0 to $50.0 million to improve our mining operations, decrease our equipment maintenance costs, and increase our coal reserves. We expect these capital investments to be funded through our mine’s operating cash flows or, if necessary, WML’s existing credit facility or capital leases; and
 
  •   We expect an increase in our investments in bond collateral in the range of $9.0 to $12.0 million primarily as a result of securing reclamation bonds for new mining areas in 2011.
     We believe the net effect of the foregoing factors will result in an increase in cash flows in 2011 relative to 2010. Excluding the expected charge to our earnings in 2011 of approximately $20.0 million explained above, we expect an overall increase in our results of operations due to increased coal operating profits. Our outlook for 2011 is based on the information we currently have available and contains certain assumptions regarding future economic conditions. Differences in actual economic conditions compared with our assumptions could have a material impact on our results in 2011 and in subsequent years.
Liquidity and Capital Resources
     At March 31, 2011, we had $45.0 million of cash and cash equivalents and $23.1 million of available borrowing capacity under our Westmoreland Mining LLC, or WML, revolving line of credit. We anticipate that our cash flows from operations, cash on hand and available borrowing capacity will be sufficient to meet our investing, financing, and working capital requirements for the next several years.
     Parent Notes Offering and Use of Proceeds
     On February 4, 2011, we issued the Parent Notes, which are $150.0 million of 10.750% senior secured notes. Our subsidiary, Westmoreland Partners, was a co-issuer of the notes. Interest is due at an annual fixed rate of 10.750% and will be paid in cash semi-annually, in arrears, on February 1 and August 1 of each year beginning August 1, 2011. The Parent Notes mature February 1, 2018. They are fully and unconditionally guaranteed by Westmoreland Energy LLC and WRI and their respective subsidiaries (other than Absaloka Coal, LLC) and by certain other subsidiaries.
     We received net proceeds from the sale of the Parent Notes in the offering of approximately $135.0 million after deducting the Initial Purchaser’s discount of $7.5 million and offering costs of $7.5 million. We repaid existing outstanding debt with those proceeds as follows: $52.7 million to repay all outstanding term

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and revolving line of credit at ROVA, including a make-whole payment of $9.1 million; $20.1 million to repay all outstanding term and revolving line of credit at WRI; and $2.5 million to retire certain of our convertible notes. The holder of our convertible notes agreed to convert the convertible notes not retired into shares of our common stock. In addition, we used $19.9 million of the net proceeds to pay all dividend arrearages on our preferred stock. We will use the remaining net proceeds from the offering for general corporate purposes including the possible acquisition of new reserves. The indenture governing the Parent Notes requires us to offer to redeem the notes on an annual basis with certain Excess Cash Flow (as defined in the indenture), and amounts used for such redemptions will not be available for other purposes.
     In connection with the Parent Notes offering, we terminated the WRI and ROVA revolving credit agreements. The WML Credit Agreements remained in place following the offering. Following the Parent Notes offering, we are able to enter into a parent-level revolving credit facility without the consent of the holders of the notes, subject to certain conditions.
     Liquidity Limitations and Requirements
     The cash at WML is available to us through quarterly distributions. The WML credit agreement requires a debt service account and imposes timing and other restrictions on the ability of WML to distribute funds to us. Cash available from WML is affected beginning in June of this year by payments due in respect of principal on the WML Notes. Following the February 4, 2011 Parent Notes offering, we expect that distributions from ROVA and WRI will comprise a significant source of liquidity for us. The cash at WRM is also available to us through dividends, subject to maintaining a statutory minimum level of capital, which was $0.1 million at March 31, 2011.
     Our liquidity continues to be affected by our heritage health and pension obligations as follows:
                 
            2011 Remaining  
    Year-to-date     Expected  
    2011 Actual     Amounts  
    (In millions)  
Postretirement medical benefits
   $ 3.3     $ 10.3  
Pension contributions
     0.9       9.3  
CBF premiums
     0.7       2.0  
Workers’ compensation benefits
     0.2       0.8  
     In addition to the Parent Notes mentioned above, WML has $125.0 million of fixed rate term debt outstanding at March 31, 2011. Principal on the notes is scheduled to be paid as follows: $7.5 million in 2011, $14.0 million in 2012, $18.0 million in 2013, $18.0 million in 2014, $20.0 million in 2015, $20.0 million in 2016, $22.0 million in 2017 and the remaining $5.5 million in 2018. The revolving credit facility has a borrowing limit of $25.0 million and matures in June 2013. At March 31, 2011, WML had no outstanding balance under the revolving credit facility and a letter of credit of $1.9 million supported by the revolving credit facility, leaving it with $23.1 million of unused borrowings. WML’s revolving line of credit is only available to fund the operations of its subsidiaries.
     WML’s credit agreement contains various affirmative and negative covenants. Operational covenants in the agreements prohibit, among other things, WML from incurring or guaranteeing additional indebtedness, creating liens on its assets, making investments or engaging in asset sales or transactions with affiliates, in each case subject to specified exceptions. Financial covenants in the agreements impose requirements relating to specified debt service coverage and leverage ratios. The debt service coverage ratio must meet or exceed a specified minimum. The leverage ratio covenant requires that WML not permit the ratio of total debt at the end of each quarter to EBITDA (both as defined) for the four quarters then ended to be greater than a specified amount. WML met all of its covenant requirements as of March 31, 2011 and expects to meet all covenant requirements for the foreseeable future.
     WML’s term debt and revolving credit facility are secured by substantially all of the assets of WML and its subsidiaries (other than Texas Westmoreland Coal Co., or TWCC), our membership interests in WML, including certain dividends and other proceeds from such interests, and substantially all of the stock of WML’s subsidiaries other than TWCC.

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    Historical Sources and Uses of Cash for Three Months Ended March 31, 2011 Compared to Three Months Ended March 31, 2010
 
    The following is a summary of cash provided by or used in each of the indicated types of activities:
                 
    Three Months Ended
    March 31,
    2011   2010
    (In thousands)
Cash provided by (used in):
                
Operating activities
  $ 16,182     $ 13,296  
Investing activities
    (5,884 )     (3,941 )
Financing activities
    28,911       (2,114 )
     Cash provided by operating activities increased $2.9 million in the three months ended March 31, 2011 compared to the three months ended March 31, 2010 primarily due to an increase in operating income.
     Cash used in investing activities increased $1.9 million in the three months ended March 31, 2011 compared to the three months ended March 31, 2010. We received $1.5 million less of proceeds from the sale of assets and investments in the three months ended March 31, 2011 compared to the same period in 2010.
     Cash provided by financing activities increased by $31.0 million for the three months ended March 31, 2011 compared to the three months ended March 31, 2010, primarily as a result of the Parent Notes offering.
     Our working capital deficit at March 31, 2011 decreased by $34.8 million to $1.0 million compared to a $35.8 million deficit at December 31, 2010 primarily as a result of a $39.2 million increase in cash and cash equivalents mostly due to the Parent Notes offering.
    Historical Sources and Uses of Cash for Year Ended December 31, 2010 Compared to Year Ended December 31, 2009
     The following is a summary of cash provided by or used in each of the indicated types of activities:
                 
    Years Ended December 31,
    2010   2009
    (In thousands)
Cash provided by (used in):
                
Operating activities
  $ 45,353     $ 29,448  
Investing activities
    (29,180 )     (38,597 )
Financing activities
    (20,917 )     (20,273 )
     Cash provided by operating activities increased $15.9 million in 2010 compared to 2009 primarily as a result of a $26.0 million reduction in net loss in 2010. The increase in operating cash flows was partially offset by the $17.9 million decrease in cash receipts due to a contractually scheduled decrease in the payments ROVA collects from its customer.
     Cash used in investing activities decreased $9.4 million in 2010 compared to 2009 primarily as a result of the reduction in our capital spending in 2010. Additions to property, plant and equipment were $22.8 million in 2010 compared to $34.5 million in 2009.
     Cash used in financing activities in 2010 remained consistent with 2009.
     Our working capital deficit at December 31, 2010 decreased by $39.2 million to approximately $35.8 million compared to a $75.0 million deficit at December 31, 2009 primarily as a result of a decrease in current installments of long-term debt and also a decrease in Other current liabilities due to the payment of a settlement for reclamation claims.

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          Contractual Obligations and Commitments
          The following table presents information about our contractual obligations and commitments as of December 31, 2010, and the effects such obligations are expected to have on liquidity and cash flow in future periods. Some of the amounts below are estimates.
                                                         
                    Payments Due by Period        
    Total   2011   2012   2013   2014   2015   After 2015
    (In thousands)  
Long-term debt obligations(1) (principal and interest)
  $ 279,738       51,731       40,076       61,264       38,008       35,880       52,779  
Capital lease obligations (principal and interest)
    30,293       8,714       8,319       7,077       4,461       1,617       105  
Operating lease obligations
    18,311       6,665       4,243       2,827       2,233       1,625       718  
Purchase obligations(2)
    105,534       28,552       28,552       28,552       17,077       2,801       —  
Other long-term liabilities(3)
    1,096,065       44,442       41,937       42,308       54,298       42,763       870,317  
 
                                                       
 
                                                        
Totals
  $ 1,529,941       140,104       123,127       142,028       116,077       84,686       923,919  
 
                                                       
 
                                                        
ProForma long-term debt obligations(4) (principal and interest)
  $ 435,022       26,098       39,661       43,918       40,898       41,355       243,092  
 
(1)   On February 4, 2011, we refinanced our convertible notes, WRI’s term and revolving line of credit and ROVA’s term debt.
 
(2)   Our purchase obligations relate to coal supply agreements for our power plants.
 
(3)   Represents benefit payments for our postretirement medical benefits, black lung, workers’ compensation, and combined benefit fund plans, as well as contributions for our defined benefit pension plans and final reclamation costs.
 
(4)   Amounts shown are subsequent to the Parent Notes offering in February 2011.
Critical Accounting Policies
          Postretirement Medical Benefits
     We have an obligation to provide postretirement medical benefits to our former employees and their dependents.
     Our liability for our employees’ postretirement medical benefit costs is recorded on our consolidated balance sheets in amounts equal to the actuarially determined liability, as this obligation is not funded. We use various assumptions including the discount rate and future cost trends, to estimate the cost and obligation for this item. Our discount rate for postretirement medical benefit is determined by utilizing a hypothetical bond portfolio model, which approximates the future cash flows necessary to service our liability. This model is calculated using a yield curve that is developed using the average yield for bonds in the tenth to ninetieth percentiles, which excludes bonds with outlier yields.
     We make assumptions related to future trends for medical care costs in the estimates of retiree health care obligations. Our medical trend assumption is developed by annually examining the historical trend of our cost per claim data and projecting forward the participant claims and our current benefit coverage. These projections include the continuation of cost savings we achieved in 2010 from the modernization of how we provide prescription drug benefits to retirees. If our assumptions do not materialize as expected, actual cash expenditures and costs that we incur could differ materially from our current estimates. Moreover, regulatory changes could increase our obligation to satisfy these or additional obligations.
     The PPACA could potentially impact these benefits. The PPACA has both short-term and long-term implications on healthcare benefit plan standards. Implementation of this legislation is planned to occur in phases, with plan standard changes taking effect beginning in 2010, but to a greater extend with the 2011 benefit plan year and extending through 2018. We will continue to evaluate the impact of the PPACA in future periods as additional information, interpretations and guidance becomes available.

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     Below we have provided a sensitivity analysis to demonstrate the significance of the health care cost trend rate assumptions in relation to reported amounts.
                 
    Postretirement Medical Benefits
Health Care Cost Trend Rate   1% Increase   1% Decrease
    (In thousands)
Effect on service and interest cost components
  $ 1,282     $ (1,079 )
Effect on postretirement medical benefit obligation
  $ 22,565     $ (19,116 )
     Asset Retirement Obligations, Final Reclamation Costs and Reserve Estimates
     Our asset retirement obligations primarily consist of cost estimates for final reclamation of surface land and support facilities at both surface mines and power plants in accordance with federal and state reclamation laws. Asset retirement obligations are based on projected pit configurations at the end of mining and are determined for each mine using estimates and assumptions including estimates of disturbed acreage as determined from engineering data, estimates of future costs to reclaim the disturbed acreage, the timing of these cash flows, and a credit-adjusted, risk-free rate. As changes in estimates occur such as mine plan revisions, changes in estimated costs, or changes in timing of the final reclamation activities, the obligation and asset are revised to reflect the new estimate after applying the appropriate credit-adjusted, risk-free rate to the changes. If our assumptions do not materialize as expected, actual cash expenditures and costs that we incur could be materially different from currently estimated. Moreover, regulatory changes could increase our obligation to perform final reclamation and mine closing activities.
     Certain of our customers have either agreed to reimburse us for final reclamation expenditures as they are incurred or have pre-funded a portion of the expected reclamation costs.
     Income Taxes and Deferred Income Taxes
     As of March 31, 2011, we had significant deferred tax assets. Our deferred tax assets include federal and state regular net operating losses, or NOLs, alternative minimum tax, or AMT, credit carryforwards, Indian Coal Tax Credits, or ICTC, carryforwards, and net deductible reversing temporary differences related to on-going differences between book and taxable income.
     We believe we will be taxed under the AMT system for the foreseeable future due to the significant amount of statutory tax depletion in excess of book depletion expected to be generated by our mining operations. As a result, we have determined that a valuation allowance is required for all of our regular federal net operating loss carryforwards and AMT credit carryforwards since they are only available to offset future regular taxes.
     We have recorded a full valuation allowance for all but $2.9 million of our state NOLs since we believe they will not be realized. No valuation allowance is being provided on $2.9 million of deferred tax assets because we believe that these NOLs will be used to offset our liabilities relating to our uncertain tax positions.
     We have determined that a full valuation allowance is required for all of our ICTC carryforward. The ICTC can generally be used to offset AMT liability. We do not believe we have sufficient positive evidence to substantiate that our deferred tax asset for the ICTC carryforward is realizable at a more-likely-than-not level of assurance. As a result, we will continue to record a full valuation allowance on our ICTC carryforward; reversing valuation allowance only if utilized in a future year.
     We have determined that since our net deductible temporary differences will not reverse for the foreseeable future, and we are unable to forecast when we will have regular taxable income when they do reverse, a full valuation allowance is required for these deferred tax assets, other than the deferred tax asset relating to our uncertain tax positions.
     The tax effect of pretax income or loss from continuing operations is generally determined by a computation that does not consider the tax effects of items that are not included in continuing operations. The exception to that incremental approach is that all items (for example, items recorded in other comprehensive

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income, extraordinary items, and discontinued operations) be considered in determining the amount of tax benefit that results from a loss from continuing operations and that shall be allocated to continuing operations.
Recent Accounting Pronouncements
     In January 2010, the FASB issued authoritative guidance, which requires additional disclosures and clarifies certain existing disclosure requirements regarding fair value measurements. Portions of this guidance are effective for interim and annual reporting periods beginning after December 15, 2009 while other portions are effective for interim and annual reporting periods beginning after December 15, 2010. We adopted this guidance effective January 1, 2010 by making the applicable disclosures.
     On January 1, 2009, we adopted accounting guidance that clarifies how to determine whether certain instruments or features are indexed to an entity’s own stock. This guidance was effective for financial statements issued for fiscal years beginning after December 15, 2008 and interim periods within those fiscal years. We recorded a cumulative effect of change in accounting principles upon adoption of this guidance.
     On January 1, 2009, we adopted accounting guidance that establishes accounting and reporting standards for (1) noncontrolling interests in partially owned consolidated subsidiaries and (2) the loss of control of subsidiaries. This guidance requires noncontrolling interests (minority interests) to be reported as a separate component of equity. The amount of net income or loss attributable to the noncontrolling interests will be included in consolidated net income or loss on the face of the income statement. In addition, this guidance requires that a parent recognize a gain or loss in net income or loss when a subsidiary is deconsolidated. Such gain or loss will be measured using the fair value of the noncontrolling equity investment on the deconsolidation date. This guidance also includes expanded disclosure requirements regarding the interests of the parent and its noncontrolling interest. We recorded $2.6 million and $1.8 million, respectively, of net loss attributable to noncontrolling interest for the years ended December 31, 2010 and December 31, 2009, which is reflected in our consolidated financial statements.
Off-Balance Sheet Arrangements
     In the normal course of business, we are a party to certain off-balance sheet arrangements. These arrangements include financial instruments with off-balance sheet risk such as bank letters of credit and performance or surety bonds. Surety bonds and letters of credit are issued by financial institutions to third parties to assure the performance of our obligations relating to reclamation, workers’ compensation obligations, postretirement medical benefit obligations, and other obligations. These arrangements are not reflected in our consolidated balance sheets, and we do not expect any material adverse effects on our financial condition, results of operations or cash flows to result from these off-balance sheet arrangements.
     We use a combination of surety bonds and letters of credit to secure our financial obligations for reclamation, workers’ compensation, postretirement medical benefit and other obligations as follows as of December 31, 2010:
                                         
                    Post              
            Workers’     Retirement              
    Reclamation     Compensation     Medical Benefit              
    Obligations     Obligations     Obligations     Other     Total  
                    (In thousands)                  
Surety bonds
   $ 230,367     $ 10,303     $ 9,432     $ 4,245     $ 254,347  
Letters of credit
     —       —       —       8,556       8,556  
 
                              
 
   $ 230,367     $ 10,303     $ 9,432     $ 12,801     $ 262,903  
 
                              
     There were no material changes to our off-balance sheet arrangements during the three months ended March 31, 2011.

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CHANGE IN AUDITORS
Change in Independent Public Accounting Firm
     On January 6, 2009, we notified KPMG LLP that, upon completion of the 2008 audit engagement and the filing of the Form 10-K for the year ending December 31, 2008, it would be dismissed as our independent registered public accounting firm. The decision to change accounting firms was approved by our Audit Committee. On March 13, 2009, KPMG completed its audit services for the Company for the fiscal year ended December 31, 2008.
     During the years ended December 31, 2008 and 2007 and the subsequent period through the date of the filing of the Form 8-K/A on March 23, 2009, we had no: (1) disagreements with KPMG on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements, if not resolved to KPMG’s satisfaction, would have caused KPMG to make reference in connection with their opinion to the subject matter of the disagreement; or (2) reportable events, except as described below. Our management has authorized KPMG to respond fully to the inquiries of the new independent registered public accounting firm regarding all matters.
     KPMG’s reports on our consolidated financial statements as of and for the years ended December 31, 2008 and 2007 did not contain any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles, except that the audit report of KPMG on the consolidated financial statements of Westmoreland and subsidiaries for the year ended December 31, 2008 expressed the opinion that various factors raised substantial doubt about our ability to continue as a going concern. The audit reports of KPMG on the effectiveness of internal control over financial reporting as of December 31, 2008 did not contain any adverse opinion or disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit scope, or accounting principles. The audit reports of KPMG on the effectiveness of internal control over financial reporting as of December 31, 2007 did not contain any adverse opinion or disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit scope, or accounting principles, except that KPMG’s report indicated that we did not maintain effective internal control over financial reporting as of December 31, 2007 because of the effect of material weaknesses on the achievement of the objectives of the control criteria and contained an explanatory paragraph that stated that: “Management identified and included in its assessment material weaknesses related to electronic spreadsheets that impact the Company’s financial reporting, census data used to calculate postretirement medical benefit obligations, and the accounting for one of the Company’s stock based compensation plans.”
     We requested and obtained from KPMG a letter addressed to the Securities and Exchange Commission stating whether or not it agreed with the above statements. A copy of KPMG’s letter, dated March 16, 2009, is filed as Exhibit 16.1 to our Current Report on Form 8-K/A filed March 23, 2009.
Engagement of Ernst & Young LLP
     On January 8, 2009, our Audit Committee approved the engagement of Ernst & Young LLP as our new independent registered public accounting firm beginning with fiscal year 2009, and to perform procedures related to the financial statements to be included in our quarterly report on Form 10-Q, beginning with, and including, the quarter ending March 31, 2009. We did not consult with Ernst & Young during the fiscal years ended December 31, 2007 and December 31, 2008, or during any subsequent period prior to its appointment as our auditor with respect to any of the matters or events listed in Regulations S-K 304(a)(2)(i) and (ii).
DESCRIPTION OF THE EXCHANGE NOTES
You can find the definitions of certain terms used in this description under “— Certain Definitions” below. Certain defined terms used in this description, but not defined below under the caption “— Certain Definitions” have the meanings assigned to them in the Indenture.
In this description, the term “Company” refers only to Westmoreland Coal Company, a Delaware corporation, and not to any of its subsidiaries. The Company and Westmoreland Partners (the “Co-Issuer”) issued the Restricted Notes and will issue the Exchange Notes under the indenture (the “Indenture”), dated February 4, 2011, among the Company, Co-Issuer, the Guarantors and Wells Fargo Bank, National Association, as trustee (the “trustee”). The term “Notes” refers to the Restricted Notes, the Exchange Notes and any other Notes

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issued under the Indenture. The terms of the Notes include those stated in the Indenture and those made a part of the Indenture pursuant to the Trust Indenture Act.
The following description is a summary of the material provisions of the Indenture. It does not restate the Indenture in its entirety. We urge you to read the Indenture because it, and not this description, define your rights as a holder of the Notes. Anyone who receives this prospectus may obtain a copy of the Indenture from the Company without charge upon request.
The registered holder of a Note will be treated as the owner of it for all purposes. Only registered holders will have rights under the Indenture.
Principal, Maturity and Interest
     The Notes will mature on February 1, 2018. The Notes will bear interest at the rate shown on the cover page of this offering memorandum, payable on February 1st and August 1st of each year, commencing on August 1, 2011, to Holders of record at the close of business on January 15 or July 15, as the case may be, immediately preceding the relevant interest payment date. Interest on the Notes will be computed on the basis of a 360-day year of twelve 30-day months. Interest (including post-petition interest in any proceedings under bankruptcy law) on overdue principal and (to the extent permitted by law) on overdue installments of interest and Additional Interest will accrue at 2% per annum in excess of such rate without regard to any applicable grace period.
     The Notes will be issued in registered form, without coupons, and in denominations of $2,000 and integral multiples of $1,000 in excess thereof.
     An aggregate principal amount of Notes equal to $150.0 million is being issued in this offering. The Issuer and the Co-Issuer may issue additional Notes having identical terms and conditions to the Notes, except for issue date, issue price and first interest payment date, in an unlimited aggregate principal amount (the “Additional Notes”), subject to compliance with the covenant described under “— Certain Covenants —Limitations on Additional Indebtedness and Preferred Stock;” provided, that the Co-Issuer shall not be permitted to issue Additional Notes independently of the Issuer. Any Additional Notes will be part of the same issue as the Notes being issued hereby and will be treated as one class with the Notes being issued in this offering, including for purposes of voting, redemptions and offers to purchase. For purposes of this “Description of the Exchange Notes,” except for references to Additional Notes in the covenant described under “— Certain Covenants — Limitations on Additional Indebtedness and Preferred Stock,” references to the Notes include Additional Notes, if any, and Exchange Notes when issued.
Methods of Receiving Payments on the Notes
     If a Holder has given wire transfer instructions to the Issuer at least ten Business Days prior to the applicable payment date, the Issuer will make all payments on such Holder’s Notes by wire transfer of immediately available funds to the account specified in those instructions to an account in the United States. Otherwise, payments on the Notes will be made at the office or agency of the paying agent (the “Paying Agent”) and registrar (the “Registrar”) for the Notes within the City and State of New York unless the Issuer elects to make interest payments by check mailed to the Holders at their addresses set forth in the register of Holders.
Note Guarantees
     The obligations of the Issuer and the Co-Issuer under the Notes, the Indenture and other related documents will be jointly and severally guaranteed (the “Note Guarantees”), on a senior secured basis, by each Restricted Subsidiary that the Issuer shall cause to become a Guarantor pursuant to the terms of the Indenture. The Guarantors will initially consist of WRI, Westmoreland Power Inc., Westmoreland Energy LLC and its direct and indirect Subsidiaries other than the Co-Issuer, Westmoreland Mining Services, Inc., Westmoreland Coal Sales Co., WCC Land Holding Company, Inc. and WRI Partners Inc. In the event all of the outstanding obligations under the WML Notes are repaid in full or refinanced (the date of such repayment or refinancing, the “WML Repayment Date”), the Issuer shall be required to cause WML and its Subsidiaries to become guarantors of the Notes on the terms applicable to the other Subsidiary Guarantors. The Note Guarantees will be secured as described in “— Security — General.” Not all of our subsidiaries will guarantee the Notes. See “— Non-Guarantor Subsidiaries.”

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     The obligations of each Guarantor under its Note Guarantee will be limited to the maximum amount as will result in those obligations not constituting a fraudulent conveyance or fraudulent transfer under federal or state law, after giving effect to (i) all other contingent and fixed liabilities of the Guarantor (including, without limitation, any guarantees under any future revolving credit agreement permitted under the Indenture) and (ii) any collections from or payments made by or on behalf of any other Guarantor in respect of its contribution obligations under the Indenture. Each Guarantor that makes a payment for distribution under its Note Guarantee is entitled to a contribution from each other Guarantor in a pro rata amount based on adjusted net assets of each Guarantor determined in accordance with GAAP.
     Any Restricted Subsidiary of the Issuer, Co-Issuer or of a Guarantor created or acquired after the Issue Date, or any Unrestricted Subsidiary that becomes a Restricted Subsidiary after the Issue Date, will be required to guarantee the Notes pursuant to a supplemental indenture on a senior secured basis, except that a newly created Subsidiary of WML or its Subsidiaries is prohibited from being a Guarantor until the WML Notes are repaid or refinanced.
     A Guarantor shall be automatically released from its obligations under its Note Guarantee and the Indenture, and any of its assets that constitute Collateral will be released from the Liens created by the Security Documents:
     (1) in the event of a sale or other disposition of all or substantially all of the assets of such Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all of the Equity Interests of such Guarantor then held by the Issuer, Co-Issuer or any Restricted Subsidiary; provided, that in the case of a sale or disposition constituting an Asset Sale, the Net Available Proceeds of such sale or other disposition are applied in accordance with the provisions under the heading “— Certain Covenants — Limitations on Asset Sales”;
     (2) if such Guarantor is designated as an Unrestricted Subsidiary in accordance with the provisions of the Indenture, upon effectiveness of such designation; or
     (3) if the Notes are discharged or defeased in accordance with the procedures described below under “— Legal Defeasance and Covenant Defeasance” and “— Satisfaction and Discharge” below.
Non-Guarantor Subsidiaries
     Certain of the Issuer’s Restricted Subsidiaries will not be Guarantors of the Notes. These Restricted Subsidiaries are WML and its Subsidiaries, Absaloka and WRM. In addition, WML and its Subsidiaries will not provide any Security for the Notes, provided, that the Notes will be secured by the Note First-Priority Lien on the WML Payments Collateral. The Issuer’s non-guarantor Subsidiaries comprise a significant portion of its overall business. For the twelve months ended December 31, 2010, the Issuer’s non-guarantor Subsidiaries represented $416.4 million, or approximately 82%, of our revenues. As of March 31, 2011, our non-guarantor Subsidiaries represented $407.4 million, or 52%, of our total assets and $485.3 million, or approximately 53%, of our total liabilities and WML would have had the ability to incur an additional $23.1 million of Indebtedness under the WML Credit Agreements, to which liabilities and other Indebtedness the Notes would be structurally subordinated. In the twelve months ended December 31, 2010, WML and its Subsidiaries distributed $33.7 million in management fees and other distributions to the Issuer. The WML Credit Agreements contain limitations on WML’s ability to pay dividends and make other payments to the Issuer, as described in “Description of Other Indebtedness—WML Credit Agreements.”
     In addition, WML has $125.0 million of fixed rate term debt (represented by the WML Notes) outstanding at June 2, 2011, which bears interest at 8.02% per annum, payable quarterly. The term debt, by its terms, is payable in full on March 31, 2018. WML also has a revolving credit facility with a borrowing limit of $25.0 million and a maturity date of June 26, 2013. The interest rate under this revolving credit facility at June 2, 2011, was 3.75% per annum. At June 2, 2011, WML had a letter of credit of $1.9 million under its revolving credit facility, but no other borrowings thereunder. The WML term debt represented by the WML Notes and the WML credit agreement are collectively referred to as the “WML Credit Agreements.”
     The Notes will be structurally subordinated to all existing and future liabilities and preferred stock of the nonguarantor Subsidiaries, including, with respect to WML, indebtedness under the WML Credit Agreements. This means that in the event of a bankruptcy, liquidation or reorganization of any of these entities, or if an event of default occurs under financing arrangements obtained by these entities, they will pay

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the holders of their debts and their trade creditors before they will be able to distribute any of their assets to the Issuer. See “Risk Factors —Risks Related to the Notes and the Collateral — The Notes will be structurally subordinated to indebtedness and other liabilities of our non-guarantor subsidiaries.”
     In addition, the WML Credit Agreements contain terms of which you should be aware. In particular, those agreements require WML to maintain its status as a “single purpose entity” by, among other things, maintaining its own separate books and records, holding its assets and credit out as separate from those of any other person, including the Issuer, and conducting its day-to-day operations with a significant degree of independence from the Issuer. The terms of the Notes reflect the requirements of the WML Credit Agreements. For example, the definition of Permitted Liens under the Indenture encompasses liens WML and its Subsidiaries would be allowed to create as permitted liens under the WML Credit Agreements, and the definition of Permitted Investments under the Indenture includes investments permitted under the WML Credit Agreements.
Restricted and Unrestricted Subsidiaries
     As of the date of the Indenture, all of the Subsidiary Guarantors, WML and its Subsidiaries, WRM and Absaloka will be “Restricted Subsidiaries.” Our Subsidiary, Basin Resources Inc. will be an Unrestricted Subsidiary and will not guarantee the Notes. Under the circumstances described below under the subheading “— Certain Covenants —Limitations on Designation of Unrestricted Subsidiaries,” the Issuer will be permitted to designate certain other Subsidiaries as “Unrestricted Subsidiaries.” The effect of designating a Subsidiary as an “Unrestricted Subsidiary” will be that:
  •   an Unrestricted Subsidiary will not be subject to many of the restrictive covenants in the Indenture;
 
  •   a Subsidiary that has previously been a Guarantor and that is designated an Unrestricted Subsidiary will be released from its Note Guarantee, the Indenture and the Security Documents, and any of its assets that constitute Collateral will be released from the Liens of the Security Documents; and
 
  •   the assets, income, cash flow and other financial results of an Unrestricted Subsidiary will not be consolidated with those of the Issuer and Co-Issuer for purposes of calculating compliance with the restrictive covenants contained in the Indenture.
Ranking
Senior Notes
     The Notes will be general senior secured obligations of the Issuer, the Co-Issuer and the Subsidiary Guarantors that will rank equally in right of payment with all existing and future Senior Indebtedness of the Issuer, the Co-Issuer and the Subsidiary Guarantors. The Notes will effectively rank senior to all Unsecured Indebtedness of the Issuer, the Co-Issuer, the Subsidiary Guarantors and Absaloka to the extent of the value of the Note Collateral securing such obligations. Under the terms of the Indenture, the Issuer, the Co-Issuer, the Subsidiary Guarantors and Absaloka will be permitted following the Issue Date to enter into or guarantee the Revolving Credit Facility with a maximum availability of up to $20.0 million that may be secured by the Revolving Facility First-Priority Liens on the Revolving Facility First-Priority Collateral. Concurrent with the Revolving Credit Facility, an intercreditor agreement would be entered into between the Note Collateral Agent and the collateral agent under the Revolving Credit Facility providing: (i) that the Notes will have a second-priority Lien in the accounts receivable and inventory, and proceeds and products thereof, (ii) identifying the rights of the respective lenders in the event of default under either the Notes or the Revolving Credit Facility or a bankruptcy, liquidation, reorganization or other winding up, or sale, of the Issuer, the Co-Issuer or any Guarantor or Absaloka, and (iii) providing other terms of the intercreditor relationship. See “— Security —Intercreditor Agreement to be Entered into in Connection with a Future Revolving Credit Facility.” In any of such events, the assets of the Issuer, the Co-Issuer, the Subsidiary Guarantors and Absaloka that secure the Revolving Credit Facility will only be available to pay obligations on the Notes and the Note Guarantees in accordance with the terms and conditions of such intercreditor agreement.

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Ranking of Note Guarantees
     The Guarantors will, jointly and severally, fully and unconditionally guarantee on a senior secured basis the due and punctual payment of principal of, premium, if any, and interest on, the Notes. See “— Security —General” for a description of the assets securing the guarantees.
     Under certain circumstances described under “— Certain Covenants —Additional Note Guarantees,” we are required to cause the execution and delivery of additional Note Guarantees by Restricted Subsidiaries.
Optional Redemption
     The Notes may not be redeemed prior to February 1, 2015. At any time or from time to time on or after February 1, 2015, upon not less than 30 nor more than 60 days notice, the Issuer, at its option, may redeem the Notes, in whole or in part, at the redemption prices (expressed as percentages of principal amount) set forth below, together with accrued and unpaid interest thereon, if any, to the redemption date, if redeemed during the twelve-month period beginning February 1 of the years indicated:
         
    Optional  
Year   Redemption Price  
2015
     103.583 %
2016
     101.792 %
2017 and thereafter
     100.000 %
Redemption with Proceeds from Qualified Equity Offerings
     At any time or from time to time prior to February 1, 2015, the Issuer, at its option, may redeem up to 35% of the aggregate principal amount of the Notes issued under the Indenture (including the principal amount of any Additional Notes issued under the Indenture but without duplication with respect to Exchange Notes) with the net cash proceeds of one or more Qualified Equity Offerings at a redemption price equal to 110.75% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest thereon, if any, to the date of redemption; provided, that (1) at least 65% of the aggregate principal amount of Notes (including the principal amount of any Additional Notes issued under the Indenture but without duplication with respect to Exchange Notes) issued under the Indenture remains outstanding immediately after the occurrence of such redemption and (2) the redemption occurs within 60 days of the date of the closing of any such Qualified Equity Offering.
     The Issuer may acquire Notes by means other than a redemption, whether pursuant to an issuer tender offer, open market purchase or otherwise, so long as the acquisition does not otherwise violate the terms of the Indenture.
Selection and Notice of Redemption
     If the Issuer makes a partial redemption, selection of the Notes for redemption will be made by the Trustee on a pro rata basis, by lot or by such method that complies with applicable legal and securities exchange requirements, if any; provided, however, that no Notes of a principal amount of $2,000 or less shall be redeemed in part and Notes shall be redeemed in higher integral multiples of $1,000. In addition, if a partial redemption is made pursuant to the provisions described under “— Optional Redemption — Redemption with Proceeds from Qualified Equity Offerings,” selection of the Notes or portions thereof for redemption shall be made by the Trustee only on a pro rata basis or on as nearly a pro rata basis as is practicable (subject to the procedures of The Depository Trust Company), unless that method is otherwise prohibited.
     Notice of redemption will be mailed by first-class mail at least 30 but not more than 60 days before the date of redemption to each Holder of Notes to be redeemed at its registered address, except that redemption notices may be mailed more than 60 days prior to a redemption date if the notice is issued in connection with a defeasance of the Notes or a satisfaction and discharge of the Indenture. If any Note is to be redeemed in part only, the notice of redemption that relates to that Note will state the portion of the principal amount of the Note to be redeemed. A new Note in a principal amount equal to the unredeemed portion of the Note will be issued in the name of the Holder of the Note upon cancellation of the original Note. On and after the date of redemption, interest will cease to accrue on Notes or portions thereof called for redemption and redeemed Notes will be cancelled as of the redemption date so long as the Issuer has deposited with the paying agent for

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the Notes funds in satisfaction of the redemption price (including accrued and unpaid interest on the Notes to be redeemed) pursuant to the Indenture.
Security
General
     The Notes and the Note Guarantees will be secured by:
     (i) the Note First-Priority Liens granted by the Issuer, the Co-Issuer and the Subsidiary Guarantors on substantially all of the tangible and intangible assets of the Issuer, the Co-Issuer and the Subsidiary Guarantors (whether now owned or hereinafter arising or acquired) pursuant to one or more First Lien Security Documents among the Issuer, the Co-Issuer, the Subsidiary Guarantors and the Note Collateral Agent and, with respect to assets consisting of Real Property and fixtures (whether now owned or hereinafter arising or acquired), pursuant to mortgages, deeds of trust or deeds to secure debt (the foregoing being the “First Lien Collateral”);
     (ii) the Note First-Priority Lien on 100% of all management fees, dividends, and distributions payable by WML to the Issuer, subject to the prior Lien under the WML Credit Agreements and related WML Security Agreements, but only to the extent that such Lien affects such management fees, dividends, and distributions (the foregoing being the “WML Payments Collateral”);
     (iii) the Note First-Priority Lien on all of the common shares of WRM held by the Issuer (the foregoing being the “WRM Collateral”); and
     (iv) the Note First-Priority Lien on any assets owned by Absaloka (the “Absaloka Collateral”);
provided, that the First Lien Collateral, the WML Payments Collateral, the WRM Collateral and the Absaloka Collateral will be subject to Permitted Liens and will not include any Excluded Property; and provided, further, that, in the event the Issuer, the Co-Issuer, the Subsidiary Guarantors and Absaloka enter into the Revolving Credit Facility secured by a first-priority Lien on the Revolving Facility First-Priority Collateral, the Note First-Priority Liens will, pursuant to the terms of an intercreditor agreement between the Note Collateral Agent and the collateral agent under the Revolving Credit Facility, become a second-priority Lien on such Revolving Facility First-Priority Collateral (the “Second Lien Collateral”). The First Lien Collateral, the WML Payments Collateral, the WRM Collateral and the Absaloka Collateral and, if the Issuer, the Co-Issuer, the Subsidiary Guarantors and Absaloka enter into a secured Revolving Credit Facility in the future, the Second Lien Collateral, are, subject to Permitted Liens and the exclusion of Excluded Property, collectively, the “Note Collateral.”
     On the WML Repayment Date, the Issuer shall cause WML and its Subsidiaries to grant a Lien (the “WML Lien”) in all of the WML Collateral existing on the WML Repayment Date or any assets acquired thereafter in favor of the Trustee and the Holders of the Notes subject to Permitted Liens and to the extent such WML Collateral does not constitute Excluded Property. The WML Collateral shall be “Note Collateral,” and the WML Lien shall be a “Note First-Priority Lien,” and shall be subject to the same terms, conditions and provisions described herein and in the Indenture and the Security Documents with respect to the Note Collateral and the Note First-Priority Liens.
     The Issuer, the Co-Issuer, the Subsidiary Guarantors and Absaloka will be required to perfect on the Issue Date the security interests in the Note Collateral solely to the extent they can be perfected by the filing of UCC-1 financing statements or the delivery of capital stock or instruments. To the extent any such security interest cannot be perfected by filing or the delivery of capital stock, the Issuer, the Co-Issuer, the Subsidiary Guarantors and Absaloka will be required to have all security interests and Liens that are contemplated by the Indenture and the Security Documents to be in place and perfected as soon as practicable following the Issue Date, but in any event no later than (A) 90 days after the Issue Date, (B) such later date as the Trustee agrees that the security interests and Liens in favor of the Holders of the Notes are required to be in place or (C) 90 days after an asset ceases to be an Excluded Property. If the Issuer, the Co-Issuer, any Subsidiary Guarantor or Absaloka were to become subject to a bankruptcy proceeding, any Liens recorded or perfected after the Issue Date would face a greater risk of being invalidated than if they had been recorded or perfected on the Issue Date. Security in real property will be granted as described in “— Security — General — Certain Covenants with Respect to the Note Collateral —Real estate mortgages and filings.”

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     From and after the Issue Date, if the Issuer, the Co-Issuer, any Subsidiary Guarantor or Absaloka creates any additional Lien upon any property to secure the Revolving Credit Facility Obligations, it must concurrently grant a Note Second-Priority Lien upon such property (subject to Permitted Liens) as security for the Notes substantially concurrently with granting any such additional Lien.
     The Liens in the Note Collateral securing the Notes and the Note Guarantees under the Security Documents will rank (i) equally in priority with the security interest and Liens in and on the Note Collateral securing any Senior Indebtedness and (ii) senior to any Unsecured Indebtedness. In addition, the Notes will not be secured by any of the assets of any Subsidiary that is not a Guarantor other than Absaloka. See “Risk Factors — Risks Related to the Notes and the Collateral — The Notes will be structurally subordinated to indebtedness and other liabilities of our non-guarantor subsidiaries.”
Intercreditor Agreement to be Entered into in Connection with a Future Revolving Credit Facility
     After the Issue Date, the Issuer, the Co-Issuer, the Subsidiary Guarantors and Absaloka will be permitted to enter into or guarantee the Revolving Credit Facility, which may be secured by the Revolving Facility First-Priority Collateral. Notwithstanding the time, order or method of grant, creation, attachment or perfection of any Liens securing the Notes, the Liens of the Notes on the Revolving Facility First-Priority Collateral shall rank junior to the Revolving Facility First-Priority Liens under the Revolving Credit Facility. Concurrent with the Revolving Credit Facility, an intercreditor agreement will be entered into between the Note Collateral Agent, the collateral agent under the Revolving Credit Facility (the “Revolving Collateral Agent”) and the relevant borrowers and guarantors parties thereto on the terms described in this section in all material respects (the “Intercreditor Agreement”). Compliance with this provision shall be evidenced by an Officers’ Certificate delivered to the Trustee.
     Prior to the discharge of the Revolving Facility First-Priority Liens, the Revolving Collateral Agent will determine whether, and if so, the time and method by which to enforce its Revolving Facility First-Priority Lien in the Revolving Facility First-Priority Collateral. Neither the Note Collateral Agent nor the Revolving Collateral Agent will be permitted (whether directly or indirectly) to enforce the security interests and other rights related to any Collateral upon which it does not have a first-priority Lien or take any enforcement action against or in respect of the Note Collateral in which it does not have a first-priority Lien, even if an Event of Default has occurred and the Notes have been accelerated, except (i) in any insolvency or liquidation proceeding of the Issuer, the Co-Issuer or any Significant Subsidiary, the Note Collateral Agent may file a proof of claim with respect to the Notes or any Note Guarantee and (ii) exercise such rights as described in the following paragraphs and certain other limited rights.
     After the discharge of the Revolving Facility First-Priority Liens, the Note Collateral Agent, acting at the instruction of the Holders of a majority in principal amount of the Notes, voting as one class, in accordance with the provisions of the Indenture and the Security Documents, will determine the time and method by which its liens in the Second Lien Collateral will be enforced and, if applicable, will distribute proceeds (after payment of the costs of enforcement and Collateral administration) of the Second Lien Collateral received by it under the Security Documents for the ratable benefit of the Holders of the Notes.
     The Note Collateral Agent may exercise rights and remedies with respect to the security interests in the Second Lien Collateral after the passage of a period of 180 days from the first date on which the Note Collateral Agent has notified the Revolving Collateral Agent that (i) an Event of Default consisting of nonpayment of any principal or interest then due under the Notes has been declared, or (ii) an Event of Default other than an Event of Default consisting of nonpayment of any principal or interest then due under the Notes has been declared and the repayment of all the principal amount under the Notes has been demanded. However, the Note Collateral Agent is only permitted to exercise remedies to the extent that the Revolving Collateral Agent, or the secured parties, under the Revolving Credit Facility Obligations are not diligently pursuing the exercise of its rights and remedies with respect to a material portion of the Second Lien Collateral.
     The rights of the Holders of the Notes with respect to the Second Lien Collateral securing the Notes and the Note Guarantees will be materially limited pursuant to the terms of the Intercreditor Agreement. Under the terms of such intercreditor agreement, the Note Second-Priority Liens in the Revolving Facility First-Priority Collateral securing the Notes will rank junior to the Revolving Facility First-Priority Liens. Any proceeds received upon a realization of the Revolving Facility First-Priority Collateral securing the Revolving Credit Facility Obligations and the Notes will be applied as follows:

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     (1) first, to the Revolving Collateral Agent to be applied as required under the Revolving Credit Facility until the payment and discharge of the Revolving Credit Facility Obligations has occurred; and
     (2) second, to the Trustee to be applied ratably to the Holders of the Notes and in such order as specified in the Indenture and the Security Documents (with the Note Collateral Agent entitled to apply any proceeds in respect of the Notes to its costs and expenses prior to principal and interest being paid to the Holders of the Notes).
     In the event of any release of the Note Collateral under the Indenture or Revolving Credit Facility, as the case may be, (i) in connection with an exercise of remedies (even if, with respect to the Revolving Facility First-Priority Collateral, such release violates the Indenture but complies with the Intercreditor Agreement) or (ii) that does not cause an express Default under the Indenture, the Note Liens on the Note Collateral and the Revolving Facility First-Priority Collateral will be automatically released and the Agents will be required to take any action (and be deemed to have authorized such action) as necessary to effect such release.
     Upon the occurrence of any acceleration under the Revolving Credit Facility Obligations, the Holders shall have the right to buy-out all of the Revolving Credit Facility Obligations as described below. In addition, upon any acceleration of the Revolving Credit Facility Obligations, no action to enforce remedies may be taken by any lender under the Revolving Credit Facility (“Revolving Lender”) or the Revolving Collateral Agent with respect to the Revolving Credit Facility Obligations for a period of (i) initially, 30 days from the date of the acceleration notice given by the Revolving Lenders to the Issuer and (ii) if the Holder Buy-out Right (as defined below) is exercised prior to the conclusion of such 30-day period, an additional 10 days (such period, the “Standstill Period”); provided, that actions to prepare for sale of or other enforcement against the Collateral, including notifying account debtors to make payments to the Revolving Lenders, that do not result in any disposition of the Collateral shall be deemed not to violate the foregoing.
     Each Holder shall have the right (but not the obligation) to purchase (or to designate an Affiliate or other party to purchase) all of the rights and obligations of the Revolving Lenders, including all of the commitments or Revolving Credit Facility Obligations owing to them (the “Holder Buy-out Right”) for an aggregate purchase price equal to the sum of (x) the then outstanding principal amount of such Revolving Credit Facility Obligations, plus (y) all accrued and unpaid interest thereon, plus (z) all other amounts accrued and unpaid in respect thereof (the “Revolving Buy-out Price”).
     The Holder Buy-out Right may be exercised by Holders upon written notice thereof to the administrative agent under the Revolving Credit Facility (the “Administrative Agent”) and the Issuer within 30 days of public notice of any event of default or acceleration of the Revolving Credit Facility Obligations committing to the purchase of 100% of the Revolving Credit Facility Obligations; provided, that so long as 100% of the Revolving Credit Facility Obligations are committed to be purchased, such Revolving Credit Facility Obligations shall be allocated as described below. Such written notice shall identify the Holder or Holders exercising such Holder Buy-out Right and contain no conditions other than the satisfaction of the requirements of the Revolving Credit Facility as to the assignment of Revolving Credit Facility Obligations to a Holder purchasing such Revolving Credit Facility Obligations. Each Holder exercising its Holder Buy-Out Right shall be entitled to a share of the Revolving Credit Facility Obligations based on its pro-rata share of the aggregate amount of outstanding Notes, subject to increases by a pro-rata share of Notes allocable to Holders that do not elect to purchase their pro rata share. Such notice shall constitute an irrevocable commitment by (x) the delivering Holders to the Revolving Lenders to purchase the Revolving Credit Facility Obligations for the Revolving Buy-out Price no later than the last day of the Standstill Period and (y) the Revolving Lenders to sell the Revolving Credit Facility Obligations to the Holders upon delivery of the Revolving Buy-out Price to the Administrative Agent. The Holders and Revolving Lenders shall timely execute all necessary transfer documentation.
     The Revolving Buy-out Price shall be paid in immediately available funds to the Administrative Agent on behalf of the Revolving Lenders, and the Administrative Agent shall promptly pay the proceeds thereof to such Revolving Lenders in accordance with their interests. If the Revolving Buy-out Price is not received by the Administrative Agent in accordance with the foregoing, the Administrative Agent may enforce such commitment on behalf of the Revolving Lenders and may exercise all other remedies hereunder, including enforcement of all remedies against the Collateral.

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     In the event a bankruptcy proceeding shall be commenced by or against the Issuer, the Co-Issuer, any Subsidiary Guarantor or Absaloka, and the Note Collateral Agent, at the institution of the majority of the Holders of Notes, and the Revolving Collateral Agent shall desire to permit the Issuer, the Co-Issuer, any Subsidiary Guarantor or Absaloka the use of cash collateral which constitutes Collateral or to enter into a debtor-in-possession financing (a “DIP Financing”) in such proceeding, (i) the Note First-Priority Liens on the Note Collateral other than the Revolving Facility First-Priority Collateral and (ii) the Note Second-Priority Liens on the Revolving Facility First-Priority Collateral may, in each case be made junior and subordinated to Liens granted to secure such DIP Financings. The use of cash collateral or the provision of DIP Financing will require the approval of the governmental authority having jurisdiction over such bankruptcy proceeding, to the extent required by law. To the extent the first-priority Liens securing the Revolving Credit Facility Obligations are subordinated to or pari passu with such DIP Financing, the Note Collateral Agent (a) will subordinate or make pari passu its Note Second-Priority Liens in the Revolving Facility First-Priority Collateral to the same extent that the Revolving Credit Facility Obligations are subordinated or pari passu to (x) the Liens securing such DIP Financing (and all obligations relating thereto), (y) adequate protection provided to the representative for, or holders of, the Revolving Credit Facility Obligations, and (z) any “carve-out” agreed by the representative for, or holders of, the Revolving Credit Facility Obligations and (b) will not request adequate protection or any other relief in connection with the Note Second-Priority Liens (other than as described below).
     The Agents will only be permitted to seek adequate protection without the consent of the Holders of the Notes or the Revolving Collateral Agent, as applicable, (i) in the form of the benefit of additional or replacement Liens on the Note Collateral (including Proceeds thereof arising after the commencement of any insolvency or liquidation proceeding), or additional or replacement collateral to secure the Notes or the Revolving Credit Facility Obligations, as long as the Trustee and the Revolving Collateral Agent, as applicable, are also granted such additional or replacement Liens or additional or replacement collateral and such additional or replacement Liens are in the case of the Revolving Facility First-Priority Collateral, subordinated to the Liens securing the Revolving Credit Facility Obligations to the same extent as the Note Second-Priority Liens on the Revolving Facility First-Priority Collateral are subordinated to the Revolving Facility First-Priority Liens and (ii) to obtain adequate protection in the form of reports, notices, inspection rights and similar forms of adequate protection to the extent granted to the Trustee or the representative of the Revolving Credit Facility Obligations, as applicable. The Intercreditor Agreement will limit the right of the Agents to seek relief from the “automatic stay” and will provide that neither Agent may assert any right of marshalling, appraisal, valuation or other similar right that may be available under applicable law with respect to the Note Collateral.
     In no event will the Intercreditor Agreement or the Revolving Credit Facility require or permit a Lien of any priority on the Note Collateral other than the Revolving Facility First-Priority Liens, nor impair or condition any right of the Trustee, the Note Collateral Agent or the Holders of the Notes with respect to the Note Collateral, other than the Revolving Facility First-Lien Collateral on the terms described herein and in the Intercreditor Agreement, nor impair or condition any other rights of the Trustee, the Note Collateral Agent or the Holders of the Notes with respect to the relevant borrowers and guarantors under the Revolving Credit Facility or their Subsidiaries.
     To the extent that the Intercreditor Agreement contains terms that are in addition to those specified herein, the Issuer shall be authorized to determine such terms, which shall be customary terms not inconsistent with the terms set forth herein and not materially adverse to the Holders. If the Issuer and the Revolving Credit Lenders are unable to agree on an Intercreditor Agreement on the terms set forth herein in all material respects, the terms of any proposed intercreditor agreement shall be required to be approved by holders of a majority of the outstanding principal amount of the Notes.
Sufficiency of collateral in the event of foreclosure
     In the event of foreclosure on the Note Collateral, there can be no assurance that the proceeds from the sale of the Note Collateral in whole or in part pursuant to the Security Documents would be sufficient to satisfy payments due on the Notes. The fair market value of the Note Collateral is subject to fluctuations based on factors that include, among others, the ability to sell the Note Collateral in an orderly sale, general economic conditions, the availability of buyers and similar factors. The amount to be received upon a sale of the Note Collateral would also be dependent on numerous factors, including, but not limited to, the actual fair market value of the Note Collateral at such time and the timing and the manner of the sale. By its nature, portions of the Note Collateral may be illiquid and may have no readily ascertainable market value or may

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require consents or approvals to transfer that are not obtainable. In particular, some assets constituting Note Collateral (including contracts and intellectual property) are more illiquid than other assets constituting Note Collateral (such as accounts receivable and inventory). Accordingly, there can be no assurance that all of the Note Collateral can be sold in a short period of time or in an orderly manner. See “Risk Factors—Risks Related to the Notes and the Collateral — There may not be sufficient collateral to pay all or any of the Notes.” Liquidating the collateral securing the Notes may not produce proceeds in an amount sufficient to pay any amounts due on the Notes. In addition, in the event of a bankruptcy, the ability of the holders to realize upon any of the Note Collateral may be subject to certain bankruptcy law limitations as described below under “— Certain bankruptcy limitations.”
Certain Covenants with Respect to the Note Collateral
     The Note Collateral will be pledged pursuant to the Security Documents, which contain provisions relating to the administration, preservation and disposition of the Note Collateral. The following is a summary of some of the covenants and provisions set forth in the Security Documents and the Indenture as they relate to the Note Collateral.
Maintenance of collateral
     The Indenture and/or the Security Documents will provide that the Issuer and the Co-Issuer will, and will cause each of the Subsidiary Guarantors and Absaloka to (i) at all times maintain, preserve and protect all property material to the conduct of its business and keep such property in good repair, working order and condition (other than wear and tear occurring in the ordinary course of business); (ii) from time to time make, or cause to be made, all needful and proper repairs, renewals, additions, improvements and replacements thereto necessary in order that the business carried on in connection therewith may be properly conducted at all times; (iii) keep its insurable property adequately insured at all times by financially sound and reputable insurers; and (iv) maintain such other insurance, to such extent and against such risks as is customary with companies in the same or similar businesses operating in the same or similar locations.
Permitted ordinary course activities with respect to collateral
     Notwithstanding the foregoing, so long as no Default or Event of Default under the Indenture would result therefrom and such transaction would not violate the Trust Indenture Act, the Issuer, the Co-Issuer and the Subsidiary Guarantors and Absaloka may, among other things, without any release or consent by the Trustee or the Agents, conduct ordinary course activities with respect to Collateral, including, without limitation, (i) selling or otherwise disposing of, in any transaction or series of related transactions, any property subject to the Lien of the Security Documents which has become worn out, defective or obsolete or not used or useful in the business; (ii) abandoning, terminating, canceling, releasing or making alterations in or substitutions of any leases or contracts subject to the Lien of the Indenture or any of the Security Documents; (iii) surrendering or modifying any license or permit subject to the Lien of the Indenture or any of the Security Documents which it may own or under which it may be operating; (iv) granting a license of any intellectual property; (v) selling, transferring or otherwise disposing of inventory in the ordinary course of business; (vi) selling, collecting, liquidating, factoring or otherwise disposing of accounts receivable in the ordinary course of business; (vii) making cash payments (including for the scheduled repayment of Indebtedness) from cash that is at any time part of the Note Collateral in the ordinary course of business that are not otherwise prohibited by the Indenture and the Security Documents; and (viii) abandoning any intellectual property which is no longer used or useful in the Issuer’s, the Co-Issuer’s or Subsidiary Guarantor’s business. The Issuer and the Co-Issuer must deliver to the Agents, within thirty (30) calendar days following the end of each six month period beginning on January 1 and July 1 of any year, an officers’ certificate to the effect that none of the releases and withdrawals occurring during the preceding six month period (or since the Issue Date, in the case of the first such certificate) were prohibited by the Indenture.
After-acquired property
     If the Issuer, the Co-Issuer, a Subsidiary Guarantor or Absaloka acquires property that is not automatically subject to a perfected security interest or Lien under the Security Documents and such property would be of the type that would constitute Collateral, or a Subsidiary becomes a Guarantor, then the Issuer, the Co-Issuer, such Guarantor or Absaloka will provide security interests in and Liens on such property (or, in the case of a new Guarantor, all of its assets constituting Collateral) in favor of the Agents for their benefit and the benefit of the Trustee, the Holders of the Notes and, if the Revolving Credit Facility has been entered into, the

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holders of the Revolving Credit Facility Obligations (with respect to the Revolving Facility First-Priority Collateral) and deliver certain joinder agreements and certificates in respect thereof as required by the Indenture and the Security Documents.
Further assurances
     Subject to the limitations described above under “— General,” the Security Documents and the Indenture will provide that the Issuer, the Co-Issuer, the Subsidiary Guarantors and Absaloka shall, at their expense, duly execute and deliver, or cause to be duly executed and delivered, such further agreements, documents and instruments, and do or cause to be done such further acts as may be reasonably necessary or proper to evidence, perfect, maintain and enforce the security interests and the priority thereof in the Note Collateral for the benefit of the Holders of the Notes, the Trustee and, if the Revolving Credit Facility has been entered into, the holders of the Revolving Credit Facility Obligations (with respect to the Revolving Facility First-Priority Collateral) and to otherwise effectuate the provisions or purposes of the Indenture and the Security Documents.
Real estate mortgages and filings
     Subject to the limitations described above under “— General,” and provided that the following does not grant any real estate security interests beyond that which is required pursuant to the Indenture, with respect to any fee interest in certain Real Property identified in a schedule to the Indenture as owned by the Issuer, the Co-Issuer or a Subsidiary Guarantor on the Issue Date or any fee interest in Real Property acquired by the Issuer, the Co-Issuer or a Subsidiary Guarantor after the Issue Date or otherwise that secures the Notes and Note Guarantees, but exclusive of Excluded Property (individually and collectively, the “Mortgaged Property”) in each instance:
     (1) with respect to each Mortgaged Property, the Issuer, the Co-Issuer and the Subsidiary Guarantors, as applicable, will cause to be delivered to the Note Collateral Agent, as mortgagee or beneficiary, as applicable, fully executed counterparts of Mortgages, each dated as of the Issue Date or, if later, the date such property is encumbered to secure the Notes and the Note Guarantees, in accordance with the requirements of the Indenture and/or the Security Documents, duly executed by the Issuer, the Co-Issuer or the applicable Subsidiary Guarantor, as the case may be;
     (2) within forty-five (45) days following the recording of any Mortgage with respect to any Mortgaged Property in accordance with the foregoing, if available at commercially reasonable rates, the Note Collateral Agent shall have received mortgagee’s title insurance policies in favor of the Note Collateral Agent, as mortgagee for the benefit of itself and the Trustee and the Holders of the Notes, in a commercially reasonable form, with respect to the property purported to be covered by such Mortgage, to insure that the interests created by the Mortgage constitute valid and Note First-Priority Liens on such Mortgaged Property free and clear of all Liens, defects and encumbrances (other than Permitted Liens), each such title insurance policy to have a policy limit, not to exceed one hundred ten percent (110%) of the then fair market value of the Mortgaged Property, and such policies shall also include, to the extent available and at a commercially reasonable premium, the endorsements, as applicable, equivalent to those delivered in connection with the Indenture and shall be accompanied by evidence of the payment in full of all premiums thereon; and
     (3) within forty-five (45) days following the recording of any Mortgage with respect to any Mortgaged Property, the Issuer, the Co-Issuer or any Subsidiary Guarantor shall deliver to the Note Collateral Agent, such filings (or any updates or affidavits that the title company may reasonably require as necessary to issue the title insurance policies), surveys and fixture filings, along with such other documents, opinions, instruments, certificates and agreements, as reasonably required to create, evidence or perfect a valid and Note First-Priority Lien on the Mortgaged Property subject to each such Mortgage (subject to Permitted Liens).
Foreclosure
     In the event of foreclosure on the Note Collateral, the proceeds from the sale of the same may not be sufficient to satisfy the Issuer’s and the Co-Issuer’s obligations under the Notes, either in whole or in part. The amount to be received upon such a sale would be dependent on numerous factors (including those described in “— Sufficiency of collateral in the event of foreclosure”). By its nature, portions of the Note Collateral may be illiquid and may have no readily ascertainable market value or may require consents that cannot be obtained. In particular, Note Collateral consisting of contracts and intellectual property is generally more illiquid than

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the Revolving Facility First-Priority Collateral consisting of receivables and inventory. Accordingly, there can be no assurance that the Note Collateral can be sold in a short period of time in an orderly manner. If the Revolving Credit Facility has been entered into, the Revolving Lenders may receive payment prior to payment of the Notes.
Certain bankruptcy limitations
     The right of the Agents to repossess and dispose of the Note Collateral upon the occurrence of an Event of Default would be significantly impaired by applicable bankruptcy law in the event that a bankruptcy case were to be commenced by or against the Issuer, the Co-Issuer or any Subsidiary Guarantor prior to the Agents having repossessed and disposed of the Note Collateral. Upon the commencement of a case for relief under the Bankruptcy Code, secured creditors such as the Agents are prohibited from repossessing security from a debtor in a bankruptcy case, or from disposing of security repossessed from the debtor or any other Collateral, without bankruptcy court approval.
     In view of the broad equitable powers of a U.S. bankruptcy court, it is impossible to predict how long payments under the Notes or any Guarantees could be delayed following commencement of a bankruptcy case, whether or when the Agents could repossess or dispose of the Note Collateral, the value of the Note Collateral at the time of the bankruptcy petition or whether or to what extent Holders of the Notes would be compensated for any delay in payment or loss of value of the Note Collateral. The Bankruptcy Code only permits the payment and/or accrual of post-petition interest, costs and attorneys’ fees to a secured creditor during a debtor’s bankruptcy case to the extent the value of the Note Collateral is determined by the bankruptcy court to exceed the aggregate outstanding principal amount of the obligations secured by the Note Collateral.
     Furthermore, in the event a bankruptcy court determines that the value of the Note Collateral is not sufficient to repay all amounts due on the Notes after payment of any priority claims, the Holders of the Notes would hold secured claims only to the extent of the value of the Note Collateral to which the Holders of the Notes are entitled (and subject to the rights in the Revolving Facility First-Priority Lien Collateral of holders of the Revolving Credit Facility Obligations), and unsecured claims with respect to such shortfall.
Release
     The Liens on the Note Collateral will be released with respect to the Notes and the Note Guarantees, as applicable:
     (1) in whole, upon payment in full of the principal of, accrued and unpaid interest, and premium, if any, on the Notes;
     (2) in whole, upon satisfaction and discharge of the Indenture;
     (3) in whole, upon a legal defeasance or a covenant defeasance as set forth under “— Legal Defeasance and Covenant Defeasance” below;
     (4) as to any asset constituting Note Collateral (A) that is sold or otherwise disposed of by the Issuer, the Co-Issuer, any of the Subsidiary Guarantors or Absaloka (to a person that is not an Issuer, Co-Issuer, a Subsidiary Guarantor or Absaloka) in a transaction permitted by “— Certain Covenants —Limitations on Asset Sales” and by the Security Documents (to the extent of the interest sold or disposed of) or otherwise permitted by the Indenture and the Security Documents, if all Liens on that asset then securing the Notes and the Note Guarantees then secured by that asset (including all commitments thereunder) are released or (B) that is otherwise released in accordance with, and as expressly provided for in accordance with, the Indenture, the Intercreditor Agreement and the Security Documents;
     (5) as set forth under “— Amendment, Supplement, Waiver and Entry into Intercreditor Agreement,” as to property that constitutes less than all or substantially all of the Note Collateral, with the consent of holders of at least a majority in aggregate principal amount of the Notes, voting as one class (or, in the case of a release of all or substantially all of the Note Collateral, with the consent of the holders of at least sixty-six and two-thirds percent (662/3%) in aggregate principal amount of the Notes, voting as one class), including consents obtained in connection with a tender offer or exchange offer for, or purchase of, Notes; or

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     (6) with respect to assets of a Guarantor upon release of such Guarantor from its Note Guarantee as set forth under “— Note Guarantees,” above.
     Upon compliance by the Issuer, the Co-Issuer, any Subsidiary Guarantor or Absaloka, as the case may be, with the conditions precedent required by the Indenture, the Trustee and the Agents shall promptly cause to be released and reconveyed to the Issuer, the Co-Issuer, the Subsidiary Guarantor or Absaloka, as the case may be, the released Collateral. Prior to each proposed release, the Issuer, the Co-Issuer, each Subsidiary Guarantor and Absaloka will furnish to the Trustee and the Agents all documents required by the Indenture, the Security Documents and the Trust Indenture Act.
Change of Control
     Upon the occurrence of any Change of Control, each Holder will have the right to require that the Issuer purchase (a “Change of Control Offer”) pursuant to the procedure required by the Indenture, all or any part (equal to $2,000 or an integral multiple of $1,000 in excess thereof) of that Holder’s Notes for a cash price (the “Change of Control Purchase Price”) equal to 101% of the principal amount of the Notes to be purchased, plus accrued and unpaid interest thereon and Additional Interest, if any, to the date of purchase, on a date specified in the notice specified below (which shall be a Business Day not earlier than 30 days nor later than 60 days from the date the notice is mailed) (a “Change of Control Payment Date”). A Change of Control Offer may be made in advance of a Change of Control or conditional upon the occurrence of a Change of Control, if a definitive agreement is in place for the Change of Control at the time the Change of Control Offer is made.
     Within 30 days following any Change of Control, or at an earlier date if the Issuer makes a Change of Control Offer in advance of, or conditioned on the occurrence of, a Change of Control, the Issuer will mail, or caused to be mailed, to the Holders a notice which notice shall state:
     (1) the circumstances and relevant facts regarding such Change of Control;
     (2) that the Change of Control Offer is being made pursuant to the relevant section of the Indenture and that all Notes properly tendered and not withdrawn shall be accepted for payment;
     (3) the Change of Control Purchase Price (including the amount of accrued interest and any Additional Interest) and the Change of Control Payment Date;
     (4) that any Note not tendered shall continue to accrue interest;
     (5) that, unless the Issuer defaults in making payment therefore, any Note accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest after the Change of Control Payment Date;
     (6) that Holders electing to have a Note purchased pursuant to a Change of Control Offer shall be required to surrender the Note, with the form entitled “Option of Holder to Elect Purchase” on the reverse of the Note completed, to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day prior to the Change of Control Payment Date;
     (7) that Holders shall be entitled to withdraw their election if the Paying Agent receives, not later than the second Business Day prior to the Change of Control Payment Date, an email, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Notes the Holder delivered for purchase and a statement that such Holder is withdrawing such Holder’s election to have such Note purchased; and
     (8) that Holders whose Notes are purchased only in part shall be issued new Notes in a principal amount equal to the unpurchased portion of the Notes surrendered.
     The Change of Control Offer is required to remain open for at least 20 Business Days or for such longer period as is required by law. The Issuer and the Co-Issuer will publicly announce the results of the Change of Control Offer on or as soon as practicable after the date of purchase.

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     If a Change of Control Offer is made, there can be no assurance that the Issuer and the Co-Issuer will have available funds sufficient to pay for all or any of the Notes of Holders seeking to accept the Change of Control Offer. In addition, we cannot assure you that in the event of a Change of Control the Issuer and the Co-Issuer will be able to obtain the consents necessary to consummate a Change of Control Offer from the parties to agreements governing other outstanding Indebtedness which may prohibit the offer.
     The definition of “Change of Control” under the Indenture includes certain events defined as “Prepayment Events” in the WML Credit Agreements. Those agreements require WML to offer to prepay indebtedness under the agreements in specified circumstances, including events relating to a change of control of the Issuer, WML or WML’s Subsidiaries. The offer price for the indebtedness would be the principal amount of such indebtedness plus, in the case of the WML Notes, a make-whole amount determined in accordance with the terms of the agreement governing the WML Notes. To the extent accepted, such an offer would reduce the amount of assets available to the Issuer to satisfy its obligations with respect to a Change of Control Offer or its other obligations under the Indenture.
     Any future credit agreement or other agreement to which the Issuer becomes a party may prohibit us from purchasing any Notes, subject to certain exceptions, and may also provide that some change of control events with respect to us would constitute a default thereunder. In the event a Change of Control occurs at a time when the Issuer is prohibited from purchasing Notes, the Issuer could seek the consent from the lenders under such other agreement to the purchase of Notes or could attempt to refinance the borrowings that contain the prohibition. If the Issuer is unsuccessful in obtaining a consent or refinancing the borrowings, the Issuer will remain prohibited from purchasing Notes. In that case, the Issuer’s failure to purchase tendered Notes would constitute an Event of Default under the Indenture which could, in turn, constitute a default under such other agreement.
     The provisions described above that require the Issuer to make a Change of Control Offer following a Change of Control will be applicable regardless of whether any other provisions of the Indenture are applicable to the transaction giving rise to the Change of Control. Except as described above with respect to a Change of Control, the Indenture does not contain provisions that permit the Holders of the Notes to require that the Issuer purchase or redeem the Notes in the event of a takeover, recapitalization or similar transaction.
     The obligation of the Issuer to make a Change of Control Offer will be satisfied if a third party makes the Change of Control Offer (an “Alternate Offer”) in the manner and at the times and otherwise in compliance with the requirements set forth in the Indenture applicable to a Change of Control Offer made by the Issuer and purchases all Notes properly tendered and not withdrawn under the Change of Control Offer. The Alternate Offer must comply with all the other provisions applicable to the Change of Control Offer, shall remain, if commenced prior to the Change of Control, open for acceptance until at least the consummation of the Change of Control (and otherwise in accordance with the time specified as set forth above) and must permit Holders to withdraw any tenders of Notes made into the Alternate Offer until the final expiration or consummation thereof. An Alternate Offer may be made in advance of a Change of Control or conditional upon the occurrence of a Change in Control, if a definitive agreement is in place for the Change of Control at the time the Alternate Offer is made.
     With respect to any disposition of assets, the phrase “all or substantially all” as used in the Indenture (including as set forth under the definition of “Change of Control” and “— Certain Covenants — Limitations on Mergers, Consolidations, Etc.” below) varies according to the facts and circumstances of the subject transaction, has no clearly established meaning under New York law (which governs the Indenture) and is subject to judicial interpretation. Accordingly, in certain circumstances there may be a degree of uncertainty in ascertaining whether a particular transaction would involve a disposition of “all or substantially all” of the assets of the Issuer, and therefore it may be unclear as to whether a Change of Control has occurred and whether the Holders have the right to require the Issuer to purchase Notes. In addition, it may be unclear whether certain transactions constitute a Change of Control. Under a recent Delaware Chancery Court interpretation of a change of control repurchase requirement with a continuing director provision, a Board of Directors may approve a slate of shareholder nominated directors without endorsing them or while simultaneously recommending and endorsing its own slate instead. The foregoing interpretation would permit the Issuer’s Board of Directors to approve a slate of directors that included a majority of dissident directors nominated pursuant to a proxy contest, and the ultimate election of such dissident slate would not constitute a “Change of Control” that would trigger a Holder’s right to require the Issuer to make an Change of Control Offer as described above.

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     The Issuer shall when making a Change of Control Offer comply, and shall use commercially reasonable efforts to cause any third party making an Alternate Offer to comply, with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of the Notes as a result of a Change of Control or an Alternate Offer, as applicable. To the extent that the provisions of any applicable securities laws or regulations conflict with the Change of Control provisions of the Indenture, the Issuer shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under the Change of Control provisions of the Indenture by virtue of such conflict.
Certain Covenants
     The Indenture will contain, among others, the following covenants:
Limitations on Additional Indebtedness and Preferred Stock
     The Issuer and the Co-Issuer will not, and the Issuer will not permit any Restricted Subsidiary to, directly or indirectly, incur any Indebtedness (including Acquired Indebtedness), and the Issuer and the Co-Issuer will not issue any Disqualified Equity Interests or Preferred Stock and the Issuer shall not permit any Restricted Subsidiaries to issue any Disqualified Equity Interests or Preferred Stock (other than Preferred Stock of a Restricted Subsidiary held by the Issuer, the Co-Issuer or any Guarantor, so long as it is so held); provided, that the Issuer, the Co-Issuer or any Guarantor may incur additional Indebtedness or issue Disqualified Equity Interests and the Issuer may issue Designated Preferred Stock if, in each case, after giving effect thereto, the Fixed Charge Coverage Ratio would have been at least 2.00 to 1.00 (the “Coverage Ratio Exception”) provided, further, that the Issuer may issue Preferred Stock under the Issuer’s Rights Plan.
     Notwithstanding the above, each of the following shall be permitted (the “Permitted Indebtedness”):
     (1) (a) Indebtedness of the Issuer, the Co-Issuer, any Guarantor and Absaloka under the Revolving Credit Facility together with the incurrence by any Restricted Subsidiary of the guarantees thereunder and the issuance and creation of letters of credit and bankers’ acceptances thereunder (with letters of credit and bankers’ acceptances being deemed to have a principal amount equal to the face amount thereof), up to an aggregate principal amount of $20.0 million outstanding at any one time, less, to the extent a permanent repayment and/or commitment reduction is required thereunder as a result of such application, the aggregate amount of Net Available Proceeds applied to repayments under such Revolving Credit Facility in accordance with the covenant described under “— Limitations on Asset Sales” and (b) Indebtedness of WML and its Subsidiaries under the Amended and Restated WML Credit Agreement and the incurrence and creation of letters of credit and bankers’ acceptances thereunder (to the extent permitted and with letters of credit and bankers’ acceptances being deemed to have a principal amount equal to the face amount thereof), up to an aggregate principal amount of $25.0 million outstanding at any time, reduced, to the extent a permanent repayment and/or commitment reduction is required thereunder;
     (2) (x) the Notes issued on the Issue Date (excluding any Additional Notes) and the Note Guarantees thereof and (y) any Exchange Notes issued in exchange for the Notes (excluding any Additional Notes) and any Note Guarantees thereof pursuant to the Registration Rights Agreement;
     (3) Indebtedness of the Issuer, the Co-Issuer and the Restricted Subsidiaries to the extent outstanding on the Issue Date (other than Indebtedness referred to in clauses (1) and (2) above), after giving effect to the intended use of proceeds of the Notes, including the WML Notes;
     (4) Indebtedness under Hedging Obligations in the ordinary course of business that are designed to protect against fluctuations in interest rates, foreign currency exchange rates and commodity prices; provided, that if such Hedging Obligations are of the type described in clause (1) of the definition thereof, (a) such Hedging Obligations relate to payment obligations on Indebtedness otherwise permitted to be incurred by this covenant, and (b) the notional principal amount of such Hedging Obligations at the time incurred does not exceed the principal amount of the Indebtedness to which such Hedging Obligations relate;
     (5) Indebtedness of the Issuer or the Co-Issuer owed to a Restricted Subsidiary and Indebtedness of any Restricted Subsidiary owed to the Issuer, the Co-Issuer or any other Restricted Subsidiary; provided, however, that (A) if the Issuer, the Co-Issuer or any Guarantor is the obligor with respect to such Indebtedness and the payee is not the Issuer, the Co-Issuer or a Guarantor, such Indebtedness must be subordinated to the

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prior payment in full in cash of all obligations of the Issuer, the Co-Issuer or such Guarantor with respect to the Notes and (B) upon any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or such Indebtedness being owed to any Person other than the Issuer, the Co-Issuer or a Restricted Subsidiary, the Issuer, the Co-Issuer or such Restricted Subsidiary, as applicable, in each case, shall be deemed to have incurred Indebtedness not permitted by this clause (5);
     (6) (x) any guarantee by the Issuer, the Co-Issuer or a Guarantor of Indebtedness of the Issuer, the Co-Issuer or any Guarantor so long as the incurrence of such Indebtedness by the Issuer, the Co-Issuer and such Guarantor is permitted under the terms of the Indenture and (y) any guarantee by a Restricted Subsidiary that is not a Guarantor of Indebtedness of the Issuer, the Co-Issuer or a Restricted Subsidiary so long as the incurrence of such Indebtedness is permitted under the terms of the Indenture;
     (7) (a) Indebtedness incurred by the Issuer, the Co-Issuer or any Restricted Subsidiary constituting reimbursement obligations with respect to any letters of credit, bankers’ acceptance warehouse receipt or similar facility issued in the ordinary course of business, including without limitation letters of credit or Indebtedness in respect of workers’ compensation claims, health, disability or other employee benefits or property, casualty or liability insurance or self-insurance or other Indebtedness with respect to reimbursement type obligations regarding workers’ compensation claims and (b) Obligations in respect of performance, surety, reclamation and similar bonds and performance and completion guarantees provided by the Issuer, the Co-Issuer or any Restricted Subsidiary or Obligations in respect of letters of credit related thereto, in each case incurred in the ordinary course of business or consistent with past practice, and any guarantees or letters of credit functioning as so supporting any of the foregoing bonds or obligations (in the case of clauses (a) and (b), other than for an obligation for money borrowed);
     (8) Purchase Money Indebtedness (a) incurred by the Issuer, the Co-Issuer or any Restricted Subsidiary, in an aggregate amount not to exceed at any time outstanding $40.0 million and (b) incurred by WML or any of its Subsidiaries in an aggregate amount not to exceed at any time outstanding $35.0 million;
     (9) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently (except in the case of daylight overdrafts) drawn against insufficient funds in the ordinary course of business; provided, however, that such Indebtedness is extinguished within five Business Days of incurrence;
     (10) Indebtedness arising in connection with endorsement of instruments for deposit in the ordinary course of business;
     (11) Refinancing Indebtedness with respect to Indebtedness incurred or outstanding pursuant to the Coverage Ratio Exception or clause (1)(b), (2), (3), (8), this clause (11), (15) or (18); provided, that for the purposes of clause 1(b) and 3 (for the purpose of clause 3, with respect to the WML Notes only), such Refinancing Indebtedness may be represented by Additional Notes and Note Guarantees;
     (12) Indebtedness supported by one or more letters of credit issued under the Revolving Credit Facility and the Amended and Restated WML Credit Agreement in accordance with clause (1)(a) and (1)(b), respectively; provided, that the amount of Indebtedness permitted to be incurred under this clause (12) supported by any such letter(s) of credit shall not exceed the amount of such letter(s) of credit; provided, further, that upon any reduction, cancellation or termination of such letter(s) of credit, there shall be deemed to be an incurrence of Indebtedness under the Indenture that must be otherwise permitted to be incurred under the Indenture equal to the excess of the amount of such Indebtedness outstanding immediately after such reduction, cancellation or termination over the remaining stated amount, if any, of such letter(s) of credit or the stated amount of any letter(s) of credit issued in a contemporaneous replacement of such letter(s) of credit;
     (13) Attributable Indebtedness incurred by the Issuer, the Co-Issuer or any Restricted Subsidiary in an aggregate amount not to exceed $10.0 million at any one time outstanding;
     (14) Indebtedness incurred by the Issuer, the Co-Issuer or any Guarantor in an aggregate principal amount (or accreted value, as applicable) at any one time outstanding, including all Refinancing Indebtedness incurred to renew, refund, refinance, replace, defease or discharge any Indebtedness incurred pursuant to this clause (14), not to exceed $20.0 million;

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     (15) Indebtedness of the Issuer, the Co-Issuer or any Restricted Subsidiary of Acquired Indebtedness (except to the extent such Acquired Indebtedness was incurred in connection with or in contemplation of such acquisition); provided, that after giving effect to such incurrence of Indebtedness either (A) the Issuer would be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Coverage Ratio Exception immediately following such transaction or (B) such Fixed Charge Coverage Ratio would have been greater than immediately prior to such acquisition;
     (16) Indebtedness of the Issuer, the Co-Issuer or any Restricted Subsidiary under any Cash Management Obligations;
     (17) Customary indemnification, adjustment of purchase price or similar obligations, including title insurance, of the Issuer, the Co-Issuer or any Restricted Subsidiary, in each case, incurred in connection with the disposition of any assets of the Issuer, the Co-Issuer or any such Restricted Subsidiary (other than guarantees incurred by any Person acquiring all or any portion of such assets for the purpose of financing such acquisition); and
     (18) Indebtedness represented by Additional Notes and Note Guarantees thereof in connection with or in contemplation of, or to provide all or any portion of the funds or credit support utilized to consummate, the acquisition by the Issuer, the Co-Issuer or any Guarantor of assets used or useful in a Permitted Business (whether through the direct purchase of assets or the purchase of capital stock of, or merger or consolidation with, any Person owning such assets); provided, that the Issuer would, on the date of such transaction after giving pro forma effect thereto and any related financing transactions as if the same had occurred at the beginning of the applicable Four-Quarter Period, have had a Total Leverage Ratio for the Four-Quarter Period immediately preceding the date of such transaction, of no more than 4.0 to 1.0.
     The Issuer and the Co-Issuer will not incur, and will not permit any Restricted Subsidiary to incur, any Indebtedness (including Permitted Indebtedness) that is contractually subordinated in right of payment to any other Indebtedness of the Issuer, the Co-Issuer or such Restricted Subsidiary unless such Indebtedness is also contractually subordinated in right of payment to the Notes and the applicable Note Guarantees on substantially identical terms; provided, however, that no Indebtedness will be deemed to be contractually subordinated in right of payment to any other Indebtedness of the Issuer or the Co-Issuer solely by virtue of being unsecured or by virtue of being secured on a junior priority basis; and provided, further, that this provision shall not apply to subordinated debt incurred by WML or its Subsidiaries at any time when the WML Notes are outstanding.
     For purposes of determining compliance with this covenant, in the event that an item of Indebtedness meets the criteria of more than one of the categories of Permitted Indebtedness described in clauses (1) through (18) above or is entitled to be incurred pursuant to the Coverage Ratio Exception, the Issuer shall classify and may reclassify, in each case in its sole discretion, such item of Indebtedness and may divide, classify and reclassify such Indebtedness in more than one of the types of Indebtedness described, except that Indebtedness incurred under the Revolving Credit Facility after the Issue Date must be incurred under clause (1) above. In addition, for purposes of determining any particular amount of Indebtedness under this covenant, guarantees, Liens or letter of credit obligations supporting Indebtedness otherwise included in the determination of such particular amount shall not be included so long as incurred by a Person that could have incurred such Indebtedness. Notwithstanding any other provision of this covenant, the maximum amount of Indebtedness that the Issuer, the Co-Issuer or any Restricted Subsidiary may incur pursuant to this covenant shall not be deemed to be exceeded solely as a result of fluctuations in exchange rates or currency values.
Limitations on Restricted Payments
     The Issuer and the Co-Issuer will not, and will not permit any Restricted Subsidiary to, directly or indirectly, make any Restricted Payment unless, at the time of and after giving effect to such Restricted Payment:
     (1) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence of such Restricted Payment;
     (2) the Issuer would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable Four-Quarter Period,

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have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Coverage Ratio Exception; or
     (3) such Restricted Payment, when added to the aggregate amount of all other Restricted Payments made by the Issuer, the Co-Issuer and the Restricted Subsidiaries after the Issue Date (other than Restricted Payments made pursuant to clauses (2), (3), (4), (5), (6), (8) or (9) of the next paragraph), is less than the sum (the “Restricted Payments Basket”) of (without duplication):
     (a) 50% of Consolidated Net Income of the Issuer for the period (taken as one accounting period) commencing on the first day of the first full fiscal quarter commencing after the Issue Date to and including the last day of the fiscal quarter ended immediately prior to the date of such calculation for which consolidated financial statements are available (or, if such Consolidated Net Income shall be a deficit, minus 100% of such aggregate deficit), plus
     (b) 100% of the aggregate net cash proceeds and the fair market value, as determined in good faith by the Board of Directors of the Issuer, of property and marketable securities, received by the Issuer either (x) as contributions to the common equity of the Issuer after the Issue Date (other than (i) by a Restricted Subsidiary, (ii) any Disqualified Equity Interests, (iii) Designated Preferred Stock and (iv) cash proceeds applied to Restricted Payments made in accordance with clause (4) of the next succeeding paragraph) or (y) from the issuance and sale of Qualified Equity Interests after the Issue Date, in each case, other than any such proceeds which are used (x) to redeem Notes in accordance with “— Optional Redemption — Redemption with Proceeds from Qualified Equity Offerings” or (y) to make Restricted Payments in reliance on clause (3) or clause (4) of the next succeeding paragraph, plus
     (c) the aggregate amount by which Indebtedness (other than any Subordinated Indebtedness) of the Issuer, the Co-Issuer or any Restricted Subsidiary is reduced on the Issuer’s balance sheet upon the conversion or exchange subsequent to the Issue Date (other than by a Subsidiary of the Issuer) into Qualified Equity Interests (less the amount of any cash, or the fair value of assets, distributed by the Issuer, the Co-Issuer or any Restricted Subsidiary upon such conversion or exchange), plus
     (d) without duplication of any amounts included in clause (4) of the next succeeding paragraph, (x) in the case of the disposition or repayment of or return on any Investment that was treated as a Restricted Payment made after the Issue Date, an amount (to the extent not included in the computation of Consolidated Net Income) equal to the lesser of (i) the aggregate amount received in cash and the fair market value, as determined by the Board of Directors of the Issuer in good faith, of property and marketable securities received after the Issue Date and representing the return of capital with respect to such Investment and (ii) the amount of such Investment that was treated as a Restricted Payment, in either case, less the cost of the disposition of such Investment and net of taxes or (y) the sale (other than to the Issuer, the Co-Issuer or a Restricted Subsidiary) of the Equity Interests of an Unrestricted Subsidiary, plus
     (e) upon a Redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary, the lesser of (i) the Fair Market Value of the Issuer’s proportionate interest in such Subsidiary immediately following such Redesignation, and (ii) the aggregate amount of the Issuer’s Investments in such Subsidiary to the extent such Investments reduced the Restricted Payments Basket and were not previously repaid or otherwise reduced.
     The foregoing provisions will not prohibit:
     (1) the payment by the Issuer, the Co-Issuer or any Restricted Subsidiary of any dividend or other distribution within 60 days after the date of declaration thereof, if on the date of declaration the payment would have complied with the provisions of the Indenture;
     (2) the redemption, repurchase, retirement or other acquisition of any Equity Interests of the Issuer, the Co-Issuer or any Restricted Subsidiary in exchange for, or out of the proceeds of the substantially concurrent issuance and sale of, Qualified Equity Interests;

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     (3) the redemption, repurchase, retirement or other acquisition of Subordinated Indebtedness of the Issuer, the Co-Issuer or any Restricted Subsidiary (a) in exchange for, or out of the proceeds of the substantially concurrent issuance and sale of, Qualified Equity Interests or (b) in exchange for, or out of the proceeds of the substantially concurrent incurrence of, Refinancing Indebtedness permitted to be incurred under the “Limitations on Additional Indebtedness and Preferred Stock” covenant and the other terms of the Indenture; provided, that the amount of any such net cash proceeds that are utilized for any such Restricted Payment will not be considered to be net proceeds of Qualified Equity Interests for purposes of clause (3)(b) of the preceding paragraph and will not be considered to be net cash proceeds from a Qualified Equity Offering for purposes of the provisions described above under the caption “— Optional Redemption —Redemption with Proceeds from Qualified Equity Offerings”;
     (4) payments to redeem Equity Interests of the Issuer, held by officers, directors or employees or former officers, directors or employees (or their transferees, estates or beneficiaries under their estates) thereof, upon their death, disability, retirement, severance or termination of employment or service pursuant to any employee benefit plan or agreement or awarded to an employee to pay for the taxes payable by such employee upon such grant or award or the vesting thereof; provided, that the aggregate amount of Restricted Payments under this clause (4) shall not exceed (A) $2.0 million during any calendar year plus (B) the amount of any net cash proceeds received by or contributed to the Issuer from the issuance and sale since the Issue Date of Qualified Equity Interests of the Issuer to its officers, directors or employees that have not been applied to the payment of Restricted Payments pursuant to the terms of clause 3(b) of the preceding paragraph or this clause (4), plus (C) the net cash proceeds of any “key-man” life insurance policies that have not been applied to Restricted Payments pursuant to this clause (4), less (D) the amount of any Restricted Payments previously made from cash proceeds received pursuant to clauses (B) and (C) of this clause (4); provided, further, that the cancellation of Indebtedness owing to the Issuer, the Co-Issuer or any Restricted Subsidiary in connection with the repurchase of Qualified Equity Interests will not be deemed to constitute a Restricted Payment;
     (5) (a) the declaration and payment of regularly scheduled or accrued dividends to holders of the Series A Preferred Stock to the extent such dividends are included in the definition of Consolidated Interest Expense, (b) the declaration and payment of regularly scheduled or accrued dividends to holders of any class or series of Disqualified Equity Interests of the Issuer, the Co-Issuer or any Restricted Subsidiary outstanding on the Issue Date or issued on or after the Issue Date in accordance with the Coverage Ratio Exception described above under the caption “— Limitations on Additional Indebtedness and Preferred Stock” to the extent such dividends are included in the definition of Consolidated Interest Expense and (c) the declaration and payment of accrued and unpaid dividends to holders of the Series A Preferred Stock outstanding as of the Issue Date with the proceeds of this offering as described under “Use of Proceeds”;
     (6) the declaration and payment of dividends or distributions to holders of any class or series of Designated Preferred Stock (other than Disqualified Equity Interests) issued by the Issuer after the Issue Date in accordance with the Coverage Ratio Exception described under the caption “— Limitations on Additional Indebtedness and Preferred Stock” to the extent such dividends are included in the definition of Consolidated Interest Expense; provided, however, that (A) for the most recently ended four full fiscal quarters for which consolidated financial statements are available immediately preceding the date of issuance of such Designated Preferred Stock, after giving effect to such issuance (and the payment of dividends or distributions thereon) on a pro forma basis, the Issuer would have had a Fixed Charge Coverage Ratio of at least 2.0 to 1.0 and (B) the aggregate amount of dividends declared and paid pursuant to this clause (6) does not exceed the net cash proceeds actually received by the Issuer from any such sale of Designated Preferred Stock (other than Disqualified Equity Interests) issued after the Issue Date;
     (7) repurchases of Equity Interests deemed to occur upon the exercise or conversion of stock options or other Equity Interests, if such repurchased or converted Equity Interests represent a portion of the exercise price thereof;
     (8) the repurchase, redemption or other acquisition or retirement for value of any Subordinated Indebtedness pursuant to the provisions in documentation governing such Subordinated Indebtedness similar to those described under “— Change of Control,” “— Certain Covenants— Limitations on Asset Sales” and “— Certain Covenants —Event of Loss”; provided, that prior to such repurchase, redemption or another acquisition, the Issuer and the Co-Issuer (or a third party to the extent permitted by the Indenture) shall have made any required Change of Control Offer, Net Proceeds Offer or Loss Proceeds Offer, as the case may be,

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with respect to the Notes and shall have repurchased all Notes validly tendered and not withdrawn in connection with such Change of Control Offer, Net Proceeds Offer or Loss Proceeds Offer; or
     (9) additional Restricted Payments of $10.0 million.
provided, that (a) in the case of any Restricted Payment pursuant to clause (3), (4), (5)(b), (6), (8) or (9) above, no Default shall have occurred and be continuing or occur as a consequence thereof and (b) no issuance and sale of Qualified Equity Interests used to make a payment pursuant to clause (2), (3) or (4) above shall increase the Restricted Payments Basket.
     In the event that a Restricted Payment meets the criteria of more than one of the exceptions described in (1) through (9) above or is entitled to be made pursuant to the first paragraph above, the Issuer shall, in its sole discretion, classify or reclassify such Restricted Payment into one or more exceptions.
Limitations on Dividend and Other Restrictions Affecting Restricted Subsidiaries
     The Issuer and the Co-Issuer will not, and will not permit any Restricted Subsidiary to, directly or indirectly, create or otherwise cause or permit to exist or become effective any consensual encumbrance or consensual restriction on the ability of any Restricted Subsidiary to:
     (a) pay dividends or make any other distributions on or in respect of its Equity Interests to the Issuer, the Co-Issuer or any Restricted Subsidiary, or with respect to any other interest or participation in, or measured by, its profits, or pay any Indebtedness owed to the Issuer, the Co-Issuer or any Restricted Subsidiary;
     (b) make loans or advances or pay any Indebtedness or other obligation owed to the Issuer, the Co-Issuer or any other Restricted Subsidiary; or
     (c) sell, lease or transfer any of its assets to the Issuer, the Co-Issuer or any other Restricted Subsidiary;
     except for:
     (1) encumbrances or restrictions existing under or by reason of applicable law or any applicable rule, regulation or order;
     (2) encumbrances or restrictions existing under the Indenture, the Notes and the Note Guarantees (including any Exchange Notes and guarantees thereof), an Intercreditor Agreement and the Security Documents;
     (3) customary non-assignment provisions of any contract or any lease or license entered into in the ordinary course of business;
     (4) encumbrances or restrictions existing under agreements existing on the date of the Indenture (including, without limitation, the WML Credit Agreements and agreements relating to Absaloka) as in effect on that date;
     (5) restrictions on transfers of assets subject to any Lien permitted under the Indenture imposed by the holder of such Lien;
     (6) restrictions on transfers of assets imposed under any agreement to sell such assets permitted under the Indenture to any Person pending the closing of such sale;
     (7) any instrument governing Acquired Indebtedness, which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person or the properties or assets of the Person so acquired, so long as such Acquired Indebtedness or encumbrance or restriction was not incurred in connection with, or in contemplation of, such acquisition;

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     (8) any other agreement governing Indebtedness entered into after the Issue Date that contains encumbrances and restrictions that are not materially more restrictive with respect to any Restricted Subsidiary than those in effect on the Issue Date with respect to that Restricted Subsidiary pursuant to agreements in effect on the Issue Date;
     (9) customary provisions in partnership agreements, limited liability company organizational governance documents, joint venture agreements and other similar agreements entered into in the ordinary course of business that restrict the transfer of ownership interests in such partnership, limited liability company, joint venture or similar Person;
     (10) Purchase Money Indebtedness and Attributable Indebtedness incurred in compliance with the covenant described under “— Limitations on Additional Indebtedness and Preferred Stock” that impose restrictions of the nature described in clause (c) above on the assets acquired;
     (11) restrictions on cash or other deposits or net worth imposed by suppliers or landlords under contracts and bonding requirements entered into in the ordinary course of business;
     (12) any encumbrances or restrictions pursuant to waivers or consents provided by lenders under the WML Credit Agreements to permit sales of assets of WML or its Subsidiaries that would be otherwise prohibited by the terms of those agreements, provided, that such encumbrances or restrictions may exist only until all Indebtedness outstanding under the WML Credit Agreements is repaid and the agreements are terminated, or until such earlier date as specified in any such waivers or consents; and
     (13) any encumbrances or restrictions imposed by any amendments or refinancings of the contracts, instruments or obligations referred to in clauses (1) through (12) above; provided, that such amendments or refinancings are, in the good faith judgment of the Issuer’s Board of Directors, no more materially restrictive with respect to such encumbrances and restrictions than those prior to such amendment or refinancing.
Limitations on Transactions with Affiliates
     The Issuer and the Co-Issuer will not, and will not permit any Restricted Subsidiary to, directly or indirectly, in one transaction or a series of related transactions, sell, lease, transfer or otherwise dispose of any of its assets to, or purchase any assets from, or enter into any contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate (an “Affiliate Transaction”), unless:
     (1) such Affiliate Transaction is on terms that are no less favorable to the Issuer, the Co-Issuer or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction at such time on an arm’s-length basis by the Issuer, the Co-Issuer or that Restricted Subsidiary from a Person that is not an Affiliate of the Issuer, the Co-Issuer or that Restricted Subsidiary; and
     (2) the Issuer delivers to the Trustee:
     (a) with respect to any Affiliate Transaction involving aggregate value in excess of $10.0 million, an Officers’ Certificate certifying that such Affiliate Transaction complies with clause (1) above and a Secretary’s Certificate which sets forth and authenticates a resolution that has been adopted by a majority of the disinterested members of the Board of Directors of the Issuer approving such Affiliate Transaction and affirming the determination set forth in clause (1) above; and
     (b) with respect to any Affiliate Transaction involving aggregate value of $20.0 million or more, the certificates described in the preceding clause (a) and a written opinion as to the fairness of such Affiliate Transaction to the Issuer, the Co-Issuer or such Restricted Subsidiary from a financial point of view issued by an Independent Financial Advisor to the Board of Directors of the Issuer.
     The foregoing restrictions shall not apply to:
     (1) transactions exclusively between or among (a) the Issuer, the Co-Issuer and one or more Guarantors, (b) Guarantors or (c) Restricted Subsidiaries that are not Guarantors;

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     (2) the payment of reasonable and customary director, officer, employee and consultant compensation (including bonuses), reimbursement of expenses and other benefits (including retirement, health, stock option and other benefit plans) and indemnification arrangements;
     (3) the issuance of Equity Interests (other than Disqualified Equity Interests) of the Issuer to any director, officer, employee or consultant of the Issuer, the Co-Issuer or its Subsidiaries in the ordinary course of business;
     (4) Restricted Payments which are made in accordance with the covenant described under “— Limitations on Restricted Payments”;
     (5) transactions with customers, clients, suppliers, joint venture partners or purchasers or sellers of goods and services, in each case in the ordinary course of business and otherwise not prohibited by the Indenture that are fair to the Issuer, the Co-Issuer or its Restricted Subsidiaries, in the reasonable determination of the members of the Board of Directors of the Issuer or the senior management of the Issuer, or are on terms at least as favorable as would reasonably have been entered into at such time with an unaffiliated party;
     (6) (x) any agreement in effect on the Issue Date and disclosed in this offering memorandum, as in effect on the Issue Date or as thereafter amended or replaced in any manner, that, taken as a whole, is not more disadvantageous to the Holders or the Issuer in any material respect than such agreement as it was in effect on the Issue Date or (y) any transaction pursuant to any agreement referred to in the immediately preceding clause (x);
     (7) the existence of, and the performance by the Issuer, the Co-Issuer or any Restricted Subsidiary of its obligations under the terms of, any limited liability company, limited partnership or other organizational document or security holders agreement (including any registration rights agreement or purchase agreement related thereto) to which it is a party on the Issue Date and which is described in this offering memorandum, as in effect on the Issue Date, and similar agreements that it may enter into thereafter; provided, however, that the existence of, or the performance by the Issuer, the Co-Issuer or any of its Restricted Subsidiaries of obligations under, any amendment to any such existing agreement or any such similar agreement entered into after the date of the Indenture shall only be permitted by this clause (7) to the extent not more disadvantageous to the Holders in any material respect, when taken as a whole, than any of such documents and agreements as in effect on the Issue Date;
     (8) the Transactions and the payment of all transaction, underwriting commitment and other fees and expenses incurred in connection with the Transactions;
     (9) sales of Qualified Equity Interests to Affiliates of the Issuer not otherwise prohibited by the Indenture and the granting of registration and other customary rights in connection therewith;
     (10) loans or advances to employees in the ordinary course of business consistent with past practice; or
     (11) any transaction between or among WML or any of its Subsidiaries, on the one hand, and the Issuer or any of its Subsidiaries other than WML and its Subsidiaries, on the other hand, that qualifies as a “Permitted Affiliate Transaction” under the WML Credit Agreements; provided, that, except with respect to the services to be provided and fees payable under the management agreement between WML and the Issuer, no such affiliate transaction shall constitute a “Permitted Affiliate Transaction” unless it is consummated on terms and conditions that are at fair market value and generally similar to the terms and conditions that would apply in a comparable arm’s length transaction with an unrelated third party and the Issuer delivers to the Trustee the certificates referred to in clause 2(a) above, to the extent required by such provision. A “Permitted Affiliate Transaction” under the WML Credit Agreements generally refers to sales of coal and other transactions effected between such parties in limited circumstances (e.g., sales of coal from WRI to a WML Subsidiary when, due to a force majeure event, the WML Subsidiary is unable to provide sufficient coal to meet a customer’s needs) at fair market value and on arms’ length terms.
Limitations on Liens
     The Issuer and the Co-Issuer shall not, and shall not permit any Restricted Subsidiary other than WML or WML’s subsidiaries in accordance with the WML Credit Agreements to, directly or indirectly,

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create, incur, assume or permit or suffer to exist any Lien of any nature whatsoever against any properties or assets of the Issuer, the Co-Issuer or any Restricted Subsidiary (including Equity Interests of a Restricted Subsidiary), whether owned at the Issue Date or thereafter acquired, or any proceeds therefrom, or assign or otherwise convey any right to receive income or profits therefrom (other than Permitted Liens and liens on the collateral securing the Revolving Credit Facility Obligations). Notwithstanding anything herein to the contrary, neither the Issuer nor any of its Restricted Subsidiaries shall permit any Refinancing Indebtedness incurred to refinance Indebtedness under the WML Notes to be secured by any Lien other than as permitted under clause (12) in the definition of Permitted Liens.
Limitations on Asset Sales
     The Issuer and the Co-Issuer will not, and will not permit any Restricted Subsidiary, other than WML or WML’s subsidiaries in accordance with the WML Credit Agreements, to, directly or indirectly, consummate any Asset Sale unless:
     (1) the Issuer, the Co-Issuer or such Restricted Subsidiary receives consideration at the time of such Asset Sale at least equal to the Fair Market Value of the assets included in such Asset Sale; and
     (2) at least 75% of the total consideration received in such Asset Sale consists of cash or Cash Equivalents. For purposes of clause (2), the following shall be deemed to be cash:
     (a) the amount (without duplication) of any Indebtedness (other than Subordinated Indebtedness) of the Issuer, the Co-Issuer or such Restricted Subsidiary that is expressly assumed by the transferee in such Asset Sale and with respect to which the Issuer, the Co-Issuer or such Restricted Subsidiary, as the case may be, is unconditionally released by the holder of such Indebtedness,
     (b) the amount of any securities, Notes or other obligations received from such transferee that are within 90 days converted by the Issuer, the Co-Issuer or such Restricted Subsidiary to cash (to the extent of the cash actually so received), and
     (c) the Fair Market Value of (i) any assets (other than securities) received by the Issuer, the Co-Issuer or any Restricted Subsidiary to be used by it in a Permitted Business, (ii) Equity Interests in a Person that is a Restricted Subsidiary or in a Person engaged in a Permitted Business that shall become a Restricted Subsidiary immediately upon the acquisition of such Person by the Issuer or the Co-Issuer or (iii) a combination of (i) and (ii).
     If at any time any non-cash consideration received by the Issuer, the Co-Issuer or any Restricted Subsidiary, as the case may be, in connection with any Asset Sale is repaid or converted into or sold or otherwise disposed of for cash (other than interest received with respect to any such non-cash consideration), then the date of such repayment, conversion or disposition shall be deemed to constitute the date of an Asset Sale hereunder and the Net Available Proceeds thereof shall be applied in accordance with this covenant.
     If the Issuer, the Co-Issuer or any Restricted Subsidiary engages in an Asset Sale, the Issuer, the Co-Issuer or such Restricted Subsidiary shall, no later than 365 days following the consummation thereof, apply amounts equal to all or any of the Net Available Proceeds therefrom to:
     (1) If such Net Available Proceeds are proceeds of an Asset Sale of any asset, prepay permanently or repay permanently any Indebtedness which was secured by the Collateral sold in such Asset Sale; provided, that if such Net Available Proceeds are proceeds of an Asset Sale of the Revolving Facility First-Priority Collateral, such Net Available Proceeds shall be applied as required under the Revolving Credit Facility;
     (2) If such Net Available Proceeds are proceeds of an Asset Sale of any assets or properties of WML or any of its Subsidiaries, apply such Net Available Proceeds as and to the extent required under the WML Credit Agreements or in connection with any consent, waiver or amendment thereto provided by the WML lenders thereunder; provided, that Net Available Proceeds that are proceeds of an Asset Sale of any properties or assets of WML or any of its Subsidiaries shall constitute “Excess Proceeds” (as defined below) only if and to the extent permitted to be distributed to the Issuer by WML or any of its Subsidiaries under the WML Credit Agreements and the WML Security Agreements;

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     (3) If such Net Available Proceeds are proceeds of any Asset Sale (other than an Asset Sale of any asset that constitutes WML Collateral), to permanently reduce any Pari Passu Indebtedness; provided, however, that if any Pari Passu Indebtedness is so reduced, the Issuer and the Co-Issuer will equally and ratably reduce Indebtedness under the Notes by making an offer to all Holders of the Notes to purchase at a purchase price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, the pro rata principal amount of the Notes; or
     (4) invest all or any part of the Net Available Proceeds thereof in (A) the purchase of assets (other than securities) to be used by the Issuer, the Co-Issuer or any Restricted Subsidiary in a Permitted Business, (B) capital expenditures to be used by the Issuer, the Co-Issuer or any Restricted Subsidiary in a Permitted Business, (C) acquisition of Qualified Equity Interests in a Person that is a Restricted Subsidiary or in a Person engaged in a Permitted Business that shall become a Restricted Subsidiary immediately upon the consummation of such acquisition or (D) a combination of (A), (B) and (C).
     The amount of Net Available Proceeds not applied or invested as provided in this paragraph will constitute “Excess Proceeds.”
     When the aggregate amount of Excess Proceeds equals or exceeds $10.0 million, the Issuer will be required to make an offer to purchase from all Holders and, if applicable, redeem (or make an offer to do so) any Pari Passu Indebtedness of the Issuer the provisions of which require the Issuer to redeem such Indebtedness with the proceeds from any Asset Sales (or offer to do so), in an aggregate principal amount of Notes and such Pari Passu Indebtedness equal to the amount of such Excess Proceeds as follows:
     (1) the Issuer will (a) make an offer to purchase (a “Net Proceeds Offer”) to all Holders in accordance with the procedures set forth in the Indenture, and (b) redeem (or make an offer to do so) any such other Pari Passu Indebtedness, pro rata in proportion to the respective principal amounts of the Notes and such other Indebtedness required to be redeemed, the maximum principal amount of Notes and Pari Passu Indebtedness that may be redeemed out of the amount (the “Payment Amount”) of such Excess Proceeds;
     (2) the offer price for the Notes will be payable in cash in an amount equal to 100% of the principal amount of the Notes tendered pursuant to a Net Proceeds Offer, plus accrued and unpaid interest thereon, if any, to the date such Net Proceeds Offer is consummated (the “Offered Price”), in accordance with the procedures set forth in the Indenture and the redemption price for such Pari Passu Indebtedness (the “Pari Passu Indebtedness Price”) shall be as set forth in the related documentation governing such Indebtedness;
     (3) if the aggregate Offered Price of Notes validly tendered and not withdrawn by Holders thereof exceeds the pro rata portion of the Payment Amount allocable to the Notes, Notes to be purchased will be selected on a pro rata basis or as nearly a pro rata basis as is practicable (subject to the procedures of the Depository Trust Company); and
     (4) upon completion of such Net Proceeds Offer in accordance with the foregoing provisions, the amount of Excess Proceeds with respect to which such Net Proceeds Offer was made shall be deemed to be zero.
     To the extent that the sum of the aggregate Offered Price of Notes tendered pursuant to a Net Proceeds Offer and the aggregate Pari Passu Indebtedness Price paid to the holders of such Pari Passu Indebtedness is less than the Payment Amount relating thereto (such shortfall constituting a “Net Proceeds Deficiency”), the Issuer may use the Net Proceeds Deficiency, or a portion thereof, for general corporate purposes, subject to the provisions of the Indenture.
     In the event of the transfer of substantially all (but not all) of the assets of the Issuer, the Co-Issuer and the Restricted Subsidiaries as an entirety to a Person in a transaction covered by and effected in accordance with the covenant described under “— Limitations on Mergers, Consolidations, Etc.,” the successor Person shall be deemed to have sold for cash at Fair Market Value the assets of the Issuer, the Co-Issuer and the Restricted Subsidiaries not so transferred for purposes of this covenant, and the successor Person shall comply with the provisions of this covenant with respect to such deemed sale as if it were an Asset Sale (with such Fair Market Value being deemed to be Net Available Proceeds for such purpose).
     The Issuer will comply with applicable tender offer rules, including the requirements of Rule 14e-1 under the Exchange Act and any other applicable laws and regulations in connection with the purchase of

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Notes pursuant to a Net Proceeds Offer. To the extent that the provisions of any securities laws or regulations conflict with the “Limitations on Asset Sales” provisions of the Indenture, the Issuer shall comply with the applicable securities laws and regulations and will not be deemed to have breached their obligations under the “Limitations on Asset Sales” provisions of the Indenture by virtue of this compliance.
Excess Cash Flow
     Within 120 days after the end of each fiscal year of the Issuer (commencing with the fiscal year ending December 31, 2011), when the aggregate Excess Cash Flow Amount equals or exceeds $1.0 million, the Issuer will be required to make an offer to purchase from all Holders Notes issued under the Indenture (including the principal amount of any Additional Notes issued under the Indenture but without duplication with respect to Exchange Notes) in an aggregate principal amount equal to the Excess Cash Flow Amount as follows:
     (1) the Issuer will make an offer to purchase (an “Excess Cash Flow Offer”) to all Holders in accordance with the procedures set forth in the Indenture, pro rata in proportion to the respective principal amounts of the Notes to be purchased, the maximum principal amount that may be purchased out of the Excess Cash Flow Amount (the “Excess Cash Flow Payment Amount”);
     (2) the offer price for the Notes will be payable in cash in an amount equal to 100% of the principal amount of the Notes tendered pursuant to an Excess Cash Flow Offer, plus accrued and unpaid interest thereon, if any, to the date such Excess Cash Flow Offer is consummated (the “Excess Cash Flow Offered Price”), in accordance with the procedures set forth in the Indenture;
     (3) if the aggregate Excess Cash Flow Offered Price of Notes validly tendered and not withdrawn by Holders thereof exceeds the pro rata portion of the Excess Cash Flow Payment Amount allocable to the Notes, Notes to be purchased will be selected on a pro rata basis; and
     (4) upon completion of such Excess Cash Flow Offer in accordance with the foregoing provisions, the Excess Cash Flow Amount with respect to which such Excess Cash Flow Offer was made shall be deemed to be zero. To the extent that the sum of the aggregate Excess Cash Flow Offered Price of Notes tendered pursuant to an Excess Cash Flow Offer is less than the Excess Cash Flow Payment Amount relating thereto (such shortfall constituting an “Excess Cash Flow Offer Deficiency”), the Issuer may use the Excess Cash Flow Offer Deficiency, or a portion thereof, for general corporate purposes, subject to the provisions of the Indenture.
     The Issuer will comply with applicable tender offer rules, including the requirements of Rule 14e-1 under the Exchange Act and any other applicable laws and regulations in connection with the purchase of Notes pursuant to an Excess Cash Flow Offer.
Rights Offering
     At the end of each of the Issuer’s fiscal quarters beginning with the fiscal quarter ended June 30, 2015, if the Total Leverage Ratio equals or exceeds 3.50 to 1.0, the Issuer shall be required within 90 days (subject to requirements of applicable securities laws) of the end of the first such fiscal quarter to provide holders of the Notes with the right to purchase, on a pro rata basis with respect to Notes held as of such date, an amount of Additional Notes equal to the amount necessary to repurchase and/or redeem all WML Notes that remain outstanding as of such date, including any make-whole payment, at an issue price of 100% (the “Rights Offering”); provided, that the Issuer shall not be required to undertake more than one Rights Offering during the term of the Notes; provided, further, that a condition to the consummation of the Rights Offering shall be the subscription by existing Holders to purchase Additional Notes equal to the amount necessary to repurchase all of the outstanding WML Notes, including any make-whole payment. The proceeds from the sale of such Additional Notes shall be used to repurchase and/or redeem all outstanding WML Notes. The Indenture will include provisions necessary to cause the Issuer and Co-Issuer to effectuate the foregoing and will be modified to permit the Issuer and Co-Issuer to comply with its foregoing obligations without a resulting breach thereof.
     The Issuer will be required to pay a make whole-amount with respect to the WML Notes to the extent such Notes are repurchased or redeemed.

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Limitations on Designation of Unrestricted Subsidiaries
     The Issuer may designate any Subsidiary (including any newly formed or newly acquired Subsidiary) of the Issuer (other than the Co-Issuer) as an “Unrestricted Subsidiary” under the Indenture (a “Designation”) only if:
     (1) no Default shall have occurred and be continuing at the time of or after giving effect to such Designation; and
     (2) the Issuer would be permitted to make, at the time of such Designation, (a) a Permitted Investment or (b) an Investment pursuant to the first paragraph of “— Limitations on Restricted Payments” above, in either case, in an amount (the “Designation Amount”) equal to the Fair Market Value of the Issuer’s proportionate interest in such Subsidiary on such date.
     No Subsidiary shall be Designated as an “Unrestricted Subsidiary” unless such Subsidiary:
     (1) has no Indebtedness other than Non-Recourse Debt;
     (2) is not party to any agreement, contract, arrangement or understanding with the Issuer, the Co-Issuer or any Restricted Subsidiary unless the terms of the agreement, contract, arrangement or understanding are no less favorable to the Issuer, the Co-Issuer or the Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates;
     (3) is a Person with respect to which none of the Issuer, the Co-Issuer or any Restricted Subsidiary has any direct or indirect obligation (a) to subscribe for additional Equity Interests or (b) to maintain or preserve the Person’s financial condition or to cause the Person to achieve any specified levels of operating results; and
     (4) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Issuer, the Co-Issuer or any Restricted Subsidiary, except for any guarantee given solely to support the pledge by the Issuer, the Co-Issuer or any Restricted Subsidiary of the Equity Interests of such Unrestricted Subsidiary, which guarantee is not recourse to the Issuer, the Co-Issuer or any Restricted Subsidiary, and except to the extent the amount thereof constitutes a Restricted Payment permitted pursuant to the covenant described under “— Limitations on Restricted Payments”; provided, further, that an Unrestricted Subsidiary may have previously been a Guarantor and have provided a Note Guarantee of the Notes.
     If, at any time, any Unrestricted Subsidiary fails to meet the preceding requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of the Indenture and any Indebtedness of the Subsidiary and any Liens on assets of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary as of the date and, if the Indebtedness is not permitted to be incurred under the covenant described under “— Limitations on Additional Indebtedness and Preferred Stock” or the Lien is not permitted under the covenant described under “— Limitations on Liens,” the Issuer shall be in default of the applicable covenant. The Issuer may not designate the Co-Issuer as an Unrestricted Subsidiary.
     The Issuer may redesignate an Unrestricted Subsidiary as a Restricted Subsidiary (a “Redesignation”) only if:
     (1) no Default shall have occurred and be continuing at the time of and after giving effect to such Redesignation; and
     (2) all Liens, Indebtedness and Investments of such Unrestricted Subsidiary outstanding immediately following such Redesignation would, if incurred or made at such time, be permitted to be incurred or made for all purposes of the Indenture.
     All Designations and Redesignations must be evidenced by resolutions of the Board of Directors of the Issuer, delivered to the Trustee certifying compliance with the foregoing provisions.

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Limitations on Sale and Leaseback Transactions
     The Issuer and the Co-Issuer will not, and will not permit any Restricted Subsidiary to, directly or indirectly, enter into any Sale and Leaseback Transaction; provided, that the Issuer, the Co-Issuer or any Restricted Subsidiary may enter into a Sale and Leaseback Transaction if:
     (1) the Issuer, the Co-Issuer or such Restricted Subsidiary could have (a) incurred the Indebtedness in an amount equal to the Attributable Indebtedness attributable to such Sale and Leaseback Transaction pursuant to the covenant described under “— Limitations on Additional Indebtedness and Preferred Stock” and (b) incurred a Lien to secure such Attributable Indebtedness pursuant to the covenant described under “— Limitations on Liens”;
     (2) the gross cash proceeds of such Sale and Leaseback Transaction are at least equal to the Fair Market Value of the asset that is the subject of such Sale and Leaseback Transaction; and
     (3) the transfer of assets in such Sale and Leaseback Transaction is permitted by, and the Issuer, the Co-Issuer or the applicable Restricted Subsidiary applies the proceeds of such transaction in accordance with, the covenant described under “— Limitations on Asset Sales.”
Limitations on the Issuance or Sale of Equity Interests of Restricted Subsidiaries
     The Issuer and the Co-Issuer will not, and will not permit any Restricted Subsidiary to, directly or indirectly, sell or issue any shares of Equity Interests of any Restricted Subsidiary except (1) to the Issuer, the Co-Issuer, a Restricted Subsidiary or the minority stockholders of any Restricted Subsidiary, on a pro rata basis or (2) to the extent such shares represent directors’ qualifying shares or shares required by applicable law to be held by a Person other than the Issuer, the Co-Issuer or a Wholly Owned Restricted Subsidiary or (3) pursuant to the Absaloka operating agreement or membership interest purchase agreement relating to the Indian coal tax credit transaction. The sale of all the Equity Interests of any Restricted Subsidiary is permitted by this covenant but is subject to the covenant described under “— Limitations on Asset Sales.”
Limitations on Mergers, Consolidations, Etc.
     The Issuer will not, directly or indirectly, in a single transaction or a series of related transactions, (a) consolidate or merge with or into another Person, or sell, lease, transfer, convey or otherwise dispose of or assign all or substantially all of the assets of the Issuer, the Co-Issuer and the Restricted Subsidiaries (taken as a whole) or (b) adopt a Plan of Liquidation unless, in either case:
(1)   either:
     (a) the Issuer will be the surviving or continuing Person; or
     (b) the Person formed by or surviving such consolidation or merger or to which such sale, lease, conveyance or other disposition shall be made (or, in the case of a Plan of Liquidation, any Person to which assets are transferred) (collectively, the “Successor”) is a corporation, limited liability company or limited partnership organized and existing under the laws of any State of the United States of America or the District of Columbia, and the Successor expressly assumes, by a supplemental indenture in form and substance reasonably satisfactory to the Trustee, all of the obligations of the Issuer and the Co-Issuer under the Notes, the Indenture, the Security Documents, the Registration Rights Agreement and, if the Revolving Credit Facility is then outstanding, any Intercreditor Agreement, and shall cause (i) such amendments, supplements or other instruments to be executed, filed and recorded in such jurisdiction as may be required by applicable law to preserve and protect the lien on the Collateral pledged by the Issuer, together with such financing statements or comparable documents as may be required to perfect any security interest in such Collateral which may be perfected by the filing of a financing statement or a similar document under the UCC or other similar statute or regulation of the relevant states or jurisdictions and (ii) the property and assets of the Person which is merged or consolidated with or into the Successor, to the extent that they are property or assets of the types which would constitute Collateral under the Security Documents (other than assets that would qualify as Excluded Property or assets that otherwise may not be made subject to a Lien), to be treated as after-acquired property and the Successor shall take such actions as may be reasonably necessary to cause such property and assets to be made subject to the Lien of

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the Security Documents in the manner and to the extent provided in the Indenture, in each case in a form reasonably satisfactory to the Trustee;
     (2) immediately prior to and immediately after giving effect to such transaction and the assumption of the obligations as set forth in clause (1)(b) above and the incurrence of any Indebtedness to be incurred in connection therewith, and the use of any net proceeds therefrom on a pro forma basis, no Default or Event of Default shall have occurred and be continuing;
     (3) immediately after and giving effect to such transaction and the assumption of the obligations set forth in clause (1)(b) above and the incurrence of any Indebtedness to be incurred in connection therewith, and the use of any net proceeds therefrom on a pro forma basis, the Issuer or the Successor, as the case may be, (a) could incur $1.00 of additional Indebtedness pursuant to the Coverage Ratio Exception or (b) shall have an Fixed Charge Coverage Ratio greater than the Fixed Charge Coverage Ratio of the Issuer immediately prior to such transaction and assumption; and
     (4) the Issuer shall have delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that such transaction and such supplemental indentures, if any, comply with the Indenture.
     Notwithstanding the foregoing, clauses (3) and (4) of the first paragraph of this covenant shall not be applicable to (a) the Issuer consolidating with, merging into or selling, assigning, transferring, conveying, leasing or otherwise disposing of all or part of its properties and assets to a Restricted Subsidiary and (b) the Issuer merging with an Affiliate solely for the purpose and with the sole effect of reincorporating the Issuer, as the case may be, in another jurisdiction so long as the amount of Indebtedness of the Issuer, the Co-Issuer and the Restricted Subsidiaries is not increased thereby.
     For purposes of this covenant, any Indebtedness of the Successor which was not Indebtedness of the Issuer immediately prior to the transaction shall be deemed to have been incurred in connection with such transaction.
     Except as provided in the fourth paragraph under the caption “— Note Guarantees,” no Guarantor or the Co-Issuer may consolidate with or merge with or into (whether or not such Guarantor or the Co-Issuer is the surviving Person) another Person, other than the Issuer, the Co-Issuer or another Guarantor, unless:
     (1) either:
     (a) such Guarantor will be the surviving or continuing Person; or
     (b) the Person formed by or surviving any such consolidation or merger assumes, by supplemental indenture in form and substance satisfactory to the Trustee, all of the obligations of such Guarantor under the Note Guarantee of such Guarantor, the Indenture, the Security Documents, the Registration Rights Agreement and, if the Revolving Credit Facility is then outstanding, any Intercreditor Agreement and shall cause (i) such amendments, supplements or other instruments to be executed, filed and recorded in such jurisdiction as may be required by applicable law to preserve and protect the lien on the Collateral pledged by such Guarantor, together with such financing statements or comparable documents as may be required to perfect any security interest in such Collateral which may be perfected by the filing of a financing statement or a similar document under the UCC or other similar statute or regulation of the relevant states or jurisdictions and (ii) the property and assets of the Person which is merged or consolidated with or into the Successor, to the extent that they are property or assets of the types which would constitute Collateral under the Security Documents (other than assets that would qualify as Excluded Property or assets that otherwise may not be made subject to a Lien), to be treated as after acquired property and the Successor shall take such actions as may be reasonably necessary to cause such property and assets to be made subject to the Lien of the Security Documents in the manner and to the extent provided in the Indenture, in each case in a form reasonably satisfactory to the Trustee; and
     (2) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing.

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     For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise, in a single transaction or series of transactions) of all or substantially all of the properties or assets of the Co-Issuer or one or more Restricted Subsidiaries, the Equity Interests of which constitute all or substantially all of the properties and assets of the Issuer, will be deemed to be the transfer of all or substantially all of the properties and assets of the Issuer.
     Upon any consolidation, combination or merger of the Issuer, the Co-Issuer or a Guarantor, or any transfer of all or substantially all of the assets of the Issuer in accordance with the foregoing, in which the Issuer, the Co-Issuer or such Guarantor is not the continuing obligor under the Notes or its Note Guarantee, the surviving entity formed by such consolidation or into which the Issuer, the Co-Issuer or such Guarantor is merged or the Person to which the conveyance, lease or transfer is made will succeed to, and be substituted for, and may exercise every right and power of, the Issuer, the Co-Issuer or such Guarantor under the Indenture, the Notes, the Note Guarantees, the Security Documents, the Registration Rights Agreement and, if the Revolving Credit Facility is then outstanding, any Intercreditor Agreement with the same effect as if such surviving entity had been named therein as the Issuer, the Co-Issuer or such Guarantor and, except in the case of a lease, the Issuer, the Co-Issuer or such Guarantor, as the case may be, will be released from the obligation to pay the principal of and interest on the Notes or in respect of its Note Guarantee, as the case may be, and all of the Issuer’s, the Co-Issuer’s or such Guarantor’s other obligations and covenants under the Notes, the Indenture, its Note Guarantee, the Security Documents, the Registration Rights Agreement and the Intercreditor Agreement, if applicable.
     Notwithstanding the foregoing, any Guarantor may consolidate with, merge with or into or convey, transfer or lease, in one transaction or a series of transactions, all or substantially all of its assets to the Issuer, the Co-Issuer or another Guarantor; provided, that the Issuer, the Co-Issuer and such Guarantors shall cause such amendments, supplements or other instruments to be executed, filed and recorded in such jurisdiction as may be required by applicable law to preserve and protect the lien on the Collateral pledged by such entity, together with such financing statements or comparable documents as may be required to perfect any security interest in such Collateral which may be perfected by the filing of a financing statement or a similar document under the UCC or other similar statute or regulation of the relevant states or jurisdictions.
Additional Note Guarantees
     If, after the Issue Date, (a) the Issuer, the Co-Issuer or any Restricted Subsidiary (other than WML and its Subsidiaries) shall acquire or create another Subsidiary (other than in any case a Subsidiary that has been designated an Unrestricted Subsidiary), (b) any Unrestricted Subsidiary is redesignated a Restricted Subsidiary or, (c) the Issuer otherwise elects or is required to have any Restricted Subsidiary become a Guarantor, including on the WML Repayment Date, at which time the Issuer shall cause WML and its Subsidiaries to become Guarantors under the Indenture, then, in each such case, the Issuer shall cause such Restricted Subsidiary to:
     (1) execute and deliver to the Trustee (a) a supplemental indenture in form and substance satisfactory to the Trustee pursuant to which such Restricted Subsidiary shall unconditionally guarantee all of the Issuer’s and the Co-Issuer’s obligations under the Notes, the Indenture, the Security Documents, the Registration Rights Agreement and, if the Revolving Credit Facility is then outstanding, any Intercreditor Agreement, (b) a notation of guarantee in respect of its Note Guarantee, and (c) a joinder to the Security Documents or new Security Documents;
     (2) deliver to the Trustee one or more Opinions of Counsel that such supplemental indenture (a) has been duly authorized, executed and delivered by such Restricted Subsidiary and (b) constitutes a valid and legally binding obligation of such Restricted Subsidiary in accordance with its terms; and
     (3) shall take such actions as may be reasonably necessary to cause the property and assets of such Restricted Subsidiary, to the extent that they are property or assets of the types which would constitute Collateral under the Security Documents, to be treated as after-acquired property and to be made subject to the Lien of the Security Documents in the manner and to the extent provided in the Indenture, in a manner reasonably satisfactory to the Trustee.

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Conduct of Business
     The Issuer and the Co-Issuer will not, and will not permit any Restricted Subsidiary to, engage in any business other than a Permitted Business.
Limitation on Activities of Certain Subsidiaries
     The Issuer will not permit Basin Resources Inc. to engage in any activities other than in relation to providing benefits to former mining operation employees and activities incidental to its organization and existence and shall not incur any Indebtedness, grant Liens over its assets or enter into any transactions other than in the ordinary course. The Issuer will not permit Westmoreland Terminal Company, Eastern Coal & Coke Company, and Criterion Coal Company to engage in any activities other than activities incidental to their organization and existence and activities incidental to their respective dissolution and shall not incur any Indebtedness, grant Liens over their assets or enter into any transactions.
Payments for Consent
     The Indenture provides that neither the Issuer, the Co-Issuer nor any of its Restricted Subsidiaries will, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of the Indenture or the Notes unless such consideration is offered to be paid or is paid to all Holders or all Holders that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement.
Reports and Other Information
     (a) Whether or not the Issuer is subject to Section 13(a) or 15(d) of the Exchange Act, the Issuer, the Co-Issuer and any Guarantor will, to the extent permitted under the Exchange Act, file with the SEC the annual reports, quarterly reports and other documents which the Issuer, the Co-Issuer and such Guarantor would have been required to file with the SEC pursuant to Sections 13(a) or 15(d) of the Exchange Act if the Issuer, the Co-Issuer or such Guarantor were so subject, such documents to be filed with the SEC on or prior to the date (the “Required Filing Date”) by which the Issuer, the Co-Issuer and such Guarantor would have been required so to file such documents if the Issuer, the Co-Issuer and such Guarantor were so subject.
     If at any time the Notes are guaranteed by a direct or indirect parent of the Issuer and such company has complied with the reporting requirements of Section 13 or 15(d) of the Exchange Act, if applicable, and has furnished the Holders of Notes, or filed electronically with the SEC’s Next-Generation EDGAR System (or any successor system), the reports described herein with respect to such company, as applicable (including any financial information required by Regulation S-X under the Securities Act relating to the Issuer, the Co-Issuer and the Guarantors), the Issuer, the Co-Issuer and the Guarantors shall be deemed to be in compliance with the provisions of this covenant.
     The Issuer, the Co-Issuer and any Guarantor will also in any event (a) within 15 days after each Required Filing Date file with the Trustee copies of the annual reports, quarterly reports and other documents which the Issuer, the Co-Issuer and such Guarantor would have been required to file with the SEC pursuant to Section 13(a) or Section 15(d) of the Exchange Act if the Issuer, the Co-Issuer and such Guarantor were subject to either of such Sections and (b) if filing such documents by the Issuer, the Co-Issuer and such Guarantor with the SEC is not permitted under the Exchange Act or prior to the exchange offer or the effectiveness of a shelf registration statement contemplated by the Registration Rights Agreement, promptly upon written request and payment of the reasonable cost of duplication and delivery, supply copies of such documents to any prospective holder at the Issuer’s cost. The Issuer, the Co-Issuer and each Guarantor shall be deemed to have satisfied the foregoing requirements if the relevant documents have been filed with the SEC.
     If the Co-Issuer’s, any Guarantor’s or secured party’s financial statements would be required to be included in the financial statements filed or delivered pursuant to the Indenture if the Issuer were subject to Section 13(a) or 15(d) of the Exchange Act, the Issuer shall include such financial statements in any filing or delivery pursuant to the Indenture.

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     The Indenture also provides that, so long as any of the Notes remain outstanding, the Issuer will make available to any prospective purchaser of Notes or beneficial owner of Notes in connection with any sale thereof the information required by Rule 144A(d)(4) under the Securities Act, until the earlier of (x) such time as the Issuer has exchanged the Notes for the Exchange Notes and (y) such time as the holders thereof have disposed of such Notes pursuant to an effective registration statement under the Securities Act.
     (b) The Issuer will also hold quarterly conference calls for the Holders of the Notes to discuss financial information for the previous quarter. The conference call will be following the last day of each fiscal quarter of the Issuer and not later than ten Business Days after the time that the Issuer distributes the financial information as set forth in clause (a) above. No fewer than two days prior to the conference call, the Issuer shall issue a press release announcing the time and date of such conference call and providing instructions for Holders, securities analysts and prospective investors to obtain access to such call. For the avoidance of doubt, the Issuer may satisfy the requirements of this paragraph by holding the conference calls required above within the time period required as part of any earnings calls of the Issuer in accordance with past practice.
Events of Loss
     Subject to any intercreditor agreement and the Security Documents, in the event of an Event of Loss with respect to any Collateral, the Issuer, the Co-Issuer or the affected Guarantor, as the case may be, will apply the Net Loss Proceeds from such Event of Loss, within 365 days after receipt, at its option to:
     (1) repay obligations under any revolving credit facility with the Net Loss Proceeds of borrowing base assets, and effect a permanent reduction in the availability under such revolving credit facility;
     (2) repay any Indebtedness which was secured by the assets to which Event of Loss related; and/or
     (3) (A) invest all or any part of the Net Loss Proceeds thereof in the purchase of assets (other than securities) to be used by the Issuer, the Co-Issuer or any Restricted Subsidiary in a Permitted Business, (B) capital expenditures to be used by the Issuer, the Co-Issuer or any Restricted Subsidiary in a Permitted Business, (C) acquisition of Qualified Equity Interests in a Person that is a Restricted Subsidiary or in a Person engaged in a Permitted Business that shall become a Restricted Subsidiary immediately upon the consummation of such acquisition or (D) a combination of (A), (B) and (C).
     Pending the final application of any Net Loss Proceeds, the Issuer, the Co-Issuer or the affected Guarantor shall deposit such Net Loss Proceeds in accordance with the Security Documents and any applicable Intercreditor Agreement.
     Any Net Loss Proceeds from an Event of Loss that are not applied or invested as provided in the prior paragraph will be deemed to constitute “Excess Loss Proceeds.” When the aggregate amount of Excess Loss Proceeds exceeds $10.0 million, the Issuer will be required to make an offer to purchase from all Holders and, if applicable, redeem (or make an offer to do so) any Pari Passu Indebtedness of the Issuer the provisions of which require the Issuer to redeem such Indebtedness with the Net Loss Proceeds (or offer to do so) (a “Loss Proceeds Offer”) in an aggregate principal amount of Notes and such Pari Passu Indebtedness equal to the amount of such Excess Loss Proceeds at an offer price in cash in an amount equal to 100% of their principal amount plus accrued and unpaid interest to the date of purchase or redemption, as applicable. If the aggregate principal amount of Notes surrendered by Holders exceeds the Excess Loss Proceeds to be used to purchase the Notes, the Trustee shall select the Notes to be purchased pursuant to the Loss Proceeds Offer on a pro rata basis or on a pro rata basis as is practicable, subject to the procedures of the Depository Trust Company.
     The Indenture provides that the Issuer will comply with the applicable tender offer rules, including Rule 14e-1 under the Exchange Act, and any other applicable securities laws or regulations in connection with a Loss Proceeds Offer, and the relevant provisions of the Indenture will be deemed modified as necessary to permit such compliance.

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Events of Default
     Each of the following is an “Event of Default”:
     (1) failure by the Issuer and the Co-Issuer to pay interest or Additional Interest on any of the Notes when it becomes due and payable and the continuance of any such failure for 30 days;
     (2) failure by the Issuer and the Co-Issuer to pay the principal of or premium, if any, on any of the Notes when due and payable, whether at stated maturity, upon redemption, upon purchase, upon acceleration or otherwise;
     (3) failure by the Issuer and the Co-Issuer to comply with any of its agreements or covenants described above under “— Certain Covenants — Limitations on Mergers, Consolidations, Etc.,” or in respect of its obligations to make a Change of Control Offer as described above under “— Change of Control”;
     (4) failure by the Issuer and the Co-Issuer to comply with any of its agreements or covenants described above under “— Certain Covenants — Limitations on Additional Indebtedness and Preferred Stock” or “— Certain Covenants— Limitations on Restricted Payments” and continuance of this failure for 30 days after notice of the failure has been given to the Issuer by the Trustee or by the Holders of at least 25% of the aggregate principal amount of the Notes then outstanding;
     (5) failure by the Issuer and the Co-Issuer to comply with any other agreement or covenant in the Indenture and continuance of this failure for 60 days after notice of the failure has been given to the Issuer by the Trustee or by the Holders of at least 25% of the aggregate principal amount of the Notes then outstanding;
     (6) (a) default with respect to any payment when due under any mortgage, indenture or other instrument or agreement under which there may be issued or by which there may be secured or evidenced Indebtedness of the Issuer, the Co-Issuer or any Restricted Subsidiary, whether such Indebtedness now exists or is incurred after the Issue Date; provided, that the principal amount of such Indebtedness aggregates to $15.0 million or more or such Indebtedness is incurred under the Revolving Credit Facility or any of the WML Credit Agreements or (b) any default under any of the WML Credit Agreements that results in the prohibition, or reduction of the amount, of any payments, dividends or distributions permitted to be made by WML or any of its Subsidiaries, directly or indirectly, to the Issuer;
     (7) one or more judgments or orders that exceed $15.0 million in the aggregate (net of amounts covered by insurance or bonded) for the payment of money have been entered by a court or courts of competent jurisdiction against the Issuer, the Co-Issuer or any Restricted Subsidiary and such judgment or judgments have not been satisfied, stayed, annulled or rescinded within 60 days of being entered;
     (8) the Issuer, the Co-Issuer or any Significant Subsidiary pursuant to or within the meaning of any applicable bankruptcy law:
     (a) commences a voluntary case,
     (b) consents to the entry of an order for relief against it in an involuntary case,
     (c) consents to the appointment of a Custodian of it or for all or substantially all of its assets, or
     (d) makes a general assignment for the benefit of its creditors;
     (9) a court of competent jurisdiction enters an order or decree under any applicable bankruptcy law that:
     (a) is for relief against the Issuer, the Co-Issuer or any Significant Subsidiary as debtor in an involuntary case,
     (b) appoints a Custodian of the Issuer, the Co-Issuer or any Significant Subsidiary or a Custodian for all or substantially all of the assets of the Issuer, the Co-Issuer or any Significant Subsidiary, or

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     (c) orders the liquidation of the Issuer, the Co-Issuer or any Significant Subsidiary, and the order or decree remains unstayed and in effect for 60 days;
     (10) any Note Guarantee of any Significant Subsidiary ceases to be in full force and effect (other than in accordance with the terms of such Note Guarantee and the Indenture) or is declared in a judicial proceeding null and void and unenforceable or found in a judicial proceeding to be invalid or any Guarantor denies its liability under its Note Guarantee (other than by reason of release of a Guarantor from its Note Guarantee in accordance with the terms of the Indenture and the Note Guarantee); or
     (11) so long as the Security Documents have not been otherwise terminated in accordance with their terms and the Note Collateral as a whole has not been released from the Lien of the Security Documents securing the Notes in accordance with the terms thereof, with respect to Collateral having a Fair Market Value in excess of $15.0 million, (a) any default by the Issuer, the Co-Issuer or any Guarantor in the performance of its obligations under the Security Documents (after the lapse of any applicable grace periods) or the Indenture which adversely affects the condition or value of such Collateral, in any material respect, (b) repudiation or disaffirmation of the Issuer, the Co-Issuer or any Guarantor of its respective obligations under the Security Documents and (c) the determination in a judicial proceeding that the Security Documents are unenforceable or invalid against the Issuer, the Co-Issuer or any Guarantor for any reason.
     If an Event of Default (other than an Event of Default specified in clause (8) or (9) above with respect to the Issuer or the Co-Issuer) shall have occurred and be continuing under the Indenture, the Trustee, by written notice to the Issuer, or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding, by written notice to the Issuer and the Trustee, may declare all amounts owing under the Notes to be due and payable immediately. If an Event of Default specified in clause (8) or (9) with respect to the Issuer or the Co-Issuer occurs, all outstanding Notes shall become due and payable without any further action or notice.
     The Trustee shall, within 30 days after the occurrence of any Default with respect to the Notes, give the Holders notice of all uncured Defaults thereunder known to it; provided, however, that, except in the case of an Event of Default in payment with respect to the Notes or a Default in complying with “— Certain Covenants —Limitations on Mergers, Consolidations, Etc.,” the Trustee shall be protected in withholding such notice if and so long as a committee of its trust officers in good faith determines that the withholding of such notice is in the interest of the Holders.
     No Holder will have any right to institute any proceeding with respect to the Indenture, the Notes, the Security Documents or, if applicable, an Intercreditor Agreement, or for any remedy thereunder, unless the Trustee:
     (1) has failed to act for a period of 60 days after receiving written notice of a continuing Event of Default by such Holder and a request to act by Holders of at least 25% in aggregate principal amount of Notes outstanding;
     (2) has been offered indemnity, security or prefunding reasonably satisfactory to it; and
     (3) has not received from the Holders of a majority in aggregate principal amount of the outstanding Notes a direction inconsistent with such request.
     However, such limitations do not apply to a suit instituted by a Holder of any Note for enforcement of payment of the principal of or interest on such Note on or after the due date therefore (after giving effect to the grace period specified in clause (1) of the first paragraph of this “— Events of Default” section).
     The Issuer is required to deliver to the Trustee annually a statement regarding compliance with the Indenture and, upon any Officer of the Issuer becoming aware of any Default, a statement specifying such Default and what action the Issuer is taking or proposes to take with respect thereto.

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Legal Defeasance and Covenant Defeasance
     The Issuer may, at its option and at any time, elect to have its obligations and the obligations of the Co-Issuer and the Guarantors discharged with respect to the outstanding Notes (“Legal Defeasance”). Legal Defeasance means that the Issuer, the Co-Issuer and the Guarantors shall be deemed to have paid and discharged the entire indebtedness represented by the Notes and the Note Guarantees, and the Indenture shall cease to be of further effect as to all outstanding Notes and Note Guarantees, except as to:
     (1) rights of Holders to receive payments in respect of the principal of and interest on the Notes when such payments are due from the trust funds referred to below,
     (2) the obligations of the Issuer and the Co-Issuer with respect to the Notes concerning issuing temporary Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes, and the maintenance of an office or agency for payment and to hold money for payments held in trust,
     (3) the rights, powers, trust, duties, and immunities of the Trustee and Note Collateral Agent, and the Issuer’s obligation in connection therewith, and
     (4) the Legal Defeasance provisions of the Indenture.
     In addition, the Issuer may, at its option and at any time, elect to have its obligations and the obligations of the Co-Issuer and the Guarantors released with respect to most of the covenants under the Indenture and the Security Documents, except as described otherwise in the Indenture (“Covenant Defeasance”), and thereafter any omission to comply with such obligations shall not constitute a Default. In the event Covenant Defeasance occurs, certain Events of Default (not including non-payment, bankruptcy, receivership, reorganization and insolvency events) will no longer apply. The Issuer may exercise its Legal Defeasance option regardless of whether it previously exercised Covenant Defeasance.
     In order to exercise either Legal Defeasance or Covenant Defeasance:
     (1) the Issuer must irrevocably deposit with the Trustee, as trust funds, in trust solely for the benefit of the Holders, U.S. legal tender, U.S. Government Obligations or a combination thereof, in such amounts as will be sufficient (without reinvestment) in the opinion of a nationally recognized firm of independent public accountants selected by the Issuer, to pay the principal of and interest on the Notes on the stated date for payment or on the redemption date of the principal or installment of principal of or interest on the Notes and the Holders must have a valid, perfected exclusive security interest in such trust,
     (2) in the case of Legal Defeasance, the Issuer shall have delivered to the Trustee an Opinion of Counsel in the United States confirming that:
     (a) the Issuer has received from, or there has been published by the Internal Revenue Service, a ruling, or
     (b) since the date of the Indenture, there has been a change in the applicable U.S. federal income tax law,
in either case to the effect that, and based thereon this Opinion of Counsel shall confirm that, the Holders will not recognize income, gain or loss for U.S. federal income tax purposes as a result of the Legal Defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred,
     (3) in the case of Covenant Defeasance, the Issuer shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that the Holders will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Covenant Defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if the Covenant Defeasance had not occurred,
     (4) no Default shall have occurred and be continuing on the date of such deposit (other than a Default resulting from the borrowing of funds to be applied to such deposit and the grant of any Lien securing such borrowing);

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     (5) the Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a Default under the Indenture (other than a Default resulting solely from the borrowing of funds to be applied to such deposit and the grant of any Lien on such deposit in favor of the Trustee and/or the Holders), the Revolving Credit Facility or any other material agreement or instrument to which the Issuer or any of its Subsidiaries is a party or by which the Issuer or any of its Subsidiaries is bound,
     (6) the Issuer shall have delivered to the Trustee an Officers’ Certificate stating that the deposit was not made by it with the intent of defeating, hindering, delaying or defrauding any other of its creditors or others, and
     (7) the Issuer shall have delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that the conditions provided for in, in the case of the Officers’ Certificate, clauses (1) through (6) and, in the case of the Opinion of Counsel, clauses (1) (with respect to the validity and perfection of the security interest), (2) and/or (3) and (5) of this paragraph have been complied with.
     If the funds deposited with the Trustee to effect Covenant Defeasance are insufficient to pay the principal of and interest on the Notes when due, then the Issuer’s and the Co-Issuer’s obligations and the obligations of Guarantors under the Indenture will be revived and no such defeasance will be deemed to have occurred.
Satisfaction and Discharge
     The Indenture and the Security Documents will be discharged and will cease to be of further effect (except as to rights of registration of transfer or exchange of Notes which shall survive until all Notes have been canceled) as to all outstanding Notes when either
     (1) all the Notes that have been authenticated and delivered (except lost, stolen or destroyed Notes which have been replaced or paid and Notes for whose payment money has been deposited in trust or segregated and held in trust by the Issuer and thereafter repaid to the Issuer or discharged from this trust) have been delivered to the Trustee for cancellation, or
     (2) (a) all Notes not delivered to the Trustee for cancellation otherwise have become due and payable or have been called for redemption pursuant to the provisions described under “— Optional Redemption,” and the Issuer has irrevocably deposited or caused to be deposited with the Trustee trust funds in an amount of money sufficient to pay and discharge the entire Indebtedness (including all principal and accrued interest) on the Notes not theretofore delivered to the Trustee for cancellation,
     (b) the Issuer and the Co-Issuer have paid all sums payable by it under the Indenture,
     (c) the Issuer and the Co-Issuer have delivered irrevocable instructions to the Trustee to apply the deposited money toward the payment of the Notes at maturity or on the date of redemption, as the case may be, and
     (d) the Holders have a valid, perfected, exclusive security interest in this trust.
     In addition, the Issuer must deliver an Officers’ Certificate and an Opinion of Counsel stating that all conditions precedent to satisfaction and discharge have been complied with.
Transfer and Exchange
     A Holder will be able to register the transfer of or Exchange Notes only in accordance with the provisions of the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. Without the prior consent of the Issuer, the Registrar is not required (1) to register the transfer of or exchange any Note selected for redemption, (2) to register the transfer of or exchange any Note for a period of 15 days before a selection of Notes to be redeemed or (3) to register the transfer or exchange of a Note between a record date and the next succeeding interest payment date.
     The Notes will be issued in registered form and the registered Holder will be treated as the owner of such Note for all purposes.

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Amendment, Supplement and Waiver and Entry into Intercreditor Agreement
     Subject to certain exceptions, the Indenture may be amended with the consent of the Holders of a majority in principal amount of the Notes then outstanding (voting as one class) (including consents obtained in connection with a tender offer for, exchange for or purchase of, the Notes) and any past default or compliance with any provisions may also be waived with the consent of the Holders of at least a majority in principal amount of the Notes then outstanding. An intercreditor agreement containing terms that differ from those set forth under “— Security — Intercreditor Agreement to be Entered into in Connection with a Future Revolving Credit Facility” in any material respect may be entered into and, subject to certain exceptions, the Intercreditor Agreement and the Security Documents may be amended, in each case with the consent of the Holders of a majority in principal amount of the Notes then outstanding (including consents obtained in connection with a tender offer for, exchange for or purchase of, the Notes) and any past default or compliance with any provisions in an Intercreditor Agreement and the Security Documents may also be waived with the consent of the Holders of a majority in principal amount of the Notes then outstanding (including consents obtained in connection with a tender offer for, exchange for or purchase of, the Notes); and such amendments may not, without the consent of the Holders of 75% in principal amount of the Notes then outstanding, release all or substantially all of the Collateral other than in accordance with the Indenture, an Intercreditor Agreement and the Security Documents; provided, that without the consent of each Holder affected, no amendment or waiver may:
     (1) change the maturity of any Note;
     (2) reduce the amount, extend the due date or otherwise affect the terms of any scheduled payment of interest on or principal of the Notes;
     (3) reduce any premium payable upon optional redemption of the Notes, change the date on, or the circumstances under which, any Notes are subject to redemption or otherwise alter the provisions with respect to the redemption of the Notes (other than provisions relating to the repurchase of Notes described above under “— Change of Control,” “— Certain Covenants — Limitations on Asset Sales”, “— Events of Loss” and — “Excess Cash Flow”, except that if a Change of Control has occurred, no amendment or other modification of the obligation of the Issuer and the Co-Issuer to make a Change of Control Offer relating to such Change of Control shall be made without the consent of each Holder of the Notes affected);
     (4) make any Note payable in money or currency other than that stated in the Notes;
     (5) make any change in the ranking or priority of any Note that would adversely affect the Holders of the Notes;
     (6) reduce the percentage of Holders necessary to consent to an amendment or waiver to the Indenture or the Notes;
     (7) impair the rights of Holders to receive payments of principal of or interest on the Notes;
     (8) release any Guarantor from any of its obligations under its Note Guarantee or the Indenture, except as permitted by the Indenture; or
     (9) make any change in these amendment and waiver provisions.
     Notwithstanding the foregoing, the Issuer, the Co-Issuer, the Trustee and the Note Collateral Agent, as applicable, may (i) enter into an Intercreditor Agreement on the same terms set forth in “ —Security—Intercreditor Agreement to be Entered into in Connection with a Future Revolving Credit Facility” in all material respects, without the consent of any Holder and (ii) amend the Indenture, the Note Guarantees, the Notes, the Security Documents or if applicable, an Intercreditor Agreement, without the consent of any Holder:
     (1) to cure any ambiguity, defect or inconsistency;
     (2) to provide for uncertificated Notes in addition to or in place of certificated Notes;

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     (3) to provide for the assumption of the obligations of the Issuer and the Co-Issuer to the Holders in the case of a merger, consolidation or sale of all or substantially all of the assets in accordance with “— Certain Covenants —Limitations on Mergers, Consolidations, etc.”;
     (4) to release any Guarantor from any of its obligations under its Note Guarantee or the Indenture (to the extent permitted by the Indenture);
     (5) to provide for the accession or succession of any parties to any Intercreditor Agreement or the Security Documents (and other amendments that are administrative or ministerial in nature) in connection with the execution or amendment, renewal, extension, substitution, refinancing, restructuring, replacement, supplementing or other modification from time to time of a Revolving Credit Facility, the WML Credit Agreements, the Notes or any other agreement or action that is not prohibited by the Indenture;
     (6) to provide for the release of Collateral in accordance with the terms of the Indenture, an Intercreditor Agreement, if applicable, and the Security Documents (it being understood that the Liens on the Collateral with respect to the Notes and the Note Guarantees will be released to the extent the corresponding Revolving Facility First-Priority Liens securing Revolving Credit Facility Obligations are released);
     (7) to provide security for additional borrowings under the Revolving Credit Facility or any additional Indebtedness which Liens are permitted to be incurred in accordance with the Indenture;
     (8) to expand the Collateral securing the Notes or the Note Guarantees;
     (9) to evidence and provide the acceptance of the appointment of a successor trustee under the Indenture or successor Note Collateral Agent;
     (10) to provide for the issuance of Exchange Notes pursuant to the terms of the Indenture and the Registration Rights Agreement; or
     (11) to make any change that does not materially adversely affect the rights of any Holder, or, in the case of the Indenture, to maintain the qualification of the Indenture under the Trust Indenture Act.
     In the case of execution of an Intercreditor Agreement without the consent of the Holders, the Issuer shall have delivered to the Trustee an Officers’ Certificate, signed by the Chief Executive Officer and Chief Financial Officer of the Issuer, confirming that the Intercreditor Agreement shall have been entered into on terms that are the same as the terms set forth under “— Security — Intercreditor Agreement to be Entered into in Connection with a Future Revolving Credit Facility” in all material respects and any additional terms are not inconsistent with the terms set forth herein and not materially adverse to the Holders.
No Personal Liability of Directors, Officers, Employees, Stockholders and Members
     No director, officer, employee, incorporator, stockholder, member or manager of the Issuer, the Co-Issuer or any Restricted Subsidiary will have any liability for any obligations of the Issuer or the Co-Issuer under the Notes, the Indenture, the Security Documents or the Intercreditor Agreement or of any Guarantor under its Note Guarantee or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes and the Note Guarantees. The waiver may not be effective to waive liabilities under the federal securities laws. It is the view of the SEC that this type of waiver is against public policy.
Concerning the Trustee and the Note Collateral Agent
     Wells Fargo Bank, National Association will be the Trustee and the Note Collateral Agent under the Indenture and has been appointed by the Issuer as Registrar and Paying Agent with regard to the Notes. The Indenture contains certain limitations on the rights of the Trustee, should it become a creditor of the Issuer, to obtain payment of claims in certain cases, or to realize on certain assets received in respect of any such claim as security or otherwise. The Trustee will be permitted to engage in other transactions; however, if it acquires any conflicting interest (as defined in the Indenture), it must eliminate such conflict or resign.

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     The Holders of a majority in principal amount of the then outstanding Notes will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee, subject to certain exceptions. The Indenture provides that, in case an Event of Default occurs and is not cured, the Trustee will be required, in the exercise of its power, to use the degree of care of a prudent person in similar circumstances in the conduct of his own affairs. Subject to such provisions, the Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request of any Holder, unless such Holder shall have offered to the Trustee indemnity, security or prefunding reasonably satisfactory to the Trustee.
     References in this section to the “Trustee” include the Trustee in its capacity as Note Collateral Agent
Governing Law
     The Indenture, the Notes, the Note Guarantees, the Security Documents (except as to real estate and certain other security documents required to be governed by local law) and any Intercreditor Agreement will be governed by, and construed in accordance with, the laws of the State of New York
Certain Definitions
     Set forth below is a summary of certain of the defined terms used in the Indenture. Reference is made to the Indenture for the full definition of all such terms.
     “Absaloka” means Absaloka Coal LLC.
     “Absaloka Collateral” has the meaning assigned to that term in clause (iv) of the first paragraph under the subheading “— Security — General.”
     “Acquired Indebtedness” means (1) with respect to any Person that becomes a Restricted Subsidiary after the Issue Date, Indebtedness of such Person and its Subsidiaries existing at the time such Person becomes a Restricted Subsidiary and (2) with respect to the Issuer, the Co-Issuer or any Restricted Subsidiary, any Indebtedness of a Person (other than the Issuer, the Co-Issuer or a Restricted Subsidiary) existing at the time such Person is merged with or into the Issuer, the Co-Issuer or a Restricted Subsidiary, or Indebtedness expressly assumed by the Issuer, the Co-Issuer or any Restricted Subsidiary in connection with the acquisition of an asset or assets from another Person.
     “Additional Interest” has the meaning set forth in the Registration Rights Agreement and the Issuer shall promptly notify the Trustee of such Additional Interest as set forth in the Registration Rights Agreement and any other registration rights agreement.
     “Additional Notes” has the meaning assigned to that term in the third paragraph under the heading “— Principal, Maturity And Interest.”
     “Administrative Agent” has the meaning assigned to that term in the ninth paragraph under the subheading “— Security —Intercreditor Agreement to be Entered into in Connection with a Future Revolving Credit Facility.”
     “Affiliate” of any Person means any other Person which directly or indirectly controls or is controlled by, or is under direct or indirect common control with, the referenced Person. For purposes of the covenant described under “— Certain Covenants —Limitations on Transactions with Affiliates,” Affiliates shall be deemed to include, with respect to any Person, any other Person (1) which beneficially owns or holds, directly or indirectly, 10% or more of any class of the Voting Stock of the referenced Person, (2) of which 10% or more of the Voting Stock is beneficially owned or held, directly or indirectly, by the referenced Person or (3) with respect to an individual, any immediate family member of such Person. For purposes of this definition, “control” of a Person shall mean the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise.
     “Affiliate Transaction” has the meaning assigned to that term in the first paragraph under the subheading “— Certain Covenants —Limitations on Transactions with Affiliates.”
     “Agents” means, collectively, the Note Collateral Agent and the Revolving Collateral Agent.

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     “Alternate Offer” has the meaning assigned to that term in the eighth paragraph under the heading “— Change of Control.”
     “amend” means to amend, supplement, restate, amend and restate or otherwise modify, including successively, and “amendment” shall have a correlative meaning.
     “Amended and Restated WMLCredit Agreement” means the Amended and Restated Credit Agreement by and among Westmoreland Mining LLC, the guarantors party thereto, the banks party thereto and PNC Bank, National Association, as agent, dated as of June 26, 2008.
     “asset” means any asset or property.
     “Asset Acquisition” means
     (1) an Investment by the Issuer, the Co-Issuer or any Restricted Subsidiary of the Issuer in any other Person if, as a result of such Investment, such Person shall become a Restricted Subsidiary of the Issuer, or shall be merged with or into the Issuer, the Co-Issuer or any Restricted Subsidiary of the Issuer, or
     (2) the acquisition by the Issuer, the Co-Issuer or any Restricted Subsidiary of the Issuer of all or substantially all of the assets of any other Person or any division or line of business of any other Person.
     “Asset Sale” means any sale, issuance, conveyance, transfer, lease, assignment or other disposition by the Issuer, the Co-Issuer or any Restricted Subsidiary to any Person (including by means of a Sale and Leaseback Transaction or a merger or consolidation or similar transaction and including any sale or issuance of the Equity Interest of any Restricted Subsidiary) (collectively, for purposes of this definition, a “transfer”), in one transaction or a series of related transactions, of any assets of the Issuer, the Co-Issuer or any of the Restricted Subsidiaries of the Issuer; provided, that for purposes of this definition, the term “Asset Sale” shall not include:
     (1) transfers of cash or Cash Equivalents;
     (2) transfers of assets (including Equity Interests) that are governed by, and made in accordance with, the covenant described under “— Certain Covenants — Limitations on Mergers, Consolidations, Etc.” and under “— Change of Control”;
     (3) Permitted Investments and Restricted Payments permitted under the covenant described under “ — Certain Covenants —Limitations on Restricted Payments”;
     (4) the creation of or realization on any Permitted Lien;
     (5) any transfer or series of related transfers that, but for this clause, would be Asset Sales, if after giving effect to such transfers, the aggregate Fair Market Value of the assets transferred in such transaction or any such series of related transactions does not exceed $2.5 million;
     (6) a transfer of assets between or among any of the Issuer, the Co-Issuer and any of the Guarantors, a transfer of assets between any Restricted Subsidiaries that are not Guarantors and a transfer of assets by a Restricted Subsidiary that is not a guarantor to the Issuer, the Co-Issuer or any Guarantor;
     (7) an issuance or sale of Equity Interests by a Guarantor to the Issuer, the Co-Issuer or to another Guarantor or an issuance or sale of Equity Interests by a Restricted Subsidiary that is not a Guarantor to the Issuer, the Co-Issuer or any Restricted Subsidiary;
     (8) a disposition of inventory in the ordinary course of business;
     (9) a disposition of obsolete or worn out equipment or equipment that is no longer useful in the conduct of the business of the Issuer, the Co-Issuer and the Restricted Subsidiaries of the Issuer and that is disposed of in each case in the ordinary course of business;

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     (10) dispositions of past due accounts and Notes receivable arising in the ordinary course of business, but only in connection with the compromise or collection thereof;
     (11) the licensing or sublicensing of intellectual property or other general intangibles and licenses, leases or subleases of other property in the ordinary course of business and which do not materially interfere with the business of the Issuer, the Co-Issuer and its Restricted Subsidiaries;
     (12) a surrender or waiver of contract rights or the settlement, release or surrender of contract, tort or other claims of any kind; and
     (13) trades of coal properties of equivalent value in the ordinary course of business.
     “Attributable Indebtedness,” when used with respect to any Sale and Leaseback Transaction, means, as at the time of determination, the present value (discounted at a rate equivalent to the Issuer’s then-current weighted average cost of funds for borrowed money as at the time of determination, compounded on a semi-annual basis) of the total obligations of the lessee for rental payments during the remaining term of the lease included in any such Sale and Leaseback Transaction.
     “Bankruptcy Code” means Title 11 of the United States Code, as amended.
     “bankruptcy law” means the Bankruptcy Code or any similar federal, foreign or state law for the relief of debtors.
     “Board of Directors” means, with respect to any Person, (i) in the case of any corporation, the board of directors of such Person, (ii) in the case of any limited liability company, the board of managers of such Person, (iii) in the case of any partnership, the Board of Directors of the general partner of such Person and (iv) in any other case, the functional equivalent of the foregoing.
     “Business Day” means a day other than a Saturday, Sunday or other day on which banking institutions in New York are authorized or required by law to close.
     “Capital Lease” means, with respect to any Person, a lease required to be capitalized for financial reporting purposes on the balance sheet of such Person in conformity with GAAP.
     “Capital Lease Obligations” of any Person means the obligations of such Person to pay rent or other amounts under a Capital Lease, and the amount of such obligation shall be the capitalized amount thereof determined in accordance with GAAP.
     “Cash Equivalents” means:
     (1) obligations issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided, that the full faith and credit of the United States of America is pledged in support thereof) or obligations of state or local governments rated not lower than AAA/Aaa by S&P or Moody’s maturing no later than twelve months from the date of acquisition;
     (2) time deposits and certificates of deposit or acceptances with a maturity of 360 days or less of any financial institution having combined capital and surplus and undivided profits of not less than $500.0 million whose obligations are rated A- or the equivalent or better by S&P or A3 or better by Moody’s on the date of acquisition;
     (3) commercial paper maturing no more than 180 days (or 270 days in the case of WML or its Subsidiaries) from the date of creation thereof issued by a corporation that is not the Issuer or an Affiliate of the Issuer, and is organized under the laws of any State of the United States of America or the District of Columbia and rated at least A-1 by S&P or at least P-1 by Moody’s;
     (4) repurchase obligations for underlying securities of the types described in clause (1) above entered into with any financial institution meeting the specifications of clause (2) above; provided, that for any Person other than WML and its Subsidiaries, such obligations may not have a term of more than seven days;
     (5) demand deposit accounts maintained in the ordinary course of business; and

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     (6) investments in money market or other mutual funds 95% of whose assets comprise securities of the types described in clauses (1) through (5) above.
     “Cash Management Obligations” means, with respect to any Person, the obligations of such Person in connection with (a) credit cards or stored value cards or (b) treasury, depository or cash management or related services, including (i) the automated clearinghouse transfer of funds or overdrafts or (ii) controlled disbursement services.
     “Change of Control” means:
     (1) the merger or consolidation of the Issuer with or into another Person or the merger of another Person with or into the Issuer or the merger of any Person with or into a Subsidiary of the Issuer if Equity Interests of the Issuer are issued in connection therewith, or the sale of all or substantially all the assets of the Issuer and Guarantors, taken as a whole, to another Person, unless holders of a majority of the aggregate voting power of the Voting Stock of the Issuer, immediately prior to such transaction, hold securities of the surviving or transferee Person that represent, immediately after such transaction, at least a majority of the aggregate voting power of the Voting Stock of the surviving Person;
     (2) any person or group of persons (within the meaning of Sections 13(d) or 14(d)(2) of the Exchange Act) shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the SEC) of capital stock or other securities of the Issuer which are entitled to cast more than 40% of the total votes which may be cast in an election of directors of the Issuer;
     (3) a majority of the board of directors of the Issuer shall be comprised of persons other than individuals who were directors of the Issuer one year prior to such time together with any individuals who were nominated for election as directors of the Issuer by individuals who were directors of the Issuer who, at the time of such individuals’ nominations, had been directors of the Issuer for at least one year;
     (4) there is any change in the persons (as such term is used in Section 13(d) and Section 14(d)(2) of the Exchange Act) who are direct owners of an equity interest in WML or certain of its Subsidiaries identified in the WML Credit Agreements;
     (5) the execution by the Issuer, Co-Issuer or any of its Subsidiaries or Affiliates, or WML or any of its Subsidiaries or Affiliates, of any agreement with respect to any proposed transaction or event or series of transactions or events which, individually or in the aggregate, may reasonably be expected to result in an event described in clauses (2), (3) or (4) above; or the execution of any written agreement which, when fully performed by the parties thereto, would result in an event described in such clauses; or
     (6) the adoption of a plan relating to the liquidation or dissolution of the Issuer.
     “Change of Control Offer” has the meaning assigned to that term in the first paragraph under the heading “— Change of Control.”
     “Change of Control Payment Date” has the meaning assigned to that term in the first paragraph under the heading “— Change of Control.”
     “Change of Control Purchase Price” has the meaning assigned to that term in the first paragraph under the heading “— Change of Control.”
     “Collateral” means collectively Note Collateral and Revolving Facility First-Priority Collateral.
     “Consolidated Adjusted Working Capital” means at any date the excess of (i) Consolidated Current Assets (excluding (A) cash and Cash Equivalents classified as such in accordance with GAAP and (B) deferred taxes calculated in accordance with GAAP) over (ii) Consolidated Current Liabilities (excluding deferred taxes calculated in accordance with GAAP).
     “Consolidated Amortization Expense” for any period means the amortization expense of the Issuer, the Co-Issuer and the Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP.

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     “Consolidated Asset Reclamation Accretion Expense” for any period means the accretion expense associated with asset reclamation obligations of the Issuer, the Co-Issuer and the Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP.
     “Consolidated Capital Expenditures” means for any period the aggregate amount of all expenditures (whether paid in cash or other consideration or accrued as a liability) that would, in accordance with GAAP, be included as additions to property, plant and equipment and other capital expenditures of the Issuer and its consolidated Subsidiaries for such period, as the same are or would be set forth in a consolidated statement of cash flows of the Issuer and its consolidated Subsidiaries for such period (including the amount of assets leased under any capital lease and any mine reserve acquisitions), but excluding (to the extent that they would otherwise be included) (i) any such expenditures made for the replacement or restoration of assets in amounts not exceeding the aggregate amount of insurance proceeds or casualty or condemnation proceeds with respect to the asset or assets being replaced or restored, (ii) any such expenditures financed with the proceeds of Indebtedness, equity issuances or other proceeds that would not be included in Consolidated EBITDA and (iii) capitalized interest.
     “Consolidated Current Assets” means at any date the consolidated current assets of the Issuer and its consolidated Subsidiaries determined as of such date in accordance with GAAP, including accounts receivable, inventory and for purposes of this definition whether or not treated as a current asset in accordance with GAAP, restricted investments and bond collateral, reclamation deposits and advanced coal royalties.
     “Consolidated Current Liabilities” means at any date the consolidated current liabilities of the Issuer and its consolidated Subsidiaries determined as of such date in accordance with GAAP, including the amount of any accounts payable, accrued expenses and any Investments made during such period to purchase performance and surety bonds for permitting purposes or reclamation.
     “Consolidated Depreciation and Depletion Expense” for any period means the depreciation and depletion expense of the Issuer, the Co-Issuer and the Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP.
     “Consolidated EBITDA” for any period means, without duplication, the sum of the amounts for such period of
     (1) Consolidated Net Income, plus
     (2) in each case only to the extent (and in the same proportion) deducted in determining Consolidated Net Income and with respect to the portion of Consolidated Net Income attributable to the Co-Issuer or any Restricted Subsidiary only if a corresponding amount would be permitted at the date of determination to be distributed to the Issuer by the Co-Issuer or such Restricted Subsidiary without prior approval (that has not been obtained), pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to the Co-Issuer or such Restricted Subsidiary or its stockholders,
     (a) Consolidated Income Tax Expense (other than income taxes or income tax adjustments (whether positive or negative) attributable to Asset Sales or extraordinary gains or losses and, without duplication, permitted tax distributions,
     (b) Consolidated Amortization Expense (but only to the extent not included in Consolidated Interest Expense),
     (c) Consolidated Asset Reclamation Accretion Expense,
     (d) Consolidated Depreciation and Depletion Expense (but only to the extent not included in Consolidated Interest Expense),
     (e) Consolidated Interest Expense,
     (f) all other non-cash items reducing Consolidated Net Income (including without limitation noncash write-offs of goodwill, intangibles and long-lived assets, but excluding any non-cash charge that results in an accrual of a reserve for cash charges in any future period) for such period, and

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     (g) costs and expenses incurred in connection with the Transactions, in each case determined on a consolidated basis in accordance with GAAP, minus
     (3) the aggregate amount of all non-cash items, determined on a consolidated basis in accordance with GAAP, to the extent such items increased Consolidated Net Income (other than the accrual of revenue, recording of receivables or the reversal of reserves in the ordinary course of business) for such period.
     “Consolidated Income Tax Expense” for any period means the provision for taxes of the Issuer, the Co-Issuer and the Restricted Subsidiaries, determined on a consolidated basis in accordance with GAAP.
     “Consolidated Interest Expense” for any period means the sum, without duplication, of the total interest expense of the Issuer, the Co-Issuer and the Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP and including, without duplication,
     (1) imputed interest on Capital Lease Obligations and Attributable Indebtedness,
     (2) commissions, discounts and other fees and charges owed with respect to letters of credit securing financial obligations, bankers’ acceptance financing and receivables financings,
     (3) amortization of debt issuance costs, debt discount or premium and other financing fees and expenses but excluding amortization of deferred financing charges incurred in respect of the Notes,
     (4) the interest portion of any deferred payment obligations,
     (5) all other non-cash interest expense,
     (6) consolidated capitalized interest,
     (7) the product of (a) all cash and non-cash dividends paid, declared, accrued or accumulated on any series of Disqualified Equity Interests or any Preferred Stock of the Issuer, the Co-Issuer or any Restricted Subsidiary (other than any such Disqualified Equity Interests or any Preferred Stock held by the Issuer, the Co-Issuer or a Wholly Owned Restricted Subsidiary or to the extent paid in Qualified Equity Interests), multiplied by (b) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, state and local statutory income tax rate of the Issuer, the Co-Issuer and the Restricted Subsidiaries, expressed as a decimal,
     (8) all interest payable with respect to discontinued operations, and
     (9) all interest on any Indebtedness of any other Person guaranteed by the Issuer, the Co-Issuer or any Restricted Subsidiary; provided, that to the extent directly related to the issuance of the Notes, amortization of debt issuance costs, debt discount or premium and other financing fees and expenses shall be excluded. Consolidated Interest Expense shall be calculated after giving effect to Hedging Obligations (including associated costs) described in clause (1) of the definition of “Hedging Obligations,” but excluding unrealized gains and losses with respect to Hedging Obligations.
     “Consolidated Net Income” for any period means the net income (or loss) of the Issuer, the Co-Issuer and the Restricted Subsidiaries for such period determined on a consolidated basis in accordance with GAAP; provided, that there shall be excluded from the calculation of Consolidated Net Income (to the extent otherwise included therein), without duplication:
     (1) the net income (or loss) of any Person (other than a Restricted Subsidiary) in which any Person other than the Issuer, the Co-Issuer and the Restricted Subsidiaries has an ownership interest, except to the extent that cash in an amount equal to any such income has actually been received by the Issuer, the Co-Issuer or any of its Restricted Subsidiaries during such period;
     (2) except to the extent includible in the consolidated net income of the Issuer pursuant to the foregoing clause (1), the net income (or loss) of any Person that accrued prior to the date that (a) such Person becomes a Restricted Subsidiary or is merged into or consolidated with the Issuer, the Co-Issuer or any Restricted Subsidiary or (b) the assets of such Person are acquired by the Issuer, the Co-Issuer or any Restricted Subsidiary;

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     (3) the net income of any Restricted Subsidiary and Co-Issuer during such period to the extent that the declaration or payment of dividends or similar distributions by such Restricted Subsidiary and Co-Issuer of that income is not permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary during such period, except that the Issuer’s equity in a net loss of any such Restricted Subsidiary for such period shall be included in determining Consolidated Net Income; provided, that the net income of WML and its Subsidiaries shall not be excluded pursuant to this clause (3) to the extent that the declaration or payment of dividends or similar distributions or payments is not permitted pursuant to provisions in the WML Credit Agreements that limit dividends, distributions or fee payments from WML to the Issuer (it being understood that this proviso shall apply only to such provisions of the WML Credit Agreements and not to any other limitations or restrictions otherwise applicable).
     (4) for the purposes of calculating the Restricted Payments Basket only, in the case of a successor to the Issuer by consolidation, merger or transfer of its assets, any income (or loss) of the successor prior to such merger, consolidation or transfer of assets;
     (5) any gain (or loss), together with any related provisions for taxes on any such gain (or the tax effect of any such loss), realized during such period by the Issuer, the Co-Issuer or any Restricted Subsidiary upon (a) the acquisition of any securities, or the extinguishment of any Indebtedness, or the sale or disposition of any Equity Interests of the Issuer, the Co-Issuer or any Restricted Subsidiary or (b) any Asset Sale (without regard to the $2.50 million limitation set forth in clause (5) of the definition thereof) by the Issuer, the Co-Issuer or any Restricted Subsidiary;
     (6) gains and losses due solely to fluctuations in currency values and the related tax effects according to GAAP;
     (7) unrealized gains and losses with respect to Hedging Obligations;
     (8) any extraordinary or nonrecurring gain (or extraordinary or nonrecurring loss), together with any related provision for taxes on any such gain (or the tax effect of any such loss), realized by the Issuer, the Co-Issuer or any Restricted Subsidiary during such period;
     (9) any impairment charge or asset write-off or write-down, including impairment charges or asset writeoffs or write-downs related to goodwill, intangible assets, deferred financing costs, inventory, long-lived assets, investments in debt and equity securities in connection with any past or future acquisition, merger, consolidation or similar transaction (excluding any non-cash items to the extent that it represents an accrual of or reserve for cash expenditures in any future period except to the extent such item is subsequently reserved or as a result of a change in law or regulation, in each case, pursuant to GAAP, and the amortization of intangibles arising pursuant to GAAP;
     (10) effects of adjustments (including the effects of such adjustments pushed down to the Issuer, the Co- Issuer and Restricted Subsidiaries) in Issuer’s consolidated financial statements pursuant to GAAP (including in the inventory, property and equipment, software, goodwill, intangible assets, in-process research and development, deferred revenue and debt line items thereof) resulting from the application of purchase accounting, as the case may be, in relation to any consummated transaction or the amortization or write-off of any amounts thereof, net of taxes; provided, that this clause (10) shall not include the recognition of ROVA deferred revenue for any period subsequent to the Issue Date; and
     (11) cumulative effect of a change in accounting principle(s) during such period.
     For purposes of this definition of “Consolidated Net Income,” “nonrecurring” means any gain or loss as of any date that is not reasonably likely to recur within the two years following such date; provided, that if there was a gain or loss similar to such gain or loss within the two years preceding such date, such gain or loss shall not be deemed nonrecurring.
     Notwithstanding the foregoing, for the purposes of the covenant described under “— Certain Covenants — Limitations on Restricted Payments” only, there shall be excluded from Consolidated Net Income any repurchases, repayments or redemptions of Investments, proceeds realized on the sale of Investments or return of capital to the Issuer, the Co-Issuer or a Restricted Subsidiary to the extent such repurchases, repayments, redemptions, proceeds or returns increase the amount of Restricted Payments

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permitted under such covenant pursuant to clause (3)(d) of the first paragraph thereof or decrease the amount of Investments outstanding pursuant to the paragraph following clause (18) of the definition of “Permitted Investments.”
     “Consolidated Total Indebtedness” means, at any date of determination, an amount equal to the sum, without duplication, of the aggregate amount of all outstanding Indebtedness of the Issuer, the Co-Issuer and its Restricted Subsidiaries.
     “Covenant Defeasance” has the meaning assigned to that term in the second paragraph under the heading “— Legal Defeasance and Covenant Defeasance.”
     “Coverage Ratio Exception” has the meaning assigned to that term in the first paragraph under the subheading “— Certain Covenants — Limitations on Additional Indebtedness and Preferred Stock.”
     “Co-Issuer” has the meaning assigned to that term in the first paragraph of the preamble of the Description of the Notes section.
     “Custodian” means any receiver, trustee, assignee, liquidator or similar official under any applicable bankruptcy law.
     “Default” means (1) any Event of Default or (2) any event, act or condition that, after notice or the passage of time or both, would be an Event of Default.
     “Designated Preferred Stock” means Preferred Stock of the Issuer (other than in the form of Disqualified Equity Interests) that is issued for cash (other than to the Co-Issuer or a Restricted Subsidiary) and is so designated as Designated Preferred Stock pursuant to an Officer’s Certificate on the issuance date thereof.
     “Designation” has the meaning assigned to that term in the first paragraph under the subheading “— Certain Covenants —Limitations on Designation of Unrestricted Subsidiaries.”
     “Designation Amount” has the meaning assigned to that term in clause (2) of the first paragraph under the subheading “— Certain Covenants — Limitations on Designation of Unrestricted Subsidiaries.”
     “DIP Financing” has the meaning assigned to that term in the eleventh paragraph under the subheading “— Security —Intercreditor Agreement to be Entered into in Connection with a Future Revolving Credit Facility.”
     “Disqualified Equity Interests” of any Person means any class of Equity Interests of such Person that, by its terms, or by the terms of any related agreement or of any security into which it is convertible, puttable or exchangeable, is, or upon the happening of any event or the passage of time would be, required to be redeemed by such Person, whether or not at the option of the holder thereof, or matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, in whole or in part, on or prior to the date which is 91 days after the final maturity date of the Notes; provided, however, that any class of Equity Interests of such Person that, by its terms, authorizes such Person to satisfy in full its obligations with respect to the payment of dividends or upon maturity, redemption (pursuant to a sinking fund or otherwise) or repurchase thereof or otherwise by the delivery of Equity Interests that are not Disqualified Equity Interests, and that is not convertible, puttable or exchangeable for Disqualified Equity Interests or Indebtedness, will not be deemed to be Disqualified Equity Interests so long as such Person satisfies its obligations with respect thereto solely by the delivery of Equity Interests that are not Disqualified Equity Interests; provided, further, that any Equity Interests that would not constitute Disqualified Equity Interests but for provisions thereof giving holders thereof (or the holders of any security into or for which such Equity Interests are convertible, exchangeable or exercisable) the right to require the Issuer to redeem such Equity Interests upon the occurrence of a change in control or asset sale occurring prior to the final maturity date of the Notes shall not constitute Disqualified Equity Interests if the change in control or asset sale provisions applicable to such Equity Interests are no more favorable to such holders than the provisions described under “— Change of Control” and “— Certain Covenants —Limitations on Asset Sales,” respectively, and such Equity Interests specifically provide that the Issuer will not redeem any such Equity Interests pursuant to such provisions prior to the Issuer’s purchase of the Notes as required pursuant to the provisions described under “— Change of Control” and “— Certain Covenants —Limitations on Asset Sales,” respectively.

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     “Equity Interests” of any Person means (1) any and all shares or other equity interests (including common stock, preferred stock, limited liability company interests and partnership interests) in such Person and (2) all rights to purchase, warrants or options (whether or not currently exercisable), participations or other equivalents of or interests in (however designated) such shares or other interests in such Person (but excluding any debt security that is convertible into, or exchangeable for, common stock).
     “Event of Default” has the meaning assigned to that term in the first paragraph under the heading “— Events of Default.”
     “Event of Loss” means, with respect to any Collateral, whether in respect of a single event or a series of related events, any (1) loss, destruction or damage of such Collateral, (2) condemnation, seizure or taking by exercise of the power of eminent domain or otherwise of such Collateral, or confiscation of such Collateral or the requisition of the use of such Collateral or (3) settlement in lieu of clause (2) above.
     “Excess Cash Flow” means for any period an amount equal to the excess of (i) the sum, without duplication, of
     (A) Consolidated EBITDA for such period plus
     (B) the decrease, if any, in Consolidated Adjusted Working Capital from the first day to the last day of such period, plus
     (C) the increase, if any, in deferred revenue liabilities (including both the current and non-current portion of such liabilities) from the first day to the last day of such period, plus
     (D) the increase, if any, in amounts drawn by the Issuer or any of its consolidated Subsidiaries under any revolving credit facility from the first day to the last day of such period, over
     (ii) the sum, without duplication, of
     (A) Consolidated Interest Expense for such period paid in cash,
     (B) Consolidated Income Tax Expense actually paid by the Issuer on a consolidated basis during such period in respect of any period ending on or after the Issue Date,
     (C) the increase, if any, in Consolidated Adjusted Working Capital from the first day to the last day of such period,
     (D) the decrease, if any, in deferred revenue liabilities (including both the current and non-current portion of such liabilities) from the first day to the last day of such period,
     (E) the aggregate amount of any permitted optional redemptions of Notes during such period under “— Optional Redemption,”
     (F) cash payments made during such period in respect of Consolidated Capital Expenditures,
     (G) consolidated cash payments (or repayments) in respect of outstanding Indebtedness (excluding any Indebtedness outstanding under any revolving credit facility) of the Issuer or any of its consolidated Subsidiaries, including principal payments in respect of capital leases and payments of any make-whole amounts, actually paid by the Issuer or any of its consolidated Subsidiaries during such period,
     (H) consolidated cash payments or repayments (whether or not resulting in a permanent commitment reduction) made in respect of outstanding Indebtedness of the Issuer or any of its consolidated Subsidiaries under any revolving credit facility, actually paid by the Issuer or any of its consolidated Subsidiaries during such period,
     (I) consolidated cash payments made by the Issuer or any of its consolidated Subsidiaries during such period related to post-retirement medical and heritage costs, in excess of amounts included in Consolidated EBITDA,

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     (J) consolidated cash payments made by the Issuer or any of its consolidated Subsidiaries during such period related to pension plans, in excess of amounts included in Consolidated EBITDA,
     (K) consolidated cash payments made by the Issuer or any of its consolidated Subsidiaries during such period related to asset reclamation,
     (L) cash amounts contributed by the Issuer or any of its consolidated Subsidiaries to fund the WML debt service reserve account during such period; provided, that such amounts shall not exceed the minimum amounts required to fund such reserve account and
     (M) cash payments made by the Issuer or any of its consolidated Subsidiaries to fund the WML working capital reserve account during such period; provided, that such amounts shall not exceed the minimum amounts required to fund such reserve account.
     “Excess Cash Flow Amount” means, as of the date of determination, an aggregate amount equal to 75% of the Excess Cash Flow for such prior fiscal year. For example, if the date of determination is April 30, 2012, Excess Cash Flow shall be calculated for the fiscal year ended December 31, 2011.
     “Excess Cash Flow Offer” has the meaning assigned to that term in clause (1) of the first paragraph under the subheading “— Certain Covenants — Excess Cash Flow.”
     “Excess Cash Flow Offer Deficiency” has the meaning assigned to that term in the second paragraph under the subheading “— Certain Covenants — Excess Cash Flow.”
     “Excess Cash Flow Offered Price” has the meaning assigned to that term in clause (2) of the first paragraph under the subheading “— Certain Covenants — Excess Cash Flow.”
     “Excess Cash Flow Payment Amount” has the meaning assigned to that term in clause (1) of the first paragraph under the subheading “— Certain Covenants — Excess Cash Flow.”
     “Excess Loss Proceeds” has the meaning assigned to that term in the third paragraph under the subheading “— Certain Covenants —Events of Loss.”
     “Excess Proceeds” has the meaning assigned to that term in the fifth paragraph under the subheading “— Certain Covenants —Limitations on Asset Sales.”
     “Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder.
     “Exchange Notes” means any Notes issued pursuant to the Registration Rights Agreement in exchange for the Notes issued on the Issue Date or in exchange for any Additional Notes.
     “Excluded Property” means (A) shares of any first-tier Subsidiary of the Issuer that is a “controlled foreign corporation” (as defined in Section 957(a) of the Code) in excess of 66% of all of the issued and outstanding Equity Interests in such Subsidiary entitled to vote (within the meaning of Treasury Regulation Section 1.956-2(c)(2)) and (B) any right, title or interest in any permit, lease, capital lease, license, contract, agreement, account receivable, inventory or equipment held by the Issuer, the Co-Issuer or any Subsidiary Guarantor or to which any of the Issuer, the Co-Issuer or any Subsidiary Guarantor is a party or any of its right, title or interest thereunder to the extent, but only to the extent, that the creation of a security interest would, under the terms of such permit, lease, capital lease, license, contract, agreement, account receivable, inventory or equipment, or as a matter of law, result in a breach of the terms of, or constitute a default under, any permit, lease, capital lease, license, contract, agreement, account receivable, inventory or equipment held by the Issuer, the Co-Issuer or any Subsidiary Guarantor or to which any of the Issuer, the Co-Issuer or any Subsidiary Guarantor is a party or render void the security interest therein (other than to the extent that any such term would be rendered ineffective pursuant to Section 9-406, 9-407, 9-408 or 9-409 of the UCC (or any successor provision or provisions); provided, that immediately upon the ineffectiveness, lapse or termination of any such provision or upon obtaining a required consent to cure any potential breach, such right, title or interest in such permit, lease, capital lease, license, contract, agreement, account receivable, inventory or equipment shall cease to be an “Excluded Property.” For the avoidance of doubt, “Excluded Property” shall not include any right to receive any payment of money or the proceeds, substitutions or replacements of any

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Excluded Property (unless such proceeds, substitutions or replacements would constitute an Excluded Property).
     Fair Market Value” means, with respect to any asset, the price (after taking into account any liabilities relating to such assets) that would be negotiated in an arm’s-length transaction for cash between a willing seller and a willing and able buyer, neither of which is under any compulsion to complete the transaction, as such price is determined in good faith by the Board of Directors of the Issuer or a duly authorized committee thereof, as evidenced by a resolution of such Board or committee.
     “First Lien Collateral” has the meaning assigned to that term in clause (i) of the first paragraph under the subheading “— Security — General.”
     “First Lien Security Documents” means any security document granting or evidencing a first-priority security interest in or Liens on any assets of any Person to secure the Obligations under the Indenture, the Notes and the Note Guarantees, as each may be amended, restated, supplemented or otherwise modified from time to time.
     “Fixed Charge Coverage Ratio” means the ratio of Consolidated EBITDA during the Four-Quarter Period ending on or prior to the date of the transaction giving rise to the need to calculate the Fixed Charge Coverage Ratio (the “Transaction Date”) to Consolidated Interest Expense for the Four-Quarter Period. For purposes of this definition, Consolidated EBITDA and Consolidated Interest Expense shall be calculated after giving effect on a pro forma basis for the period of such calculation to:
     (1) the incurrence of any Indebtedness or the issuance of any Preferred Stock or Disqualified Equity Interests of the Issuer, the Co-Issuer or any Restricted Subsidiary (and the application of the proceeds thereof) and any repayment of other Indebtedness or redemption of other Preferred Stock or Disqualified Equity Interests (and the application of the proceeds therefrom) (other than the incurrence or repayment of Indebtedness in the ordinary course of business for working capital purposes pursuant to any revolving credit arrangement) occurring during the Four-Quarter Period or at any time subsequent to the last day of the Four-Quarter Period and on or prior to the Transaction Date, as if such incurrence, repayment, issuance or redemption, as the case may be (and the application of the proceeds thereof), occurred on the first day of the Four-Quarter Period; and
     (2) any Asset Sale or Asset Acquisition (including, without limitation, any Asset Acquisition giving rise to the need to make such calculation as a result of the Issuer, the Co-Issuer or any Restricted Subsidiary (including any Person who becomes a Restricted Subsidiary as a result of such Asset Acquisition) incurring Acquired Indebtedness and also including any Consolidated EBITDA associated with any such Asset Acquisition) occurring during the Four-Quarter Period or at any time subsequent to the last day of the Four-Quarter Period and on or prior to the Transaction Date, as if such Asset Sale or Asset Acquisition (including the incurrence of, or assumption of liability for, any such Indebtedness or Acquired debtedness) occurred on the first day of the Four-Quarter Period; provided, that with respect to any Asset Sale, in the case of Consolidated Interest Expense, only to the extent that the obligations giving rise to such Consolidated Interest Expense will not be obligations of the Issuer, the Co-Issuer or any Restricted Subsidiary following the Transaction Date.
     If the Issuer, the Co-Issuer or any Restricted Subsidiary directly or indirectly guarantees Indebtedness of a third Person, the preceding sentence shall give effect to the incurrence of such guaranteed Indebtedness as if the Issuer, the Co-Issuer or such Restricted Subsidiary had directly incurred or otherwise assumed such guaranteed Indebtedness.
     In calculating Consolidated Interest Expense for purposes of determining the denominator (but not the numerator) of this Fixed Charge Coverage Ratio:
     (1) interest on outstanding Indebtedness determined on a fluctuating basis as of the Transaction Date and which will continue to be so determined thereafter shall be deemed to have accrued at a fixed rate per annum equal to the rate of interest on such Indebtedness in effect on the Transaction Date;
     (2) if interest on any Indebtedness actually incurred on the Transaction Date may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a euro currency interbank offered

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rate, or other rates, then the interest rate in effect on the Transaction Date will be deemed to have been in effect during the Four-Quarter Period; and
     (3) notwithstanding clause (1) or (2) above, interest on Indebtedness determined on a fluctuating basis, to the extent such interest is covered by agreements relating to Hedging Obligations, shall be deemed to accrue at the rate per annum resulting after giving effect to the operation of these agreements.
     For purposes of this definition, whenever pro forma effect is to be given to any pro forma event, the pro forma calculations will be made on a basis that is consistent with Article 11 of Regulation S-X under the Securities Act and shall include, for the avoidance of doubt, synergies, operating expense reductions and other cost savings to the extent allowable, calculated in accordance with Article 11 of Regulation S-X under the Securities Act.
     “Foreign Subsidiary” means, with respect to any Person, any Restricted Subsidiary of such Person that is not organized or existing under the laws of the United States of America, any state thereof, the District of Columbia, or any territory thereof.
     “Four-Quarter Period” with respect to any Person means the most recent four consecutive full fiscal quarters for which internal financial statements are available at such Person.
     “GAAP” means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession of the United States, as in effect on the Issue Date (without giving effect to Accounting Standards Codification Topic 825-10-25, “The Fair Value Option”).
     “guarantee” means a direct or indirect guarantee by any Person of any Indebtedness of any other Person and includes any obligation, direct or indirect, contingent or otherwise, of such Person (1) to purchase or pay (or advance or supply funds for the purchase or payment of) Indebtedness of such other Person (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services (unless such purchase arrangements are on arm’s-length terms and are entered into in the ordinary course of business), to take-or-pay, or to maintain financial statement conditions or otherwise); or (2) entered into for purposes of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); “guarantee,” when used as a verb, and “guaranteed” have correlative meanings.
     “Guarantors” means the Issuer, the Co-Issuer and Subsidiary Guarantors, and each other Person that is required to, or at the election of the Issuer does, become a Guarantor by the terms of the Indenture after the Issue Date, in each case, until such Person is released from its Note Guarantee in accordance with the terms of the Indenture.
     “Hedging Obligations” of any Person means the obligations of such Person pursuant to (1) any interest rate swap agreement, interest rate collar agreement or other similar agreement or arrangement, (2) agreements or arrangements relating to, or designed to protect such Person against, fluctuations in foreign currency exchange rates, or (3) any forward contract, commodity swap agreement, commodity option agreement or other similar agreement or arrangement.
     “Holder” means any registered holder, from time to time, of the Notes.
     “Holder Buy-out Right” has the meaning assigned to that term in the eighth paragraph under the subheading “— Security —Intercreditor Agreement to be Entered into in Connection with a Future Revolving Credit Facility.”
     “incur” means, with respect to any Indebtedness or Obligation, incur, create, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to such Indebtedness or Obligation; provided, that (1) the Indebtedness of a Person existing at the time such Person became a Restricted Subsidiary shall be deemed to have been incurred by such Restricted Subsidiary and (2) neither the accrual of interest nor the accretion of original issue discount shall be deemed to be an incurrence of Indebtedness.

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     “Indebtedness” means, with respect to any specified Person:
     (1) all liabilities, contingent or otherwise, of such Person for borrowed money (whether or not the recourse of the lender is to the whole of the assets of such Person or only to a portion thereof);
     (2) all obligations of such Person evidenced by bonds, debentures, Notes or other similar instruments other than obligations in respect of asset reclamation obligations;
     (3) all letters of credit or reimbursement obligations of such Person in respect of letters of credit, letters of guaranty, bankers’ acceptances and similar credit transactions;
     (4) all obligations of such Person to pay the deferred and unpaid purchase price of property or services, except trade payables, pension and other retirement related benefits and accrued expenses incurred by such Person in the ordinary course of business in connection with obtaining goods, materials or services;
     (5) the maximum fixed redemption or repurchase price of all Disqualified Equity Interests of such Person;
     (6) all Capital Lease Obligations of such Person;
     (7) all Indebtedness of others secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person;
     (8) all Indebtedness of others guaranteed by such Person to the extent of such guarantee; provided, that Indebtedness of the Issuer, the Co-Issuer or its Subsidiaries that is guaranteed by the Issuer, the Co-Issuer or the Issuer’s Subsidiaries shall only be counted once in the calculation of the amount of Indebtedness of the Issuer, the Co-Issuer and its Subsidiaries on a consolidated basis;
     (9) all Attributable Indebtedness;
     (10) all Preferred Stock of such Person;
     (11) to the extent not otherwise included in this definition, Hedging Obligations of such Person; and
     (12) all obligations of such Person under conditional sale or other title retention agreements relating to assets purchased by such Person;
if and to the extent any of the preceding items (other than letters of credit, Attributable Indebtedness and Hedging Obligations) would appear as a liability on a balance sheet of the specified Person prepared in accordance with GAAP.
     The amount of any Indebtedness which is incurred at a discount to the principal amount at maturity thereof as of any date shall be deemed to have been incurred at the accreted value thereof as of such date. The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above, the maximum liability of such Person for any such contingent obligations at such date and, in the case of clause (7), the lesser of (a) the Fair Market Value of any asset subject to a Lien securing the Indebtedness of others on the date that the Lien attaches and (b) the amount of the Indebtedness secured. For purposes of clause (5), the “maximum fixed redemption or repurchase price” of any Disqualified Equity Interests that do not have a fixed redemption or repurchase price shall be calculated in accordance with the terms of such Disqualified Equity Interests as if such Disqualified Equity Interests were redeemed or repurchased on any date on which an amount of Indebtedness outstanding shall be required to be determined pursuant to the Indenture.
     “Indenture” has the meaning assigned to that term in the first paragraph of the preamble of the Description of the Notes section.
     “Independent Financial Advisor” means an accounting, appraisal or investment banking firm of nationally recognized standing that is, in the reasonable judgment of the Issuer’s Board of Directors, qualified

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to perform the task for which it has been engaged and disinterested and independent with respect to the Issuer and its Affiliates.
     “Initial Purchaser” means Gleacher & Company, Inc. and such other initial purchasers party to the purchase agreement entered into in connection with the offer and sale of the Notes issued on the Issue Date.
     “Intercreditor Agreement” has the meaning assigned to that term in the first paragraph under “ — Security — Intercreditor Agreement to be Entered into in Connection with a Future Revolving Credit Facility.”
     “interest” means, with respect to the Notes, interest on the Notes.
     “Investments” of any Person means:
     (1) all direct or indirect investments by such Person in any other Person in the form of joint ventures, loans, advances or capital contributions or other credit extensions constituting Indebtedness of such other Person, and any guarantee of Indebtedness of any other Person;
     (2) all purchases (or other acquisitions for consideration) by such Person of Indebtedness, Equity Interests or other securities of any other Person (other than any such purchase that constitutes a Restricted Payment of the type described in clause (2) of the definition thereof);
     (3) all other items that would be classified as investments (including purchases of assets outside the ordinary course of business) on a balance sheet of such Person prepared in accordance with GAAP; and
     (4) the Designation of any Subsidiary as an Unrestricted Subsidiary.
     Except as otherwise expressly specified in this definition, the amount of any Investment (other than an Investment made in cash) shall be the FairMarket Value thereof on the date such Investment is made. The amount of Investment pursuant to clause (4) shall be the Designation Amount determined in accordance with the covenant described under “— Certain Covenants —Limitations on Designation of Unrestricted Subsidiaries.” If the Issuer, the Co-Issuer or any Subsidiary sells or otherwise disposes of any Equity Interests of any direct or indirect Subsidiary such that, after giving effect to any such sale or disposition, such Person is no longer a Subsidiary, the Issuer shall be deemed to have made an Investment on the date of any such sale or other disposition equal to the Fair Market Value of the Equity Interests of and all other Investments in such Subsidiary not sold or disposed of, which amount shall be determined in good faith by the Board of Directors. The acquisition by the Issuer, the Co-Issuer or any Restricted Subsidiary of a Person that holds an Investment in a third Person shall be deemed to be an Investment by the Issuer, the Co-Issuer or such Restricted Subsidiary in the third Person in an amount equal to the Fair Market Value of the Investment held by the acquired Person in the third Person.
     “Issue Date” means the date on which the Notes are originally issued.
     “Issuer” has the meaning assigned to that term in the first paragraph of the preamble of the Description of the Notes section.
     “Legal Defeasance” has the meaning assigned to that term in the first paragraph under the heading “— Legal Defeasance and Covenant Defeasance.”
     “Lien” means, with respect to any asset, any mortgage, deed of trust, lien (statutory or other), pledge, lease, easement, restriction, covenant, charge, security interest or other encumbrance of any kind or nature in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, and any lease in the nature thereof, any option or other agreement to sell, and any filing of, or agreement to give, any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction (other than cautionary filings in respect of operating leases).
     “Loss Proceeds Offer” has the meaning assigned to that term in the third paragraph under the subheading “— Certain Covenants —Events of Loss.”

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     “Moody’s” means Moody’s Investors Service, Inc., and its successors.
     “Mortgage” means any mortgage or deed of trust with respect to Real Property owned in fee simple by the Issuer, the Co-Issuer or any Guarantor, including any assignment of leases and rents, security agreement and fixture filing relating thereto, entered into by the Issuer, the Co-Issuer or any Guarantor in favor of the Note Collateral Agent for its benefit and the benefit of the Trustee and the Holders of Notes.
     “Mortgaged Property” has the meaning assigned to that term in the first paragraph under the subheading “— Security —Certain Covenants with Respect to the Note Collateral —Real estate mortgages and filings.”
     “Net Available Proceeds” means, with respect to any Asset Sale, the proceeds of such Asset Sale in the form of cash or Cash Equivalents, net of:
     (1) brokerage commissions and other fees and expenses (including fees and expenses of legal counsel, accountants and investment banks) of such Asset Sale;
     (2) provisions for taxes payable as a result of such Asset Sale (after taking into account any available tax credits or deductions and any tax sharing arrangements);
     (3) amounts required to be paid to any Person (other than the Issuer, the Co-Issuer or any Restricted Subsidiary) owning a beneficial interest in the assets subject to the Asset Sale or to repay Indebtedness outstanding at the time of the Asset Sale that is secured by a Lien on the property or assets sold; and
     (4) appropriate amounts to be provided by the Issuer, the Co-Issuer or any Restricted Subsidiary, as the case may be, as a reserve required in accordance with GAAP against any adjustment in the sale price of such asset or assets or liabilities associated with such Asset Sale and retained by the Issuer, the Co-Issuer or any Restricted Subsidiary, as the case may be, after such Asset Sale, including pensions and other post employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale, all as reflected in an Officers’ Certificate delivered to the Trustee; provided, however, that any amounts remaining after adjustments, revaluations or liquidations of such reserves shall constitute Net Available Proceeds.
     “Net Loss Proceeds” means, with respect to any Event of Loss, the aggregate proceeds in the form of cash or Cash Equivalents including, without limitation, insurance proceeds from condemnation awards or damages awarded by any judgment, in each case received by the Issuer, the Co-Issuer or any of its Restricted Subsidiaries from such Event of Loss, net of:
     (1) reasonable out-of-pocket expenses and fees relating to such Event of Loss (including without limitation legal, accounting, appraisal or insurance adjuster fees);
     (2) taxes paid or payable after taking into account any reduction in consolidated tax liability due to available tax credits or deductions and any tax sharing arrangements;
     (3) any repayment of Indebtedness that is secured by, or directly related to, the property or assets that are the subject of such Event of Loss;
     (4) amounts required to be paid to any Person (other than the Issuer, the Co-Issuer or any Restricted Subsidiary) owning a beneficial interest in the assets subject to the Event of Loss; and
     (5) appropriate amounts to be provided by the Issuer, the Co-Issuer or any Restricted Subsidiary, as the case may be, as a reserve, in accordance with GAAP, against any liabilities associated with such Event of Loss and retained by the Issuer, the Co-Issuer or any Restricted Subsidiary, as the case may be, after such Event of Loss, including, without limitation, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Event of Loss.
     “Net Proceeds Deficiency” has the meaning assigned to that term in the seventh paragraph under the subheading “— Certain Covenants — Limitations on Asset Sales.”

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     “Net Proceeds Offer” has the meaning assigned to that term in clause (1) of the sixth paragraph under the subheading “— Certain Covenants — Limitations on Asset Sales.”
     “Non-Recourse Debt” means Indebtedness of an Unrestricted Subsidiary:
     (1) as to which none of the Issuer, the Co-Issuer or any Restricted Subsidiary (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (b) is directly or indirectly liable as a guarantor or otherwise, or (c) constitutes the lender;
     (2) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit upon notice, lapse of time or both any holder of any other Indebtedness of the Issuer, the Co-Issuer or any Restricted Subsidiary to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity; and
     (3) as to which the lenders have been notified in writing that they will not have any recourse to the Equity Interests or assets of the Issuer, the Co-Issuer or any Restricted Subsidiary.
     “Note Collateral” has the meaning assigned to that term in the first paragraph under the subheading “— Security —General.”
     “Note Collateral Agent” has the meaning assigned to that term in the first paragraph of the preamble of the Description of the Notes section.
     “Note First-Priority Liens” means the liens on the Note Collateral created in favor of the Note Collateral Agent for its benefit and the benefit of the Trustee and the Holders of the Notes, subject solely to Permitted Liens.
     “Note Guarantees” has the meaning assigned to that term under the first paragraph of the heading “— Note Guarantees.”
     “Note Liens” means, collectively, the Note First-Priority Liens and the Note Second-Priority Liens.
     “Note Second-Priority Liens” means the Liens on the Revolving Facility First-Priority Collateral created in favor of the Note Collateral Agent for its benefit and the benefit of the Trustee and the Holders of the Notes, subject solely to Permitted Liens and Revolving Facility First-Priority Liens.
     “Notes” has the meaning assigned to that term in the first paragraph of the preamble of the Description of the Notes section.
     “Obligations” means any principal, premium, interest, penalties, fees, indemnification, reimbursements, costs, expenses, damages and other liabilities payable under the documentation governing any Indebtedness.
     “Offered Price” has the meaning assigned to that term in clause (2) of the sixth paragraph under the subheading “— Certain Covenants — Limitations on Asset Sales.”
     “Officer” means any of the following of the Issuer: the Chairman of the Board of Directors, the Chief Executive Officer, the Chief Financial Officer, the President, any Vice President, the Treasurer or the Secretary.
     “Officers’ Certificate” means a certificate signed in the name of the Issuer (i) by the chairman of the Board of Directors, the president or chief executive officer or a vice president and (ii) by the chief financial officer, the treasurer or any assistant treasurer or the secretary or any assistant secretary.
     “Opinion of Counsel” means a written opinion from legal counsel who is reasonably acceptable to the Trustee. The counsel may be an employee of or counsel to the Issuer.

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     “Pari Passu Indebtedness” means any Indebtedness of the Issuer, the Co-Issuer or any Guarantor that ranks pari passu in right of payment with the Notes or the Note Guarantees, as applicable, and is secured by a Lien on the Note Collateral that has the same priority as the Lien securing the Notes and the Note Guarantees.
     “Pari Passu Indebtedness Price” has the meaning assigned to that term in clause (2) of the sixth paragraph under the subheading “— Certain Covenants — Limitations on Asset Sales.”
     “Paying Agent” has the meaning assigned to that term under the heading “— Methods of Receiving Payments on the Notes.”
     “Payment Amount” has the meaning assigned to that term in clause (1) of the sixth paragraph under the subheading “— Certain Covenants — Limitations on Asset Sales.”
     “Permitted Business” means the businesses engaged in by the Issuer, the Co-Issuer and its Subsidiaries on the Issue Date as described in this offering memorandum and businesses that are reasonably related thereto or reasonable extensions thereof.
     “Permitted Collateral Liens” shall mean (a) in the case of Collateral other than Mortgaged Property and any pledged securities, Permitted Liens, (b) in the case of Mortgaged Property, “Permitted Collateral Liens” shall mean the Liens described in clauses (1), (2), (3), (5), (6), (10), (13), (14), (16), (18), (19), (20), (21) (insofar as it relates to Liens to secure Obligations in respect of Refinancing Indebtedness of Indebtedness secured by Liens referred to in clause (12), (15), (18), (19), (20), (27), (30) or (33) of the definition of “Permitted Liens”) and (22), (27), (29), (30), (32) and (33) of the definition of “Permitted Liens” and (c) in the case of Collateral consisting of pledged securities, shall mean the Liens described in clause (1), (3), (5), (8), (16), (17), (20), (21), (30), (32) and (33) of the definition of “Permitted Liens.”
     “Permitted Indebtedness” has the meaning assigned to that term in the second paragraph under the subheading “— Certain Covenants — Limitations on Additional Indebtedness and Preferred Stock.”
     “Permitted Investment” means:
     (1) (a) Investments by the Issuer, the Co-Issuer or any Restricted Subsidiary in (i) the Issuer, any Guarantor or the Co-Issuer or (ii) in any Person that is or will become immediately after such Investment a Restricted Subsidiary and a Guarantor or that will merge or consolidate into the Issuer, the Co-Issuer or a Guarantor, including any Investment of such Person not made in contemplation of such transaction and (b) Investments by any Restricted Subsidiary that is not a Guarantor in (i) any Restricted Subsidiary or (ii) any Person that is or will become immediately after such Investment a Restricted Subsidiary or that will merge or consolidate into the Issuer, the Co-Issuer or a Restricted Subsidiary, including any Investment of such Person not made in contemplation of such transaction;
     (2) Investments in the Issuer by any Restricted Subsidiary or the Co-Issuer;
     (3) Hedging Obligations incurred pursuant to clause (4) of the second paragraph under the covenant described under “— Certain Covenants —Limitations on Additional Indebtedness and Preferred Stock”;
     (4) cash and Cash Equivalents;
     (5) receivables owing to the Issuer, the Co-Issuer or any Restricted Subsidiary if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; provided, however, that such trade terms may include such concessionary trade terms as the Issuer, the Co-Issuer or any such Restricted Subsidiary deems reasonable under the circumstances;
     (6) ordinary course trade credit, advances to customers, commissions, tranche and other similar advances to officers, directors and employees made in each case in the ordinary course of business.
     (7) Investments in securities of trade creditors or customers received pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of such trade creditors or customers;

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     (8) Investments made by the Issuer, the Co-Issuer or any Restricted Subsidiary as a result of consideration received in connection with an Asset Sale made (to the extent applicable) in compliance with clauses (1) and (2) of the first paragraph of the covenant described under “— Certain Covenants —Limitations on Asset Sales”;
     (9) prepaid expenses, surety, reclamation and performance bonds and lease, tax, utilities, workers’ compensation, performance and similar deposits made in the ordinary course of business;
     (10) stock, obligations or securities received in settlement of debts created in the ordinary course of business and owing to the Issuer, the Co-Issuer or any Restricted Subsidiary or in satisfaction of judgments;
     (11) Investments, to the extent Qualified Equity Interests are used to make the Investment;
     (12) Investments existing on the Issue Date and any modification, replacement, renewal or extension thereof; provided, that the amount of any such Investment may be increased (1) (x) as required by the terms of such Investment as in existence on the Issue Date or (y) as otherwise permitted under the Indenture, or (2) with respect to Absaloka, as required to meet the requirements of the Internal Revenue Code;
     (13) Investments represented by guarantees otherwise permitted to be made by the Indenture;
     (14) Investments not to exceed the greater of (a) $1.0 million per any calendar year at WRM and (b) contributions required to maintain statutorily-defined minimum capitalization at WRM; provided, that such Investments are in the ordinary course of business, consistent with past practice and made on an arm’s length basis;
     (15) Investments from the Issuer up to $1.0 million per any calendar year to Basin Resources Inc. and Westmoreland Power Inc. and Investments from the Issuer in an aggregate amount not to exceed $5,000 to Westmoreland Terminal Company, Eastern Coal & Coke Company, and Criterion Coal Company, in each case in connection with their respective dissolution;
     (16) Investments made after the date hereof in Restricted Subsidiaries that are not Guarantors in an aggregate amount not to exceed $10.0 million at any one time outstanding (with each Investment being valued as of the date made and without regard to subsequent changes in value);
     (17) any Investment by Issuer, the Co-Issuer or a Restricted Subsidiary in a Permitted Business having an aggregative fair market value, taken together with all other Investments made pursuant to this clause (17) that are at that time outstanding (without giving effect to the sale of an Unrestricted Subsidiary to the extent the proceeds of such sale do not consist of cash and/or marketable securities), not to exceed $5.0 million;
     (18) other Investments in an aggregate amount not to exceed $10.0 million at any one time outstanding (with each Investment being valued as of the date made and without regard to subsequent changes in value); provided, that no Investment made in reliance on clauses (17) and (18) shall be made in any Person that is the direct or indirect holder of a majority of the outstanding Equity Interests of the Issuer; and
     (19) An investment made by the Issuers in WML and its Subsidiaries with the proceeds of the issuance and sale of Additional Notes as permitted to be incurred under the “Limitations on Additional Indebtedness and Preferred Stock” covenant and the other terms of the Indenture for the purpose of the concurrent refinancing of the WML Notes.
     The amount of Investments outstanding at any time pursuant to clauses (16), (17) and (18) above shall be deemed to be reduced:
     (a) upon the disposition or repayment of or return on any Investment made pursuant to clauses (16), (17) and (18) above, by an amount equal to the return of capital with respect to such Investment to the Issuer, the Co-Issuer or any Restricted Subsidiary (to the extent not included in the computation of Consolidated Net Income), less the cost of the disposition of such Investment and net of taxes); and

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     (b) upon a Redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary, by an amount equal to the lesser of (x) the Fair Market Value of the Issuer’s proportionate interest in such Subsidiary immediately following such Redesignation, and (y) the aggregate amount of Investments in such Subsidiary that increased (and did not previously decrease) the amount of Investments outstanding pursuant to clauses (16), (17) and (18) above.
     “Permitted Liens” means the following types of Liens:
     (1) Liens for taxes, assessments or governmental charges or claims, Liens otherwise existing under applicable law, or Liens or encumbrances upon, and defects of title to, real or personal property other than the Collateral or the WML Collateral, including any attachment of personal or real property or other legal process prior to adjudication of a dispute on the merits, in each case, that are either (a) not delinquent or (b) contested in good faith by appropriate proceedings and as to which the Issuer, Co-Issuer or the Restricted Subsidiaries shall have set aside on its books such reserves as may be required pursuant to GAAP and such proceedings have the effect of preventing forfeiture or sale of the property or assets subject to any such Lien;
     (2) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens imposed by law incurred in the ordinary course of business for sums not yet delinquent or being contested in good faith by appropriate proceedings, if adequate reserves or other appropriate provision, if any, as shall be required by GAAP shall have been made in respect thereof and such proceedings have the effect of preventing forfeiture or sale of the property or assets subject to any such Lien;
     (3) pledges incurred, deposits made or bonds given in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, reclamation, surety and appeal bonds, bids, leases, government contracts, performance and return-of-money bonds and other ordinary course obligations (exclusive of obligations for the payment of borrowed money);
     (4) Liens upon specific items of inventory or other goods and proceeds of any Person securing such Person’s obligations in respect of bankers’ acceptances issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods;
     (5) judgment Liens not giving rise to a Default so long as such Liens are adequately bonded and any appropriate legal proceedings which may have been duly initiated for the review of such judgment have not been finally terminated or the period within which the proceedings may be initiated has not expired;
     (6) survey exceptions, easements, rights-of-way, zoning restrictions and other similar charges, restrictions or encumbrances in respect of real property or immaterial imperfections of title that were not incurred in connection with Indebtedness and which do not, in the aggregate, impair in any material respect the ordinary conduct of the business of the Issuer, the Co-Issuer and the Restricted Subsidiaries taken as a whole, including without limitation, encumbrances and exceptions to title expressly set forth as an exception to the policies of title insurance obtained to insure the lien of each Mortgage granted in connection with the Notes or the Revolving Credit Facility or the mortgages granted in connection with the WML Credit Agreements;
     (7) Liens securing reimbursement obligations with respect to commercial letters of credit which encumber documents and other assets relating to such letters of credit and products and proceeds thereof;
     (8) Liens encumbering deposits made to secure obligations arising from statutory, regulatory, contractual or warranty requirements of the Issuer, the Co-Issuer or any Restricted Subsidiary, including rights of offset and setoff;
     (9) bankers’ Liens, rights of setoff and other similar Liens existing solely with respect to cash and Cash Equivalents on deposit in one or more of accounts maintained by the Issuer, the Co-Issuer or any Restricted Subsidiary, in each case granted in the ordinary course of business in favor of the bank or banks with which such accounts are maintained, securing amounts owing to such bank with respect to cash management and operating account arrangements, including those involving pooled accounts and netting arrangements; provided, that in no case shall any such Liens secure (either directly or indirectly) the repayment of any Indebtedness;

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     (10) Liens on leases or subleases arising from the provisions of such lease and subleases and granted to others in the ordinary course of business that do not materially interfere with the ordinary course of business of the Issuer, Co-Issuer or any Restricted Subsidiary, and Liens on property leased under operating leases existing under the WML Credit Agreements;
     (11) Liens arising from filing Uniform Commercial Code (or equivalent statutes) financing statements regarding operating leases entered into in the ordinary course of business;
     (12) (a) Liens securing the Notes (other than any Additional Notes, except as otherwise provided in this clause (12)) and any Note Guarantee and (b) Liens securing Additional Notes to the extent such Liens secure Refinancing Indebtedness represented by Additional Notes and Note Guarantees of Indebtedness incurred under clause 1(b) and, with respect to WML Notes only, clause 3 in the covenant described under “— Limitations on Additional Indebtedness and Preferred Stock”;
     (13) Liens in respect of royalty, production payment and other obligations under coal leases and similar agreements entered into in the ordinary course of business and to the extent such Liens do not secure any obligation for borrowed money;
     (14) Liens in respect of supply, sales, surface use and other operational agreements entered into consistent with normal practices in the mining industry, in each case to the extent such agreements are entered into in the ordinary course of business and such Liens do not secure any obligation for borrowed money;
     (15) (a) Liens existing on the Issue Date securing Indebtedness outstanding on the Issue Date and (b) Liens with respect to the assets and common stock, and the products and proceeds thereof, of WML’s Subsidiary Texas Westmoreland Coal Co. in favor of NRG Texas Power LLC as contemplated by the WML Credit Agreements;
     (16) Liens in favor of the Issuer, the Co-Issuer or a Guarantor;
     (17) Liens securing Obligations in respect of Indebtedness under the Revolving Credit Facility, but only to the extent such Indebtedness is incurred in reliance on and outstanding under clause (1)(a) in the covenant described under “— Limitations on Additional Indebtedness and Preferred Stock” and only for so long as the Liens securing such Obligations are subject to the Intercreditor Agreement;
     (18) Liens securing Obligations in respect of Indebtedness under the Amended and Restated WML Credit Agreement, but only to the extent such Indebtedness is incurred in reliance on and outstanding under clause 1(b) in the covenant described under “— Limitations on Additional Indebtedness and Preferred Stock”;
     (19) Liens securing Purchase Money Indebtedness;
     (20) Liens on assets or shares of stock of a Person existing at the time such Person becomes a Restricted Subsidiary of the Issuer or at the time the Issuer, the Co-Issuer or the Restricted Subsidiary acquires the asset or shares including by merger or consolidation or otherwise; provided, that such Liens were in existence prior to the contemplation of such Person becoming a Restricted Subsidiary of the Issuer or such acquisition and do not extend to any assets other than those of the Person that becomes a Restricted Subsidiary of the Issuer, or is merged with or into or consolidated with the Issuer, the Co-Issuer or any Restricted Subsidiary of the Issuer or otherwise acquired;
     (21) Liens to secure Obligations in respect of Refinancing Indebtedness of Indebtedness secured by Liens referred to in the foregoing clauses (12) (with respect to Notes and Additional Notes), (15) (other than with respect to the WML Notes), (17), (18), (20), (30) and (33) (but only to the extent any such Indebtedness secured by such Lien is permitted to be refinanced pursuant to the covenant entitled “— Certain Covenants — Limitations on Additional Indebtedness and Preferred Stock”); provided, that in each case:
     (a) such Liens do not extend to any additional assets (other than improvements thereon and replacements thereof); and
     (b) the Indebtedness secured by such Lien is not increased to any amount greater than the sum of (x) the outstanding principal amount plus accrued and unpaid interest, or, if greater, the committed amount, of the Indebtedness renewed, refunded, refinanced, replaced, defeased or

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discharged with such Refinancing Indebtedness and (y) an amount necessary to pay any fees and expenses, including premiums, related to such renewal, refunding, refinancing, replacement, defeasance or discharge;
     (22) Liens to secure Attributable Indebtedness incurred pursuant to the covenant described under “— Limitations on Sale and Leaseback Transactions”; provided, that any such Lien shall not extend to or cover any assets of the Issuer, the Co-Issuer or any Restricted Subsidiary other than the assets which are the subject of the Sale and Leaseback Transaction in which the Attributable Indebtedness is incurred;
     (23) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods in the ordinary course of business;
     (24) Liens incurred in the ordinary course of business of the Issuer, the Co-Issuer or any Restricted Subsidiary with respect to obligations (other than Indebtedness) that do not in the aggregate exceed $5.0 million at any one time outstanding; provided, that such Lien shall in no event extend to any Mortgaged Property;
     (25) Liens securing Hedging Obligations permitted to be incurred by clause (4) in the covenant described under “— Limitations on Additional Indebtedness and Preferred Stock” so long as to the extent such Liens relate to Collateral they are subject to the Intercreditor Agreement;
     (26) Liens to secure Obligations in respect of Cash Management Obligations permitted to be incurred by clause (16) in the covenant described under “— Limitations on Additional Indebtedness and Preferred Stock” so long as to the extent such Liens relate to Collateral, they are subject to the Intercreditor Agreement;
     (27) Liens on cash, Cash Equivalents or other property arising in connection with the defeasance, discharge or redemption of Indebtedness or other Obligations in compliance with the Indenture;
     (28) licenses of intellectual property granted by the Issuer, the Co-Issuer or any Restricted Subsidiary in the ordinary course of business and not interfering in any material respect with the ordinary conduct of business of the Issuer, the Co-Issuer or the Restricted Subsidiaries;
     (29) encumbrances or exceptions expressly permitted pursuant to the Mortgages;
     (30) Liens securing Indebtedness permitted to be incurred by clause (18) in the covenant described under “— Limitations on Additional Indebtedness and Preferred Stock”
     (31) Liens on cash advances in favor of the seller of any property to be acquired in an Investment permitted pursuant to Permitted Investments to be applied against the purchase price for such Investment, solely to the extent such Investment would have been permitted on the date of the creation of such Lien;
     (32) Liens arising by operation of law or contract on insurance policies and the proceeds thereof to secure premiums thereunder; and
     (33) Liens on Collateral in favor of an Agent for the benefit of the Holders or the Revolving Lenders relating to such Agent’s administrative expenses with respect to the Collateral;
provided, however, that no consensual Liens shall be permitted to exist, directly or indirectly, on any Collateral, other than Permitted Collateral Liens and Liens granted pursuant to the Security Documents (including Mortgages), any First Lien Security Document or any Second Lien Security Document.
     “Person” means any individual, corporation, partnership, limited liability company, joint venture, incorporated or unincorporated association, joint-stock company, trust, unincorporated organization or government or other agency or political subdivision thereof or other entity of any kind.
     “Plan of Liquidation” with respect to any Person, means a plan that provides for, contemplates or the effectuation of which is preceded or accompanied by (whether or not substantially contemporaneously, in phases or otherwise): (1) the sale, lease, conveyance or other disposition of all or substantially all of the assets of such Person; and (2) the distribution of all or substantially all of the proceeds of such sale, lease,

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conveyance or other disposition of all or substantially all of the remaining assets of such Person to holders of Equity Interests of such Person.
     “Preferred Stock” means, with respect to any Person, any and all preferred or preference stock or other equity interests (however designated) of such Person whether now outstanding or issued after the Issue Date.
     “principal” means, with respect to the Notes, the principal of, and premium, if any, on the Notes.
     “Purchase Money Indebtedness” means Indebtedness, including Capital Lease Obligations, of the Issuer, the Co-Issuer or any Restricted Subsidiary incurred for the purpose of financing all or any part of the purchase price of property, plant or equipment used in the business of the Issuer, the Co-Issuer or any Restricted Subsidiary or the cost of installation, construction or improvement thereof; provided, however, that (1) the amount of such Indebtedness shall not exceed such purchase price or cost, (2) such Indebtedness shall not be secured by any asset other than the specified asset being financed or assets securing any letter of credit supporting the Issuer, the Co-Issuer or Restricted Subsidiary’s ability to pay such purchase price or, in the case of real property or fixtures, including additions and improvements, the real property (other than any Mortgaged Property) to which such asset is attached and (3) such Indebtedness shall be incurred within 180 days after such acquisition of such asset by the Issuer, the Co-Issuer or such Restricted Subsidiary or such installation, construction or improvement.
     “Qualified Equity Interests” of any Person means Equity Interests of such Person other than Disqualified Equity Interests; provided, that such Equity Interests shall not be deemed Qualified Equity Interests to the extent sold or owed to a Subsidiary of such Person or financed, directly or indirectly, using funds (1) borrowed from such Person or any Subsidiary of such Person until and to the extent such borrowing is repaid or (2) contributed, extended, guaranteed or advanced by such Person or any Subsidiary of such Person (including, without limitation, in respect of any employee stock ownership or benefit plan). Unless otherwise specified, Qualified Equity Interests refer to Qualified Equity Interests of the Issuer.
     “Qualified Equity Offering” means the issuance and sale of Qualified Equity Interests of the Issuer to Persons other than any Person who is, prior to such issuance and sale, an Affiliate of the Issuer; provided, however, that cash proceeds therefrom equal to not less than 100% of the aggregate principal amount of any Notes to be redeemed are received by the Issuer as a capital contribution immediately prior to such redemption.
     “Real Property” means, collectively, all right, title and interest (including any leasehold, mineral or other estate) in and to any and all parcels of or interests in real property owned, leased or operated by any Person, whether by lease, license or other means, together with, in each case, all easements, hereditaments and appurtenances relating thereto, all improvements and appurtenant fixtures and rights incidental to the ownership, lease or operation thereof.
     “redeem” means to redeem, repurchase, purchase, defease, retire, discharge or otherwise acquire or retire for value; and “redemption” shall have a correlative meaning; provided, that this definition shall not apply for purposes of “— Optional Redemption.”
     “Redesignation” has the meaning assigned to that term in the fourth paragraph under the subheading “— Certain Covenants —Limitations on Designation of Unrestricted Subsidiaries.”
     “refinance” means to refinance, repay, prepay, replace, renew or refund.
     “Refinancing Indebtedness” means Indebtedness of the Issuer, the Co-Issuer or a Restricted Subsidiary issued in exchange for, or the proceeds from the issuance and sale or disbursement of which are used substantially concurrently to redeem, extend, refinance, renew, replace, defease or refund in whole or in part, or constituting an amendment of, any Indebtedness of the Issuer, the Co-Issuer or any Restricted Subsidiary (the “Refinanced Indebtedness”) in a principal amount not in excess of the principal amount (plus premium, if any) of the Refinanced Indebtedness so repaid or amended (or, if such Refinancing Indebtedness refinances Indebtedness under a revolving credit facility or other agreement providing a commitment for subsequent borrowings, with a maximum commitment plus costs and fees not to exceed the maximum commitment under such revolving credit facility or other agreement, less the amount of any permanent repayment and/or commitment reduction that was required thereunder at any time); provided, that:

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     (1) the Refinancing Indebtedness is the obligation of the same Person as that of the Refinanced Indebtedness;
     (2) if the Refinanced Indebtedness was subordinated to or pari passu with the Notes or the Note Guarantees, as the case may be, then such Refinancing Indebtedness, by its terms, is expressly pari passu with (in the case of Refinanced Indebtedness that was pari passu with) or subordinate in right of payment to (in the case of Refinanced Indebtedness that was subordinated to) the Notes or the Note Guarantees, as the case may be, at least to the same extent as the Refinanced Indebtedness;
     (3) the Refinancing Indebtedness is scheduled to mature either (a) no earlier than the Refinanced Indebtedness being repaid or amended or (b) at least 91 days after the maturity date of the Notes;
     (4) the portion, if any, of the Refinancing Indebtedness that is scheduled to mature on or prior to the maturity date of the Notes has a Weighted Average Life to Maturity at the time such Refinancing Indebtedness is incurred that is equal to or greater than the Weighted Average Life to Maturity of the portion of the Refinanced Indebtedness being repaid that is scheduled to mature on or prior to the maturity date of the Notes; and
     (5) the Refinancing Indebtedness is secured only to the extent, if at all, and by the assets, that the Refinanced Indebtedness being repaid or amended is secured, and such security interest encumbering such assets is of the same priority as, or a lower priority than, the security interest that secured the Refinanced Indebtedness being repaid or amended.
     “Registrar” has the meaning assigned to that term under the heading “— Methods of Receiving Payments on the Notes.”
     “Registration Rights Agreement” means the Registration Rights Agreement related to the Notes, to be executed on the Issue Date, among the Issuer, the Co-Issuer, the Guarantors and the Initial Purchasers set forth therein.
     “Required Filing Date” has the meaning assigned to that term in the first paragraph under the subheading “— Certain Covenants —Reports and Other Information.”
     “Restricted Payment” means any of the following:
     (1) the declaration or payment of any dividend or any other distribution on Equity Interests of the Issuer, the Co-Issuer or any Restricted Subsidiary or any payment made to the direct or indirect holders (in their capacities as such) of Equity Interests of the Issuer, the Co-Issuer or any Restricted Subsidiary, including, without limitation, any payment of any dividend or other distribution in connection with any merger or consolidation involving the Issuer (but not included in or part of merger consideration) but excluding (a) dividends or distributions payable solely in Qualified Equity Interests, (b) in the case of the Co-Issuer and Restricted Subsidiaries, dividends or distributions payable to the Issuer, the Co-Issuer or to a Guarantor, (c) in the case of Restricted Subsidiaries that are not Guarantors, dividends or distributions payable to the Issuer or to a Restricted Subsidiary that is not a Guarantor and (d) in the case of any dividend or distribution payable on or in respect of any class of series of securities issued by a Restricted Subsidiary other than a Wholly Owned Subsidiary, pro rata dividends or distributions to minority stockholders of such Restricted Subsidiary (or owners of an equivalent interest in the case of a Subsidiary that is an entity other than a corporation in accordance with the organizational documents of such entities); provided, that the Issuer, the Co-Issuer or a Restricted Subsidiary receives at least its pro rata share of such dividend or distribution in accordance with its Equity Interests in such class or series of securities or in accordance with the organizational documents of such entities;
     (2) the purchase, redemption or other acquisition or retirement of any Equity Interests of the Issuer, the Co-Issuer, any Restricted Subsidiary or any equity holder of the Issuer, including, without limitation, any purchase, redemption or other acquisition or retirement in connection with any merger or consolidation involving the Issuer (other than an exchange of stock as part of merger consideration in connection with a merger or consolidation) but excluding any such Equity Interests held by the Issuer, the Co-Issuer or any Restricted Subsidiary;
     (3) any Investment other than a Permitted Investment; or

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     (4) any payment or redemption, repurchase, defeasance or other acquisition or retirement in each case prior to the scheduled maturity or prior to any scheduled repayment of principal or sinking fund payment, as the case may be, on or in respect of Subordinated Indebtedness.
     “Restricted Payments Basket” has the meaning assigned to that term in clause (3) of the first paragraph under the subheading “— Certain Covenants — Limitations on Restricted Payments.”
     “Restricted Subsidiary” means any current or future Subsidiary of the Issuer other than an Unrestricted Subsidiary, including Absaloka. For the avoidance of doubt, on the date of the Indenture, WELLC and each Subsidiary of WELLC, WRI and each Subsidiary of WRI, Westmoreland Mining Services, Inc., WML, WRM, Westmoreland Coal Sales Co., WCC Land Holding Company, Inc. and Westmoreland Power Inc. will be Restricted Subsidiaries unless and until designated as Unrestricted Subsidiaries.
     “Revolving Buy-out Price” has the meaning assigned to that term in the eighth paragraph under the subheading “— Security — Intercreditor Agreement to be Entered into in Connection with a Future Revolving Credit Facility.”
     “Revolving Collateral Agent” has the meaning assigned to that term in the first paragraph under the subheading “— Security — Intercreditor Agreement to be Entered into in Connection with a Future Revolving Credit Facility.”
     “Revolving Credit Facility” means a revolving credit facility that may be entered into after the date of the Indenture and under which the Issuer, the Co-Issuer, the Subsidiary Guarantors and Absaloka would be a borrower or guarantor, including any Notes, guarantees, collateral and security documents, instruments and agreements executed in connection therewith, and in each case as amended, amended and restated, supplemented, modified, refinanced, replaced or otherwise restructured, in whole or in part, from time to time.
     “Revolving Credit Facility Obligations” means the indebtedness outstanding under the Revolving Credit Facility that is secured by a Permitted Lien described in clause (17) of the definition thereof, and all other obligations of the Issuer, the Co-Issuer, any Guarantor or Absaloka under the Revolving Credit Facility, all Cash Management Obligations permitted by the Indenture and secured by the collateral securing any Obligations under the Revolving Credit Facility, and all Hedging Obligations permitted by the Indenture and secured by the collateral securing any Obligations under the Revolving Credit Facility.
     “Revolving Facility First-Priority Collateral” means substantially all of the accounts receivable and inventory of the Issuer, the Co-Issuer, the Subsidiary Guarantors (whether now owned or hereinafter arising or acquired) and Absaloka (if it is a guarantor under the Revolving Credit Facility) and the proceeds and products thereof.
     “Revolving Facility First-Priority Liens” means Liens on the Revolving Facility First-Priority Collateral securing any Revolving Credit Facility Obligations on a first-priority basis.
     “Revolving Lenders” has the meaning assigned to that term in the seventh paragraph under the subheading “— Security —Intercreditor Agreement to be Entered into in Connection with a Future Revolving Credit Facility.”
     “Rights Plan” means that certain amended and restated rights agreement entered into by the Issuer on February 7, 2003, as subsequently amended, and any successor plan. “S&P” means Standard & Poor’s Ratings Services, a division of the McGraw-Hill Companies, Inc., and its successors.
     “Sale and Leaseback Transactions” means with respect to any Person an arrangement with any bank, insurance company or other lender or investor or to which such lender or investor is a party, providing for the leasing by such Person of any asset of such Person which has been or is being sold or transferred by such Person to such lender or investor or to any Person to whom funds have been or are to be advanced by such lender or investor on the security of such asset.
     “SEC” means the U.S. Securities and Exchange Commission.
     “Second Lien Collateral” has the meaning assigned to that term in the first paragraph under the subheading “— Security —General.”

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     “Second Lien Security Document” means any security document granting or evidencing a second-priority security interest in or Liens on any assets of any Person to secure the Obligations under the Indenture, the Notes and the Note Guarantees, as each may be amended, restated, supplemented or otherwise modified from time to time.
     “Secretary’s Certificate” means a certificate signed by the Secretary of the Issuer.
     “Securities Act” means the U.S. Securities Act of 1933, as amended.
     “Security Documents” means collectively, the First Lien Security Documents and the Second Lien Security Documents.
     “Senior Indebtedness” means
     (1) all Indebtedness of the Issuer, the Co-Issuer or any of the Restricted Subsidiaries outstanding under the Revolving Credit Facility and all Hedging Obligations with respect thereto;
     (2) any other Indebtedness of the Issuer, the Co-Issuer or any of the Restricted Subsidiaries permitted to be incurred under the terms of the Indenture, unless the instrument under which such Indebtedness is incurred expressly provides that it is subordinated in right of payment to the Notes or any Note Guarantee; and
     (3) all Obligations with respect to the items listed in the preceding clauses (1) and (2).
     Notwithstanding anything to the contrary in the preceding sentence, Senior Indebtedness will not include:
     (a) any intercompany Indebtedness of the Issuer, the Co-Issuer or any of the Restricted Subsidiaries to the Issuer or any of its Restricted Subsidiaries; or
     (b) any Indebtedness that is incurred in violation of the Indenture. For the avoidance of doubt, “Senior Indebtedness” will not include any trade payables or taxes owed or owing by the Issuer, the Co-Issuer or any Restricted Subsidiary.
     “Series A Preferred Stock” means the Series A Convertible Exchangeable Preferred Stock, par value $1.00 per share, of the Issuer.
     “Significant Subsidiary” means (1) any Restricted Subsidiary that would be a “significant subsidiary” as defined in Rule 1-02(w)(1) or (2) of Regulation S-X promulgated pursuant to the Securities Act as such Regulation is in effect on the Issue Date and (2) any Restricted Subsidiary that, when aggregated with all other Restricted Subsidiaries that are not otherwise Significant Subsidiaries and as to which any event described in clause (8) or (9) under “— Events of Default” has occurred and is continuing, would constitute a Significant Subsidiary under clause (1) of this definition.
     “Standstill Period” has the meaning assigned to that term in the seventh paragraph under the subheading “— Security— Intercreditor Agreement to be Entered into in Connection with a Future Revolving Credit Facility.”
     “Subordinated Indebtedness” means (a) with respect to the Issuer or the Co-Issuer, any Indebtedness of the Issuer or the Co-Issuer that is by its terms subordinated in right of payment to the Notes pursuant to a written agreement and (b) with respect to any Guarantor, any Indebtedness of such Guarantor that is by its terms subordinated in right of payment to the Note Guarantee of such Guarantor pursuant to a written agreement. For the purposes of the foregoing, for the avoidance of doubt, no Indebtedness shall be deemed to be subordinated in right of payment to any other Indebtedness solely by virtue of being unsecured or secured by a lower priority Lien or by virtue of the fact that the holders of such Indebtedness have entered into intercreditor agreements or other arrangements giving one or more of such holders priority over the other holders in the collateral held by them.

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     “Subsidiary” means, with respect to any Person:
     (1) any corporation, limited liability company, association or other business entity of which more than 50% of the total voting power of the Equity Interests entitled (without regard to the occurrence of any contingency) to vote in the election of the Board of Directors thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of such Person (or a combination thereof); and
     (2) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are such Person or one or more Subsidiaries of such Person (or any combination thereof);
provided, that Absaloka shall be considered a Subsidiary of the Issuer. Unless otherwise specified, “Subsidiary” refers to a Subsidiary of the Issuer.
     “Subsidiary Guarantors” means (i) WELLC, Westmoreland North Carolina Power LLC, WEI-Roanoke Valley, Inc., Westmoreland-Roanoke Valley, LP, WRI, WRI Partners, Westmoreland Mining Services, Inc., Westmoreland Coal Sales Co., WCC Land Holding Company, Inc. and Westmoreland Power Inc., (ii) each other domestic Subsidiary of WELLC and WRI as may be formed after the Issue Date and (iii) each other domestic Subsidiary of the Issuer, the Co-Issuer or a Guarantor that becomes a Restricted Subsidiary after the Issue Date.
     “Successor” has the meaning assigned to that term in clause (1)(b) of the first paragraph under the subheading “— Certain Covenants —Limitations on Mergers, Consolidations, Etc.”
     “Total Assets” means the total amount of all assets of the Issuer, the Co-Issuer and the Restricted Subsidiaries, determined on a consolidated basis in accordance with GAAP as shown on the most recent internal balance sheet of the Issuer.
     “Total Leverage Ratio” means the ratio, as of any date of determination, of (i) Consolidated Total Indebtedness of the Issuer, the Co-Issuer and the Restricted Subsidiaries as of such date to (ii) Consolidated EBITDA for the most recently ended four full fiscal quarters for which internal consolidated financial statements are available immediately preceding such date.
     “Transactions” means (a) the entering into and initial borrowing, if any, under the Revolving Credit Facility,(b) the issuance of the Notes offered by this offering memorandum (including the grant of the security interests and Liens pursuant to the Security Documents) and issuance of Exchange Notes, (c) the repayment of the Issuer’s existing PIK senior secured convertible Notes, (d) the repayment of WRI’s existing revolving credit facility and term loan, (e) the repayment of WELLC’s existing term loan, (f) redemption or repayment of the outstanding accrued dividends on the Issuer’s Series A Convertible Preferred Stock and (f) all transactions (including the payment of fees and expenses) related to any of the foregoing.
     “Trust Indenture Act” means the Trust Indenture Act of 1939, as amended.
     “Trustee” has the meaning assigned to that term in the first paragraph of the preamble of the Description of the Notes section.
     “UCC” means the Uniform Commercial Code as in effect in the State of New York, and any successor statute, as in effect from time to time (except that terms used herein which are defined in the Uniform Commercial Code as in effect in the State of New York on the date hereof shall continue to have the same meaning notwithstanding any replacement or amendment of such statute except as the Note Collateral Agent may otherwise determine).
     “Unrestricted Subsidiary” means (1) Basin Resources Inc.; (2) any Subsidiary that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors of the Issuer in accordance with the covenant described under “— Certain Covenants — Limitations on Designation of Unrestricted Subsidiaries”; and (3) any Subsidiary of an Unrestricted Subsidiary.

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     “U.S. Government Obligations” means direct non-callable obligations of, or obligations guaranteed by, the United States of America for the payment of which guarantee or obligations the full faith and credit of the United States is pledged.
     “Voting Stock” with respect to any Person, means securities of any class of Equity Interests of such Person (in the case of a partnership, the sole general partner or managing general partner of such Person) entitling the holders thereof (whether at all times or only so long as no senior class of stock or other relevant equity interest has voting power by reason of any contingency) to vote in the election of members of the Board of Directors of such Person.
     “Weighted Average Life to Maturity” when applied to any Indebtedness at any date, means the number of years obtained by dividing (1) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payment of principal, including payment at final maturity, in respect thereof by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment by (2) the then outstanding principal amount of such Indebtedness.
     “WELLC” means Westmoreland Energy LLC.
     “Wholly Owned” means, with respect to any Restricted Subsidiary, a Restricted Subsidiary of which 100% of the Equity Interests (except for directors’ qualifying shares) are owned directly by the Issuer or through one or more Wholly Owned Restricted Subsidiaries (or a combination thereof).
     “WML” means Westmoreland Mining LLC.
     “WML Collateral” means all assets that secure Indebtedness under the WML Credit Agreements.
     “WML Credit Agreements” means (A) the Amended and Restated WML Credit Agreement and (B) the WML Notes.
     “WML Lien” has the meaning assigned to that term in under the subheading “— Security — General.”
     “WML Notes” means the Note Purchase Agreement regarding $125,000,000 8.02% Senior Guaranteed Secured Notes due March 31, 2018 among Westmoreland Mining LLC and each of the purchasers named in Schedule A thereto, dated as of June 26, 2008.
     “WML Payments Collateral” has the meaning assigned to that term in clause (ii) of the first paragraph under the subheading “— Security — General.”
     “WML Repayment Date” has the meaning assigned to that term in under the heading “— Note Guarantees.”
     “WML Security Agreements” means that certain Security Agreement dated as of June 26, 2008, entered into between WML and certain of its Subsidiaries and U.S. Bank National Association, the Amended and Restated Security Agreement dated June 26, 2008 among WML and certain of its Subsidiaries and US Bank National Association, the Pledge Agreement dated June 26, 2008 among the Issuer, WML and US Bank National Association, and the Amended and Restated Pledge Agreement dated June 26, 2008 among Issuer, WML and US Bank National Association.
     “WRI” means Westmoreland Resources Inc.
     “WRM” means Westmoreland Risk Management Ltd.
     “WRM Collateral” has the meaning assigned to that term in clause (iii) of the first paragraph under the subheading “— Security — General.”

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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
     The following is a summary of material U.S. federal income tax considerations relating to the exchange of Restricted Notes for Exchange Notes in the exchange offer. It does not contain a complete analysis of all the potential tax considerations relating to the exchange. This summary is limited to holders of Restricted Notes that hold the Restricted Notes as “capital assets” (in general, assets held for investment). Special situations, such as the following, are not addressed:
•   tax consequences to holders that may be subject to special tax treatment, such as tax-exempt entities, dealers in securities or foreign currencies, brokers, certain financial institutions or “financial services entities,” insurance companies, regulated investment companies, traders in securities that elect to use a mark-to-market method of accounting for their securities holdings, retirement plans, real estate investment trusts, controlled foreign corporations and shareholders of such corporations, passive foreign investment companies and shareholders of such companies, former citizens or long-term residents of the United States, certain U.S. expatriates or corporations that accumulate earnings to avoid U.S. federal income tax;
•   tax consequences to persons holding notes as part of a hedging, integrated, constructive sale or conversion transaction or a straddle or other risk reduction transaction;
•   tax consequences to holders whose “functional currency” is not the U.S. Dollar;
•   tax consequences to persons who hold notes through a partnership or similar pass-through entity;
•   alternative minimum tax, gift tax or estate tax consequences, if any; or
•   any state, local or foreign tax consequences.
     The discussion below is based upon the provisions of the Internal Revenue Code of 1986, as amended, existing and proposed Treasury regulations promulgated thereunder, and rulings, judicial decisions and administrative interpretations thereunder, as of the date hereof. Those authorities may be changed, perhaps retroactively, so as to result in U.S. federal income tax consequences different from those discussed below.
Consequences of Tendering Notes
     The exchange of the Restricted Notes for the Exchange Notes in the exchange offer will not constitute a taxable exchange. As a result, you will not recognize taxable gain or loss as a result of such exchange, the holding period of the Exchange Notes you receive will include the holding period of the Restricted Notes you exchange and the adjusted tax basis of the Exchange Notes you receive will be the same as the adjusted tax basis of the Restricted Notes you exchange.
     The preceding discussion of certain material U.S. federal income tax consequences is for general information only and is not tax advice. Accordingly, each investor is urged to consult its own tax advisor as to the particular tax consequences to it of exchanging Restricted Notes for Exchange Notes, including the applicability and effect of any U.S. federal, state, local or foreign tax laws, and of any proposed changes in applicable laws.
PLAN OF DISTRIBUTION
     Each broker-dealer that receives Exchange Notes in the exchange offer for its own account must acknowledge that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resales of such Exchange Notes. Broker-dealers who acquired the Restricted Notes directly from us in the initial offering must, in the absence of an exemption, comply with the registration and prospectus delivery requirements of the Securities Act in connection with the resales of the Exchange Notes and cannot rely on the position of the staff of the Commission enunciated in the Exxon Capital no-action letter. In addition, broker-dealers who acquired Restricted Notes directly from us in the initial offering cannot use this prospectus in connection with resales of the Exchange Notes. We reserve the right in our sole discretion to purchase or make offers for, or to offer Exchange Notes for, any Restricted Notes that remain outstanding subsequent to the expiration of the exchange offer pursuant to this prospectus or otherwise and, to the extent permitted by applicable law, purchase Restricted Notes in the open market, in privately negotiated transactions or otherwise. This prospectus, as it may be amended or supplemented from time to time, may be used by all persons subject to the prospectus delivery requirements of the Securities Act, including broker-dealers in connection with resales of Exchange Notes received in the exchange offer, where such Exchange Notes were acquired as a result of market-making activities or other trading activities and may be used by us to purchase any Restricted Notes outstanding after expiration of the exchange offer. We have agreed that, for a period of up to 180 days from the date on which the exchange offer is completed, we will make this prospectus, as amended or

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supplemented, available to any broker-dealer for use in connection with any such resale if such broker-dealer indicates in the letter of transmittal that it will do so. In addition, until         , 2011, all dealers effecting transactions in the Exchange Notes may be required to deliver a prospectus.
     We will not receive any proceeds from any sale of Exchange Notes by broker-dealers. Exchange Notes received by broker-dealers in the exchange offer for their own account may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the Exchange Notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer and/or the purchasers of any such Exchange Notes. Any broker-dealer that resells Exchange Notes that were received by it in the exchange offer for its own account and any broker or dealer that participates in a distribution of such Exchange Notes may be deemed to be an “underwriter” within the meaning of the Securities Act and any profit on any such resale of such Exchange Notes and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The letter of transmittal states that, by acknowledging that it will deliver and by delivering a prospectus meeting the requirements of the Securities Act, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act.
     For a period of up to 180 days from the date on which the exchange offer is completed, we will promptly send additional copies of this prospectus and any amendment or supplement to this prospectus to any broker-dealer that requests such documents. We have agreed to pay all expenses incident to the exchange offer, other than commissions or concessions of any brokers or dealers and will indemnify holders of the Notes, including any broker-dealers, against certain liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
     The validity of the exchange Notes and the related guarantees will be passed upon for us by Davis Graham & Stubbs LLP, our outside legal counsel.
EXPERTS
      The consolidated financial statements of the Company as of December 31, 2010 and 2009 and for the years then ended included in this Form S-4 have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their report appearing herein dated March 11, 2011, except for Note 19 as to which the date is June 3, 2011. Such consolidated financial statements are included herein in reliance upon such report given on the authority of such firm as experts in accounting and auditing.
      The consolidated financial statements of Westmoreland Energy LLC as of December 31, 2010 and 2009 and for the years then ended included in this Form S-4 have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their report appearing herein dated June 3, 2011. Such consolidated financial statements are included herein in reliance upon such report given on the authority of such firm as experts in accounting and auditing.
      The consolidated financial statements of Westmoreland Resources Inc. as of December 31, 2010 and 2009 and for the years then ended included in this Form S-4 have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their report appearing herein dated June 3, 2011. Such consolidated financial statements are included herein in reliance upon such report given on the authority of such firm as experts in accounting and auditing.
     The consolidated statements of operations, shareholders’ deficit and comprehensive loss, cash flows and the related financial statement schedule of Westmoreland Coal Company for the year ended December 31, 2008, the consolidated statements of operations, shareholders’ deficit and comprehensive loss, and cash flows of Westmoreland Resources, Inc for the year ended December 31, 2008, and the consolidated statements of operations, member’s equity and comprehensive income(loss) and cash flows of Westmoreland Energy LLC for the year ended December 31, 2008, have been included herein in reliance upon the reports of KPMG LLP, an independent registered public accounting firm, included herein, and upon the authority of said firm as experts in accounting and auditing. The audit reports covering these consolidated financial statements contain an explanatory paragraph that states that during the year ended December 31, 2008, Westmoreland Coal Company had suffered recurring losses from operations, had a working capital deficit, and had a net capital deficiency, which raised substantial doubt about its ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.
     Estimates of our coal reserves included in this prospectus were prepared by Norwest Corporation. The estimates have been included in this prospectus in reliance upon the authority of Norwest Corporation as experts in such matters.

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WHERE YOU CAN FIND MORE INFORMATION
     We have filed with the SEC a registration statement on Form S-4 under the Securities Act with respect to the Exchange Notes. This prospectus, which forms a part of the registration statement, does not contain all of the information set forth in the registration statement. For further information with respect to us and the Exchange Notes, reference is made to the registration statement. Statements contained in this prospectus as to the contents of any contract or other documents are not necessarily complete.
     We have historically filed annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any document we have or will file with the SEC at the SEC’s public website (www.sec.gov) or at the Public Reference Room of the SEC located at 100 F Street, N.E., Washington, DC 20549. Copies of such materials can be obtained from the Public Reference Room of the SEC at prescribed rates. You can call the SEC at 1-800-SEC-0330 to obtain information on the operation of the Public Reference Room.
     So long as we are subject to the reporting requirements of the Exchange Act, we and the guarantors are required to make available to the trustee and the holders of the Notes the information required to be filed with the SEC. Regardless of whether we are subject to the reporting requirements of the Exchange Act, we have agreed that for as long as any of the Notes remain outstanding, we will furnish to the trustee and holders of the Notes certain information that would otherwise be required to be filed with the SEC under Sections 13 or 15(d) of the Exchange Act.
     This prospectus contains summaries of certain agreements that we have entered into in connection with the exchange offer, such as the Indenture and related agreements. The descriptions contained in this prospectus of these agreements do not purport to be complete and are subject to, or qualified in their entirety by reference to, the definitive agreements.

133

 

INDEX TO FINANCIAL STATEMENTS
         
      Page
Westmoreland Coal Company and Subsidiaries
        
Consolidated Balance Sheets (Unaudited) as of March 31, 2011 and December 31, 2010
     136  
Consolidated Statements of Operations (Unaudited) for the Three Months Ended March 31, 2011 and 2010
     138  
Consolidated Statement of Shareholders’ Deficit (Unaudited) for the Three Months Ended March 31, 2011
     139  
Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, 2011 and 2010
     140  
Notes to Consolidated Financial Statements (Unaudited) for the Three Months Ended March 31, 2011 and 2010
     141  
Reports of Independent Registered Public Accounting Firms
     162  
Consolidated Balance Sheets as of December 31, 2010 and 2009
     164  
Consolidated Statements of Operations for the Years Ended December 31, 2010, 2009 and 2008
     166  
Consolidated Statements of Shareholders’ Deficit and Comprehensive Loss for the Years Ended December 31, 2010, 2009 and 2008
     167  
Consolidated Statements of Cash Flows for the Years Ended December 31, 2010, 2009 and 2008
     168  
Notes to Consolidated Financial Statements for the Years Ended December 31, 2010, 2009 and 2008
     169  
Other Financial Statements of Certain Westmoreland Coal Company Subsidiaries
        
The following financial statements for certain of Westmoreland Coal Company’s wholly owned subsidiaries are included pursuant to Regulation S-X, Rule 3-16, “Financial Statements of Affiliates Whose Securities Collateralize an Issue Registered of Being Registered.”
        
Westmoreland Resources, Inc. and subsidiary
        
Reports of Independent Registered Public Accounting Firms
     216  
Consolidated Balance Sheets as of December 31, 2010 and 2009
     218  
Consolidated Statements of Operations for the Years Ended December 31, 2010, 2009 and 2008
     219  
Consolidated Statements of Shareholder’s Equity and Comprehensive Income (Loss) for the Years Ended December 31, 2010, 2009 and 2008
     220  
Consolidated Statements of Cash Flows for the Years Ended December 31, 2010, 2009 and 2008
     221  
Notes to Consolidated Financial Statements for the Years Ended December 31, 2010, 2009 and 2008
     222  

134

 

         
      Page
Westmoreland Energy LLC
        
Reports of Independent Registered Public Accounting Firms
     236  
Consolidated Balance Sheets as of December 31, 2010 and 2009
     238  
Consolidated Statements of Operations for the Years Ended December 31, 2010, 2009 and 2008
     239  
Consolidated Statements of Member’s Equity and Comprehensive Income (Loss) for the Years Ended December 31, 2010, 2009 and 2008
     240  
Consolidated Statements of Cash Flows for the Years Ended December 31, 2010, 2009 and 2008
     241  
Notes to Consolidated Financial Statements for the Years Ended December 31, 2010, 2009 and 2008
     242  

135

 

WESTMORELAND COAL COMPANY AND SUBSIDIARIES
Westmoreland Coal Company and Subsidiaries
Consolidated Balance Sheets
                 
    March 31,     December 31,  
    2011     2010  
    (Unaudited)     (Audited)  
    (In thousands)  
Assets
                
Current assets:
                
Cash and cash equivalents
   $ 44,984     $ 5,775  
Receivables:
                
Trade
     49,776       50,578  
Contractual third-party reclamation receivables
     7,638       7,743  
Other
     3,620       4,545  
 
            
 
     61,034       62,866  
 
                
Inventories
     26,180       23,571  
Other current assets
     5,461       5,335  
 
            
Total current assets
     137,659       97,547  
 
            
Property, plant and equipment:
                
Land and mineral rights
     83,893       83,824  
Capitalized asset retirement cost
     114,856       114,856  
Plant and equipment
     509,013       506,661  
 
            
 
     707,762       705,341  
Less accumulated depreciation, depletion and amortization
     (299,381 )     (288,386 )
 
            
Net property, plant and equipment
     408,381       416,955  
 
                
Advanced coal royalties
     3,532       3,695  
Reclamation deposits
     73,007       72,274  
Restricted investments and bond collateral
     55,701       55,384  
Contractual third-party reclamation receivables, less current portion
     88,514       87,739  
Deferred income taxes
     2,900       2,458  
Intangible assets, net of accumulated amortization of $9.5 million and $9.1 million at March 31, 2011, and December 31, 2010, respectively
     6,137       6,555  
Other assets
     12,156       7,699  
 
            
Total Assets
   $ 787,987     $ 750,306  
 
            
See accompanying Notes to Consolidated Financial Statements.

136

 

Westmoreland Coal Company and Subsidiaries
Consolidated Balance Sheets
                 
    March 31,     December 31,  
    2011     2010  
    (Unaudited)     (Audited)  
    (In thousands)  
Liabilities and Shareholders’ Deficit
                
Current liabilities:
                
Current installments of long-term debt
   $ 17,673     $ 14,973  
Accounts payable and accrued expenses:
                
Trade
     44,354       46,247  
Production taxes
     28,467       26,317  
Workers’ compensation
     951       954  
Postretirement medical benefits
     13,581       13,581  
SERP
     304       304  
Deferred revenue
     10,594       10,209  
Asset retirement obligations
     15,235       14,514  
Other current liabilities
     7,524       6,241  
 
            
Total current liabilities
     138,683       133,340  
 
            
 
                
Long-term debt, less current installments
     276,689       208,731  
Revolving lines of credit
     —       18,400  
Workers’ compensation, less current portion
     9,360       9,424  
Excess of pneumoconiosis benefit obligation over trust assets
     2,726       2,246  
Postretirement medical benefits, less current portion
     196,726       197,279  
Pension and SERP obligations, less current portion
     19,683       20,462  
Deferred revenue, less current portion
     73,025       75,395  
Asset retirement obligations, less current portion
     227,117       227,129  
Intangible liabilities, net of accumulated amortization $9.6 million at March 31, 2011, and $9.4 million at December 31, 2010, respectively
     8,409       8,663  
Other liabilities
     9,496       11,592  
 
              
Total liabilities
     961,914       912,661  
 
            
 
                
Shareholders’ deficit:
                
Preferred stock of $1.00 par value Authorized 5,000,000 shares; Issued and outstanding 160,129 shares at March 31, 2011, and December 31, 2010
     160       160  
Common stock of $2.50 par value Authorized 30,000,000 shares; Issued and outstanding 13,155,263 shares at March 31, 2011, and 11,160,798 shares at December 31, 2010
     32,887       27,901  
Other paid-in capital
     120,748       98,466  
Accumulated other comprehensive loss
     (57,507 )     (57,680 )
Accumulated deficit
     (264,632 )     (226,740 )
 
            
Total Westmoreland Coal Company shareholders’ deficit
     (168,344 )     (157,893 )
Noncontrolling interest
     (5,583 )     (4,462 )
 
            
Total deficit
     (173,927 )     (162,355 )
 
            
Total Liabilities and Shareholders’ Deficit
   $ 787,987     $ 750,306  
 
            
See accompanying Notes to Consolidated Financial Statements.

137

 

Westmoreland Coal Company and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
                 
    Three Months Ended  
    March 31,  
    2011     2010  
    (In thousands, except  
    per share data)  
Revenues
   $ 127,764     $ 126,439  
 
Cost, expenses and other:
                
Cost of sales
     97,510       97,677  
Depreciation, depletion and amortization
     11,245       11,392  
Selling and administrative
     9,305       9,976  
Heritage health benefit expenses
     3,778       3,915  
Loss on sales of assets
     83       71  
Other operating income
     (1,597 )     (1,906 )
 
            
 
     120,324       121,125  
 
            
Operating income
     7,440       5,314  
 
Other income (expense):
                
Interest expense
     (6,967 )     (5,723 )
Loss on extinguishment of debt
     (17,030 )     —  
Interest income
     382       410  
Other loss
     (3,017 )     (3,836 )
 
            
 
     (26,632 )     (9,149 )
 
            
Loss before income taxes
     (19,192 )     (3,835 )
Income tax benefit from operations
     (460 )     (90 )
 
            
Net loss
     (18,732 )     (3,745 )
Less net loss attributable to noncontrolling interest
     (1,121 )     (890 )
 
            
Net loss attributable to the Parent company
     (17,611 )     (2,855 )
Less preferred stock dividend requirements
     340       340  
 
            
Net loss applicable to common shareholders
   $ (17,951 )   $ (3,195 )
 
            
 
Net loss per share applicable to common shareholders:
                
Basic and diluted
   $ (1.45 )   $ (0.30 )
 
Weighted average number of common shares outstanding:
                
Basic and diluted
     12,369       10,521  
 
Net loss (from above)
   $ (18,732 )   $ (3,745 )
Other comprehensive loss:
                
Tax effect of other comprehensive income gains
     (110 )     —  
Amortization of accumulated actuarial gains or losses and transition obligations, pension
     385       228  
Amortization of accumulated actuarial gains or losses transition obligations and prior service costs, postretirement medical benefits
     (72 )     (68 )
Unrealized and realized gain on available-for-sale securities
     (30 )     (499 )
Comprehensive loss
   $ (18,559 )   $ (4,084 )
 
            
See accompanying Notes to Consolidated Financial Statements.

138

 

Westmoreland Coal Company and Subsidiaries
Consolidated Statement of Shareholders’ Deficit
Three Months Ended March 31, 2011
(Unaudited)
                                                         
    Class A                                          
    Convertible                                          
    Exchangeable             Other Paid-In     Accumulated Other             Non-     Total Shareholders’  
    Preferred Stock     Common Stock     Capital     Compre-hensive Loss     Accumulated Deficit     controlling Interest     Equity (Deficit)  
                            (In thousands)                          
Balance at December 31, 2010 (160,129 preferred shares and 11,160,798 common shares outstanding)
   $ 160     $ 27,901     $ 98,466     $ (57,680 )   $ (226,740 )   $ (4,462 )   $ (162,355 )
Preferred dividends paid
     —       —       —       —       (20,281 )     —       (20,281 )
Common stock issued as compensation (104,019 shares)
     —       260       1,393       —       —       —       1,653  
Common stock options exercised (12,500 shares)
     —       31       100       —       —       —       131  
Conversion of convertible notes (1,877,946 shares)
     —       4,695       20,789       —       —       —       25,484  
Net loss
     —       —       —       —       (17,611 )     (1,121 )     (18,732 )
Tax effect of other comprehensive income gains
     —       —       —       (110 )     —       —       (110 )
Amortization of accumulated actuarial gains or losses and transition obligations, pension
     —       —       —       385       —       —       385  
Amortization of accumulated actuarial gains or losses, transition obligations and prior service costs, postretirement medical benefits
     —       —       —       (72 )     —       —       (72 )
Unrealized losses on available-for-sale securities
     —       —       —       (30 )     —       —       (30 )
     
Balance at March 31, 2011 (160,129 preferred shares and 13,155,263 common shares outstanding)
   $ 160     $ 32,887     $ 120,748     $ (57,507 )   $ (264,632 )   $ (5,583 )   $ (173,927 )
     
See accompanying Notes to Consolidated Financial Statements.

139

 

Westmoreland Coal Company and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
                 
    Three Months Ended March 31,  
    2011     2010  
    (In thousands)  
Cash flows from operating activities:
                
Net loss
   $ (18,732 )   $ (3,745 )
Adjustments to reconcile net loss to net cash provided by operating activities:
                
Depreciation, depletion and amortization
     11,245       11,392  
Accretion of asset retirement obligation and receivable
     2,700       3,003  
Amortization of intangible assets and liabilities, net
     163       85  
Non-cash tax benefits
     (110 )     —  
Share-based compensation
     1,653       1,363  
Loss on sales of assets
     83       71  
Non-cash interest expense
     —       388  
Amortization of deferred financing costs
     635       523  
Loss on extinguishment of debt
     17,030       —  
Gain on impairment and sales of investment securities
     —       (659 )
Loss on derivative instruments
     3,079       4,515  
Changes in operating assets and liabilities:
                
Receivables, net
     3,630       (3,866 )
Inventories
     (2,609 )     (1,502 )
Excess of pneumoconiosis benefit obligation over trust assets
     480       347  
Accounts payable and accrued expenses
     2,009       3,770  
Deferred revenue
     (1,985 )     617  
Accrual for workers’ compensation
     (67 )     (51 )
Asset retirement obligation
     (2,661 )     (1,875 )
Accrual for postretirement medical benefits
     (625 )     (361 )
Pension and SERP obligations
     (394 )     (39 )
Other assets and liabilities
     658       (680 )
 
            
Net cash provided by (used) in operating activities
     16,182       13,296  
 
            
 
                
Cash flows from investing activities:
                
Additions to property, plant and equipment
     (2,923 )     (4,337 )
Change in restricted investments and bond collateral and reclamation deposits
     (1,080 )     (592 )
Net proceeds from sales of assets
     22       379  
Proceeds from the sale of investments
     —       1,119  
Receivable from customer for property and equipment purchases
     (1,903 )     (510 )
 
            
Net cash used in investing activities
     (5,884 )     (3,941 )
 
            
 
                
Cash flows from financing activities:
                
Change in book overdrafts
     108       890  
Borrowings from long-term debt, net of debt discount
     142,500       —  
Repayments of long-term debt
     (60,391 )     (8,112 )
Borrowings on revolving lines of credit
     50,700       28,400  
Repayments of revolving lines of credit
     (69,100 )     (23,300 )
Debt issuance and other refinancing costs
     (14,756 )     —  
Preferred dividends paid
     (20,281 )     —  
Exercise of stock options
     131       8  
 
            
Net cash provided by (used in) financing activities
     28,911       (2,114 )
 
            
 
                
Net increase in cash and cash equivalents
     39,209       7,241  
Cash and cash equivalents, beginning of period
     5,775       10,519  
 
            
Cash and cash equivalents, end of period
   $ 44,984     $ 17,760  
 
            
 
                
Non-cash transactions:
                
Capital leases
   $ —     $ 866  
See accompanying Notes to Consolidated Financial Statements.

140

 

Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
1. BASIS OF PRESENTATION
     The accompanying unaudited consolidated financial statements include accounts of Westmoreland Coal Company, or the Company, or Parent, and its subsidiaries and controlled entities. The Company’s current principal activities, all conducted within the United States, are the production and sale of coal from its mines in Montana, North Dakota and Texas, and the ownership of the Roanoke Valley power plants, or ROVA, in North Carolina. The Company’s activities are primarily conducted through wholly owned subsidiaries. All intercompany transactions and accounts have been eliminated in consolidation.
     The Company’s Absaloka Mine is owned by its subsidiary Westmoreland Resources, Inc., or WRI. The right to mine coal at the Absaloka Mine has been subleased to an affiliated entity whose operations the Company controls. The Beulah, Jewett, Rosebud, and Savage Mines are owned through the Company’s subsidiary Westmoreland Mining LLC, or WML.
     The Company is subject to two major debt arrangements: (1) $125.0 million senior secured notes at WML that are collaterized by all assets of WML, Westmoreland Savage Corporation, or WSC, Western Energy Company, or WECO, and Dakota Westmoreland Corporation, or DWC, and (2) $150.0 million senior secured notes (issued February 4, 2011) at the Parent level that are largely collaterized by the assets of the Parent, WRI and ROVA, referred to herein as the Parent Notes.
     These quarterly consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010, or the 2010 Form 10-K. The accounting principles followed by the Company are set forth in the Notes to the Company’s consolidated financial statements in its 2010 Form 10-K. Most of the descriptions of the accounting principles and other footnote disclosures previously made have been omitted in this report so long as the interim information presented is not misleading.
     The consolidated financial statements of the Company have been prepared in accordance with United States generally accepted accounting principles and require use of management’s estimates. The financial information contained in this Form 10-Q is unaudited, but reflects all adjustments, which are, in the opinion of management, necessary for a fair presentation of the financial information for the periods shown. Such adjustments are of a normal recurring nature. The results of operations for the three months ended March 31, 2011 are not necessarily indicative of results to be expected for the year ending December 31, 2011.
2. ACCOUNTING POLICIES
     Newly Adopted Accounting Pronouncements
     In January 2010, accounting guidance was issued regarding fair value measurements and disclosures and improvement in the disclosure about fair value measurements. This guidance requires additional disclosures regarding significant transfers in and out of Levels 1 and 2 of fair value measurements, including a description of the reasons for the transfers. This guidance also requires additional disclosures for the activity in Level 3 fair value measurements, requiring presentation of information about purchases, sales, issuances, and settlements in the reconciliation for fair value measurements. This guidance is effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. See Note 10 for applicable disclosures.

141

 

3. INVENTORIES
     Inventories consisted of the following:
                 
    March 31,     December 31,  
    2011     2010  
    (In thousands)  
Coal stockpiles
   $ 694     $ 678  
Coal fuel inventories
     3,808       1,936  
Materials and supplies
     22,258       21,538  
Reserve for obsolete inventory
     (580 )     (581 )
 
            
Total
   $ 26,180     $ 23,571  
 
            
4. RESTRICTED INVESTMENTS AND BOND COLLATERAL
     The Company’s restricted investments and bond collateral consists of the following:
                 
    March 31,     December 31,  
    2011     2010  
    (In thousands)  
Coal Segment:
                
Westmoreland Mining — debt reserve account
   $ 9,964     $ 7,514  
Reclamation bond collateral:
                
Rosebud Mine
     12,264       12,263  
Absaloka Mine
     10,974       10,956  
Jewett Mine
     3,001       3,001  
Beulah Mine
     1,270       1,270  
 
                
Power Segment:
                
Letter of credit account
     5,976       5,990  
Debt protection account
     —       905  
Repairs and maintenance account
     —       1,067  
Ash reserve account
     —       602  
 
                
Corporate Segment:
                
Workers’ compensation bonds
     6,390       6,350  
Postretirement medical benefit bonds
     5,862       5,466  
 
            
Total restricted investments and bond collateral
   $ 55,701     $ 55,384  
 
            
For all of its restricted investments and bond collateral accounts, the Company can select from limited fixed-income investment options for the funds and receive the investment returns on these investments. Funds in the restricted investment and bond collateral accounts are not available to meet the Company’s cash needs.
These accounts include held-to-maturity and available-for-sale securities. Held-to-maturity securities are recorded at amortized cost, adjusted for the amortization or accretion of premiums or discounts calculated on the effective interest method. Interest income is recognized when earned. Available-for-sale securities are reported at fair value with unrealized gains and losses excluded from earnings and reported in Accumulated other comprehensive loss.

142

 

The Company’s carrying value and estimated fair value of its restricted investments and bond collateral at March 31, 2011 are as follows:
                 
    Carrying Value     Fair Value  
    (In thousands)  
Cash and cash equivalents
   $ 42,606     $ 42,606  
Time deposits
     7,679       7,679  
Held-to-maturity securities
     2,544       2,853  
Available-for-sale securities
     2,872       2,872  
 
            
 
   $ 55,701     $ 56,010  
 
            
Following the Parent Notes offering in February 2011, discussed in Note 5, ROVA is no longer required to maintain its debt protection accounts, ash reserve account or the repairs and maintenance account.
     Held-to-Maturity and Available-for-Sale Restricted Investments and Bond Collateral
     The amortized cost, gross unrealized holding gains and fair value of held-to-maturity securities at March 31, 2011, is as follows (in thousands):
         
Amortized cost
   $ 2,544  
Gross unrealized holding gains
     309  
 
      
Fair value
   $ 2,853  
 
      
     Maturities of held-to-maturity securities are as follows at March 31, 2011:
                 
    Amortized Cost     Fair Value  
    (In thousands)  
Due in five years or less
   $ 659     $ 730  
Due after five years to ten years
     772       857  
Due in more than ten years
     1,113       1,266  
 
            
 
   $ 2,544     $ 2,853  
 
            
     The cost basis, gross unrealized holding gains and fair value of available-for-sale securities at March 31, 2011, is as follows (in thousands):
         
Cost basis
   $ 2,566  
Gross unrealized holding gains
     306  
Fair value
   $ 2,872  
 
      

143

 

5. LINES OF CREDIT AND LONG-TERM DEBT
     The amounts outstanding under the Company’s lines of credit and long-term debt consist of the following:
                 
    Total Debt Outstanding  
    March 31,     December 31,  
    2011     2010  
    (In thousands)  
Corporate:
                
Senior secured notes
   $ 150,000     $ —  
Convertible notes
     —       18,495  
Debt discount
     (7,383 )     (4,823 )
Westmoreland Mining, LLC:
                
Revolving line of credit
     —       1,500  
Term debt
     125,000       125,000  
Capital lease obligations
     17,184       18,407  
Other term debt
     2,368       2,556  
Westmoreland Resources, Inc.:
                
Revolving line of credit
     —       16,900  
Term debt
     —       9,600  
Capital lease obligations
     7,193       7,821  
ROVA:
                
Term debt
     —       46,220  
Debt premiums
     —       428  
 
            
Total debt outstanding
     294,362       242,104  
Less current portion
     (17,673 )     (14,973 )
 
            
Total debt outstanding, less current portion
   $ 276,689     $ 227,131  
 
            
     The following table presents aggregate contractual debt maturities of all long-term debt and the lines of credit at March 31, 2011 (in thousands):
         
Remainder of 2011
   $ 12,934  
2012
     21,512  
2013
     24,815  
2014
     22,565  
2015
     21,910  
Thereafter
     198,009  
 
      
Total
     301,745  
Less: debt discount
     (7,383 )
 
      
Total debt
   $ 294,362  
 
      
     Corporate
     On February 4, 2011 through a private placement offering, the Company issued $150.0 million of Parent Notes, which are senior secured notes. The Company’s subsidiary, Westmoreland Partners, was a co-issuer of the notes. The Parent Notes were issued at a 5% discount, mature February 18, 2018, and bear a fixed interest rate of 10.750%, payable semi-annually, in arrears, on February 1 and August 1 of each year beginning August 1, 2011. Substantially all of the assets of the Parent, ROVA and WRI constitute collateral for the Parent Notes as to which the holders of these notes have a first priority lien. Under the indenture governing the Parent Notes, the Company is required to offer a portion of its Excess Cash Flow (as defined by the indenture) for each fiscal year to purchase some of these notes at 100% of the principal amount.
     As a result of this offering, the Company recorded a $17.0 million loss on extinguishment of debt in the three months ended March 31, 2011. The loss included a $9.1 million make-whole payment for ROVA’s debt and $7.9 million of non-cash write-offs of unamortized discount on debt and related capitalized debt costs and convertible debt conversion expense.

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     The indenture governing the Parent Notes contains, among other provisions, events of default and various affirmative and negative covenants. As of March 31, 2011, the Company was in compliance with all covenants.
     Westmoreland Mining LLC
     WML has outstanding $125.0 million in term debt as of March 31, 2011 and is party to a revolving credit facility with a maximum availability of $25.0 million. In the three months ended March 31, 2011, WML repaid $1.4 million of its capital lease obligations and other term debt. The weighted average interest rate for WML’s capital leases and other term debt was 7.99% and 6.19%, respectively, at March 31, 2011.
     The available balance on the $25.0 million revolving line of credit at March 31, 2011 was $23.1 million. The revolving line of credit supports a $1.9 million letter of credit, which reduces the available balance. The interest rate on the revolving line of credit was 3.75% at March 31, 2011.
     WML’s lending arrangements contain, among other provisions, events of default and various affirmative and negative covenants. As of March 31, 2011, WML was in compliance with all covenants.
     Westmoreland Resources, Inc.
     In February 2011, proceeds from the Parent Note offering were used to pay off the outstanding balance of WRI’s term debt and revolving line of credit. In addition, WRI’s revolving line of credit was terminated in February 2011.
     In the three months ended March 31, 2011, WRI repaid $0.6 million of its capital lease obligations. WRI did not enter into any capital lease or other debt agreements during the three months ended March 31, 2011. The weighted average interest rate for WRI’s capital leases was 6.68% at March 31, 2011.
     ROVA
     In February 2011, proceeds from the Parent Note offering were used to repay all of ROVA’s outstanding fixed rate term debt. In addition, ROVA’s revolving line of credit was terminated in February 2011.
     Convertible Debt
     In February 2011, the outstanding balance of the Company’s convertible notes was eliminated, with $2.5 million paid to retire a portion of the convertible notes and the remainder of the notes being converted into 1,877,946 shares of Company common stock at a conversion price of $8.50 per share.
6. PENSION AND POSTRETIREMENT MEDICAL BENEFITS
     Pension
     The Company provides pension benefits to qualified full-time employees pursuant to collective bargaining agreements. The Company froze its pension plan for non-union employees in 2009.

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     The Company incurred net periodic benefit costs of providing these pension benefits as follows:
                 
    Three Months Ended  
    March 31,  
    2011     2010  
    (In thousands)  
Components of net periodic benefit cost:
                
Service cost
   $ 153     $ 196  
Interest cost
     1,120       1,606  
Expected return on plan assets
     (1,106 )     (1,299 )
Amortization of deferred items
     385       228  
 
            
Total net periodic benefit cost
   $ 552     $ 731  
 
            
     The Company is required by a WML loan covenant to ensure that by 8.5 months after the end of the plan year, the value of its pension assets are at least 90% of the plan’s year end actuarially determined pension liability.
     The Company contributed $0.9 million in cash to its retirement plans in the three months ended March 31, 2011. The Company expects to make approximately $9.3 million of pension plan contributions during the remainder of 2011.
     Postretirement Medical Benefits
     The Company provides postretirement medical benefits to retired employees and their dependents as mandated by the Coal Industry Retiree Health Benefit Act of 1992 and pursuant to collective bargaining agreements. The Company also provides these benefits to qualified full-time employees pursuant to collective bargaining agreements.
     The Company incurred net periodic benefit costs of providing postretirement medical benefits as follows:
                 
    Three Months Ended  
    March 31,  
    2011     2010  
    (In thousands)  
Components of net periodic benefit cost:
                
Service cost
   $ 123     $ 141  
Interest cost
     2,627       2,752  
Amortization of deferred items
     (72 )     (68 )
 
            
Total net periodic benefit cost
   $ 2,678     $ 2,825  
 
            
     The following table shows the net periodic medical benefit costs that relate to current operations and former mining operations:
                 
    Three Months Ended  
    March 31,  
    2011     2010  
    (In thousands)  
Former mining operations
   $ 2,314     $ 2,518  
Current operations
     364       307  
 
            
Total net periodic benefit cost
   $ 2,678     $ 2,825  
 
            
     The costs for the former mining operations are included in Heritage health benefit expenses and the costs for current operations are included as operating expenses.

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     The Company expects to pay approximately $10.3 million for postretirement medical benefits during the remainder of 2011, net of Medicare Part D reimbursements. A total of $3.3 million was paid in the three months ended March 31, 2011, net of Medicare Part D reimbursements.
7. HERITAGE HEALTH BENEFIT EXPENSES
     The caption Heritage health benefit expenses used in the Consolidated Statements of Operations refers to costs of benefits the Company provides to its former mining operation employees. The components of these expenses are as follows:
                 
    Three Months Ended  
    March 31,  
    2011     2010  
    (In thousands)  
Health care benefits
   $ 2,454     $ 2,676  
Combined benefit fund payments
     686       756  
Workers’ compensation benefits
     158       136  
Black lung benefits
     480       347  
 
            
Total
   $ 3,778     $ 3,915  
 
            
8. ASSET RETIREMENT OBLIGATIONS, CONTRACTUAL THIRD-PARTY RECLAMATION RECEIVABLES, AND RECLAMATION DEPOSITS
     The asset retirement obligations, contractual third-party reclamation receivables, and reclamation deposits for each of the Company’s mines and ROVA at March 31, 2011 are summarized below:
                         
            Contractual        
    Asset     Third-Party        
    Retirement     Reclamation     Reclamation  
    Obligations     Receivables     Deposits  
    (In thousands)  
Rosebud
   $ 107,247     $ 14,797     $ 73,007  
Jewett
     80,816       80,816       —  
Absaloka
     32,437       539       —  
Beulah
     18,390       —       —  
Savage
     2,733       —       —  
ROVA
     729       —       —  
 
                  
Total
   $ 242,352     $ 96,152     $ 73,007  
 
                  
     Asset Retirement Obligations
     Changes in the Company’s asset retirement obligations were as follows:
                 
    Three Months Ended  
    March 31,  
    2011     2010  
    (In thousands)  
Asset retirement obligations, beginning of period
   $ 241,643     $ 244,615  
Accretion
     5,019       4,792  
Liabilities settled
     (4,310 )     (3,906 )
 
            
Asset retirement obligations, end of period
     242,352       245,501  
Less current portion
     (15,235 )     (16,675 )
 
            
Asset retirement obligations, less current portion
   $ 227,117     $ 228,826  
 
            

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     Contractual Third-Party Reclamation Receivables
     The Company has recognized an asset of $96.2 million as contractual third-party reclamation receivables, representing the present value of customer obligations to reimburse the Company for reclamation expenditures at the Company’s Rosebud, Jewett and Absaloka Mines.
     Reclamation Deposits
     The Company’s reclamation deposits will be used to fund final reclamation activities. The Company’s carrying value and estimated fair value of its reclamation deposits at March 31, 2011 are as follows:
                 
    Carrying Value     Fair Value  
    (In thousands)  
Cash and cash equivalents
   $ 36,146     $ 36,146  
Held-to-maturity securities
     18,767       20,036  
Time deposits
     15,903       15,903  
Available-for-sale securities
     2,191       2,191  
 
            
 
   $ 73,007     $ 74,276  
 
            
     Held-to-maturity and Available-for-sale Reclamation Deposits
     The amortized cost, gross unrealized holding gains and losses and fair value of held-to-maturity securities at March 31, 2011 are as follows (in thousands):
         
Amortized cost   $ 18,767  
Gross unrealized holding gains
     1,341  
Gross unrealized holding losses
     (72 )
 
      
Fair value
   $ 20,036  
 
      
     Maturities of held-to-maturity securities at March 31, 2011 are as follows:
                 
    Amortized Cost     Fair Value  
    (In thousands)  
Due in five years or less
   $ 7,529     $ 7,854  
Due after five years to ten years
     4,067       4,177  
Due in more than ten years
     7,171       8,005  
 
            
 
   $ 18,767     $ 20,036  
 
            
     The cost basis, gross unrealized holding gains and fair value of available-for-sale securities at March 31, 2011 are as follows (in thousands):
         
Cost basis
   $ 2,000  
Gross unrealized holding gains
     191  
 
      
Fair value
   $ 2,191  
 
      

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9. DERIVATIVE INSTRUMENTS
     Derivative Liabilities
     The Company evaluates all of its financial instruments to determine if such instruments are derivatives, derivatives that qualify for the normal purchase normal sale exception, or contain features that qualify as embedded derivatives. All derivative financial instruments, except for derivatives that qualify for the normal purchase normal sale exception, are recognized on the balance sheet at fair value. Changes in fair value are recognized in earnings if they are not eligible for hedge accounting or in other comprehensive income if they qualify for cash flow hedge accounting.
     The Company’s convertible notes were retired on February 4, 2011. The fair value of the conversion feature in the Company’s convertible debt instrument was determined using the following assumptions at February 4, 2011:
     
Stock Price
  Bond Yield
 
$13.57   4.55%
     The fair value of outstanding derivative instruments not designated as hedging instruments on the accompanying Consolidated Balance Sheet was as follows:
                         
    Balance Sheet     March 31,     December 31,  
Derivative Instruments   Location     2011     2010  
            (In thousands)  
Convertible debt — conversion feature
   Other liabilities   $ —     $ 3,588  
     The effect of derivative instruments not designated as hedging instruments on the accompanying Consolidated Statements of Operations was as follows:
                         
            Three Months Ended  
    Statement of     March 31,  
Derivative Instruments   Operations Location     2011     2010  
            (In thousands)  
Convertible debt — conversion feature
   Other income (loss)   $ (3,079 )   $ (4,521 )
Warrant
   Other income (loss)     —       6  
10. FAIR VALUE MEASUREMENTS
     Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. See Notes 4, 8 and 9 for additional disclosures related to fair value measurements.
     Fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy, as defined below, gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.
  •   Level 1, defined as observable inputs such as quoted prices in active markets for identical assets.
 
  •   Level 2, defined as observable inputs other than Level 1 prices. These include quoted prices for similar assets or liabilities in an active market, quoted prices for identical assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
 
  •   Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

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     The table below sets forth, by level, the Company’s financial assets that are accounted for at fair value:
         
    Fair Value at  
    March 31, 2011  
    Level 1  
    (In thousands)  
Assets:
        
Available-for-sale investments included in Restricted investments and bond collateral
   $ 2,872  
Available-for-sale investments included in Reclamation deposits
     2,191  
 
      
Total assets
   $ 5,063  
 
      
     The following table summarizes the change in the fair values of the derivative instrument liabilities categorized as Level 3:
         
    Three Months Ended  
    March 31, 2011  
    (In thousands)  
Beginning balance
   $ 3,588  
Change in fair value
     3,079  
Settlements
     (6,667 )
 
      
Ending balance
   $ —  
 
      
     The Company calculates the fair value of its debt by using discount rate estimates based on interest rates as of March 31, 2011. The estimated fair values of the Company’s debt with fixed interest rates, excluding conversion feature values, are as follows:
                 
    Carrying Value     Fair Value  
    (In thousands)  
December 31, 2010
   $ 185,320     $ 196,483  
March 31, 2011
   $ 267,617     $ 278,465  
11. SHAREHOLDERS’ EQUITY
     Preferred Stock
     The Company has outstanding Series A Convertible Exchangeable Preferred Stock on which cumulative dividends of $2.125 per share are payable quarterly. In February 2011, the Company paid $19.9 million of dividends that had accumulated as of January 1, 2011.
12. RESTRICTED STOCK UNITS, STOCK OPTIONS, AND STOCK APPRECIATION RIGHTS (SARs)
     The Company recognized compensation expense from share-based arrangements shown in the following table:
                 
    Three Months Ended  
    March 31,  
    2011     2010  
    (In thousands)  
Recognition of fair value of restricted stock units, stock options, and stock appreciation rights over vesting period; and issuance of common stock
   $ 569     $ 225  
Contributions of stock to the Company’s 401(k) plan
     1,084       1,138  
 
            
Total share-based compensation expense
   $ 1,653     $ 1,363  
 
            

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    Restricted Stock Units
     A summary of restricted stock unit activity for the three months ended March 31, 2011 is as follows:
                         
            Weighted Average     Unamortized  
            Grant-Date Fair     Compensation Expense  
    Units     Value     (In thousands)  
Non-vested at December 31, 2010
     192,697     $ 8.13          
Non-vested at March 31, 2011
     192,697     $ 8.13     $ 1,118 (1)
 
                  
 
1     Expected to be recognized over the next two years.
     In April 2011, 172,081 restricted stock units were granted, of which 86,052 units will vest ratably over a three-year period. The remaining 86,029 units are performance-based, which will vest and pay out at the end of a three-year period if performance goals are met.
     Stock Options
     Information with respect to stock option activity for the three months ended March 31, 2011 is as follows:
                                         
                    Weighted             Unamortized  
                    Average Remaining     Aggregate Intrinsic     Compensation  
            Weighted Average     Contractual Life     Value     Expense  
    Stock Options     Exercise Price     (in years)     (In thousands)     (In thousands)  
Outstanding at December 31, 2010
     318,590     $ 18.99                          
Exercised
     (12,500 )   $ 10.48             $ 49          
Expired or forfeited
     (20,000 )   $ 12.04                          
 
                                      
Outstanding at March 31, 2011
     286,090     $ 19.86       4.5     $ 17          
 
                              
Options exercisable at March 31, 2011
     241,334     $ 19.57       4.0     $ 17     $ 131 (1)
 
                              
 
1   Expected to be recognized over the next three months.
     Stock Appreciation Rights
     Information with respect to stock appreciation rights, or SARs, activity for the three months ended March 31, 2011 is as follows:
                                         
                    Weighted Average             Unamortized  
                    Remaining Contractual     Aggregate Intrinsic     Compensation  
            Weighted Average     Life     Value     Expense  
    SARs     Base Price     (in years)     (In thousands)     (In thousands)  
Outstanding at December 31, 2010
     118,934     $ 22.13                          
Outstanding and exercisable at March 31, 2011
     118,934     $ 22.13       4.2     $ —     $ —  
 
                              
13. EARNINGS PER SHARE
     Basic earnings (loss) per share has been computed by dividing the net income (loss) applicable to common shareholders by the weighted average number of shares of common stock outstanding during each period. Net income (loss) applicable to common shareholders includes the adjustment for net income or loss attributable to noncontrolling interest. Diluted earnings (loss) per share is computed by including the dilutive effect of common stock that would be issued assuming conversion or exercise of outstanding convertible notes and securities, stock options, stock appreciation rights, restricted stock units and warrants. No such items were included in the computation of diluted loss per share in the three months ended March 31, 2011 and March 31, 2010 because the Company incurred a loss from operations in each of these periods and the effect of inclusion

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would have been anti-dilutive.
     The table below shows the number of shares that were excluded from the calculation of diluted income (loss) per share because their inclusion would be anti-dilutive to the calculation:
                 
    Three Months Ended  
    March 31,  
    2011     2010  
    (In thousands)  
Convertible notes and securities
     1,094       2,859  
Restricted stock units, stock options, SARs, and warrant shares
     598       776  
 
            
Total shares excluded from diluted shares calculation
     1,692       3,635  
 
            
14. BUSINESS SEGMENT INFORMATION
     Segment information is based on a management approach, which requires segmentation based upon the Company’s internal organization and reporting of revenue and operating income.
     The Company’s operations are classified into four segments: coal, power, heritage and corporate.
     Summarized financial information by segment is as follows:
                                         
    Coal     Power     Heritage     Corporate     Consolidated  
    (In thousands)  
Three Months Ended March 31, 2011
                                        
Revenues
   $ 104,136     $ 23,628     $ —     $ —     $ 127,764  
Depreciation, depletion, and amortization
     8,613       2,553       —       79       11,245  
Operating income (loss)
     8,819       4,619       (4,170 )     (1,828 )     7,440  
Total assets
     516,725       206,894       12,541       51,827       787,987  
Capital expenditures
     2,688       227       —       8       2,923  
Three Months Ended March 31, 2010
                                        
Revenues
   $ 103,550     $ 22,889     $ —     $ —     $ 126,439  
Depreciation, depletion, and amortization
     8,757       2,536       —       99       11,392  
Operating income (loss)
     7,352       4,172       (4,255 )     (1,955 )     5,314  
Total assets
     538,886       220,127       11,247       8,258       778,518  
Capital expenditures
     3,829       68       —       440       4,337  
     A reconciliation of segment operating income to loss before income taxes follows:
                 
    Three Months Ended  
    March 31,  
    2011     2010  
    (In thousands)  
Operating income
   $ 7,440     $ 5,314  
Interest expense
     (6,967 )     (5,723 )
Loss on extinguishment of debt
     (17,030 )     —  
Interest income
     382       410  
Other loss
     (3,017 )     (3,836 )
 
            
Loss before income taxes
   $ (19,192 )   $ (3,835 )
 
            

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15. CONTINGENCIES
     The Company is a party to claims and lawsuits with respect to various matters. The Company provides for costs related to contingencies when a loss is probable and the amount is reasonably estimable. After conferring with counsel, it is the opinion of management that the ultimate resolution of pending claims will not have a material adverse effect on the consolidated financial condition, results of operations or liquidity of the Company.
16. SUPPLEMENTAL CONSOLIDATING FINANCIAL INFORMATION
     Pursuant to the indenture governing the Parent Notes, certain wholly owned subsidiaries of the Company have fully and unconditionally guaranteed the notes on a joint and several basis. The following tables present unaudited consolidating financial information for (i) the issuer of the notes (Westmoreland Coal Company), (ii) the co-issuer of the notes (Westmoreland Partners), (iii) the guarantors under the notes, and (iv) the entities which are not guarantors under the notes:

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CONSOLIDATING BALANCE SHEETS
March 31, 2011
(In thousands)
                                                 
    Parent/             Guarantor     Non-Guarantor     Consolidating        
Assets   Issuer     Co-Issuer     Subsidiaries     Subsidiaries     Adjustments     Total  
Current assets:
                                                
Cash and cash equivalents
   $ 36,770     $ 3,715     $ 161     $ 4,338     $ —     $ 44,984  
Receivables:
                                                
Trade
     —       13,880       9       35,887       —       49,776  
Contractual third-party reclamation receivables
     —       —       127       7,511       —       7,638  
Intercompany receivable/payable
     (20,135 )     —       10,050       (23,504 )     33,589       —  
Other
     161       221       8,973       109       (5,844 )     3,620  
 
                                    
 
     (19,974 )     14,101       19,159       20,003       27,745       61,034  
Inventories
     —       3,808       4,209       18,163       —       26,180  
Other current assets
     745       423       554       3,739       —       5,461  
 
                                    
Total current assets
     17,541       22,047       24,083       46,243       27,745       137,659  
 
                                    
Property, plant and equipment:
                                                
Land and mineral rights
     —       1,156       17,806       64,931       —       83,893  
Capitalized asset retirement cost
     —       239       20,463       94,154       —       114,856  
Plant and equipment
     2,619       216,391       117,447       172,556       —       509,013  
 
                                    
 
     2,619       217,786       155,716       331,641       —       707,762  
Less accumulated depreciation, depletion and amortization
     (2,066 )     (44,709 )     (84,290 )     (168,316 )     —       (299,381 )
 
                                    
Net property, plant and equipment
     553       173,077       71,426       163,325       —       408,381  
Advanced coal royalties
     —       —       848       2,684       —       3,532  
Reclamation deposits
     —       —       —       73,007       —       73,007  
Restricted investments and bond collateral
     12,251       5,976       10,975       26,499       —       55,701  
Contractual third-party reclamation receivables, less current portion
     —       —       412       88,102       —       88,514  
Deferred income taxes
     —       —       —       —       2,900       2,900  
Intangible assets
     —       5,793       —       344       —       6,137  
Investment in subsidiaries
     157,792       —       (717 )     3,770       (160,845 )     —  
Other assets
     7,385       —       1,387       3,384       —       12,156  
 
                                    
Total assets
   $ 195,522     $ 206,893     $ 108,414     $ 407,358     $ (130,200 )   $ 787,987  
 
                                    

154

 

CONSOLIDATING BALANCE SHEETS
March 31, 2011
(In thousands)
                                                 
    Parent/             Guarantor     Non-Guarantor     Consolidating        
Liabilities and Stockholders’ Deficit   Issuer     Co-Issuer     Subsidiaries     Subsidiaries     Adjustments     Total  
Current liabilities
                                                
Current installments of long-term debt
   $ (735 )   $ —     $ 2,296     $ 16,112     $ —     $ 17,673  
Accounts payable and accrued expenses:
                                                
Trade
     2,688       9,733       3,067       35,015       (6,149 )     44,354  
Production taxes
     —       334       1,354       26,779       —       28,467  
Workers’ compensation
     951       —       —       —       —       951  
Postretirement medical benefits
     12,198       —       —       1,383       —       13,581  
SERP
     304       —       —       —       —       304  
Deferred revenue
     —       8,689       37       1,868       —       10,594  
Asset retirement obligations
     —       —       3,184       12,051       —       15,235  
Other current liabilities
     2,571       —       2,000       2,925       28       7,524  
 
                                    
Total current liabilities
     17,977       18,756       11,938       96,133       (6,121 )     138,683  
 
                                    
Long-term debt, less current installments
     143,352       —       4,897       128,440       —       276,689  
Workers’ compensation, less current portion
     9,360       —       —       —       —       9,360  
Excess of pneumoconiosis benefit obligation over trust assets
     2,726       —       —       —       —       2,726  
Postretirement medical benefits, less current portion
     168,953       —       —       27,773       —       196,726  
Pension and SERP obligations, less current portion
     15,709       150       —       3,824       —       19,683  
Deferred revenue, less current portion
     —       65,050       —       7,975       —       73,025  
Asset retirement obligations, less current portion
     —       728       29,253       197,136       —       227,117  
Intangible liabilities
     —       8,409       —       —       —       8,409  
Other liabilities
     473       —       4,518       1,435       3,070       9,496  
Intercompany receivable/payable
     10,899       —       6,878       28,507       (46,284 )     —  
 
                                    
Total liabilities
     369,449       93,093       57,484       491,223       (49,335 )     961,914  
 
                                    
 
                                                
Shareholders’ Deficit
                                                
Preferred stock
     160       —       —       —       —       160  
Common stock
     32,887       5       110       132       (247 )     32,887  
Other paid-in capital
     120,748       52,699       16,583       52,717       (121,999 )     120,748  
Accumulated other comprehensive loss
     (57,507 )     (200 )     94       (14,113 )     14,219       (57,507 )
Accumulated deficit
     (264,632 )     61,296       34,143       (122,601 )     27,162       (264,632 )
 
                                    
Total Westmoreland Coal Company shareholders’ deficit
     (168,344 )     113,800       50,930       (83,865 )     (80,865 )     (168,344 )
Noncontrolling interest
     (5,583 )     —       —       —       —       (5,583 )
 
                                    
Total deficit
     (173,927 )     113,800       50,930       (83,865 )     (80,865 )     (173,927 )
 
                                    
Total liabilities and stockholders’ deficit
   $ 195,522     $ 206,893     $ 108,414     $ 407,358     $ (130,200 )   $ 787,987  
 
                                    

155

 

CONSOLIDATING BALANCE SHEETS
December 31, 2010
(In thousands)
                                                 
    Parent/             Guarantor     Non-Guarantor     Consolidating        
Assets   Issuer     Co-Issuer     Subsidiaries     Subsidiaries     Adjustments     Total  
Current assets:
                                                
Cash and cash equivalents
   $ 271     $ 880     $ —     $ 4,624     $ —     $ 5,775  
Receivables:
                                                
Trade
     —       14,148       65       36,365       —       50,578  
Contractual third-party reclamation receivables
     —       —       135       7,608       —       7,743  
Intercompany receivable/payable
     —       —       10,193       (21,544 )     11,351       —  
Other
     66       198       4,917       1,530       (2,166 )     4,545  
 
                                    
 
     66       14,346       15,310       23,959       9,185       62,866  
Inventories
     —       1,935       4,624       17,012       —       23,571  
Other current assets
     796       224       469       3,944       (98 )     5,335  
 
                                    
Total current assets
     1,133       17,385       20,403       49,539       9,087       97,547  
 
                                    
Property, plant and equipment:
                                                
Land and mineral rights
     —       1,156       17,806       64,862       —       83,824  
Capitalized asset retirement cost
     —       239       20,463       94,154       —       114,856  
Plant and equipment
     2,611       215,851       117,360       170,839       —       506,661  
 
                                    
 
     2,611       217,246       155,629       329,855       —       705,341  
Less accumulated depreciation, depletion and amortization
     (1,987 )     (42,156 )     (82,239 )     (162,004 )     —       (288,386 )
 
                                    
Net property, plant and equipment
     624       175,090       73,390       167,851       —       416,955  
Advanced coal royalties
     —       —       998       2,697       —       3,695  
Reclamation deposits
     —       —       —       72,274       —       72,274  
Restricted investments and bond collateral
     11,816       8,563       10,956       24,049       —       55,384  
Contractual third-party reclamation receivables
     —       —       390       87,349       —       87,739  
Deferred income taxes
     —       —       —       —       2,458       2,458  
Intangible assets
     —       6,203       —       352       —       6,555  
Investment in subsidiaries
     115,612       —       (717 )     3,770       (118,665 )     —  
Other assets
     2,060       401       1,683       3,555       —       7,699  
 
                                    
Total assets
   $ 131,245     $ 207,642     $ 107,103     $ 411,436     $ (107,120 )   $ 750,306  
 
                                    

156

 

CONSOLIDATING BALANCE SHEETS
December 31, 2010
(In thousands)
                                                 
    Parent/             Guarantor     Non-Guarantor     Consolidating        
Liabilities and Stockholders’ Deficit   Issuer     Co-Issuer     Subsidiaries     Subsidiaries     Adjustments     Total  
Current liabilities
                                                
Current installments of long-term debt
   $ —     $ —     $ 2,255     $ 12,718     $ —     $ 14,973  
Accounts payable and accrued expenses:
                                                
Trade
     5,187       8,549       3,283       31,709       (2,481 )     46,247  
Production taxes
     —       2       1,084       25,231       —       26,317  
Workers’ compensation
     954       —       —       —       —       954  
Postretirement medical benefits
     12,198       —       —       1,383       —       13,581  
SERP
     304       —       —       —       —       304  
Deferred revenue
     —       8,805       349       1,055       —       10,209  
Asset retirement obligations
     —       —       3,371       11,143       —       14,514  
Other current liabilities
     249       782       3,138       2,164       (92 )     6,241  
 
                                    
Total current liabilities
     18,892       18,138       13,480       85,403       (2,573 )     133,340  
 
                                    
Long-term debt, less current installments
     13,671       46,648       15,166       133,246       —       208,731  
Revolving lines of credit, less current portion
     —       —       16,900       1,500       —       18,400  
Workers’ compensation, less current portion
     9,424       —       —       —       —       9,424  
Excess of pneumoconiosis benefit obligation over trust assets
     2,246       —       —       —       —       2,246  
Postretirement medical benefits, less current portion
     169,677       —       —       27,602       —       197,279  
Pension and SERP obligations, less current portion
     16,105       154       —       4,203       —       20,462  
Deferred revenue, less current portion
     —       67,308       —       8,087       —       75,395  
Asset retirement obligations, less current portion
     —       715       28,967       197,447       —       227,129  
Intangible liabilities
     —       8,663       —       —       —       8,663  
Other liabilities
     4,153       —       3,149       1,409       2,881       11,592  
Intercompany receivable/payable
     59,432       —       (19,590 )     26,424       (66,266 )     —  
 
                                    
Total liabilities
     293,600       141,626       58,072       485,321       (65,958 )     912,661  
 
                                    
Shareholders’ Deficit
                                                
Preferred stock
     160       —       —       —       —       160  
Common stock
     27,901       5       110       132       (247 )     27,901  
Other paid-in capital
     98,466       30       16,036       53,264       (69,330 )     98,466  
Accumulated other comprehensive income
     (57,680 )     (203 )     120       (14,353 )     14,436       (57,680 )
Accumulated earnings (deficit)
     (226,740 )     66,184       32,765       (112,928 )     13,979       (226,740 )
 
                                    
Total Westmoreland Coal Company shareholders’ deficit
     (157,893 )     66,016       49,031       (73,885 )     (41,162 )     (157,893 )
Noncontrolling interest
     (4,462 )     —       —       —       —       (4,462 )
 
                                    
Total equity (deficit)
     (162,355 )     66,016       49,031       (73,885 )     (41,162 )     (162,355 )
 
                                    
Total liabilities and stockholders’ deficit
   $ 131,245     $ 207,642     $ 107,103     $ 411,436     $ (107,120 )   $ 750,306  
 
                                    

157

 

CONSOLIDATING STATEMENTS OF OPERATIONS
Three Months Ended March 31, 2011
(In thousands)
                                                 
    Parent/             Guarantor     Non-Guarantor     Consolidating        
    Issuer     Co-Issuer     Subsidiaries     Subsidiaries     Adjustments     Total  
     
Revenues
   $ —     $ 23,628     $ 14,824     $ 103,197     $ (13,885 )   $ 127,764  
 
                                                
Costs, expenses:
                                                
Cost of sales
     —       15,559       11,152       84,684       (13,885 )     97,510  
Depreciation, depletion and amortization
     79       2,553       2,051       6,562       —       11,245  
Selling and administrative
     2,379       897       1,008       5,021       —       9,305  
Heritage health benefit expenses
     3,576       —       —       202       —       3,778  
Loss on sales of assets
     —       —       —       83       —       83  
Other operating income
     —       —       (1,597 )     —       —       (1,597 )
 
                                    
 
     6,034       19,009       12,614       96,552       (13,885 )     120,324  
 
                                    
Operating income (loss)
     (6,034 )     4,619       2,210       6,645       —       7,440  
Other income (expense):
                                                
Interest expense
     (3,073 )     (428 )     (301 )     (3,184 )     19       (6,967 )
Loss on extinguishment of debt
     (7,873 )     (9,073 )     (84 )     —       —       (17,030 )
Interest income
     60       6       68       267       (19 )     382  
Other income (loss)
     (3,079 )     —       33       29       —       (3,017 )
 
                                    
 
     (13,965 )     (9,495 )     (284 )     (2,888 )     —       (26,632 )
 
                                    
Income (loss) from operations before income taxes
     (19,999 )     (4,876 )     1,926       3,757       —       (19,192 )
Equity in income of subsidiaries
     (1,104 )     —       —       —       1,104       —  
 
                                    
 
     (18,895 )     (4,876 )     1,926       3,757       (1,104 )     (19,192 )
Income tax (benefit) expense from operations
     (163 )     —       547       1,566       (2,410 )     (460 )
 
                                    
Net income (loss)
     (18,732 )     (4,876 )     1,379       2,191       1,306       (18,732 )
Less net income attributable to noncontrolling interest
     (1,121 )     —       —       —       —       (1,121 )
 
                                    
Net income (loss) attributable to the Parent company
   $ (17,611 )   $ (4,876 )   $ 1,379     $ 2,191     $ 1,306     $ (17,611 )
 
                                    

158

 

CONSOLIDATING STATEMENTS OF OPERATIONS
Three Months Ended March 31, 2010
(In thousands)
                                                 
                            Non-              
    Parent/             Guarantor     Guarantor     Consolidating        
    Issuer     Co-Issuer     Subsidiaries     Subsidiaries     Adjustments     Total  
     
Revenues
   $ (33 )   $ 22,889     $ 12,721     $ 103,253     $ (12,391 )   $ 126,439  
 
                                                
Costs, expenses:
                                                
Cost of sales
     —       15,045       11,637       83,419       (12,424 )     97,677  
Depreciation, depletion and amortization
     99       2,537       1,921       6,835       —       11,392  
Selling and administrative
     2,356       1,136       1,115       5,369       —       9,976  
Heritage health benefit expenses
     3,681       —       —       234       —       3,915  
Loss on sales of assets
     —       —       —       71       —       71  
Other operating income
     —       —       (1,906 )     —       —       (1,906 )
 
                                    
 
     6,136       18,718       12,767       95,928       (12,424 )     121,125  
 
                                    
Operating income (loss)
     (6,169 )     4,171       (46 )     7,325       33       5,314  
Other income (expense):
                                                
Interest expense
     (724 )     (1,218 )     (641 )     (3,140 )     —       (5,723 )
Interest income
     53       18       (133 )     477       (5 )     410  
Other income (loss)
     (4,424 )     5       —       583       —       (3,836 )
 
                                    
 
     (5,095 )     (1,195 )     (774 )     (2,080 )     (5 )     (9,149 )
 
                                    
Income (loss) from operations before income taxes
     (11,264 )     2,976       (820 )     5,245       28       (3,835 )
Equity in income of subsidiaries
     (8,408 )     —       —       —       8,408       —  
 
                                    
 
     (2,856 )     2,976       (820 )     5,245       (8,380 )     (3,835 )
Income tax (benefit) expense from operations
     —       32       (246 )     2,737       (2,613 )     (90 )
 
                                    
Net income (loss)
     (2,856 )     2,944       (574 )     2,508       (5,767 )     (3,745 )
Less net income attributable to noncontrolling interest
     —       —       —       —       (890 )     (890 )
 
                                    
Net income (loss) attributable to the Parent company
   $ (2,856 )   $ 2,944     $ (574 )   $ 2,508     $ (4,877 )   $ (2,855 )
 
                                    

159

 

CONSOLIDATING STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 2011
(In thousands)
                                                 
                            Non-              
    Parent/             Guarantor     Guarantor     Consolidating        
Statements of Cash Flows   Issuer     Co-Issuer     Subsidiaries     Subsidiaries     Adjustments     Total  
 
Cash flows from operating activities:
                                                
Net income (loss)
   $ (18,732 )   $ (4,875 )   $ 1,378     $ 2,192     $ 1,305     $ (18,732 )
Adjustments to reconcile net loss to net cash provided by operation activities:
                                                
Equity in income of subsidiaries
     (1,104 )     —       —       —       1,104       —  
Depreciation, depletion, and amortization
     79       2,553       2,051       6,562       —       11,245  
Accretion of asset retirement obligation and receivable
     —       14       758       1,928       —       2,700  
Amortization of intangible assets and liabilities, net
     —       155       —       8       —       163  
Non-cash tax benefits
     —       —       —       —       (110 )     (110 )
Share-based compensation
     1,653       —       —       —       —       1,653  
Loss on sale of assets
     —       —       —       83       —       83  
Amortization of deferred financing costs
     377       (21 )     109       170       —       635  
Loss on extinguishment of debt
     7,873       9,073       84       —       —       17,030  
Gain (loss) on derivative
     3,079       —       —       —       —       3,079  
Changes in operating assets and liabilities:
                                                
Receivables, net
     (95 )     245       (4,001 )     3,803       3,678       3,630  
Inventories
     —       (1,873 )     415       (1,151 )     —       (2,609 )
Excess of pneumoconiosis benefit obligation over trust assets
     480       —       —       —       —       480  
Accounts payable and accrued expenses
     (2,499 )     533       (147 )     7,791       (3,669 )     2,009  
Deferred revenue
     —       (2,374 )     (312 )     701       —       (1,985 )
Accrual for workers’ compensation
     (67 )     —       —       —       —       (67 )
Asset retirement obligations
     —       —       (673 )     (1,988 )     —       (2,661 )
Accrual for postretirement medical benefits
     (870 )     —       —       245       —       (625 )
Pension and SERP obligations
     (193 )     —       —       (201 )     —       (394 )
Other assets and liabilities
     2,425       (314 )     1,202       (2,425 )     (230 )     658  
 
                                    
Net cash provided by (used in) operating activities
     (7,594 )     3,116       864       17,718       2,078       16,182  
 
                                    
Cash flows from investing activities:
                                                
Distributions received by subsidiaries
     11,700       —       —       —       (11,700 )     —  
Additions to property, plant and equipment
     (8 )     (227 )     (112 )     (2,576 )     —       (2,923 )
Change in restricted investments and bond collateral and reclamation deposits
     (440 )     2,587       (45 )     (3,182 )     —       (1,080 )
Net proceeds from sales of assets
     —       —       —       22       —       22  
Receivable from customer for property and equipment purchases
     —       —       —       (1,903 )     —       (1,903 )
 
                                    
Net cash provided by (used in) investing activities
     11,252       2,360       (157 )     (7,639 )     (11,700 )     (5,884 )
 
                                    
Cash flows from financing activities:
                                                
Bank overdrafts
     (146 )     —       (674 )     928       —       108  
Borrowings of long-term debt, net of debt discount
     142,500       —       —       —       —       142,500  
Repayments of long-term debt
     (2,532 )     (46,220 )     (10,230 )     (1,409 )     —       (60,391 )
Borrowings on revolving lines of credit
     —       1,500       12,200       37,000       —       50,700  
Repayments on revolving lines of credit
     —       (1,500 )     (29,100 )     (38,500 )     —       (69,100 )
Debt issuance and other refinancing costs
     (5,779 )     (9,077 )     100       —       —       (14,756 )
Dividends/distributions
     (20,281 )     —       —       (11,700 )     11,700       (20,281 )
Exercise of stock options
     131       —       —       —       —       131  
Transactions with Parent/affiliates
     (81,051 )     52,656       27,158       3,315       (2,078 )     —  
 
                                    
Net cash provided by (used in) financing activities
     32,842       (2,641 )     (546 )     (10,366 )     9,622       28,911  
 
                                    
Net increase (decrease) in cash and cash equivalents
     36,500       2,835       161       (287 )     —       39,209  
Cash and cash equivalents, beginning of year
     271       880       —       4,624       —       5,775  
 
                                    
Cash and cash equivalents, end of year
   $ 36,771     $ 3,715     $ 161     $ 4,337     $ —       44,984  
 
                                    

160

 

CONSOLIDATING STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 2010
(In thousands)
                                                 
    Parent/             Guarantor     Non-Guarantor     Consolidating        
Statements of Cash Flows   Issuer     Co-Issuer     Subsidiaries     Subsidiaries     Adjustments     Total  
 
Cash flows from operating activities:
                                                
Net income (loss)
   $ (11,264 )   $ 2,943     $ (573 )   $ 2,507     $ 2,642     $ (3,745 )
Adjustments to reconcile net income (loss) to net cash provided by operation activities:
                                                
Equity in income of subsidiaries
     (8,408 )     —       —       —       8,408       —  
Depreciation, depletion, and amortization
     99       2,537       1,921       6,835       —       11,392  
Accretion of asset retirement obligation and receivable
     —       13       752       2,238       —       3,003  
Amortization of intangible assets and liabilities, net
     —       155       —       (70 )     —       85  
Share-based compensation
     1,363       —       —       —       —       1,363  
Loss on sale of assets
     —       —       —       71       —       71  
Non-cash interest expense
     388       —       —       —       —       388  
Amortization of deferred financing costs
     335       (86 )     125       149       —       523  
Gain on impairments and sales of investment securities
     (97 )     —       —       (562 )     —       (659 )
Gain (loss) on derivative
     4,521       (6 )     —       —       —       4,515  
Changes in operating assets and liabilities:
                                                
Receivables, net
     359       (432 )     (2,540 )     (2,609 )     1,356       (3,866 )
Inventories
     —       (1,363 )     116       (255 )     —       (1,502 )
Excess of pneumoconiosis benefit obligation over trust assets
     347       —       —       —       —       347  
Accounts payable and accrued expenses
     (322 )     3,069       134       2,597       (1,708 )     3,770  
Deferred revenue
     —       (572 )     —       1,189       —       617  
Accrual for workers’ compensation
     (51 )     —       —       —       —       (51 )
Asset retirement obligations
     —       —       (188 )     (1,687 )     —       (1,875 )
Accrual for postretirement medical benefits
     (522 )     —       —       161       —       (361 )
Pension and SERP obligations
     280       1       —       (320 )     —       (39 )
Other assets and liabilities
     (634 )     (187 )     680       (417 )     (122 )     (680 )
 
                                    
Net cash provided by (used in) operating activities
     (13,606 )     6,072       427       9,827       10,576       13,296  
 
                                    
Cash flows from investing activities:
                                                
Distributions received by subsidiaries
     8,100       —       —       —       (8,100 )     —  
Additions to property, plant and equipment
     (440 )     (68 )     (635 )     (3,194 )     —       (4,337 )
Change in restricted investments and bond collateral and reclamation deposits
     (579 )     1,691       131       (1,835 )     —       (592 )
Net proceeds from sales of assets
     —       —       —       379       —       379  
Proceeds from the sale of investments
     156       —       —       963       —       1,119  
Receivable from customer for property and equipment purchases
     —       —       —       (510 )     —       (510 )
 
                                    
Net cash provided by (used in) investing activities
     7,237       1,623       (504 )     (4,197 )     (8,100 )     (3,941 )
 
                                    
Cash flows from financing activities:
                                                
Bank overdrafts
     (76 )     —       (14 )     980       —       890  
Borrowings of long-term debt
     —       —       —       —       —       —  
Repayments of long-term debt
     —       (5,405 )     (1,118 )     (1,589 )     —       (8,112 )
Borrowings on revolving lines of credit
     —       3,800       20,100       4,500       —       28,400  
Repayments on revolving lines of credit
     —       —       (18,800 )     (4,500 )     —       (23,300 )
Debt issuance costs
     —       —       —       —       —       —  
Exercise of stock options
     8       —       —       —       —       8  
Dividends/distributions
     —       —       —       (8,100 )     8,100       —  
Transactions with Parent/affiliates
     6,186       (163 )     (75 )     4,628       (10,576 )     —  
 
                                    
Net cash provided by (used in) financing activities
     6,118       (1,768 )     93       (4,081 )     (2,476 )     (2,114 )
 
                                    
Net increase (decrease) in cash and cash equivalents
     (251 )     5,927       16       1,549       —       7,241  
Cash and cash equivalents, beginning of year
     755       138       —       9,626       —       10,519  
 
                                    
Cash and cash equivalents, end of year
   $ 504     $ 6,065     $ 16     $ 11,175     $ —       17,760  
 
                                    

161

 

Report of Independent Registered Public Accounting Firm:
The Board of Directors and Shareholders of Westmoreland Coal Company
     We have audited the accompanying consolidated balance sheets of Westmoreland Coal Company and subsidiaries (the “Company”) as of December 31, 2010 and 2009, and the related consolidated statements of operations, shareholders’ deficit and comprehensive loss, and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
     We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
     In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Westmoreland Coal Company and subsidiaries at December 31, 2010 and 2009, and the consolidated results of their operations and their cash flows for the years then ended in conformity with U.S. generally accepted accounting principles.
     As discussed in Note 9 to the consolidated financial statements, the Company adopted Emerging Issues Task Force 07-5, Determining Whether an Instrument (or Embedded Feature) is Indexed to an Entity’s Own Stock (codified in FASB ASC Topic 815,) effective as of January 1, 2009.
     We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2010, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 11, 2011 expressed an unqualified opinion thereon.
/s/ ERNST & YOUNG LLP
Denver, Colorado
March 11, 2011, except as to Note 19 as to which the date is June 3, 2011

162

 

Report of Independent Registered Public Accounting Firm:
The Board of Directors and Shareholders
Westmoreland Coal Company:
     We have audited the consolidated statements of operations, shareholders’ deficit and comprehensive loss, and cash flows of Westmoreland Coal Company and subsidiaries (the Company) for the year ended December 31, 2008. In connection with our audit of the aforementioned consolidated financial statements, we also audited the related consolidated financial statement Schedule I. These consolidated financial statements, and the related financial statement schedule, are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
     We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
     In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the results of Westmoreland Coal Company and subsidiaries operations and their cash flows for the year ended December 31, 2008, in conformity with U.S. generally accepted accounting principles.
     The consolidated financial statements have been prepared assuming the Company will continue as a going concern. During the year ended December 31, 2008, the Company had suffered recurring losses from operations, had a working capital deficit, and had a net capital deficiency that raised substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ KPMG LLP
Denver, Colorado
March 13, 2009, except as to Note 19 to the consolidated financial statements as to which the date is June 3, 2011

163

 

Westmoreland Coal Company and Subsidiaries
Consolidated Balance Sheets
                 
    December 31,     December 31,  
    2010     2009  
    (In thousands)  
Assets
                
Current assets:
                
Cash and cash equivalents
   $ 5,775     $ 10,519  
Receivables:
                
Trade
     50,578       46,393  
Contractual third-party reclamation receivables
     7,743       7,257  
Other
     4,545       3,162  
 
            
 
     62,866       56,812  
 
                
Inventories
     23,571       25,871  
Other current assets
     5,335       6,047  
 
            
Total current assets
     97,547       99,249  
 
            
 
                
Property, plant and equipment:
                
Land and mineral rights
     83,824       83,694  
Capitalized asset retirement cost
     114,856       134,821  
Plant and equipment
     506,661       486,238  
 
            
 
     705,341       704,753  
Less accumulated depreciation, depletion and amortization
     (288,386 )     (248,569 )
 
            
Net property, plant and equipment
     416,955       456,184  
 
                
Advanced coal royalties
     3,695       3,056  
Reclamation deposits
     72,274       73,067  
Restricted investments and bond collateral
     55,384       48,188  
Contractual third-party reclamation receivables, less current portion
     87,739       74,989  
Deferred income taxes
     2,458       2,341  
Intangible assets, net of accumulated amortization of $9.1 million and $6.8 million at December 31, 2010 and December 31, 2009, respectively
     6,555       8,781  
Other assets
     7,699       6,873  
 
            
Total Assets
   $ 750,306     $ 772,728  
 
            
See accompanying Notes to Consolidated Financial Statements.

164

 

Westmoreland Coal Company and Subsidiaries
Consolidated Balance Sheets
                 
    December 31,     December 31,  
    2010     2009  
    (In thousands)  
Liabilities and Shareholders’ Deficit
                
Current liabilities:
                
Current installments of long-term debt
   $ 14,973     $ 41,089  
Revolving lines of credit
     —       16,400  
Accounts payable and accrued expenses:
                
Trade
     46,247       39,264  
Production taxes
     26,317       24,510  
Workers’ compensation
     954       1,031  
Postretirement medical benefits
     13,581       14,501  
SERP
     304       306  
Deferred revenue
     10,209       8,760  
Asset retirement obligations
     14,514       15,513  
Other current liabilities
     6,241       12,851  
 
            
Total current liabilities
     133,340       174,225  
 
            
 
                
Long-term debt, less current installments
     208,731       197,206  
Revolving lines of credit, less current portion
     18,400       —  
Workers’ compensation, less current portion
     9,424       10,188  
Excess of pneumoconiosis benefit obligation over trust assets
     2,246       786  
Postretirement medical benefits, less current portion
     197,279       175,722  
Pension and SERP obligations, less current portion
     20,462       26,827  
Deferred revenue, less current portion
     75,395       84,243  
Asset retirement obligations, less current portion
     227,129       229,102  
Intangible liabilities, net of accumulated amortization $9.4 million at December 31, 2010 and $7.7 million at December 31, 2009, respectively
     8,663       10,300  
Other liabilities
     11,592       5,928  
 
            
Total liabilities
     912,661       914,527  
 
            
 
                
Shareholders’ deficit:
                
Preferred stock of $1.00 par value Authorized 5,000,000 shares; Issued and outstanding 160,129 shares at December 31, 2010, and December 31, 2009
     160       160  
Common stock of $2.50 par value Authorized 30,000,000 shares; Issued and outstanding 11,160,798 shares at December 31, 2010 and 10,345,927 shares at December 31, 2009
     27,901       25,864  
Other paid-in capital
     98,466       91,432  
Accumulated other comprehensive loss
     (57,680 )     (31,223 )
Accumulated deficit
     (226,740 )     (226,215 )
 
            
Total Westmoreland Coal Company shareholders’ deficit
     (157,893 )     (139,982 )
Noncontrolling interest
     (4,462 )     (1,817 )
 
            
Total deficit
     (162,355 )     (141,799 )
 
            
Total Liabilities and Shareholders’ Deficit
   $ 750,306     $ 772,728  
 
            
See accompanying Notes to Consolidated Financial Statements.

165

 

Westmoreland Coal Company and Subsidiaries
Consolidated Statements of Operations
                         
    Years Ended December 31,  
    2010     2009     2008  
    (In thousands, except per share data)  
Revenues
   $ 506,057     $ 443,368     $ 509,696  
 
                        
Cost and expenses:
                        
Cost of sales
     394,827       373,070       409,795  
Depreciation, depletion and amortization
     44,690       44,254       41,387  
Selling and administrative
     39,481       40,612       40,513  
Heritage health benefit expenses
     14,421       28,074       33,452  
Restructuring charges
     —       —       2,009  
Loss (gain) on sales of assets
     226       191       (1,425 )
Other operating income
     (8,109 )     (11,059 )     —  
 
                  
 
     485,536       475,142       525,731  
 
                  
Operating income (loss)
     20,521       (31,774 )     (16,035 )
Other income (expense):
                        
Interest expense
     (22,992 )     (23,733 )     (23,130 )
Interest expense attributable to beneficial conversion feature
     —       —       (8,146 )
Loss on extinguishment of debt
     —       —       (5,178 )
Interest income
     1,747       3,218       5,125  
Other income (loss)
     (2,587 )     5,991       (284 )
 
                  
 
     (23,832 )     (14,524 )     (31,613 )
 
                  
Loss before income taxes
     (3,311 )     (46,298 )     (47,648 )
Income tax (benefit) expense
     (141 )     (17,136 )     919  
 
                  
Net loss
     (3,170 )     (29,162 )     (48,567 )
Less net loss attributable to noncontrolling interest
     (2,645 )     (1,817 )     —  
 
                  
Net loss attributable to the Parent company
     (525 )     (27,345 )     (48,567 )
Less preferred stock dividend requirements
     1,360       1,360       1,360  
 
                  
Net loss applicable to common shareholders
   $ (1,885 )   $ (28,705 )   $ (49,927 )
 
                  
 
                        
Net loss per share applicable to common shareholders:
                        
Basic and diluted
   $ (0.17 )   $ (2.88 )   $ (5.25 )
 
                  
Weighted average number of common shares outstanding
                        
Basic and diluted
     10,791       9,967       9,512  
See accompanying Notes to Consolidated Financial Statements.

166

 

Westmoreland Coal Company and Subsidiaries
Consolidated Statements of Shareholders’ Deficit and Comprehensive Loss
Years Ended December 31, 2010, 2009 and 2008
                                                         
    Class A                                              
    Convertible                     Accumulated                     Total  
    Exchangeable                     Other             Non-     Shareholders'  
    Preferred     Common     Other Paid-In     Comprehensive     Accumulated     controlling     Equity  
    Stock     Stock     Capital     Loss       Deficit     Interest     (Deficit)  
    (In thousands)  
Balance at December 31, 2007 (160,129 preferred shares and 9,427,203 common shares outstanding)
   $ 160     $ 23,567     $ 85,352     $ (125,187 )   $ (161,149 )   $ —     $ (177,257 )
Common stock issued as compensation (221,933 shares)
     —       554       2,242       —       —       —       2,796  
Common stock options exercised (40,882 shares)
     —       102       101       —       —       —       203  
Warrant repriced in lieu of registration requirement
     —       —       355       —       —       —       355  
Beneficial conversion feature on convertible debt
     —       —       8,146       —       —       —       8,146  
Net loss
     —       —       —       —       (48,567 )     —       (48,567 )
Adjustments to accumulated actuarial losses of pension plans
     —       —       —       (17,589 )     —       —       (17,589 )
Amortization of accumulated actuarial losses of pension plans
     —       —       —       351       —       —       351  
Adjustments to accumulated actuarial losses, prior service costs and transition obligations of postretirement medical benefit plans
     —       —       —       5,533       —       —       5,533  
Amortization of accumulated actuarial losses, prior service costs and transition obligations of postretirement medical benefit plans
     —       —       —       8,319       —       —       8,319  
Unrealized loss on available-for-sale securities
     —       —       —       (788 )     —       —       (788 )
Other than temporary impairment of available-for-sale securities recognized in earnings
     —       —       —       900       —       —       900  
 
                                                      
Comprehensive loss
                                                     (51,841 )
     
Balance at December 31, 2008 (160,129 preferred shares and 9,690,018 common shares outstanding)
     160       24,223       96,196       (128,461 )     (209,716 )     —       (217,598 )
Cumulative effect of adoption of ASC 815-40
     —       —       (9,847 )     —       10,846       —       999  
Common stock issued as compensation (255,909 shares, less 100,000 shares forfeited)
     —       391       2,180       —       —       —       2,571  
Contributions of Company stock to pension plans assets (500,000 shares)
     —       1,250       2,903       —       —       —       4,153  
Net loss
     —       —       —       —       (27,345 )     (1,817 )     (29,162 )
Tax effect of other comprehensive income gains
     —       —       —       (17,062 )     —       —       (17,062 )
Adjustments to accumulated actuarial losses and transition obligations, pension
     —       —       —       (1,459 )     —       —       (1,459 )
Amortization of accumulated actuarial losses and transition obligations, pension
     —       —       —       1,845       —       —       1,845  
Amortization of accumulated actuarial losses and transition obligations, postretirement medical benefit
     —       —       —       7,079       —       —       7,079  
Effect of pension plan freeze
     —       —       —       10,670       —       —       10,670  
Effect of postretirement medical benefit plan amendments
     —       —       —       95,313       —       —       95,313  
Unrealized gain on available-for-sale securities
     —       —       —       852       —       —       852  
 
                                                      
Comprehensive income
                                                     68,076  
     
Balance at December 31, 2009 (160,129 preferred shares and 10,345,927 common shares outstanding)
     160       25,864       91,432       (31,223 )     (226,215 )     (1,817 )     (141,799 )
Common stock issued as compensation (337,371 shares)
     —       843       3,206       —       —       —       4,049  
Common stock options exercised (2,500 shares)
     —       6       2       —       —       —       8  
Contributions of Company stock to pension plan assets (475,000 shares)
     —       1,188       3,826       —       —       —       5,014  
Net loss
     —       —       —       —       (525 )     (2,645 )     (3,170 )
Amortization of accumulated actuarial losses and transition obligations, pension
     —       —       —       1,312       —       —       1,312  
Adjustments to accumulated actuarial losses and transition obligations, pension
     —       —       —       (3,860 )     —       —       (3,860 )
Amortization of accumulated actuarial gains and transition obligations, postretirement medical benefits
     —       —       —       (275 )     —       —       (275 )
Adjustments to accumulated actuarial gains and transition obligations, postretirement medical benefits
     —       —       —       (23,195 )     —       —       (23,195 )
Unrealized and realized gains on available-for-sale securities
     —       —       —       (439 )     —       —       (439 )
 
                                                      
Comprehensive loss
                                                     (29,627 )
     
Balance at December 31, 2010 (160,129 preferred shares and 11,160,798 common shares outstanding)
   $ 160     $ 27,901     $ 98,466     $ (57,680 )   $ (226,740 )   $ (4,462 )   $ (162,355 )
     
See accompanying Notes to Consolidated Financial Statements.

167

 

Westmoreland Coal Company and Subsidiaries
Consolidated Statements of Cash Flows
                         
    Years Ended December 31,  
    2010     2009     2008  
    (In thousands)  
Cash flows from operating activities:
                        
Net loss
   $ (3,170 )   $ (29,162 )   $ (48,567 )
Adjustments to reconcile net loss to net cash provided by operating activities:
                        
Depreciation, depletion and amortization
     44,690       44,254       41,387  
Accretion of asset retirement obligation and receivable
     11,540       9,974       9,528  
Non-cash tax benefits
     —       (17,062 )     —  
Amortization of intangible assets and liabilities, net
     590       279       598  
Restructuring charges
     —       —       2,009  
Share-based compensation
     4,049       2,552       2,733  
Loss (gain) on sales of assets
     226       191       (1,425 )
Non-cash interest expense
     1,236       1,470       8,934  
Amortization of deferred financing costs
     2,304       1,975       839  
Loss on extinguishment of debt
     —       —       2,292  
Loss (gain) on impairment and sales of investment securities
     (604 )     412       900  
Loss (gain) on derivative instruments
     3,456       (6,122 )     —  
Changes in operating assets and liabilities:
                        
Receivables, net
     (4,728 )     15,503       (6,240 )
Inventories
     2,300       (1,217 )     4,144  
Excess of pneumoconiosis benefit obligation over trust assets
     1,460       3,025       (23 )
Accounts payable and accrued expenses
     9,041       (13,802 )     2,001  
Deferred revenue
     (7,399 )     10,486       29,177  
Accrual for workers’ compensation
     (841 )     (1,619 )     3,316  
Asset retirement obligations
     (7,783 )     (2,219 )     (889 )
Accrual for postretirement medical benefits
     (2,832 )     7,762       10,021  
Pension and SERP obligations
     (3,902 )     3,173       (2,116 )
Other assets and liabilities
     (4,280 )     (405 )     (3,374 )
 
                  
Net cash provided by operating activities
     45,353       29,448       55,245  
 
                  
Cash flows from investing activities:
                        
Additions to property, plant and equipment
     (22,814 )     (34,546 )     (31,320 )
Change in restricted investments and bond collateral and reclamation deposits
     (8,545 )     (4,601 )     24,319  
Net proceeds from sales of assets
     712       937       2,641  
Proceeds from the sale of investments
     2,307       796       —  
Receivable from customer for property and equipment purchases
     (840 )     (1,183 )     (2,228 )
 
                  
Net cash used in investing activities
     (29,180 )     (38,597 )     (6,588 )
 
                  
Cash flows from financing activities:
                        
Change in book overdrafts
     (595 )     596       (5,043 )
Borrowings from long-term debt
     —       8,562       205,377  
Repayments of long-term debt
     (20,405 )     (35,275 )     (219,785 )
Borrowings on revolving lines of credit
     170,900       94,116       169,600  
Repayments on revolving lines of credit
     (168,900 )     (88,016 )     (173,500 )
Debt issuance costs
     (1,925 )     (256 )     (5,304 )
Exercise of stock options
     8       —       203  
 
                  
Net cash used in financing activities
     (20,917 )     (20,273 )     (28,452 )
 
                  
Net increase (decrease) in cash and cash equivalents
     (4,744 )     (29,422 )     20,205  
Cash and cash equivalents, beginning of year
     10,519       39,941       19,736  
 
                  
Cash and cash equivalents, end of year
   $ 5,775     $ 10,519     $ 39,941  
 
                  
Supplemental disclosures of cash flow information:
                        
Cash paid during the year for:
                        
Interest
   $ 19,744     $ 20,418     $ 22,226  
Income taxes (refunds)
     (236 )     2,263       2,227  
Non-cash transactions:
                        
Accrued purchases of property and equipment
     628       949       2,715  
Capital leases and other financing sources
     3,748       11,286       14,859  
See accompanying Notes to Consolidated Financial Statements.

168

 

Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     Nature of Operations
     Westmoreland Coal Company, or the Company, Westmoreland, WCC, or the Parent, is an energy company. The Company’s current principal activities, all conducted within the United States, are the production and sale of coal from its mines in Montana, North Dakota and Texas; and the ownership of power plants in North Carolina. The Company’s activities are primarily conducted through wholly owned subsidiaries.
     The Company’s Absaloka Mine is owned by its wholly owned subsidiary Westmoreland Resources, Inc., or WRI. The right to mine coal at the Absaloka Mine has been subleased to an affiliated entity whose operations the Company controls. The Rosebud, Jewett, Beulah and Savage Mines are owned through the Company’s wholly owned subsidiary Westmoreland Mining LLC, or WML.
     Liquidity
     Following the February 4, 2011 Parent Notes offering described below, the Company has cash on hand in excess of $45 million. The Company also expects increases in coal operating profits and the Company’s heritage health benefit expenditures to continue at their reduced 2010 rates. As a result, the Company anticipates that its cash flows from operations, cash on hand and available borrowing capacity will be sufficient to meet its investing, financing, and working capital requirements for the next several years.
     On February 4, 2011 through a private placement offering, the Company issued $150.0 million of Senior Secured Notes due in 2018 together with Westmoreland Partners as co-issuer. The Parent Notes mature February 18, 2018 and they bear a fixed interest rate of 10.750%, payable semi-annually, in arrears, on February 1 and August 1 of each year beginning August 1, 2011. Substantially all of the assets of ROVA and WRI constitute collateral for the Parent Notes as to which the holders of these notes have a first priority lien. Under the indenture governing the Parent Notes, the Company is required to offer a portion of its Excess Cash Flow (as defined by the Indenture) for each fiscal year to purchase some of these notes at 100% of the principal amount.
     The Company received approximately $135.2 million in proceeds from the Parent Notes offering after deducting the Initial Purchaser’s discount of $7.5 million and offering costs of $7.3 million. The proceeds were used to pay the outstanding balance on WRI and ROVA’s term and revolving lines of credit. The credit facilities at both WRI and ROVA were terminated in February 2011, as result of the Parent Notes offering. The Company is still able to enter into a revolving credit facility without the consent of the holders of the notes, subject to certain conditions. The outstanding balance for the convertible notes was also eliminated with $2.5 million being paid to retire a portion of the corporate convertible notes with the remainder of the notes being converted into 1,877,946 shares of Westmoreland common stock at a conversion price of $8.50 per share. In February 2011, the Company used $19.9 million of the proceeds to pay all dividend arrearages on its preferred stock.
     As a result of the Parent Notes offering, the Company recorded the current portion of its convertible notes, current portions of WRI’s term and revolving line of credit and ROVA’s term debt as non-current liabilities in its consolidated balance sheet at December 31, 2010. The Company will also record a loss on extinguishment of debt in the first quarter of 201l because of the offering.
     The Company’s liquidity continues to be affected by its heritage health, pension, capital expenditures and bond collateral obligations. The cash at WML is available to the Company through quarterly distributions. The WML credit agreement requires a debt service account and imposes timing and other restrictions on the ability of WML to distribute funds to WCC. Cash available from WML is affected beginning in 2011 by payments due in respect of principal on the WML term debt. Following the February 4, 2011 note offering described above, the Company expects that distributions from ROVA and WRI will comprise a significant source of liquidity. The cash at WRM is also available to the Company through dividends.

169

 

Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
     Consolidation Policy
     The Consolidated Financial Statements of Westmoreland Coal Company include the accounts of the Company and its controlled subsidiaries. The Company consolidates any variable interest entity, or VIE, for which the Company is considered the primary beneficiary. The Company provides for non-controlling interests in consolidated subsidiaries, in which the Company’s ownership is less than 100 percent. All intercompany accounts and transactions have been eliminated.
     A VIE is an entity that is unable to make significant decisions about its activities or does not have the obligation to absorb losses or the right to receive returns generated by its operations. If the entity meets one of these characteristics, then the Company must determine if it is the primary beneficiary of the VIE. The party exposed to the majority of the risks and rewards with the VIE is the primary beneficiary and must consolidate the entity.
     The Company has determined that at December 31, 2010, it was the primary beneficiary in Absaloka Coal LLC, a VIE, in which it holds less than a 50% ownership. As a result, the Company has consolidated this entity within the coal segment.
     Use of Estimates
     The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
     Cash and Cash Equivalents
     Cash and cash equivalents are stated at cost, which approximate fair value. Cash equivalents consist of highly liquid investments with original maturities of three months or less.
     Trade Receivables
     Trade receivables are recorded at the invoiced amount and do not bear interest. The Company evaluates the need for an allowance for doubtful accounts based on a review of collectability. The Company has determined that no allowance is necessary for trade receivables as of December 31, 2010 and 2009.
     Inventories
     Inventories, which include materials and supplies as well as raw coal, are stated at the lower of cost or market. Cost is determined using the average cost method. Coal inventory costs include labor, supplies, equipment, operating overhead and other related costs.
     Restricted Investments and Bond Collateral
     The Company has requirements to maintain restricted cash and investments for bonding and debt requirements. Amounts held are recorded as Restricted Investments and Bond Collateral. Funds in the restricted investment and bond collateral accounts are not available to meet the Company’s operating cash needs.
     Mine Development
     At existing surface operations, additional pits may be added to increase production capacity in order to meet customer requirements. These expansions may require significant capital to purchase additional equipment, relocate equipment, expand the workforce, build or improve existing haul roads and create the initial pre-production box cut to remove overburden for new pits at existing operations. If these pits operate in a separate and distinct area of the mine, the costs associated with initially uncovering coal for production are capitalized and amortized over the life of the developed pit consistent with coal industry practices. Once production has begun, mining costs are then expensed as incurred.

170

 

Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
     Where new pits are routinely developed as part of a contiguous mining sequence, the Company expenses such costs as incurred. The development of a contiguous pit typically reflects the planned progression of an existing pit, thus maintaining production levels from the same mining area utilizing the same employee group and equipment.
     Property, Plant and Equipment
     Property, plant and equipment are recorded at cost and includes long-term spare parts inventory. Expenditures that extend the useful lives of existing plant and equipment or increase productivity of the assets are capitalized. Maintenance and repair costs that do not extend the useful life or increase productivity of the asset are expensed as incurred. Coal reserves are recorded at cost, or at fair value in the case of acquired businesses.
     Coal reserves, mineral rights and mine development costs are depleted based upon estimated recoverable proven and probable reserves. Plant and equipment are depreciated on a straight-line basis over the assets’ estimated useful lives as follows:
         
    Years  
Buildings and improvements
     15 to 30  
Machinery and equipment
     3 to 36  
     Long-term spare parts inventory begins depreciation when placed in service.
     The Company assesses the carrying value of its property, plant and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability is measured by comparing estimated undiscounted cash flows expected to be generated from such assets to their net book value. If net book value exceeds estimated cash flows, the asset is written down to fair value. When an asset is retired or sold, its cost and related accumulated depreciation and depletion are removed from the accounts. The difference between the net book value of the asset and proceeds on disposition is recorded as a gain or loss. Fully depreciated plant and equipment still in use is not eliminated from the accounts.
     Reclamation Deposits and Contractual Third-Party Reclamation Receivables
     Certain of the Company’s customers have either agreed to reimburse the Company for reclamation expenditures as they are incurred or have pre-funded a portion of the expected reclamation costs. Amounts received from customers and held on deposit are recorded as reclamation deposits. Amounts that are reimbursable by customers are recorded as third-party reclamation receivables when the related reclamation obligation is recorded.
     Financial Instruments
     The Company evaluates all of its financial instruments to determine if such instruments are derivatives, derivatives that qualify for the normal purchase normal sale exception or instruments which contain features that qualify them as embedded derivatives. Except for derivatives that qualify for the normal purchase normal sale exception, all financial instruments are recognized in the balance sheet at fair value. Changes in fair value are recognized in earnings if they are not eligible for hedge accounting or Accumulated other comprehensive income (loss) if they qualify for cash flow hedge accounting.
     Held-to-maturity financial instruments consist of non-derivative financial assets with fixed or determinable payments and a fixed term, which the Company has the ability and intent to hold until maturity, and, therefore, accounts for them as held-to-maturity securities. Held-to-maturity securities are recorded at amortized cost, adjusted for the amortization or accretion of premiums or discounts calculated on the effective interest method. Interest income is recognized when earned.
     The Company has securities classified as available-for-sale, which are recorded at fair value. The changes in fair values are recorded as unrealized gains (losses) as a component of Accumulated other comprehensive loss in shareholder’s deficit.

171

 

Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
     The Company reviews its securities routinely for other-than-temporary impairment. The primary factors used to determine if an impairment charge must be recorded because a decline in value of the security is other than temporary include (i) whether the fair value of the investment is significantly below its cost basis, (ii) the financial condition of the issuer of the security, (iii) the length of time that the cost of the security has exceeded its fair value and (iv) the Company’s intent and ability to retain the investment for a period of time sufficient to allow for any anticipated recovery in market value. Other-than-temporary impairments are recorded as a component of Other income (expense).
     Intangible Assets and Liabilities
     Identifiable intangible assets or liabilities acquired in a business combination must be recognized and reported separately from goodwill. The Company has determined that its most significant acquired identifiable intangible assets and liabilities are related to sales and purchase agreements. Intangible assets result from more favorable market prices than contracted prices in sales and purchase agreements as measured during a business combination. Intangible liabilities result from less favorable market prices than contracted prices in sales and purchase agreements as measured during a business combination. The majority of these intangible assets and liabilities are amortized on a straight-line basis over the respective period of the sales and purchase agreements, while the remainder are amortized on a unit-of-production basis.
     Amortization of intangible assets recognized in Cost of sales was $1.7 million in 2010, $1.7 million in 2009, and $1.7 million in 2008. Amortization of intangible liabilities recognized in Revenues was $1.1 million in 2010, $1.4 million in 2009, and $1.1 million in 2008.
     The estimated aggregate amortization amounts from intangibles assets and liabilities for each of the next five years as of December 31, 2010 are as follows:
         
    Amortization  
    Expense (Revenue)  
    (In thousands)  
2011
   $ 657  
2012
     657  
2013
     657  
2014
     10  
2015
     (798 )
     Workers’ Compensation Benefits
     The Company is self-insured for workers’ compensation claims incurred prior to 1996. The liabilities for workers’ compensation claims are actuarially determined estimates of the ultimate losses incurred based on the Company’s experience. Adjustments to the probable ultimate liabilities are made annually based on subsequent developments and experience and are included in operations at the time of the revised estimate.
     The Company insures its current employees through third-party insurance providers and state arrangements.
     Black Lung Benefits
     The Company is self-insured for federal and state pneumoconiosis (black lung) benefits for former employees and has established an independent trust to pay these benefits. The Company accounts for these benefits on the accrual basis. An independent actuary annually calculates the present value of the accumulated black lung obligation. The underfunded status in 2010 of the Company’s obligation is included as Excess of pneumoconiosis benefit obligation over trust assets in the accompanying Consolidated Balance Sheets. Actuarial gains and losses are recognized in the period in which they arise.
     The Company insures its current represented employees through arrangements with its unions and its current non-represented employees are insured through third-party insurance providers.

172

 

Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
     Postretirement Health Care Benefits
     The Company accrues the cost to provide the benefits over the employees’ period of active service for postretirement benefits other than pensions. These costs are determined on an actuarial basis. The Company’s consolidated balance sheet reflects the unfunded status of postretirement benefit obligations.
     Pension and SERP Plans
     The Company accrues the cost to provide the benefits over the employees’ period of active service for the non-contributory defined benefit pension and SERP plans it sponsors. These costs are determined on an actuarial basis. The Company’s consolidated balance sheet reflects the unfunded status of the defined benefit pension and SERP plans.
     Deferred Revenue
     Deferred revenues represent funding received upon the negotiation of long-term contracts. The deferred revenues for coal will be recognized as deliveries of the reserved coal are made in accordance with the long-term coal contracts. Deferred power revenues are recognized on a pro rata basis, based on the payments estimated to be received over the remaining term of the power sales agreements.
     Asset Retirement Obligations
     The Company’s asset retirement obligation, or ARO, liabilities primarily consist of estimated costs to reclaim surface land and support facilities at its mines in accordance with federal and state reclamation laws as established by each mining permit.
     The Company estimates its ARO liabilities for final reclamation and mine closure based upon detailed engineering calculations of the amount and timing of the future costs for a third party to perform the required work. These estimates are based on projected pit configurations at the end of mining and are escalated for inflation, and then discounted at a credit-adjusted risk-free rate. The Company records an ARO asset associated with the initial recorded liability. The ARO asset is amortized based on the units of production method over the estimated recoverable, proven and probable reserves at the related mine, and the ARO liability is accreted to the projected settlement date. Changes in estimates could occur due to revisions of mine plans, changes in estimated costs, and changes in timing of the performance of reclamation activities.
     Income Taxes
     Deferred income taxes are provided for temporary differences arising from differences between the financial statement amount and tax basis of assets and liabilities existing at each balance sheet date using enacted tax rates anticipated to be in effect when the related taxes are expected to be paid or recovered. A valuation allowance is established if it is more likely than not that a deferred tax asset will not be realized. In determining the need for a valuation allowance, the Company considers projected realization of tax benefits based on expected levels of future taxable income, available tax planning strategies and its overall deferred tax position.
     Accounting guidance prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Under this guidance, a company can recognize the benefit of an income tax position only if it is more likely than not (greater than 50%) that the tax position will be sustained upon tax examination, based solely on the technical merits of the tax position. Guidance is also provided on the derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.
     The Company includes interest and penalties related to income tax matters in Income tax expense.
     The tax effect of pretax income or loss from continuing operations is generally determined by a computation that does not consider the tax effects of items that are not included in continuing operations. The exception to that incremental approach is that all items (for example, items recorded in other comprehensive income, extraordinary items, and discontinued operations) be considered in determining the amount of tax benefit that results from a loss from continuing operations and that shall be allocated to continuing operations.

173

 

Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
     Deferred Financing Costs
     The Company capitalizes costs incurred in connection with borrowings or establishment of credit facilities and issuance of debt securities. These costs are amortized as an adjustment to interest expense over the life of the borrowing or term of the credit facility using the effective interest method. These amounts are recorded in Other assets in the accompanying Consolidated Balance Sheets.
     Coal Revenues
     The Company recognizes coal sales revenue at the time title passes to the customer in accordance with the terms of the underlying sales agreements and after any contingent performance obligations have been satisfied. Coal sales revenue is recognized based on the pricing contained in the contracts in place at the time that title passes. Retroactive pricing adjustments to those contracts are recognized as revised agreements are reached with the customers and any performance obligations included in the revised agreements are satisfied.
     Power Revenues
     ROVA supplies power under long-term power sales agreements. Under these agreements, ROVA invoices and collects capacity payments based on kilowatt-hours produced if the units are dispatched or for the kilowatt-hours of available capacity if the units are not fully dispatched.
     A portion of the capacity payments under the agreements is considered to be an operating lease. The Company is recognizing amounts invoiced under the power sales agreements as revenue on a pro rata basis, based on the weighted average per kilowatt hour capacity payments estimated to be received over the remaining term of the power sales agreements. Under this method of recognizing revenue, $6.0 million of prior deferred revenue was recognized during 2010 while $11.2 million of amounts invoiced during 2009, were deferred from recognition. The Company began to recognize prior deferred revenue during 2010 at its smaller ROVA plant, and during 2009 at its larger ROVA plant.
     Other Operating Income (Loss)
     Other operating income in the accompanying Consolidated Results of Operations reflects income from sources other than coal or power revenues. Income from the Company’s Indian Coal Tax Credit monetization transaction is recorded as Other operating income.
     Exploration and Drilling Costs
     Exploration expenditures are charged to Cost of sales as incurred, including costs related to drilling and study costs incurred to convert or upgrade mineral resources to reserves.
     Share-Based Compensation
     Share-based compensation expense is generally measured at the grant date and recognized as expense over the vesting period of the entire award.
     Earnings (Loss) per Share
     Basic earnings (loss) per share have been computed by dividing the net income (loss) applicable to common shareholders by the weighted average number of shares of common stock outstanding during each period. Net income (loss) applicable to common shareholders includes the adjustment for net income or loss attributable to noncontrolling interest. Diluted earnings (loss) per share is computed by including the dilutive effect of common stock that would be issued assuming conversion or exercise of outstanding convertible notes, stock options, stock appreciation rights, restricted stock and warrants. No such items were included in the computation of diluted loss per share for the years ended 2010, 2009 or 2008 because the Company incurred a loss from operations in each of these periods and the effect of inclusion would have been anti-dilutive.

174

 

Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
     The table below shows the number of shares that were excluded from the calculation of diluted loss per share because their inclusion would be anti-dilutive to the calculation:
                         
    Years Ended December 31,  
    2010     2009     2008  
    (In thousands)  
Convertible notes and securities
     2,943       2,820       2,673  
Restricted stock units, stock options, SARs, and warrant shares
     630       779       870  
     
Total shares excluded from diluted shares calculation
     3,573       3,599       3,543  
     
     Accounting Pronouncements Adopted
     In January 2010, the FASB issued authoritative guidance, which requires additional disclosures and clarifies certain existing disclosure requirements regarding fair value measurements. This guidance is effective for interim and annual reporting periods beginning after December 15, 2009. The Company adopted this guidance effective January 1, 2010. However, none of the specific additional disclosures were applicable at December 31, 2010.
     On January 1, 2009, the Company adopted accounting guidance that clarifies how to determine whether certain instruments or features are indexed to an entity’s own stock. This guidance was effective for financial statements issued for fiscal years beginning after December 15, 2008 and interim periods within those fiscal years. The Company recorded a cumulative effect of change in accounting principles upon adoption of this guidance. See Note 9 for additional information.
     On January 1, 2009, the Company adopted accounting guidance that establishes accounting and reporting standards for (1) noncontrolling interests in partially owned consolidated subsidiaries and (2) the loss of control of subsidiaries. This guidance requires noncontrolling interests (minority interests) to be reported as a separate component of equity. The amount of net income or loss attributable to the noncontrolling interests will be included in consolidated net income or loss on the face of the income statement. In addition, this guidance requires that a parent recognize a gain or loss in net income or loss when a subsidiary is deconsolidated. Such gain or loss will be measured using the fair value of the noncontrolling equity investment on the deconsolidation date. This guidance also includes expanded disclosure requirements regarding the interests of the parent and its noncontrolling interest. The Company recorded $2.6 million and $1.8 million, respectively, of net loss attributable to noncontrolling interest for the years ended December 31, 2010 and December 31, 2009, which is reflected in the Company’s consolidated financial statements.
2. INVENTORIES
     Inventories consisted of the following:
                 
    December 31,  
    2010     2009  
    (In thousands)  
Coal
   $ 678     $ 1,158  
Materials and supplies
     23,474       25,713  
Reserve for obsolete inventory
     (581 )     (1,000 )
 
            
Total
   $ 23,571     $ 25,871  
 
            

175

 

Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
3. RESTRICTED INVESTMENTS AND BOND COLLATERAL
     The Company’s restricted investments and bond collateral consist of the following:
                 
    December 31,  
    2010     2009  
    (In thousands)  
Coal Segment:
                
Westmoreland Mining — debt reserve account
   $ 7,514     $ 5,064  
Reclamation bond collateral:
                
Rosebud Mine
     12,263       12,462  
Absaloka Mine
     10,956       9,228  
Jewett Mine
     3,001       1,502  
Beulah Mine
     1,270       1,270  
 
                
Power Segment:
                
Letter of credit account
     5,990       6,037  
Debt protection account
     905       2,067  
Repairs and maintenance account
     1,067       —  
Ash reserve account
     602       600  
 
                
Corporate Segment:
                
Workers’ compensation bonds
     6,350       6,118  
Postretirement medical benefit bonds
     5,466       3,840  
 
            
Total restricted investments and bond collateral
   $ 55,384     $ 48,188  
 
            
     For all of its restricted investments and bond collateral accounts, the Company can select investment options for the funds and receives the investment returns on these investments. Funds in the restricted investment and bond collateral accounts are not available to meet the Company’s cash needs. These restricted investments include holds held-to-maturity and available-for-sale securities.
     The Company’s carrying value and estimated fair value of its restricted investments and bond collateral at December 31, 2010 are as follows:
                 
    Carrying Value     Fair Value  
    (In thousands)  
Cash and cash equivalents
   $ 39,557     $ 39,557  
Time deposits
     10,266       10,266  
Held-to-maturity securities
     2,672       3,012  
Available-for-sale securities
     2,889       2,889  
 
            
 
   $ 55,384     $ 55,724  
 
            
     In 2010, the Company recorded a gain of $0.1 million on the sale of available-for-sale securities held as restricted investments and bond collateral. In 2009, an impairment of $0.2 million was recorded as a result of other-than-temporary declines in the value of marketable securities included in restricted investments and bond collateral.
     Coal Segment
     Pursuant to the terms of the Note Purchase Agreement dated June 26, 2008, WML must maintain a debt service reserve account. The debt service reserve account is required to contain funds sufficient to pay the principal, interest, and collateral agent’s fees scheduled to be paid in the following six months. The debt service reserve account was fully funded at December 31, 2010.
     As of December 31, 2010, the Company had reclamation bond collateral in place for its Absaloka, Rosebud, Jewett and Beulah Mines. These government-required bonds assure that coal-mining operations comply with applicable federal and state regulations relating to the performance and completion of final reclamation activities. The amounts deposited in the bond collateral account secure the bonds issued by the bonding company.

176

 

Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
     Power Segment
     Pursuant to the terms of its loan agreement with Prudential, ROVA was required to maintain either three or six months debt service reserves in its debt protection accounts, which was based on the calculation of its current debt service coverage ratio. Following the Parent Notes offering in February 2011, this is no longer required.
     The loan agreement required ROVA to fund an ash reserve account to $0.6 million. The ash reserve account was fully funded at December 31, 2010.
     The loan agreement also required ROVA to fund a repairs and maintenance account up to a maximum amount of $2.6 million. The funds for the repairs and maintenance account were required to be deposited every three months based on a formula contained in the agreement.
     Following the Parent Notes offering in February 2011, the debt protection, ash reserve, and repairs and maintenance accounts are no longer required and will be available for current operating needs.
     Corporate Segment
     The Company is required to obtain surety bonds in connection with its self-insured workers’ compensation plan and certain health care plans. The Company’s surety bond underwriters require collateral to issue these bonds.
     Held-to-Maturity and Available-for-Sale Restricted Investments and Bond Collateral
     The amortized cost, gross unrealized holding gains and losses and fair value of held-to-maturity securities are as follows:
                 
    December 31,  
    2010     2009  
    (In thousands)  
Amortized cost
   $ 2,672     $ 3,479  
Gross unrealized holding gains
     340       113  
Gross unrealized holding losses
     —       (2 )
 
            
Fair value
   $ 3,012     $ 3,590  
 
            
     Maturities of held-to-maturity securities are as follows at December 31, 2010:
                 
    Amortized Cost     Fair Value  
    (In thousands)  
Due in five years or less
   $ 652     $ 730  
Due after five years to ten years
     762       859  
Due in more than ten years
     1,258       1,423  
 
            
 
   $ 2,672     $ 3,012  
 
            
     The cost basis, gross unrealized holding gains and losses and fair value of available-for-sale securities are as follows:
                 
    December 31,  
    2010     2009  
    (In thousands)  
Cost basis
   $ 2,566     $ 2,625  
Gross unrealized holding gains
     323       281  
Gross unrealized holding losses
     —       (27 )
 
            
Fair value
   $ 2,889     $ 2,879  
 
            

177

 

Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
4. LINES OF CREDIT AND LONG-TERM DEBT
     The amounts outstanding under the Company’s lines of credit and long-term debt consisted of the following as of the dates indicated:
                 
    Total Debt Outstanding  
    December 31,  
    2010     2009  
    (In thousands)  
Westmoreland Mining, LLC:
                
Revolving line of credit
   $ 1,500     $ —  
Term debt
     125,000       125,000  
Capital lease obligations
     18,407       22,360  
Other term debt
     2,556       1,463  
Westmoreland Resources, Inc.:
                
Revolving line of credit
     16,900       16,400  
Term debt
     9,600       12,000  
Capital lease obligations
     7,821       9,864  
ROVA:
                
Term debt
     46,220       55,575  
Debt premiums
     428       880  
Corporate:
                
Convertible notes
     18,495       17,258  
Debt discount
     (4,823 )     (6,105 )
 
            
Total debt outstanding
     242,104       254,695  
Less current portion
     (14,973 )     (57,489 )
 
            
Total debt outstanding, less current portion
   $ 227,131     $ 197,206  
 
            
     The following table presents aggregate contractual debt maturities of all long-term debt and the lines of credit:
                 
            Subsequent  
    As of     to Parent  
    December 31,     Notes  
    2010     Offering  
    (In thousands)  
2011
   $ 42,298     $ 14,973  
2012
     32,732       21,512  
2013
     56,855       26,315  
2014
     34,435       22,565  
2015
     32,170       21,910  
Thereafter
     48,009       198,009  
 
            
Total
     246,499       305,284  
Less: debt discount
     (4,395 )     (7,500 )
 
            
Total debt
   $ 242,104     $ 297,784  
 
            
     Westmoreland Mining LLC
     WML has $125.0 million of fixed rate term debt outstanding at December 31, 2010. The term debt bears interest at 8.02% per annum, payable quarterly. The principal payments required for the term debt are $7.5 million in 2011, $14.0 million in 2012, $18.0 million in 2013, $18.0 million in 2014, $20.0 million in 2015, and $47.5 million thereafter. The term debt is payable in full on March 31, 2018.
     At December 31, 2010, WML has the 2001 Revolving Credit Agreement, or the Revolver, with a borrowing limit of $25.0 million and a maturity date of June 26, 2013. WML has two interest rate options to choose from on the Revolver. The Base Rate option bears interest at a base rate plus 0.50% and is payable monthly (3.75% per annum at December 31, 2010). The LIBOR Rate option bears interest at the London Interbank Offering Rate, or LIBOR, rate plus 3.0% (3.30% per annum at December 31, 2010). In addition, a commitment fee of 0.50% of the average unused portion of the available Revolver is

178

 

Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
payable quarterly. At December 31, 2010, the Revolver had an outstanding balance of $1.5 million and also supported a $1.9 million letter of credit. The Company had $21.6 million of unused borrowings under the Revolver.
     The term debt and Revolver are secured by substantially all assets of WML, Westmoreland Savage Corporation, or WSC, Western Energy Company, or WECO, and Dakota Westmoreland Corporation, or DWC; the Company’s membership interest in WML; and the stock of WSC, WECO and DWC. WECO, DWC, and WSC have guaranteed WML’s obligations with respect to the term debt and the Revolver. The credit agreement requires a debt service account and imposes timing and other restrictions on the ability of WML to distribute funds to the Parent.
     WML’s lending arrangements contain, among other conditions, events of default and various affirmative and negative covenants. As of December 31, 2010, WML was in compliance with all covenants. The Company expects to meet all WML covenant requirements in 2011.
     WML engages in leasing transactions for equipment utilized in its mining operations. At December 31, 2010 and 2009, the capital leases outstanding had a weighted average interest rate of 7.96% and 7.74%, respectively. WML also had other term debt outstanding at December 31, 2010 and 2009, with weighted average interest rate of 6.14% for both years.
     Westmoreland Resources, Inc.
     In December 2010, WRI’s Business Loan Agreement was amended and the $20.0 million revolving line of credit was extended through December 18, 2011. The interest rate for the term debt and the revolver were payable at the prime rate. The term debt and the revolver were both subject to a per annum 8.0% and 7.0% floor, respectively. As described in Note 1, the outstanding balance of the term debt and the revolving line of credit were repaid and the revolving line of credit was terminated in February 2011.
     At December 31, 2010, the Company had $3.1 million of unused borrowings under the revolver. The revolver did not have commitment fees for the unused portion of the available revolving loan.
     The two debt instruments were collateralized by a first lien in WRI’s inventory, chattel paper, accounts and notes receivable, and equipment. WCC was the guarantor of the debt under the Agreement and its guaranty was secured by a pledge of WCC’s interest in WRI.
     WRI’s Business Loan Agreement required it to comply with numerous covenants and minimum financial ratio requirements primarily related to debt coverage, tangible net worth, capital expenditures, and its operations. Primarily as a result of unfavorable market conditions driving decreases in tonnages sold, WRI was not in compliance with a net worth requirement contained in its Business Loan Agreement at April 30, 2010. As a result of this non-compliance, the interest rates on WRI’s term debt and revolving line of credit were increased 1% (to 8% and 7%, respectively at December 31, 2010). As of December 31, 2010, WRI was in compliance with all covenants, with the exception of the net worth requirement.
     WRI leases equipment utilized in its operations at the Absaloka Mine. The weighted average interest rate for these capital leases outstanding at December 31, 2010 and 2009 was 6.65% and 7.60%, respectively.
     ROVA
     At December 31, 2010, ROVA’s outstanding fixed rate term debt had interest rates varying from 6.0% to 11.42%. The weighted average interest rate on the fixed rate term debt at December 31, 2010 and 2009 was 9.93% and 10.0%, respectively. As described in Note 1, the outstanding balance of the fixed rate term debt was repaid in February 2011.
     ROVA had a $6.0 million revolving loan with interest payable quarterly at the three-month LIBOR rate plus 1.375% (1.68% per annum at December 31, 2010). In addition, a commitment fee of 1.375% of the unused portion of the available revolving loan was payable quarterly. At December 31, 2010, the Company had $6.0 million of unused borrowings under the revolver. ROVA’s revolving line of credit was terminated as part of the Parent Notes offering described in Note 1.
     The term debt as well as the revolving loan were secured by a pledge of the quarterly cash distributions from ROVA. ROVA was required to comply with certain loan covenants related to interest and fixed charge coverage. As of December 31, 2010, ROVA was in compliance with such covenants.

179

 

Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
     Convertible Debt
     On March 4, 2008, the Company completed the sale of $15.0 million in senior secured convertible notes to an existing shareholder pursuant to a Note Purchase Agreement. The notes had an interest rate of 10.0% per annum. Interest on the notes was payable monthly in cash or in kind by increasing the principal amount of each note at the Company’s option. The number of shares of common stock into which the notes could be converted increased in the circumstances specified in the Note Purchase Agreement, including the Company’s payment of interest on the notes in kind and the issuance of additional securities at a price less than the conversion price of the notes then in effect. The Company paid interest in kind through the issuance of $1.2 million of additional notes during 2010. This resulted in an additional 123,644 shares of common stock being issuable on conversion of the convertible notes at a conversion price of $10.00 per share, bringing the total to 1,849,453 shares at December 31, 2010. As described in Note 1, the convertible notes were retired in February 2011.
     The convertible notes were secured by a second lien on the assets of WRI.
     The note purchase agreement contained affirmative and negative covenants. WRI’s non-compliance with the net worth requirement in its Business Loan Agreement triggered a cross default in the Company’s convertible notes. On August 2, 2010, the Company obtained a waiver from its lenders regarding this cross default. In consideration of this waiver, the interest rate on the convertible notes increased 1% on July 1, 2010 to 10%. As of December 31, 2010, the Company was in compliance with all covenants, with the exception of the cross default that had been waived.
5. POSTRETIREMENT MEDICAL BENEFITS
     The Company provides postretirement medical benefits to retired employees and their dependents, mandated by the Coal Industry Retiree Health Act of 1992 and pursuant to collective bargaining agreements. The Company also provides these benefits to qualified full-time employees pursuant to collective bargaining agreements. These benefits are provided through self-insured programs.
     In 2009, plan amendments, which modernized how the Company provides prescription drug benefits to retirees, favorable claims experience, favorable interest rates, and reductions in administrative fees resulted in a $95.3 million reduction in the Company’s postretirement medical obligation with a corresponding decrease in Accumulated other comprehensive loss.
     In March 2010, the Patient Protection and Affordable Care Act, or PPACA was enacted, potentially impacting the Company’s costs to provide healthcare benefits to its retired employees. The PPACA has both short-term and long-term implications on healthcare benefit plan standards. Implementation of this legislation is planned to occur in phases, with plan standard changes taking effect beginning in 2010, but to a greater extent with the 2011 benefit plan year and extending through 2018. Beginning in 2018, the PPACA will impose a 40% excise tax on employers to the extent that the value of their healthcare plan coverage exceeds certain dollar thresholds. As a result, the Company has increased its postretirement medical benefit obligation at December 31, 2010 by $6.9 million with a corresponding increase in Accumulated other comprehensive loss. The Company will continue to evaluate the impact of the PPACA in future periods as additional information, interpretations and guidance becomes available.
     In addition to the $6.9 million increase in the Company’s postretirement medical obligation at December 31, 2010 due to the PPACA, an additional increase of $16.3 million occurred as a result of changes in discount rates and claims experience. As a result, the Company had a corresponding increase in Accumulated other comprehensive loss.

180

 

Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
     The following table sets forth the actuarial present value of postretirement medical benefit obligations and amounts recognized in the Company’s financial statements:
                 
    December 31,  
    2010     2009  
    (In thousands)  
Change in benefit obligations:
                
Net benefit obligation at beginning of year
   $ 190,223     $ 284,851  
Service cost
     539       735  
Interest cost
     10,498       16,233  
Plan participant contributions
     153       140  
Actuarial (gain) loss
     23,195       (60,155 )
Gross benefits paid
     (14,797 )     (17,816 )
Federal subsidy on benefits paid
     1,049       1,315  
Plan amendments
     —       (35,080 )
 
            
Net benefit obligation at end of year
     210,860       190,223  
 
            
 
                
Change in plan assets:
                
Employer contributions
     14,644       17,676  
Plan participant contributions
     153       140  
Gross benefits paid
     (14,797 )     (17,816 )
 
            
Fair value of plan assets at end of year
     —       —  
 
            
Unfunded status at end of year
   $ (210,860 )   $ (190,223 )
 
            
 
                
Amounts recognized in the balance sheet consist of:
                
Current liabilities
   $ (13,581 )   $ (14,501 )
Noncurrent liabilities
     (197,279 )     (175,722 )
Accumulated other comprehensive loss (gain)
     8,336       (15,134 )
 
            
Net amount recognized
   $ (202,524 )   $ (205,357 )
 
            
 
                
Amounts recognized in accumulated other comprehensive loss consists of:
                
Net actuarial loss (gain)
   $ 15,777     $ (7,151 )
Prior service credit
     (7,627 )     (8,262 )
Transition obligation
     186       279  
 
            
 
   $ 8,336     $ (15,134 )
 
            
     The Company has elected to amortize its unrecognized, unfunded accumulated postretirement medical benefit obligation over a 20-year period. Transition obligations, prior service costs and credits, and actuarial gains and losses are amortized over the average life expectancy of the plan’s participants. The transition obligation, actuarial loss and prior service credit that will be amortized from accumulated other comprehensive loss into net periodic pension cost in 2011 are less than $0.1 million, $0.3 million, and $0.6 million, respectively.

181

 

Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
     The components of net periodic postretirement medical benefit cost are as follows:
                         
    Years Ended December 31,  
    2010     2009     2008  
    (In thousands)  
Components of net periodic benefit cost:
                        
Service cost
   $ 539     $ 735     $ 677  
Interest cost
     10,498       16,233       17,107  
Amortization of:
                        
Transition obligation
     93       3,381       3,613  
Prior service cost (credit)
     (636 )     924       1,325  
Actuarial loss
     268       2,774       3,381  
 
                  
Total net periodic benefit cost
   $ 10,762     $ 24,047     $ 26,103  
 
                  
     The following table shows the net periodic postretirement medical benefit costs that relate to current and former mining operations:
                         
    Years Ended December 31,  
    2010     2009     2008  
    (In thousands)  
Former mining operations
   $ 9,225     $ 22,186     $ 24,553  
Current operations
     1,537       1,861       1,550  
 
                  
Total net periodic benefit cost
   $ 10,762     $ 24,047     $ 26,103  
 
                  
     The costs for the former mining operations are included in Heritage health benefit expenses and the costs for current operations are included as operating expenses.
     Assumptions
     The weighted-average assumptions used to determine the benefit obligations as of the end of each year were as follows:
                 
    December 31,
    2010   2009
Discount rate
     5.15 %     5.71 %
Measurement date
   December 31, 2010   December 31, 2009
     The discount rate is adjusted annually based on an Aa corporate bond index adjusted for the difference in the duration of the bond index and the duration of the benefit obligations. This rate is calculated using a yield curve, which is developed using the average yield for bonds in the tenth to ninetieth percentiles, which excludes bonds with outlier yields.
     The weighted-average assumptions used to determine net periodic benefit cost were as follows:
                         
            December 31,    
    2010   2009   2008
Discount rate
     5.71 %     5.45% - 6.05 %     6.10 %
Measurement date
   December 31, 2009   December 31, 2008   December 31, 2007

182

 

Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
     The following presents information about the assumed health care trend rate:
                 
    Year Ended December 31,  
    2010     2009  
Health care cost trend rate assumed for next year
     7.50 %     8.00 %
Rate to which the cost trend is assumed to decline (ultimate trend rate)
     5.00 %     5.00 %
Year that the trend rate reaches the ultimate trend rate
     2016       2016  
     The effect of a one percent change on the health care cost trend rate used to calculate periodic postretirement medical benefit costs and the related benefit obligation are summarized in the table below:
                 
    Postretirement Medical Benefits  
    1 % Increase     1 % Decrease  
    (In thousands)  
Effect on service and interest cost components
   $ 1,282     $ (1,079 )
Effect on postretirement medical benefit obligation
   $ 22,565     $ (19,116 )
     Cash Flows
     The following benefit payments and Medicare D subsidy (which the Company receives as a benefit partially offsetting its prescription drug costs for retirees and their dependents) are expected by the Company:
                         
    Postretirement   Medicare D   Net Postretirement
    Medical Benefits   Subsidy   Medical Benefits
    (In thousands)  
2011
  $ 14,734     $ (1,153 )   $ 13,581  
2012
    15,088       (1,215 )     13,873  
2013
    15,428       (1,270 )     14,158  
2014
    15,617       (1,318 )     14,299  
2015
    15,903       (1,350 )     14,553  
Years 2016 — 2020
    78,962       (7,201 )     71,761  
     Combined Benefit Fund
     Additionally, the Company makes payments to the UMWA Combined Benefit Fund, or CBF, which is a multiemployer health plan neither controlled by nor administered by the Company. The CBF is designed to pay health care benefits to UMWA workers (and dependents) who retired prior to 1976. The Company is required by the Coal Act to make monthly premium payments into the CBF. These payments are based on the number of the Company’s UMWA employees who retired prior to 1976, and the Company’s pro-rata assigned share of UMWA retirees whose companies are no longer in business. The Company expenses payments to the CBF when they are due. Payments in 2010, 2009 and 2008 were $3.0 million, $3.1 million and $3.5 million, respectively.
     Workers’ Compensation Benefits
     The Company was self-insured for workers’ compensation benefits prior to January 1, 1996. Since 1996, the Company has purchased third-party insurance for workers’ compensation claims.

183

 

Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
     The following table shows the changes in the Company’s workers’ compensation obligation:
                 
    December 31,  
    2010     2009  
    (In thousands)  
Workers’ compensation , beginning of year (including current portion)
   $ 11,219     $ 12,838  
Accretion
     429       300  
Claims paid
     (633 )     (806 )
Actuarial changes
     (637 )     (1,113 )
 
            
Workers’ compensation, end of year
     10,378       11,219  
Less current portion
     (954 )     (1,031 )
 
            
Workers’ compensation, less current portion
   $ 9,424     $ 10,188  
 
            
     The discount rates used in determining the workers’ compensation benefit accruals are adjusted annually based on ten-year Treasury bond rates. At December 31, 2010 and 2009, the rates were 3.60% and 4.10%, respectively.
     Pneumoconiosis (Black Lung) Benefits
     The Company is self-insured for federal and state pneumoconiosis benefits for former employees and has established an independent trust to pay these benefits.
     The PPACA amended previous legislation related to black lung disease, providing automatic extension of awarded lifetime benefits to surviving spouses and providing changes to the legal criteria used to assess and award claims. Since the legislation passed in March 2010, the Company has experienced a significant increase in claims filed compared to the corresponding period in prior years. However, the Company has not been able to determine what, if any, additional impact may result from these claims due to lack of claims experience under the new legislation and court rulings interpreting the new provisions. The Company will continue to evaluate the impact of the PPACA in future periods as additional information, interpretations, guidance and claims experience becomes available.
     The following table sets forth the funded status of the Company’s black lung obligation:
                 
    December 31,  
    2010     2009  
    (In thousands)  
Actuarial present value of benefit obligation:
                
Expected claims from terminated employees
   $ 949     $ 937  
Amounts owed to existing claimants
     13,108       13,723  
 
            
Total present value of benefit obligation
     14,057       14,660  
Plan assets at fair value, primarily government-backed securities
     11,811       13,874  
 
            
Excess of the pneumoconiosis benefit obligation over trust assets
   $ (2,246 )   $ (786 )
 
            
     The underfunded status of the Company’s 2010 and 2009 obligation is included as Excess of pneumoconiosis benefit obligation over trust assets in the accompanying Consolidated Balance Sheets.
     The discount rates used in determining the actuarial present value of the pneumoconiosis benefit obligation are based on corporate bond yields and are adjusted annually. At December 31, 2010 and 2009, the rates used were 4.60% and 5.20%, respectively.

184

 

Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
     Plan Assets
     The fair value of the Company’s Black Lung trust assets by asset category is as follows:
                         
    Year Ended December 31, 2010  
            Quoted Prices     Significant  
            in Active     Other  
            Markets for     Observable  
            Identical Assets     Inputs  
    Fair Value     Level 1     Level 2  
            (In thousands)          
U.S. treasury securities
   $ 10,416     $ —     $ 10,416  
Mortgage-backed securities
     682       —       682  
Cash and cash equivalents
     713       713       —  
 
                  
 
   $ 11,811     $ 713     $ 11,098  
 
                  
                         
    Year Ended December 31, 2009  
            Quoted Prices     Significant  
            in Active     Other  
            Markets for     Observable  
            Identical Assets     Inputs  
    Fair Value     Level 1     Level 2  
    (In thousands)  
U.S. treasury securities
   $ 12,860     $ —     $ 12,860  
Mortgage-backed securities
     839       —       839  
Cash and cash equivalents
     175       175       —  
 
                  
 
   $ 13,874     $ 175     $ 13,699  
 
                  
     The Black Lung Level 1 trust assets include cash and cash equivalents.
     The Black Lung Level 2 trust assets include U.S. treasury bonds and notes where evaluators gather information from market sources and integrate relative credit information, observed market movements, and sector news into the evaluated pricing applications and models to value these assets. Level 2 trust assets also include mortgage-backed securities which are valued via model using various inputs such as daily cash flow, snapshots of US Treasury market, floating rate indices as a benchmark yield, spread over index, periodic and life caps, next coupon adjustment date, and convertibility of the bond.
6. PENSION AND OTHER SAVING PLANS
     Defined Benefit Pension Plans
     The Company provides defined benefit pension plans to qualified full-time employees pursuant to collective bargaining agreements. Benefits are generally based on years of service and the employee’s average annual compensation for the highest five continuous years of employment as specified in the plan agreement. The Company’s funding policy is to contribute annually the minimum amount prescribed, as specified by applicable regulations or loan covenants.
     Effective July 1, 2009, the Company froze its pension plan for non-represented employees and, as a result, future benefits will no longer accrue under this plan. The Company recorded a $10.7 million decrease in its pension liability with a corresponding decrease in Accumulated other comprehensive loss.

185

 

Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
     Supplemental Executive Retirement Plan
     The Company maintains a Supplemental Executive Retirement Plan or SERP for former executives as a result of employment or severance agreements. The SERP is an unfunded non-qualified deferred compensation plan, which provides benefits to certain employees beyond the maximum limits imposed by the Employee Retirement Income Security Act and the Internal Revenue Code. The Company does not expect to add new participants to its SERP plan.
     The following table provides a reconciliation of the changes in the benefit obligations of the plans and the fair value of assets of the qualified plans and the amounts recognized in the Company’s financial statements for both the defined benefit pension and SERP plans:
                                 
    Defined Benefit Pension     SERP  
    December 31,     December 31,  
    2010     2009     2010     2009  
    (In thousands)  
Change in benefit obligation:
                                
Net benefit obligation at beginning of year
   $ 76,084     $ 76,672     $ 3,200     $ 3,279  
Service cost
     610       1,577       —       —  
Interest cost
     4,490       4,650       183       191  
Actuarial loss
     7,025       3,171       175       36  
Benefits paid
     (2,762 )     (1,610 )     (306 )     (306 )
Plan amendments
     —       204       —       —  
Curtailments
     —       (8,580 )     —       —  
 
                        
Net benefit obligation at end of year
     85,447       76,084       3,252       3,200  
 
                        
 
                                
Change in plan assets:
                                
Fair value of plan assets at the beginning of year
     52,152       40,783       —       —  
Actual return on plan assets
     7,732       7,196       —       —  
Employer contributions
     10,811       5,782       306       306  
Benefits paid
     (2,762 )     (1,610 )     (306 )     (306 )
 
                        
Fair value of plan assets at end of year
     67,933       52,151       —       —  
 
                        
Funded status at end of year
   $ (17,514 )   $ (23,933 )   $ (3,252 )   $ (3,200 )
 
                        
 
                                
Amounts recognized in the accompanying balance sheet consist of:
                                
Current liability
   $ —     $ —     $ (304 )   $ (306 )
Noncurrent liability
     (17,514 )     (23,933 )     (2,948 )     (2,894 )
Accumulated other comprehensive loss
     22,946       20,542       770       625  
 
                        
Net amount recognized at end of year
   $ 5,432     $ (3,391 )   $ (2,482 )   $ (2,575 )
 
                        
 
                                
Amounts recognized in accumulated other comprehensive loss consist of:
                                
Net actuarial loss
   $ 22,946     $ 20,542     $ 765     $ 610  
Prior service costs
     —       —       5       15  
 
                        
 
   $ 22,946     $ 20,542     $ 770     $ 625  
 
                        
     The accumulated benefit obligation for all plans was $88.7 million and $79.3 million at December 31, 2010 and 2009, respectively. There is no difference between the accumulated benefit obligation and the benefit obligation in 2010 or 2009 due to the pension plan freeze mentioned above.

186

 

Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
     Prior service costs and actuarial gains and losses are amortized over the expected future period of service of the plan’s participants using the corridor method. The net actuarial loss and prior service costs that will be amortized from accumulated other comprehensive loss into net periodic benefit cost in 2011 is $1.5 million and less than $0.1 million, respectively.
     The components of net periodic benefit cost are as follows:
                                                 
    Defined Benefit Pension             SERP          
    Years Ended December 31,     Years Ended December 31,  
    2010     2009     2008     2010     2009     2008  
                    (In thousands)                  
Components of net periodic benefit cost:
                                                
Service cost
   $ 610     $ 1,577     $ 2,597     $ —     $ —     $ —  
Interest cost
     4,490       4,650       4,390       183       191       198  
Expected return on plan assets
     (4,393 )     (3,359 )     (4,416 )     —       —       —  
Curtailment loss
     —       204       —       —       —       —  
Amortization of:
                                                
Prior service cost
     —       —       —       10       10       10  
Actuarial loss
     1,282       1,817       340       20       18       11  
 
                                    
Total net periodic pension cost
   $ 1,989     $ 4,889     $ 2,911     $ 213     $ 219     $ 219  
 
                                    
     These costs are included in the accompanying statement of operations in Cost of sales and Selling and administrative expenses.
     Assumptions
     The weighted-average assumptions used to determine the benefit obligations as of the end of each year were as follows:
                                 
    Defined Benefit Pension   SERP
    December 31,   December 31,
    2010   2009   2010   2009
             
Discount rate
     5.15% - 5.40 %     5.96 %     5.40 %     6.00 %
Rate of compensation increase
     N/A       N/A       N/A       N/A  
Measurement date
   December 31, 2010   December 31, 2009   December 31, 2010   December 31, 2009
     The discount rate is adjusted annually based on an Aa corporate bond index adjusted for the difference in the duration of the bond index and the duration of the benefit obligations. This rate is calculated using a yield curve, which is developed using the average yield for bonds in the tenth to ninetieth percentiles, which excludes bonds with outlier yields.
     The following table provides the assumptions used to determine net periodic benefit cost:
                                                 
    Defined Benefit Pension   SERP  
    Years Ended December 31,   Years Ended December 31,
    2010   2009   2008   2010   2009   2008
                             
Discount rate
     5.75%-6.00 %     6.10 %     6.20%-6.30 %     6.00 %     6.10 %     6.30 %
Expected return on plan assets
     7.80 %     7.96 %     8.50 %     N/A       N/A       N/A  
Rate of compensation increase
     N/A       4.00%-7.50 %     4.00%-7.50 %     N/A       4.00%-7.50 %     4.00%-7.50 %
Measurement date
   December 31, 2009   December 31, 2008   December 31, 2007   December 31, 2009   December 31, 2008   December 31, 2007

187

 

Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
     Plan Assets
     The Company’s investment goals are to maximize returns subject to specific risk management policies. The Company sets the expected return on plan assets based on historical trends and forecasts provided by its third-party fund managers. Its risk management policies permit investments in mutual funds, and prohibit direct investments in debt and equity securities and derivative financial instruments. The Company invested in its common stock in 2010 in order to meet plan funding requirements. The Company addresses diversification by the use of mutual fund investments whose underlying investments are in fixed income and equity securities, both domestic and international. These mutual funds are readily marketable and can be sold to fund benefit payment obligations as they become payable.
     The weighted-average target asset allocation of the Company’s pension trusts were as follows at December 31, 2010:
         
    Target  
    Allocation  
Asset category
        
Cash and equivalents
     0% - 10 %
Equity securities funds
     40% - 70 %
Debt securities funds
     30% - 60 %
Other
     0% - 10 %
Total
        
     The fair value of the Company’s pension plan assets by asset category is as follows:
                                 
    Year Ended December 31, 2010  
            Quoted              
            Prices in              
            Active     Significant        
            Markets for     Other     Significant  
            Identical     Observable     Unobservable  
            Assets     Inputs     Inputs  
    Fair Value     Level 1     Level 2     Level 3  
            (In thousands)          
Equity securities funds:
                                
U.S.
   $ 29,233     $ 29,233     $ —     $ —  
International
     6,659       6,659       —       —  
Debt securities funds:
                                
U.S. bonds
     22,736       —       22,736       —  
Short-term securities
     1,313       1,313       —       —  
Limited partnerships and limited liability companies
     1,359       —       —       1,359  
Westmoreland Coal common stock
     6,045       6,045       —       —  
Cash and cash equivalents
     588       588       —       —  
 
                        
 
   $ 67,933     $ 43,838     $ 22,736     $ 1,359  
 
                        

188

 

Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
                                 
    Year Ended December 31, 2009  
            Quoted              
            Prices in              
            Active     Significant        
            Markets for     Other     Significant  
            Identical     Observable     Unobservable  
            Assets     Inputs     Inputs  
    Fair Value     Level 1     Level 2     Level 3  
            (In thousands)          
Equity securities funds:
                                
U.S.
   $ 24,850     $ 24,850     $ —     $ —  
International
     2,467       2,467       —       —  
Debt securities funds:
                                
U.S. bonds
     15,065       —       15,065       —  
Short-term securities
     967       967       —       —  
Limited partnerships and limited liability companies
     1,697       —       —       1,697  
Westmoreland Coal common stock
     3,240       3,240       —       —  
Cash and cash equivalents
     3,865       3,865       —       —  
 
                        
 
   $ 52,151     $ 35,389     $ 15,065     $ 1,697  
 
                        
     The Company’s Level 1 assets include domestic and foreign equity securities funds and its common stock, which is typically valued using quoted market prices of a national exchange. Cash and cash equivalents and short-term investments are predominantly held in money market accounts.
     The Company’s Level 2 assets include U.S. bond funds, which contain primarily domestic fixed-income securities that are valued using inputs such as benchmark yields, reported trades, broker/dealer quotes and issuer spreads.
     The Company’s Level 3 assets include interest in limited partnerships and limited liability companies that invest in privately held companies or privately held real estate assets. Due to the private nature of the partnership investments, pricing inputs are not readily observable. Assets valuations are developed by the general partners that manage the partnerships. These valuations are based on property appraisals, application of public market multiples to private company cash flows, utilization of market transactions that provide valuation information for comparable companies and other methods.
     A summary of changes in the fair value of the Plan’s Level 3 assets is shown below:
                 
    Limited partnerships and limited  
    liability companies  
    Year Ended December 31,  
    2010     2009  
    (In thousands)  
Beginning balance
   $ 1,697     $ 5,866  
Realized loss
     —       (283 )
Unrealized (loss) gain
     197       (234 )
Settlements
     (535 )     (3,652 )
 
            
Ending balance
   $ 1,359     $ 1,697  
 
            

189

 

Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
     Contributions
     The Company is required by loan covenants to ensure that by 8.5 months after the end of the plan year, the value of its pension assets are at least 90% of each of the plan’s year end actuarially determined pension liability.
     The Company contributed $5.8 million in cash and $5.0 million in company stock to its retirement plans during 2010, in order to achieve the required 90% funding status. In 2011, the Company expects to make approximately $10.2 million of pension plan contributions in cash. The increase in expected contributions primarily resulted from the recent decline in the value of the Company’s pension investments.
     Cash Flows
     The following benefit payments are expected to be paid from its pension plan assets:
         
    Pension Benefits  
    (In thousands)  
2011
   $ 2,674  
2012
     3,049  
2013
     3,476  
2014
     3,899  
2015
     4,277  
Years 2016 - 2020
     27,412  
     The benefits expected to be paid are based on the same assumptions used to measure the Company’s pension benefit obligation at December 31, 2010 and include estimated future employee service.
     Multi-Employer Pension
     The Company contributes to a multiemployer defined benefit pension plan pursuant to collective bargaining agreements. The contributions are based on hours worked and totaled $4.5 million, $4.3 million and $4.6 million for the years ended December 31, 2010, 2009 and 2008, respectively.
     Other Plans
     The Company sponsors 401(k) saving plans, which were established to assist eligible employees provide for their future retirement needs. The Company’s expense, representing its contributions of Company stock to the plans, was $2.7 million, $2.4 million and $1.5 million for the years ended December 31, 2010, 2009 and 2008, respectively.
7. HERITAGE HEALTH BENEFIT EXPENSES
     The caption Heritage health benefit expenses used in the Consolidated Statements of Operations refers to costs of benefits the Company provides to its former mining operation employees. The components of these expenses are as follows:
                         
    Years Ended December 31,  
    2010     2009     2008  
    (In thousands)  
Health care benefits
   $ 9,927     $ 22,490     $ 25,588  
Combined benefit fund payments
     2,953       3,132       3,470  
Workers’ compensation benefits (credit)
     81       (485 )     4,417  
Black lung benefits (credit)
     1,460       2,937       (23 )
 
                  
Total
   $ 14,421     $ 28,074     $ 33,452  
 
                  
     The decrease in heritage health benefit expenses was primarily due to an agreement the Company entered into to modernize how it provides prescription drug benefits to retirees.

190

 

Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
8.   ASSET RETIREMENT OBLIGATIONS, CONTRACTUAL THIRD-PARTY RECLAMATION RECEIVABLE, AND RECLAMATION DEPOSITS
     The asset retirement obligation, contractual third-party reclamation receivable, and reclamation deposits for each of the Company’s mines and ROVA at December 31, 2010 are summarized below:
                         
            Contractual        
    Asset     Third-Party        
    Retirement     Reclamation     Reclamation  
    Obligation     Receivable     Deposits  
    (In thousands)  
Rosebud
   $ 106,990     $ 14,622     $ 72,274  
Jewett
     80,335       80,335       —  
Absaloka
     32,338       525       —  
Beulah
     18,588       —       —  
Savage
     2,676       —       —  
ROVA
     716       —       —  
 
                  
Total
   $ 241,643     $ 95,482     $ 72,274  
 
                  
     Asset Retirement Obligations
     Changes in the Company’s asset retirement obligations were as follows:
                 
    Years Ended December 31,  
    2010     2009  
    (In thousands)  
Asset retirement obligations, beginning of year (including current portion)
   $ 244,615     $ 222,708  
Accretion
     19,773       17,436  
Liabilities settled
     (15,351 )     (9,434 )
Changes due to amount and timing of reclamation
     (7,394 )     13,905  
 
            
Asset retirement obligations, end of year
     241,643       244,615  
Less current portion
     (14,514 )     (15,513 )
 
            
Asset retirement obligations, less current portion
   $ 227,129     $ 229,102  
 
            
     As permittee, the Company or its subsidiaries are responsible for the total amount of final reclamation costs for its mines and ROVA. The financial responsibility for a portion of final reclamation of the mines when they are closed has been transferred by contract to certain customers, while other customers have provided guarantees or funded escrow accounts to cover final reclamation costs. Costs of reclamation of mining pits prior to mine closure are recovered in the price of coal shipped.
     As of December 31, 2010, the Company had $230.4 million in surety bonds outstanding to secure reclamation obligations.
     Contractual Third-Party Reclamation Receivables
     The Company has recognized as an asset $95.5 million as contractual third-party reclamation receivables, representing the present value of customer obligations to reimburse the Company for reclamation expenditures at the Company’s Rosebud, Jewett and Absaloka Mines.
     During 2010, the Company increased its Contractual third-party reclamation receivables by $9.0 million due to a customer reclamation settlement. A corresponding decrease was recorded to Capitalized asset retirement cost.

191

 

Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
     Reclamation Deposits
     The Company’s reclamation deposits will be used to fund final reclamation activities. The Company’s carrying value and estimated fair value of its reclamation deposits at December 31, 2010, are as follows:
                 
    Carrying Value     Fair Value  
    (In thousands)  
Cash and cash equivalents
   $ 38,534     $ 38,534  
Held-to-maturity securities
     15,633       17,044  
Time deposits
     15,903       15,903  
Available-for-sale securities
     2,204       2,204  
 
            
 
   $ 72,274     $ 73,685  
 
            
     In 2010, the Company recorded a $0.6 million gain on the sale of available-for-sale securities held as reclamation deposits. In 2009, an impairment of $0.3 million was recorded as a result of other-than-temporary declines in the value of marketable securities included in reclamation deposits.
     Held-to-Maturity and Available-for-Sale Reclamation Deposits
     The amortized cost, gross unrealized holding gains and losses and fair value of held-to-maturity securities are as follows:
                 
    Years Ended December 31,  
    2010     2009  
    (In thousands)  
Amortized cost
   $ 15,633     $ 21,099  
Gross unrealized holding gains
     1,453       1,418  
Gross unrealized holding losses
     (42 )     (9 )
 
            
Fair value
   $ 17,044     $ 22,508  
 
            
     Maturities of held-to-maturity securities are as follows at December 31, 2010:
                 
    Amortized Cost     Fair Value  
    (In thousands)  
Due in five years or less
   $ 3,350     $ 3,732  
Due after five years to ten years
     4,207       4,335  
Due in more than ten years
     8,076       8,977  
 
            
 
   $ 15,633     $ 17,044  
 
            
     The cost basis, gross unrealized holding gains and fair value of available-for-sale securities are as follows:
                 
    December 31,  
    2010     2009  
    (In thousands)  
Cost basis
   $ 2,000     $ 2,402  
Gross unrealized holding gains
     204       712  
 
            
Fair value
   $ 2,204     $ 3,114  
 
            

192

 

Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
9.   DERIVATIVE INSTRUMENTS
     Adoption of ASC 815-40
     On January 1, 2009, the Company adopted ASC 815-40, Determining Whether an Instrument (or Embedded Feature) is Indexed to an Entity’s Own Stock. As part of the adoption of ASC 815-40, the Company determined that its convertible debt instrument is not indexed to its stock, and therefore the value of the conversion feature was separated from the debt and reclassified as a liability. A corresponding debt discount was established which will be amortized over the life of the convertible notes. Prior to adopting ASC 815-40, the Company followed ASC 470-20, Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios. ASC 470-20 required the Company to record interest expense and corresponding paid-in-capital related to the beneficial conversion feature in its convertible debt and was superseded by ASC 815-40. In addition to the Company’s convertible debt, ASC 815-40 also applies to a warrant the Company issued and, therefore, the value of the warrant has been recorded as a liability. As a part of the Parent Notes offering in February 2011, the convertible notes were retired.
     The Company recorded the following cumulative effect of change in accounting principle pursuant to its adoption of ASC 815-40:
                                 
                    Other        
    Debt Discount     Derivative Liability     Paid-In-Capital     Accumulated Deficit  
            (In thousands)          
Record January 1, 2009, debt discount and derivative instrument liability related to convertible debt
   $ 7,734     $ 5,605     $ —     $ (2,129 )
Record January 1, 2009, derivative instrument liability related to warrant
     —       477       —       477  
Record amortization of debt discount from March 4, 2008, through December 31, 2008
     (653 )     —       —       653  
Record the reversal of the beneficial conversion feature expensed in 2008 under ASC 470-20
     —       —       (8,147 )     (8,147 )
Record the reversal of prior accounting related to the warrant
     —       —       (1,700 )     (1,700 )
 
                        
 
   $ 7,081     $ 6,082     $ (9,847 )   $ (10,846 )
 
                        
     Convertible Debt
     A Binomial Lattice model was used to obtain the fair value of the conversion feature in the Company’s convertible debt instrument. The conversion feature of the convertible debt instruments had no value at December 31, 2009 and the following assumptions were used at December 31, 2010:
         
Stock Price   Bond Yield  
 
$11.94
     5.16 %
     Warrant
     The Company’s warrant expired August 20, 2010 and therefore had no value at December 31, 2010. The following assumptions were used for the warrant at December 31, 2009:
                                 
Number of                            
Shares Included in                           Expected Life
Warrant   Dividend Yield   Volatility   Risk Free Rate   (in years)
 
173,228
   None     65 %     0.20 %     1.0  

193

 

Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
     The fair value of outstanding derivative instruments not designated as hedging instruments on the accompanying Consolidated Balance Sheet were as follows (in thousands):
                         
            December 31,  
Derivative Instruments   Balance Sheet Location     2010     2009  
 
Convertible debt -conversion feature
   Other liabilities   $ 3,588     $ —  
Warrant
   Other liabilities     —       30  
     The effect of derivative instruments not designated as hedging instruments on the accompanying Consolidated Statements of Operations was as follows (in thousands):
                         
            Income (Expense)  
            Recognized in Earnings on  
            Derivatives  
    Statement of     Year Ended December 31,  
Derivative Instruments   Operations Location     2010     2009  
 
Convertible debt -conversion feature
   Other income (loss)   $ (3,486 )   $ 5,674  
Warrant
   Other income (loss)     30       448  
10. FAIR VALUE MEASUREMENTS
     Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company is required to disclose the fair value of financial instruments where practicable. The carrying amounts of cash equivalents, accounts receivable and accounts payable reflected on the Consolidated Balance Sheet approximate the fair value of these instruments due to the short duration to their maturities. The Company calculates the fair value of its long-term debt by using discount rate estimates based on interest rates as of December 31, 2010. See Notes 3, 8 and 9 for additional disclosures related to fair value measurements on restricted cash and bond collateral, reclamation deposits and embedded derivatives, respectively.
     The estimated fair value of the Company’s debt with fixed interest rates, excluding conversion feature values are as follows:
                 
    Carrying Value     Fair Value  
    (In thousands)  
December 31, 2009
   $ 192,608     $ 201,352  
December 31, 2010
   $ 185,320     $ 196,483  
     Fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy, as defined below, gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.
  •   Level 1, defined as observable inputs such as quoted prices in active markets for identical assets. Level 1 assets include available-for-sale equity securities generally valued based on independent third-party market prices.
 
  •   Level 2, defined as observable inputs other than Level 1 prices. These include quoted prices for similar assets or liabilities in an active market, quoted prices for identical assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. The Company had no Level 2 inputs at December 31, 2010.
 
  •   Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. The Company’s convertible notes’ conversion feature and warrant were classified as Level 3. These items were valued using the Binomial Lattice model and the Black-Scholes model, respectively.

194

 

Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
     The table below sets forth, by level, the Company’s financial assets and liabilities that are accounted for at fair value:
                                 
    Year Ended December 31, 2010        
    Level 1     Level 2     Level 3     Total  
            (In thousands)          
Assets:
                                
Available-for-sale investments included in Restricted investments and bond collateral
   $ 2,889     $ —     $ —     $ 2,889  
Available-for-sale investments included in Reclamation deposits
     2,204       —       —       2,204  
 
                        
Total assets
   $ 5,093     $ —     $ —     $ 5,093  
 
                        
Liabilities:
                                
Convertible debt — conversion feature
   $ —     $ —     $ 3,588     $ 3,588  
Total liabilities
   $ —     $ —     $ 3,588     $ 3,588  
 
                        
                                 
    Year Ended December 31, 2009  
    Level 1     Level 2     Level 3     Total  
            (In thousands)          
Assets:
                                
Available-for-sale investments included in Restricted investments and bond collateral
   $ 2,879     $ —     $ —     $ 2,879  
Available-for-sale investments included in Reclamation deposits
     3,114       —       —       3,114  
 
                        
Total assets
   $ 5,993     $ —     $ —     $ 5,993  
 
                        
Liabilities:
                                
Warrant
   $ —     $ —     $ 30     $ 30  
 
                        
Total liabilities
   $ —     $ —     $ 30     $ 30  
 
                        
     The following table summarizes the change in the fair values of the derivative instrument liabilities categorized as Level 3:
                 
    Year Ended December 31,  
    2010     2009  
    (In thousands)  
Beginning balance
   $ 30     $ —  
January 1, 2010, beginning balance adjustment pursuant to adoption of ASC 815-40
     —       6,082  
Additional debt discount
     102       70  
Change in fair value
     3,456       (6,122 )
 
            
Ending balance
   $ 3,588     $ 30  
 
            
11. STOCKHOLDERS’ EQUITY
     Preferred and Common Stock
     The Company has two classes of capital stock outstanding, common stock, par value $2.50 per share, and Series A Convertible Exchangeable Preferred Stock on which cumulative dividends of $2.125 per share are payable quarterly. Each share of Series A Preferred Stock is represented by four Depositary Shares. Under the terms of the Series A Preferred Stock, the Company can redeem preferred shares at any time for the redemption value of $100.00 plus accumulated dividends paid in cash.

195

 

Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
     The amount of dividends accumulated through and including January 1, 2011 and the redemption value of preferred shares are shown below:
                         
                    Extended Total  
    Shares     Per Share     (in thousands)  
     
Dividends accumulated(1)
     160,129     $ 124.53     $ 19,940  
Redemption value
     160,129     $ 100.00       16,013  
 
                      
Total
                   $ 35,953  
 
                      
 
(1)   In February 2011, the Company paid the $19.9 million of accumulated dividends as of January 1, 2011.
     The Company is permitted to pay preferred stock dividends to the extent that there is a surplus, as defined by Delaware law.
     Restricted Net Assets
     WCC has obligations to pay pension and postretirement medical benefits, to fund corporate expenditures, and to pay interest on the Parent Notes. However, WCC conducts no operations, has no source of revenue and is fully dependent on distributions from its subsidiaries to pay its costs. At December 31, 2010, the loan agreements of WML and ROVA required debt service accounts and imposed timing and other restrictions on the ability of WML and ROVA to distribute funds to WCC.
     At December 31, 2010, the subsidiaries of the Parent had approximately $108.1 million of net assets that were not available to be transferred to the Parent in the form of dividends, loans, or advances due to restrictions contained in the credit facilities of these subsidiaries. Subsequent to the Parent Notes offering, the Company will no longer have restricted net assets.
12.   RESTRICTED STOCK, STOCK OPTIONS, AND STOCK APPRECIATION RIGHTS
     As of December 31, 2010, the Company had restricted stock, stock options, and stock-settled stock appreciation rights, or SARs, outstanding from five stock incentive plans. Four of these plans were terminated in October 2009. Employees are now granted restricted stock units from the 2007 Incentive Stock Plan. The 2007 Incentive Stock Plan also provides that non-employee directors will receive equity awards with a value of $50,000 after each annual meeting.
     The maximum number of remaining shares that can be issued under the 2007 Incentive Stock Plan is 288,261.
     Compensation cost arising from share-based arrangements is shown in the following table:
                         
    Years Ended December 31,  
    2010     2009     2008  
            (In thousands)          
Recognition of fair value of restricted stock, stock options and SARs over vesting period
   $ 1,058     $ 702     $ 1,227  
Contributions of stock to the Company’s 401(k) plan
     2,991       1,869       1,569  
Compensation credit for performance units plan (1)
     —       (19 )     (63 )
 
                  
Total share-based compensation expense (2)
   $ 4,049     $ 2,552     $ 2,733  
 
                  
 
(1)   The Company’s only active performance unit plan expired June 30, 2009.
 
(2)   These costs are recorded in Cost of sales and Selling and administrative expenses in the accompanying statement of operations.

196

 

Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
     The Company used the Black-Scholes option pricing model to determine the fair value of options and SARs on the date of grant. The Company utilized U.S. Treasury yields as of the grant date for its risk-free interest rate assumption and expected volatilities were based on historical stock price movement and other factors. The Company utilized historical data to develop its dividend yield and expected option life assumptions. The following assumptions were used for the year ended December 31, 2008; no options or SARs were granted in 2010 or 2009:
         
    December 31, 2008  
Assumptions (weighted average):
        
Risk-free interest rate
     3.62 %
Expected dividend yield
   None  
Expected volatility
     50 %
Expected life (in years)
     7.0  
     Restricted Stock
     The Company may issue restricted stock, which requires no payment from the employee. Restricted stock typically vests ratably over three years. Upon vesting, restricted stock will be redeemed and paid to employees with either cash or the Company’s common stock. Compensation expense is based on the fair value on the grant date and is recorded ratably over the vesting period.
     A summary of restricted stock award activity for the year ended December 31, 2010, is as follows:
                         
                    Unamortized  
            Weighted Average     Compensation  
    Common     Grant-Date Fair     Expense  
    Shares     Value     (In thousands)  
     
Non-vested at December 31, 2009
     96,558     $ 8.36          
Granted
     157,833     $ 8.31          
Vested
     (47,656 )   $ 9.21          
Forfeited
     (14,038 )   $ 8.14          
 
                      
Non-vested at December 31, 2010
     192,697     $ 8.13     $ 1,265 (1)
 
                  
 
(1)   Expected to be recognized over the next three years.
     Weighted average grant-date fair value was $8.31, $8.24 and $15.99 for 2010, 2009 and 2008, respectively.
     The total grant-date fair value of restricted stock that vested was $0.4 million in 2010 and $0.2 million in both 2009 and 2008.

197

 

Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
     Stock Options
     Stock options generally vest over three years, expire ten years from the date of grant, and have an option price equal to the market value of the stock on the date of grant.
     Information with respect to stock option activity for the year ended December 31, 2010, is as follows:
                                         
                    Weighted Average                
                    Remaining             Unamortized  
            Weighted     Contractual     Aggregate     Compensation  
            Average     Life     Intrinsic     Expense  
    Stock Options     Exercise Price     (in years)     Value     (In thousands)  
     
Outstanding at December 31, 2009
     354,224     $ 18.73                          
Exercised
     (2,500 )   $ 3.38             $ 16,588          
Expired
     (28,466 )   $ 17.40                          
Forfeited
     (4,668 )   $ 21.40                          
 
                                      
Outstanding at December 31, 2010
     318,590     $ 18.99       4.4     $ 16,938          
 
                                
Exercisable at December 31, 2010
     273,834     $ 18.60       3.9     $ 16,938     $ 259 (1)
 
                              
 
(1)   Expected to be recognized over the next year.
     The weighted average grant-date fair value per stock option granted in 2008 was $11.84. No stock options were granted in 2010 or 2009.
     The intrinsic value of stock options exercised was less than $0.1 million in 2010 and $0.5 million in 2008. No stock options were exercised in 2009.
     The total grant-date fair value of stock options that vested was $0.1 million in both 2010 and 2009 and less than $0.1 million in 2008.
     SARs
     SARs generally vest over three years, expire ten years from the date of grant, and have a base price equal to the market value of the stock on the date of grant. Upon vesting, the holders may exercise the SARs and receive a number of shares of common stock having a value equal to the appreciation in the value of the common stock between the grant date and the exercise date.
     Information with respect to SARs granted and outstanding for the year ended December 31, 2010 is as follows:
                                         
                    Weighted                
                    Average             Unamortized  
            Weighted     Remaining             Compensation  
            Average     Contractual Life     Aggregate Intrinsic     Expense  
    SARs     Base Price     (in years)     Value     (In thousands)  
     
Outstanding at December 31, 2009
     155,334     $ 21.91                          
Expired
     (36,400 )   $ 21.18                          
 
                                      
Outstanding at December 31, 2010
     118,934     $ 22.13       4.6     $ —          
 
                                
Exercisable at December 31, 2010
     118,934     $ 22.13       4.6     $ —     $ —  
 
                              
     No SARs were granted during 2010, 2009, or 2008.
     The intrinsic value of SARs exercised was less than $0.1 million in 2008. No SARs were exercised in 2010 or 2009.

198

 

Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
     The total grant-date fair value of SARs that vested was less than $0.1 million in both 2010 and 2009 and $0.3 million in 2008.
13.   ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
     The following is a summary of accumulated other comprehensive income (loss):
                                 
    Pension and             Tax Effect of Other        
    Postretirement     Available for Sale     Comprehensive     Accumulated Other  
    Medical Benefits     Securities     Income Gains     Comprehensive Loss  
            (In thousands)          
Balance at January 1, 2008
   $ (116,093 )   $ —     $ (9,094 )   $ (125,187 )
2008 activity
     (3,386 )     112       —       (3,274 )
 
                        
Balance at December 31, 2008
     (119,479 )     112       (9,094 )     (128,461 )
Postretirement medical benefit plan amendments and pension plan freeze adjustments
     105,983       —       —       105,983  
2009 activity
     7,465       852       (17,062 )     (8,745 )
 
                        
Balance at December 31, 2009
     (6,031 )     964       (26,156 )     (31,223 )
2010 activity
     (26,018 )     (439 )     —       (26,457 )
 
                        
Balance at December 31, 2010
   $ (32,049 )   $ 525     $ (26,156 )   $ (57,680 )
 
                        
     Pension and postretirement medical benefit adjustments relate to changes in the funded status of various benefit plans, as discussed in Notes 5 and 6. The unrealized gains and losses associated with recognizing the Company’s “available-for-sale” securities at fair value are recorded through Accumulated other comprehensive loss. See Note 14 regarding the tax effect of other comprehensive income gains.
14.   INCOME TAX
     Income tax expense (benefit) attributable to net loss before income taxes consists of:
                         
    Year Ended December 31,  
    2010     2009     2008  
            (In thousands)          
Current:
                        
Federal
   $ (10 )   $ (323 )   $ —  
State
     (14 )     1,168       919  
 
                  
 
     (24 )     845       919  
Deferred:
                        
Federal
     —       (15,977 )     —  
State
     (117 )     (2,004 )     —  
 
                  
 
     (117 )     (17,981 )     —  
 
                  
Income tax expense (benefit)
   $ (141 )   $ (17,136 )   $ 919  
 
                  

199

 

Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
     Income tax expense (benefit) attributable to net loss before income taxes differed from the amounts computed by applying the statutory Federal income tax rate of 34% to pre-tax income as a result of the following:
                         
    Year Ended December 31,  
    2010     2009     2008  
    (In thousands)  
Computed tax benefit at statutory rate
   $ (1,126 )   $ (15,619 )   $ (16,200 )
Increase (decrease) in tax expense resulting from:
                        
Tax depletion in excess of basis
     (4,019 )     (713 )     (2,643 )
Non-deductible interest expense and convertible debt valuation
     2,076       (1,074 )     3,156  
Noncontrolling interest
     899       618       —  
State income taxes, net
     (1,090 )     (2,467 )     (3,214 )
Change in valuation allowance for net deferred tax assets
     (3,312 )     2,902       24,628  
Medicare Part D subsidy law change
     7,159       —       —  
Indian Coal Tax Credits
     (120 )     (96 )     (5,893 )
Other, net
     (608 )     (687 )     1,085  
 
                  
Income tax expense (benefit)
   $ (141 )   $ (17,136 )   $ 919  
 
                  
     The PPACA reduces the tax benefits available to an employer that receives the Medicare Part D subsidy beginning in years ending after December 31, 2010. As a result of the PPACA, employers that receive the Medicare Part D subsidy will recognize the deferred tax effects of the reduced deductibility of the postretirement prescription drug coverage in the period the PPACA was enacted. On March 30, 2010, a companion bill, the Reconciliation Act, was signed into law. The Reconciliation Act reduces the effect of the PPACA on affected employers by deferring for two years (until years ending after December 31, 2012) the reduced deductibility of the postretirement prescription drug coverage. Accounting for income taxes requires that the effect of adjusting the deferred tax asset for the elimination of this deduction be included in income from continuing operations. However, entities that have a full valuation allowance for this deferred tax asset would recognize a related decrease in the valuation allowance. As the Company has a full valuation allowance against its related deferred tax asset, this change in tax law regarding the Medicare Part D subsidy will not have an effect on the Company’s income from continuing operations. The effect of this change in tax law is a reduction of $7.2 million of the Company’s deferred tax assets with a corresponding decrease in its valuation allowance. In addition, this change in the tax deduction does not affect the pre-tax expense or corresponding liability for postretirement prescription drug benefits.
     For the year ended December 31, 2009, the Company recorded a tax benefit of $17.1 million due to a non-cash income tax benefit related to gains recorded within other comprehensive income during 2009. Generally accepted accounting principles, or GAAP, require all items be considered, including items recorded in other comprehensive income, in determining the amount of tax benefit that results from a loss from continuing operations that should be allocated to continuing operations. In accordance with GAAP, the Company recorded a tax benefit on its loss from continuing operations, which was exactly offset by income tax expense on other comprehensive income as follows:
                         
    Loss From              
    Continuing     Other     Total  
    Operations     Comprehensive Income     Comprehensive Income  
    (In thousands)  
Pre-allocation
   $ (46,224 )   $ 114,300     $ 68,076  
Tax allocation
     17,062     $ (17,062 )     —  
 
                  
As presented
   $ (29,162 )   $ 97,238     $ 68,076  
 
                  
     As the income tax expense on other comprehensive income is equal to the income tax benefit recognized in continuing operations, the Company’s total comprehensive income is unchanged. In addition, the Company’s net deferred tax position at December 31, 2009 was not impacted by this tax allocation.

200

 

Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
     The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below:
                 
    December 31,  
    2010     2009  
    (In thousands)  
Deferred tax assets:
                
Federal net operating loss carryforwards
   $ 74,061     $ 67,133  
State net operating loss carryforwards
     24,627       14,983  
Alternative minimum tax credit carryforwards
     7,009       5,683  
Charitable contribution carryforwards
     169       179  
Indian Coal Tax Credit carryforwards
     25,552       26,654  
Accruals for the following:
                
Workers’ compensation
     4,013       4,338  
Postretirement medical benefit and pension obligations
     80,116       81,764  
Incentive plans
     1,843       900  
Asset retirement obligations
     68,561       66,839  
Deferred revenues
     29,430       31,757  
Gain on sale of partnership interest
     6,402       8,061  
Other accruals
     5,618       7,147  
 
            
Total gross deferred assets
     327,401       315,438  
Less valuation allowance
     (247,086 )     (232,575 )
 
            
Net deferred tax assets
     80,315       82,863  
 
            
Deferred tax liabilities:
                
Property, plant and equipment, differences due to depreciation and amortization
     (76,656 )     (77,562 )
Change in accounting method
     (354 )     (2,137 )
Other
     (847 )     (823 )
 
            
Total gross deferred tax liabilities
     (77,857 )     (80,522 )
 
            
Net deferred tax asset
   $ 2,458     $ 2,341  
 
            
     As of December 31, 2010, the Company had significant deferred tax assets. The deferred tax assets include federal and state regular net operating losses, or NOLs, alternative minimum tax, or AMT, credit carryforwards, Indian Coal Tax Credit, or ICTC, carryforwards, charitable contribution carryforwards, and net deductible reversing temporary differences related to on-going differences between book and taxable income.
     The Company believes it will be taxed under the AMT system for the foreseeable future due to the significant amount of statutory tax depletion in excess of book depletion expected to be generated by its mining operations. As a result, Westmoreland has determined that a valuation allowance is required for all of its regular federal net operating loss carryforwards and AMT credit carryforwards since they are only available to offset future regular taxes.
     The Company has recorded a full valuation allowance for all but $2.5 million of its state net operating losses, since it believes they will not be realized. No valuation allowance is being provided on $2.5 million of deferred tax assets because it is believed that these net operating losses will be used to offset the Company’s liabilities relating to its uncertain tax positions.
     The Company has determined that a full valuation allowance is required for all its ICTC carryforward. The ICTC can generally be used to offset AMT liability. The Company does not believe it has sufficient positive evidence of significant magnitude to substantiate that its deferred tax asset for the ICTC carryforward is realizable at a more-likely-than-not level of assurance. As a result, the Company will continue to record a full valuation allowance on its ICTC carryforward; reversing valuation allowance only if utilized in a future year.
     The Company has determined that since its net deductible temporary differences will not reverse for the foreseeable future, and it is unable to forecast when it will have regular taxable income when they do reverse, a full valuation allowance is required for these deferred tax assets, other than the deferred tax asset relating to the Company’s uncertain tax positions.

201

 

Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
     As of December 31, 2010, the Company has available Federal net operating loss carryforwards to reduce future regular taxable income, which expires as follows:
         
Expiration Date   Regular Tax  
(In thousands)
2011
   $ 32,698  
2012
     449  
2018
     28  
2019
     88,429  
2020
     32  
after 2020
     96,165  
 
      
Total
   $ 217,801  
 
      
     As of December 31, 2010, the Company has an estimated $25.6 million in ICTC carryforwards available to offset the Company’s regular tax and AMT liabilities. As of December 31, 2010, the Company also has an estimated $479.5 million in State net operating loss carryforwards to reduce future taxable income.
     For the year ended December 31, 2010, Westmoreland recorded a long-term liability related to uncertain tax positions. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
                 
    Year Ended December 31,  
    2010     2009  
    (In thousands)  
Balance of unrecognized tax benefits at beginning of year
   $ 2,861     $ 1,748  
Additions for tax positions related to current year
     18       1,113  
 
            
Balance of unrecognized tax benefits at end of year
   $ 2,879     $ 2,861  
 
            
     As of December 31, 2010, the Company had $0.1 million of accrued interest and penalties included in the long-term tax liability, of which less than $0.1 million was recognized in 2010.
     The Company files tax returns in the U.S. federal jurisdiction and in various U.S. state jurisdictions, and is subject to examination by taxing authorities in all of these jurisdictions. From time to time, the Company’s tax returns are reviewed or audited by various U.S. state taxing authorities. The Company believes that adjustments, if any, resulting from these reviews or audits would not be material, individually or in the aggregate, to the Company’s financial position, results of operations or liquidity. It is reasonably possible that the amount of unrecognized tax benefits related to certain of the Company’s tax positions will increase or decrease in the next twelve months as audits or reviews are initiated and settled. At this time, an estimate of the range of a reasonably possible change cannot be made. With few exceptions, the Company is not subject to income tax examinations by U.S. federal or state jurisdictions for fiscal years prior to 2005.
15. COMMITMENTS
     Supply Agreements
     Westmoreland Partners, which owns ROVA, has two coal supply agreements with TECO Coal Corporation, or TECO. If Westmoreland Partners continues to purchase coal under these contracts at the current volume and pricing, then Westmoreland Partners would be obligated to pay TECO $28.6 million in each of the years of 2011, 2012, 2013, $17.1 million for 2014 and $2.8 million for 2015.

202

 

Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
     Leases
     The gross value of property, plant, equipment and mine development assets under capital leases was $37.5 million and $46.9 million as of December 31, 2010 and 2009, respectively, related primarily to the leasing of mining equipment. The accumulated amortization for these items was $11.0 million and $9.5 million at December 31, 2010 and 2009, respectively.
     Future minimum capital and operating lease payments as of December 31, 2010, are as follows:
                 
    Year Ended December 31, 2010  
    Capital Leases     Operating Leases  
    (In thousands)  
2011
   $ 8,714     $ 6,665  
2012
     8,319       4,243  
2013
     7,077       2,827  
2014
     4,461       2,233  
2015
     1,617       1,625  
Thereafter
     105       718  
 
            
Total minimum lease payments
   $ 30,293     $ 18,311  
 
              
Less imputed interest
     (4,064 )        
 
              
Present value of minimum capital lease payments
   $ 26,229          
 
              
     Rental expense under operating leases during the years ended December 31, 2010, 2009 and 2008 totaled $6.0 million, $6.7 million and $4.9 million, respectively.
     The Company leases certain of its coal reserves from third parties and pays royalties based on either a per ton rate or as a percentage of revenues received. Royalties charged to expense under all such lease agreements amounted to $41.3 million, $29.7 million and $35.7 million in the years ended December 31, 2010, 2009 and 2008, respectively.
16. CONTINGENCIES
     The Company is a party to numerous claims and lawsuits with respect to various matters. The Company provides for costs related to contingencies when a loss is probable and the amount is reasonably estimable. After conferring with counsel, it is the opinion of management that the ultimate resolution of pending claims will not have a material adverse effect on the consolidated financial condition, results of operations, or liquidity of the Company.
17. BUSINESS SEGMENT INFORMATION
     Segment information is based on a management approach, which requires segmentation based upon the Company’s internal organization and reporting of revenue and operating income.
     The Company’s operations are classified into four segments: coal, power, heritage and corporate. The coal segment includes the production and sale of coal from Montana, North Dakota and Texas. The power segment includes its ROVA operations located in North Carolina. The heritage segment costs primarily include benefits the Company provides to former mining operation employees as well as other administrative costs associated with providing those benefits and cost containment efforts. The corporate segment primarily consists of corporate administrative expenses.

203

 

Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
     Summarized financial information by segment is as follows:
                                         
    Coal     Power     Heritage     Corporate     Consolidated  
    (In thousands)  
December 31, 2010
                                        
Revenues
   $ 418,058     $ 87,999     $ —     $ —     $ 506,057  
Operating income (loss)
     32,922       11,721       (15,968 )     (8,154 )     20,521  
Total assets
     520,722       207,643       12,283       9,658       750,306  
Capital expenditures
     20,056       2,207       —       551       22,814  
December 31, 2009
                                        
Revenues
   $ 361,206     $ 82,162     $ —     $ —     $ 443,368  
Operating income (loss)
     476       7,672       (31,770 )     (8,152 )     (31,774 )
Total assets
     537,924       216,685       4,634       13,485       772,728  
Capital expenditures
     30,078       4,251       —       217       34,546  
December 31, 2008
                                        
Revenues
   $ 419,806     $ 89,890     $ —     $ —     $ 509,696  
Restructuring charges
     155       —       —       1,854       2,009  
Operating income (loss)
     15,211       16,920       (35,472 )     (12,694 )     (16,035 )
Total assets
     557,245       239,083       5,301       11,338       812,967  
Capital expenditures
     29,534       1,711       —       75       31,320  
     A reconciliation of segment income (loss) from operations to loss before income taxes follows:
                         
            Year Ended        
    2010     2009     2008  
    (In thousands)  
Income (loss) from operations
   $ 20,521     $ (31,774 )   $ (16,035 )
Interest expense attributable to beneficial conversion feature
     —       —       (8,146 )
Loss on extinguishment of debt
     —       —       (5,178 )
Interest expense
     (22,992 )     (23,733 )     (23,130 )
Interest income
     1,747       3,218       5,125  
Other income (loss)
     (2,587 )     5,991       (284 )
 
                    
Loss before income taxes
   $ (3,311 )   $ (46,298 )   $ (47,648 )
 
                  
     The Company derives its revenues from a few key customers. The customers from which more than 10% of total revenue has been derived and the percentage of total revenue from those customers is summarized as follows:
                         
    2010     2009     2008  
    (In thousands)  
Customer A — coal
   $ 119,633     $ 79,502     $ 131,859  
Customer B — coal
     80,493       85,334       80,581  
Customer C — power
     86,926       81,037       88,651  
Customer D — coal (1)
     64,968       51,187       —  
Customer E — coal (2)
     —       49,670       —  
 
                  
Percentage of total revenue
     70 %     78 %     60 %
 
                  
 
(1)   The revenue from Customer D did not exceed 10% in 2008.
 
(2)   The revenue from Customer E did not exceed 10% in 2010 and 2008.

204

 

Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
18. QUARTERLY FINANCIAL DATA (UNAUDITED)
     Summarized quarterly financial data is as follows:
                                 
    Three Months Ended  
    March 31     June 30     September 30     December 31  
    (In thousands; except per share data)  
2010:
                                
Revenues
   $ 126,439     $ 127,632     $ 124,080     $ 127,906  
Operating income (loss)
     5,314       1,333       7,839       6,035  
Net income (loss) applicable to common shareholders
     (3,195 )     919       2,513       (2,122 )
Basic income (loss) per common share
   $ (0.30 )   $ 0.09     $ 0.23     $ (0.19 )
 
                                
2009:
                                
Revenues
   $ 121,798     $ 104,780     $ 112,404     $ 104,386  
Operating loss
     (4,402 )     (6,249 )     (9,751 )     (11,372 )
Net loss applicable to common shareholders
     (5,629 )     (7,232 )     (7,837 )     (8,007 )
Basic and diluted loss per common share
   $ (0.59 )   $ (0.75 )   $ (0.77 )   $ (0.78 )

205

 

Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
19. SUPPLEMENTAL CONSOLIDATING FINANCIAL INFORMATION
     Pursuant to the indenture governing the Parent Notes, certain wholly owned subsidiaries of the Company have fully and unconditionally guaranteed the notes on a joint and several basis. The following tables present unaudited consolidating financial information for (i) the issuer of the notes (Westmoreland Coal Company), (ii) the co-issuer of the notes (Westmoreland Partners), (iii) the guarantors under the notes, and (iv) the entities which are not guarantors under the notes:
CONSOLIDATING BALANCE SHEETS
December 31, 2009
(In thousands)
                                                 
    Parent/             Guarantor     Non-Guarantor     Consolidating        
Assets   Issuer     Co-Issuer     Subsidiaries     Subsidiaries     Adjustments     Total  
 
Current assets:
                                                
Cash and cash equivalents
   $ 755     $ 138     $ —     $ 9,626     $ —     $ 10,519  
Receivables:
                                                
Trade
     —       13,737       29       32,824       (197 )     46,393  
Contractual third-party reclamation receivables
     —       —       180       7,077       —       7,257  
Intercompany receivable/payable
     —       —       11,429       (16,592 )     5,163       —  
Other
     424       —       2,686       672       (620 )     3,162  
 
                                    
 
     424       13,737       14,324       23,981       4,346       56,812  
Inventories
     —       2,571       4,415       18,885       —       25,871  
Other current assets
     454       176       540       4,877       —       6,047  
 
                                    
Total current assets
     1,633       16,622       19,279       57,369       4,346       99,249  
 
                                    
Property, plant and equipment:
                                                
Land and mineral rights
     —       1,156       17,764       64,774       —       83,694  
Capitalized asset retirement cost
     —       239       22,016       112,566       —       134,821  
Plant and equipment
     2,295       214,531       113,388       156,024       —       486,238  
 
                                    
 
     2,295       215,926       153,168       333,364       —       704,753  
Less accumulated depreciation, depletion and amortization
     (1,830 )     (32,953 )     (74,566 )     (139,220 )     —       (248,569 )
 
                                    
Net property, plant and equipment
     465       182,973       78,602       194,144       —       456,184  
Advanced coal royalties
     —       —       —       3,056       —       3,056  
Reclamation deposits
     —       —       —       73,067       —       73,067  
Restricted investments and bond collateral
     9,958       8,705       9,226       20,299       —       48,188  
Contractual third-party reclamation receivables, less current portion
     —       —       120       74,869       —       74,989  
Deferred income taxes
     —       —       —       —       2,341       2,341  
Intangible assets
     —       7,842       —       939       —       8,781  
Investment in subsidiaries
     110,341       —       (664 )     3,770       (113,447 )     —  
Other assets
     451       543       1,926       3,953       —       6,873  
 
                                    
Total assets
   $ 122,848     $ 216,685     $ 108,489     $ 431,466     $ (106,760 )   $ 772,728  
 
                                    

206

 

Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
CONSOLIDATING BALANCE SHEETS
December 31, 2009
(In thousands)
                                                 
                            Non-              
    Parent/             Guarantor     Guarantor     Consolidating        
Liabilities and Stockholders’ Deficit   Issuer     Co-Issuer     Subsidiaries     Subsidiaries     Adjustments     Total  
 
Current liabilities
                                                
Current installments of long-term debt
   $ 11,154     $ 9,806     $ 14,469     $ 5,660     $ —     $ 41,089  
Revolving lines of credit
     —       —       16,400       —       —       16,400  
Accounts payable and accrued expenses:
                                                
Trade
     2,854       7,469       2,887       27,033       (979 )     39,264  
Production taxes
     —       2       2,406       22,102       —       24,510  
Workers’ compensation
     1,031       —       —       —       —       1,031  
Postretirement medical benefits
     13,198       —       —       1,303       —       14,501  
SERP
     306       —       —       —       —       306  
Deferred revenue
     —       6,840       724       1,196       —       8,760  
Asset retirement obligations
     —       —       4,512       11,001       —       15,513  
Other current liabilities
     853       942       3,777       7,279       —       12,851  
 
                                    
Total current liabilities
     29,396       25,059       45,175       75,574       (979 )     174,225  
 
                                    
Long-term debt, less current installments
     —       46,648       7,745       142,813       —       197,206  
Workers’ compensation, less current portion
     10,188       —       —       —       —       10,188  
Excess of pneumoconiosis benefit obligation over trust assets
     786       —       —       —       —       786  
Postretirement medical benefits, less current portion
     151,057       —       —       24,665       —       175,722  
Pension and SERP obligations, less current portion
     20,626       178       —       6,023       —       26,827  
Deferred revenue, less current portion
     —       75,283       —       8,960       —       84,243  
Asset retirement obligations, less current portion
     —       664       27,916       200,522       —       229,102  
Intangible liabilities
     —       9,682       —       618       —       10,300  
Other liabilities
     656       30       538       1,684       3,020       5,928  
Intercompany receivable/payable
     51,938       —       (20,896 )     28,891       (59,933 )     —  
 
                                    
Total liabilities
     264,647       157,544       60,478       489,750       (57,892 )     914,527  
 
                                    
 
                                                
Shareholders’ deficit:
                                                
Preferred stock
     160       —       —       —       —       160  
Common stock
     25,864       5       110       132       (247 )     25,864  
Other paid-in capital
     91,432       1       15,921       48,646       (64,568 )     91,432  
Accumulated other comprehensive income (loss)
     (31,223 )     (164 )     106       (11,199 )     11,257       (31,223 )
Accumulated earnings (deficit)
     (226,215 )     59,299       31,874       (95,863 )     4,690       (226,215 )
 
                                    
Total Westmoreland Coal Company shareholders’ deficit
     (139,982 )     59,141       48,011       (58,284 )     (48,868 )     (139,982 )
Noncontrolling interest
     (1,817 )     —       —       —       —       (1,817 )
 
                                    
Total equity (deficit)
     (141,799 )     59,141       48,011       (58,284 )     (48,868 )     (141,799 )
 
                                    
Total liabilities and shareholders’ deficit
   $ 122,848     $ 216,685     $ 108,489     $ 431,466     $ (106,760 )   $ 772,728  
 
                                    

207

 

Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
CONSOLIDATING BALANCE SHEETS
December 31, 2010
(In thousands)
                                                 
                            Non-              
    Parent/             Guarantor     Guarantor     Consolidating        
Assets   Issuer     Co-Issuer     Subsidiaries     Subsidiaries     Adjustments     Total  
 
Current assets:
                                                
Cash and cash equivalents
   $ 271     $ 880     $ —     $ 4,624     $ —     $ 5,775  
Receivables:
                                                
Trade
     —       14,148       65       36,365       —       50,578  
Contractual third-party reclamation receivables
     —       —       135       7,608       —       7,743  
Intercompany receivable/payable
     —       —       10,193       (21,544 )     11,351       —  
Other
     66       198       4,917       1,530       (2,166 )     4,545  
 
                                    
 
     66       14,346       15,310       23,959       9,185       62,866  
 
                                                
Inventories
     —       1,935       4,624       17,012       —       23,571  
Other current assets
     796       224       469       3,944       (98 )     5,335  
 
                                    
Total current assets
     1,133       17,385       20,403       49,539       9,087       97,547  
 
                                    
Property, plant and equipment:
                                                
Land and mineral rights
     —       1,156       17,806       64,862       —       83,824  
Capitalized asset retirement cost
     —       239       20,463       94,154       —       114,856  
Plant and equipment
     2,611       215,851       117,360       170,839       —       506,661  
 
                                    
 
     2,611       217,246       155,629       329,855       —       705,341  
Less accumulated depreciation, depletion and amortization
     (1,987 )     (42,156 )     (82,239 )     (162,004 )     —       (288,386 )
 
                                    
Net property, plant and equipment
     624       175,090       73,390       167,851       —       416,955  
Advanced coal royalties
     —       —       998       2,697       —       3,695  
Reclamation deposits
     —       —       —       72,274       —       72,274  
Restricted investments and bond collateral
     11,816       8,563       10,956       24,049       —       55,384  
Contractual third-party reclamation receivables, less current portion
     —       —       390       87,349       —       87,739  
Deferred income taxes
     —       —       —       —       2,458       2,458  
Intangible assets
     —       6,203       —       352       —       6,555  
Investment in subsidiaries
     115,612       —       (717 )     3,770       (118,665 )     —  
Other assets
     2,060       401       1,683       3,555       —       7,699  
 
                                    
Total assets
   $ 131,245     $ 207,642     $ 107,103     $ 411,436     $ (107,120 )   $ 750,306  
 
                                    

208

 

Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
CONSOLIDATING BALANCE SHEETS
December 31, 2010
(In thousands)
                                                 
                            Non-              
    Parent/             Guarantor     Guarantor     Consolidating        
Liabilities and Stockholders’ Deficit   Issuer     Co-Issuer     Subsidiaries     Subsidiaries     Adjustments     Total  
 
Current liabilities
                                                
Current installments of long-term debt
   $ —     $ —     $ 2,255     $ 12,718     $ —     $ 14,973  
Accounts payable and accrued expenses:
                                                
Trade
     5,187       8,549       3,283       31,709       (2,481 )     46,247  
Production taxes
     —       2       1,084       25,231       —       26,317  
Workers’ compensation
     954       —       —       —       —       954  
Postretirement medical benefits
     12,198       —       —       1,383       —       13,581  
SERP
     304       —       —       —       —       304  
Deferred revenue
     —       8,805       349       1,055       —       10,209  
Asset retirement obligations
     —       —       3,371       11,143       —       14,514  
Other current liabilities
     249       782       3,138       2,164       (92 )     6,241  
 
                                    
Total current liabilities
     18,892       18,138       13,480       85,403       (2,573 )     133,340  
 
                                    
Long-term debt, less current installments
     13,671       46,648       15,166       133,246       —       208,731  
Revolving lines of credit, less current portion
     —       —       16,900       1,500       —       18,400  
Workers’ compensation, less current portion
     9,424       —       —       —       —       9,424  
Excess of pneumoconiosis benefit obligation over trust assets
     2,246       —       —       —       —       2,246  
Postretirement medical benefits, less current portion
     169,677       —       —       27,602       —       197,279  
Pension and SERP obligations, less current portion
     16,105       154       —       4,203       —       20,462  
Deferred revenue, less current portion
     —       67,308       —       8,087       —       75,395  
Asset retirement obligations, less current portion
     —       715       28,967       197,447       —       227,129  
Intangible liabilities
     —       8,663       —       —       —       8,663  
Other liabilities
     4,153       —       3,149       1,409       2,881       11,592  
Intercompany receivable/payable
     59,432       —       (19,590 )     26,424       (66,266 )     —  
 
                                    
Total liabilities
     293,600       141,626       58,072       485,321       (65,958 )     912,661  
 
                                    
 
                                                
Shareholders’ deficit:
                                                
Preferred stock
     160       —       —       —       —       160  
Common stock
     27,901       5       110       132       (247 )     27,901  
Other paid-in capital
     98,466       30       16,036       53,264       (69,330 )     98,466  
Accumulated other comprehensive income (loss)
     (57,680 )     (203 )     120       (14,353 )     14,436       (57,680 )
Accumulated earnings (deficit)
     (226,740 )     66,184       32,765       (112,928 )     13,979       (226,740 )
 
                                    
Total Westmoreland Coal Company shareholders’ deficit
     (157,893 )     66,016       49,031       (73,885 )     (41,162 )     (157,893 )
Noncontrolling interest
     (4,462 )     —       —       —       —       (4,462 )
 
                                    
Total equity (deficit)
     (162,355 )     66,016       49,031       (73,885 )     (41,162 )     (162,355 )
 
                                    
Total liabilities and stockholders’ deficit
   $ 131,245     $ 207,642     $ 107,103     $ 411,436     $ (107,120 )   $ 750,306  
 
                                    

209

 

Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
CONSOLIDATING STATEMENTS OF OPERATIONS
Year Ended December 31, 2008
(In thousands)
                                                 
                            Non-              
    Parent/             Guarantor     Guarantor     Consolidating        
    Issuer     Co-Issuer     Subsidiaries     Subsidiaries     Adjustments     Total  
     
Revenues
   $ —     $ 90,006     $ 76,367     $ 354,939     $ (11,616 )   $ 509,696  
 
                                                
Costs and expenses:
                                                
Cost of sales
     —       59,761       62,922       298,728       (11,616 )     409,795  
Depreciation, depletion and amortization
     381       9,780       6,898       24,328       —       41,387  
Selling and administrative
     12,585       3,867       4,872       19,189       —       40,513  
Heritage health benefit expenses
     32,104       —       —       1,348       —       33,452  
Restructuring charges
     1,854       —       120       35       —       2,009  
Gain (loss) on sales of assets
     1       (876 )     (6 )     (544 )     —       (1,425 )
 
                                    
 
     46,925       72,532       74,806       343,084       (11,616 )     525,731  
 
                                    
Operating income (loss)
     (46,925 )     17,474       1,561       11,855       —       (16,035 )
Other income (expense):
                                     —       —  
Interest expense
     (9,385 )     (1,351 )     (1,542 )     (10,852 )     —       (23,130 )
Interest expense attributable to beneficial conversion feature
     —       (8,146 )     —       —       —       (8,146 )
Loss on extinguishment of debt
     —       (1,345 )     —       (3,833 )     —       (5,178 )
Interest income
     532       511       265       4,017       (200 )     5,125  
Other income (loss)
     66       —       —       (350 )     —       (284 )
 
                                    
 
     (8,787 )     (10,331 )     (1,277 )     (11,018 )     (200 )     (31,613 )
 
                                    
Loss before income taxes and income of consolidated subsidiaries
     (55,712 )     7,143       284       837       (200 )     (47,648 )
Equity in income of subsidiaries
     (7,172 )     —       —       —       7,172       —  
 
                                    
Loss before income taxes
     (48,540 )     7,143       284       837       (7,372 )     (47,648 )
Income tax expense (benefit)
     27       11,883       138       4,510       (15,639 )     919  
 
                                    
Net income (loss)
   $ (48,567 )   $ (4,740 )   $ 146     $ (3,673 )   $ 8,267     $ (48,567 )
 
                                    

210

 

Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
CONSOLIDATING STATEMENTS OF OPERATIONS
Year Ended December 31, 2009
(In thousands)
                                                 
                            Non-              
    Parent/             Guarantor     Guarantor     Consolidating        
    Issuer     Co-Issuer     Subsidiaries     Subsidiaries     Adjustments     Total  
     
Revenues
   $ —     $ 82,162     $ 52,643     $ 360,117     $ (51,554 )   $ 443,368  
 
                                                
Costs and expenses:
                                                
Cost of sales
     —       60,504       46,966       317,154       (51,554 )     373,070  
Depreciation, depletion and amortization
     418       9,764       8,265       25,807       —       44,254  
Selling and administrative
     11,585       4,231       4,682       20,114       —       40,612  
Heritage health benefit expenses
     26,813       —       —       1,261       —       28,074  
Gain (loss) on sales of assets
     —       12       78       101       —       191  
Other operating income
     —       —       (11,059 )     —       —       (11,059 )
 
                                    
 
     38,816       74,511       48,932       364,437       (51,554 )     475,142  
 
                                    
Operating income (loss)
     (38,816 )     7,651       3,711       (4,320 )     —       (31,774 )
Other income (expense):
                                                
Interest expense
     (2,618 )     (5,946 )     (2,195 )     (12,977 )     3       (23,733 )
Interest income
     376       120       446       2,344       (68 )     3,218  
Other income (loss)
     5,691       448       28       (176 )     —       5,991  
 
                                    
 
     3,449       (5,378 )     (1,721 )     (10,809 )     (65 )     (14,524 )
 
                                    
Loss before income taxes and income of consolidated subsidiaries
     (35,367 )     2,273       1,990       (15,129 )     (65 )     (46,298 )
Equity in income of subsidiaries
     10,869       —       —       —       (10,869 )     —  
 
                                    
Loss before income taxes
     (46,236 )     2,273       1,990       (15,129 )     10,804       (46,298 )
Income tax expense (benefit)
     (17,074 )     3,812       106       (4,224 )     244       (17,136 )
 
                                    
Net income (loss)
     (29,162 )     (1,539 )     1,884       (10,905 )     10,560       (29,162 )
Less net loss attributable to noncontrolling interest
     (1,817 )     —       —       —       —       (1,817 )
 
                                    
Net loss attributable to the Parent company
   $ (27,345 )   $ (1,539 )   $ 1,884     $ (10,905 )   $ 10,560     $ (27,345 )
 
                                    

211

 

Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
CONSOLIDATING STATEMENTS OF OPERATIONS
Year Ended December 31, 2010
(In thousands)
                                                 
                            Non-              
    Parent/             Guarantor     Guarantor     Consolidating        
    Issuer     Co-Issuer     Subsidiaries     Subsidiaries     Adjustments     Total  
     
Revenues
   $ —     $ 87,999     $ 52,201     $ 416,410     $ (50,553 )   $ 506,057  
 
                                                
Costs and expenses:
                                                
Cost of sales
     —       61,739       44,943       338,698       (50,553 )     394,827  
Depreciation, depletion and amortization
     391       10,131       7,897       26,271       —       44,690  
Selling and administrative
     9,292       4,287       4,140       21,905       (143 )     39,481  
Heritage health benefit expenses
     13,732       —       —       689       —       14,421  
Gain (loss) on sales of assets
     —       122       (5 )     109       —       226  
Other operating income
     —       —       (8,109 )     —       —       (8,109 )
 
                                    
 
     23,415       76,279       48,866       387,672       (50,696 )     485,536  
 
                                    
Operating income (loss)
     (23,415 )     11,720       3,335       28,738       143       20,521  
Other income (expense):
                                                
Interest expense
     (3,195 )     (4,659 )     (2,534 )     (12,723 )     119       (22,992 )
Interest income
     246       36       141       1,448       (124 )     1,747  
Other income (loss)
     (3,389 )     30       48       724       —       (2,587 )
 
                                    
 
     (6,338 )     (4,593 )     (2,345 )     (10,551 )     (5 )     (23,832 )
 
                                    
Loss before income taxes and income of consolidated subsidiaries
     (29,753 )     7,127       990       18,187       138       (3,311 )
Equity in income of subsidiaries
     (26,268 )     —       —       —       26,268       —  
 
                                    
Loss before income taxes
     (3,485 )     7,127       990       18,187       (26,130 )     (3,311 )
Income tax expense (benefit)
     (315 )     368       21       3,945       (4,160 )     (141 )
 
                                    
Net income (loss)
     (3,170 )     6,759       969       14,242       (21,970 )     (3,170 )
Less net loss attributable to noncontrolling interest
     (2,645 )     —       —       —       —       (2,645 )
 
                                    
Net loss attributable to the Parent company
   $ (525 )   $ 6,759     $ 969     $ 14,242     $ (21,970 )   $ (525 )
 
                                    

212

 

Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
CONSOLIDATING STATEMENTS OF CASH FLOWS
Year Ended December 31, 2008
(In thousands)
                                                 
                            Non-              
    Parent/             Guarantor     Guarantor     Consolidating        
Statements of Cash Flows   Issuer     Co-Issuer     Subsidiaries     Subsidiaries     Adjustments     Total  
 
Cash flows from operating activities:
                                                
Net loss
   $ (48,567 )   $ (4,740 )   $ 146     $ (3,673 )   $ 8,267     $ (48,567 )
Adjustments to reconcile net loss to net cash provided by operating activities:
                                                
Equity in income of subsidiaries
     (7,172 )     —       —       —       7,172       —  
Depreciation, depletion, and amortization
     381       9,780       6,898       24,328       —       41,387  
Accretion of asset retirement obligation and receivable
     —       32       950       8,546       —       9,528  
Amortization of intangible assets and liabilities, net
     —       620       24       (46 )     —       598  
Share-based compensation
     2,733       —       —       —       —       2,733  
Restructuring charges
     1,854       —       120       35       —       2,009  
Loss (gain) on sale of assets
     1       (876 )     (6 )     (544 )     —       (1,425 )
Loss on extinguishment of debt
     —       1,102       —       1,190       —       2,292  
Amortization of deferred financing costs
     78       (105 )     132       734       —       839  
Non-cash interest expense
     8,934       —       —       —       —       8,934  
Loss on investments securities
     271       —       —       629       —       900  
Changes in operating assets and liabilities:
                                                
Receivables, net
     (526 )     (3,546 )     4,510       (8,579 )     1,901       (6,240 )
Inventories
     —       959       (787 )     3,972       —       4,144  
Excess of pneumoconiosis benefit obligation over trust assets
     (23 )     —       —       —       —       (23 )
Accounts payable and accrued expenses
     (1,010 )     (406 )     (6,105 )     10,446       (924 )     2,001  
Deferred revenue
     —       28,774       133       270       —       29,177  
Accrual for workers’ compensation
     3,316       —       —       —       —       3,316  
Asset retirement obligations
     —       —       —       (889 )     —       (889 )
Accrual for postretirement medical benefits
     3,175       —       —       6,846       —       10,021  
Pension and SERP obligations
     (6,701 )     —       —       4,822       (237 )     (2,116 )
Other assets and liabilities
     (750 )     (2,302 )     2,892       (2,611 )     (603 )     (3,374 )
 
                                    
Net cash provided by (used in) operating activities
     (44,006 )     29,292       8,907       45,476       15,576       55,245  
 
                                    
Cash flows from investing activities:
                                                
Distributions received from subsidiaries
     35,525       —       —       —       (35,525 )     —  
Additions to property, plant and equipment
     (75 )     (1,711 )     (2,364 )     (27,170 )     —       (31,320 )
Change in restricted investments and bond collateral and reclamation deposits
     (1,274 )     19,868       (2,252 )     8,024       (47 )     24,319  
Net proceeds from sales of assets
     —       876       672       1,093       —       2,641  
Receivable from customer for property and equipment purchases
     —       —       —       (2,228 )     —       (2,228 )
 
                                    
Net cash provided by (used in) investing activities
     34,176       19,033       (3,944 )     (20,281 )     (35,572 )     (6,588 )
 
                                    
Cash flows from financing activities:
                                                
Change in book overdrafts
     59       —       344       (5,446 )     —       (5,043 )
Borrowings from long-term debt
     15,000       64,880       —       125,497       —       205,377  
Repayments of long-term debt
     —       (132,070 )     (2,680 )     (85,035 )     —       (219,785 )
Borrowings on revolving lines of credit
     —       —       70,100       99,500       —       169,600  
Repayments on revolving lines of credit
     —       —       (71,500 )     (102,000 )     —       (173,500 )
Debt issuance costs
     (623 )     (296 )     (225 )     (4,160 )     —       (5,304 )
Exercise of stock options
     203       —       —       —       —       203  
Dividends/distributions
     —       (21,000 )     —       (14,525 )     35,525       —  
Transactions with Parent/affiliates
     (4,159 )     30,151       (1,599 )     (8,864 )     (15,529 )     —  
 
                                    
Net cash provided by (used in) financing activities
     10,480       (58,335 )     (5,560 )     4,967       19,996       (28,452 )
 
                                    
Net increase (decrease) in cash and cash equivalents
     650       (10,010 )     (597 )     30,162       —       20,205  
Cash and cash equivalents, beginning of year
     306       15,674       597       3,159       —       19,736  
 
                                    
Cash and cash equivalents, end of year
   $ 956     $ 5,664     $ —     $ 33,321     $ —     $ 39,941  
 
                                    

213

 

Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
CONSOLIDATING STATEMENTS OF CASH FLOWS
Year Ended December 31, 2009
(In thousands)
                                                 
                            Non-              
    Parent/             Guarantor     Guarantor     Consolidating        
Statements of Cash Flows   Issuer     Co-Issuer     Subsidiaries     Subsidiaries     Adjustments     Total  
 
Cash flows from operating activities:
                                                
Net loss
   $ (29,162 )   $ (1,539 )   $ 1,884     $ (10,905 )   $ 10,560     $ (29,162 )
Adjustments to reconcile net loss to net cash provided by operating activities:
                                                
Equity in income of subsidiaries
     10,869       —       —       —       (10,869 )     —  
Gain on derivative instruments
     (5,674 )     (448 )     —       —       —       (6,122 )
Depreciation, depletion, and amortization
     418       9,764       8,265       25,807       —       44,254  
Accretion of asset retirement obligation and receivable
     —       34       1,291       8,649       —       9,974  
Amortization of intangible assets and liabilities, net
     —       621       —       (342 )     —       279  
Non-cash tax benefits
     (17,062 )     —       —       —       —       (17,062 )
Share-based compensation
     2,552       —       —       —       —       2,552  
Loss (gain) on sale of assets
     —       12       78       101       —       191  
Amortization of deferred financing costs
     1,143       (313 )     572       573       —       1,975  
Non-cash interest expense
     1,470       —       —       —       —       1,470  
Gain (loss) on investments securities
     (11 )     —       —       423       —       412  
Changes in operating assets and liabilities:
                                                
Receivables, net
     102       8,341       661       7,910       (1,511 )     15,503  
Inventories
     —       (730 )     (617 )     130       —       (1,217 )
Excess of pneumoconiosis benefit obligation over trust assets
     3,025       —       —       —       —       3,025  
Accounts payable and accrued expenses
     (123 )     (61 )     (3,990 )     (9,577 )     (51 )     (13,802 )
Deferred revenue
     —       11,216       (139 )     (591 )     —       10,486  
Accrual for workers’ compensation
     (1,619 )     —       —       —       —       (1,619 )
Asset retirement obligations
     —       —       (307 )     (1,912 )     —       (2,219 )
Accrual for postretirement medical benefits
     (3,362 )     —       —       11,124       —       7,762  
Pension and SERP obligations
     2,682       —       —       491       —       3,173  
Other assets and liabilities
     (1,220 )     (2,427 )     (2,307 )     5,879       (330 )     (405 )
 
                                    
Net cash provided by (used in) operating activities
     (35,972 )     24,470       5,391       37,760       (2,201 )     29,448  
 
                                    
Cash flows from investing activities:
                                                
Distributions received from subsidiaries
     26,399       —       —       —       (26,399 )     —  
Additions to property, plant and equipment
     (218 )     (4,251 )     (3,919 )     (26,158 )     —       (34,546 )
Change in restricted investments and bond collateral and reclamation deposits
     (2,239 )     2,266       (1,399 )     (3,229 )     —       (4,601 )
Net proceeds from sales of assets
     —       —       105       832       —       937  
Proceeds from the sale of investments
     415       —       —       381       —       796  
Receivable from customer for property and equipment purchases
     —       —       —       (1,183 )     —       (1,183 )
 
                                    
Net cash provided by (used in) investing activities
     24,357       (1,985 )     (5,213 )     (29,357 )     (26,399 )     (38,597 )
 
                                    
Cash flows from financing activities:
                                                
Change in book overdrafts
     (291 )     —       244       643       —       596  
Borrowings from long-term debt
     —       —       7,764       798       —       8,562  
Repayments of long-term debt
     —       (25,845 )     (3,719 )     (5,711 )     —       (35,275 )
Borrowings on revolving lines of credit
     —       —       79,116       15,000       —       94,116  
Repayments on revolving lines of credit
     —       —       (73,016 )     (15,000 )     —       (88,016 )
Debt issuance costs
     —       —       (256 )     —       —       (256 )
Dividends/distributions
     —       (7,706 )     —       (18,693 )     26,399       —  
Transactions with Parent/affiliates
     11,705       5,540       (10,311 )     (9,135 )     2,201       —  
 
                                    
Net cash provided by (used in) financing activities
     11,414       (28,011 )     (178 )     (32,098 )     28,600       (20,273 )
 
                                    
Net increase (decrease) in cash and cash equivalents
     (201 )     (5,526 )     —       (23,695 )     —       (29,422 )
Cash and cash equivalents, beginning of year
     956       5,664       —       33,321       —       39,941  
 
                                    
Cash and cash equivalents, end of year
   $ 755     $ 138     $ —     $ 9,626     $ —     $ 10,519  
 
                                    

214

 

Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements (Cont.)
CONSOLIDATING STATEMENTS OF CASH FLOWS
Year Ended December 31, 2010
(In thousands)
                                                 
                            Non-              
    Parent/             Guarantor     Guarantor     Consolidating        
Statements of Cash Flows   Issuer     Co-Issuer     Subsidiaries     Subsidiaries     Adjustments     Total  
 
Cash flows from operating activities:
                                                
Net loss
   $ (3,170 )   $ 6,759     $ 969     $ 14,242     $ (21,970 )   $ (3,170 )
Adjustments to reconcile net loss to net cash provided by operating activities:
                                                
Equity in income of subsidiaries
     (26,268 )     —       —       —       26,268       —  
Gain on derivative instruments
     3,486       (30 )     —       —       —       3,456  
Depreciation, depletion, and amortization
     391       10,131       7,897       26,271       —       44,690  
Accretion of asset retirement obligation and receivable
     —       51       3,007       8,482       —       11,540  
Amortization of intangible assets and liabilities, net
     —       621       —       (31 )     —       590  
Share-based compensation
     4,049       —       —       —       —       4,049  
Loss (gain) on sale of assets
     —       122       (5 )     109       —       226  
Amortization of deferred financing costs
     1,489       (308 )     450       673       —       2,304  
Non-cash interest expense
     1,236       —       —       —       —       1,236  
Gain on investments securities
     (97 )     —       —       (507 )     —       (604 )
Changes in operating assets and liabilities:
                                                
Receivables, net
     358       (609 )     (2,266 )     (3,367 )     1,156       (4,728 )
Inventories
     —       635       (208 )     1,873       —       2,300  
Excess of pneumoconiosis benefit obligation over trust assets
     1,460       —       —       —       —       1,460  
Accounts payable and accrued expenses
     2,333       884       (863 )     8,189       (1,502 )     9,041  
Deferred revenue
     —       (6,010 )     (375 )     (1,014 )     —       (7,399 )
Accrual for workers’ compensation
     (841 )     —       —       —       —       (841 )
Asset retirement obligations
     —       —       (1,769 )     (6,014 )     —       (7,783 )
Accrual for postretirement medical benefits
     (2,813 )     —       —       (19 )     —       (2,832 )
Pension and SERP obligations
     (6,828 )     —       93       2,833       —       (3,902 )
Other assets and liabilities
     (923 )     (211 )     898       (3,986 )     (58 )     (4,280 )
 
                                    
Net cash provided by (used in) operating activities
     (26,138 )     12,035       7,828       47,734       3,894       45,353  
 
                                    
Cash flows from investing activities:
                                                
Distributions received from subsidiaries
     31,300       —       —       —       (31,300 )     —  
Additions to property, plant and equipment
     (550 )     (2,207 )     (4,275 )     (15,782 )     —       (22,814 )
Change in restricted investments and bond collateral and reclamation deposits
     (1,714 )     142       (1,716 )     (5,257 )     —       (8,545 )
Net proceeds from sales of assets
     —       1       66       645       —       712  
Proceeds from the sale of investments
     156       —       —       2,151       —       2,307  
Receivable from customer for property and equipment purchases
     —       —       —       (840 )     —       (840 )
 
                                    
Net cash provided by (used in) investing activities
     29,192       (2,064 )     (5,925 )     (19,083 )     (31,300 )     (29,180 )
 
                                    
Cash flows from financing activities:
                                                
Change in book overdrafts
     (111 )     —       57       (541 )     —       (595 )
Repayments of long-term debt
     —       (9,355 )     (4,440 )     (6,610 )     —       (20,405 )
Borrowings on revolving lines of credit
     —       7,300       91,500       72,100       —       170,900  
Repayments on revolving lines of credit
     —       (7,300 )     (91,000 )     (70,600 )     —       (168,900 )
Debt issuance costs
     (1,718 )     —       (207 )     —       —       (1,925 )
Exercise of stock options
     8       —       —       —       —       8  
Dividends/distributions
     —       —       —       (31,300 )     31,300       —  
Transactions with Parent/affiliates
     (1,717 )     126       2,187       3,298       (3,894 )     —  
 
                                    
Net cash provided by (used in) financing activities
     (3,538 )     (9,229 )     (1,903 )     (33,653 )     27,406       (20,917 )
 
                                    
Net increase (decrease) in cash and cash equivalents
     (484 )     742       —       (5,002 )     —       (4,744 )
Cash and cash equivalents, beginning of year
     755       138       —       9,626       —       10,519  
 
                                    
Cash and cash equivalents, end of year
   $ 271     $ 880     $ —     $ 4,624     $ —     $ 5,775  
 
                                    

215

 

WESTMORELAND RESOURCES, INC. AND SUBSIDIARY
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholder of
Westmoreland Resources, Inc.
We have audited the accompanying consolidated balance sheets of Westmoreland Resources, Inc. and subsidiary (the Company) (a wholly owned subsidiary of Westmoreland Coal Company) as of December 31, 2010 and 2009 and the related consolidated statements of operations, shareholder’s equity and comprehensive income (loss) and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Westmoreland Resources, Inc. and subsidiary as of December 31, 2010 and 2009, and the result of their operations and their cash flow for the years then ended in conformity with U.S. generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Denver, Colorado
June 3, 2011

216

 

WESTMORELAND RESOURCES, INC. AND SUBSIDIARY
Independent Auditors’ Report
The Board of Directors
Westmoreland Resources, Inc:
We have audited the accompanying consolidated statements of operations, shareholder’s deficit and comprehensive loss, and cash flows of Westmoreland Resources, Inc. (the Company) ( a wholly owned subsidiary of Westmoreland Coal Company) for the year ended December 31, 2008. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the results of Westmoreland Resources, Inc operations and their cash flows for the year ended December 31, 2008, in conformity with U.S. generally accepted accounting principles.
The consolidated financial statements have been prepared assuming the Company will continue as a going concern. During the year ended December 31, 2008, Westmoreland Coal Company had suffered recurring losses from operations, had a working capital deficit, and had a net capital deficiency that raised substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.
/s/ KPMG LLP
Denver, Colorado
April 24, 2009

217

 

Westmoreland Resources, Inc. and Subsidiary
Consolidated Balance Sheets
December 31, 2010 and 2009
(In thousands)
                 
    2010     2009  
Assets
                
Current assets:
                
Cash and cash equivalents
   $ 583     $ 923  
Accounts receivable
                
Trade
     3,712       3,427  
Other
     2,435       1,713  
 
            
 
     6,147       5,140  
Inventories
     4,320       3,786  
Other current assets
     603       719  
 
            
Total current assets
     11,653       10,568  
 
            
Property, plant and equipment, at cost:
                
Land and mineral rights
     17,806       17,764  
Plant and equipment
     117,321       113,347  
Asset retirement costs
     20,463       22,016  
 
            
 
     155,590       153,127  
Less accumulated depreciation, depletion and amortization
     (82,233 )     (74,534 )
 
            
Net property, plant and equipment
     73,357       78,593  
Restricted investments and bond collateral
     10,956       9,226  
Contractual third-party reclamation receivables
     390       120  
Advanced coal royalties
     998       —  
Intangible assets, net of accumulated amortization of $1.5 million at December 31, 2010 and $1.0 million at 2009
     —       550  
Other assets
     1,683       1,927  
 
            
Total assets
   $ 99,037     $ 100,984  
 
            
 
                
Liabilities and Shareholder’s Equity
                
Current liabilities:
                
Current installments of long-term debt
   $ 2,255     $ 14,117  
Revolving line of credit
     —       16,400  
Accounts payable
     4,682       3,949  
Book overdrafts
     695       618  
Payable to related parties
     465       953  
Accrued expenses
     7,461       7,482  
Asset retirement obligations
     3,371       4,512  
Other current liabilities
     2,214       3,001  
 
            
Total current liabilities
     21,143       51,032  
 
            
 
                
Long-term debt, less current installments
     15,166       7,744  
Revolving line of credit, less current installments
     16,900       —  
Asset retirement obligations, less current portion
     28,967       27,916  
Other liabilities
     3,149       1,156  
 
            
Total liabilities
     85,325       87,848  
 
            
Shareholder’s equity:
                
Common stock of $1 par value. Authorized 40,000 shares; issued and outstanding 10,000 shares at December 31, 2010 and December 31, 2009
     10       10  
Additional paid-in capital
     15,526       15,412  
Advances to Parent
     (13,387 )     (16,171 )
Accumulated other comprehensive income
     120       106  
Retained earnings
     15,905       15,596  
 
            
Total Westmoreland Resources Inc. shareholder’s equity
     18,174       14,953  
Noncontrolling interest
     (4,462 )     (1,817 )
 
            
Total shareholder’s equity
     13,712       13,136  
 
            
Total liabilities and shareholder’s equity
   $ 99,037     $ 100,984  
 
            
See accompanying Notes to Consolidated Financial Statements.

218

 

Westmoreland Resources, Inc. and Subsidiary
Consolidated Statements of Operations
Years Ended December 31, 2010, 2009 and 2008
(In thousands, except per share data)
                         
    2010     2009     2008  
Revenues
   $ 74,997     $ 78,360     $ 80,148  
Costs and expenses:
                        
Cost of coal and operating expenses
     71,614       74,931       67,859  
Depreciation, depletion, and amortization
     7,886       8,252       6,885  
Selling and administrative
     3,437       3,797       4,074  
Restructuring charge
     —       —       120  
Loss (gain) on sale of assets
     19       78       (6 )
Other operating income
     (8,109 )     (11,059 )     —  
 
                  
 
     74,847       75,999       78,932  
 
                  
Operating income
     150       2,361       1,216  
Other income (expense):
                        
Interest expense
     (2,534 )     (2,195 )     (1,543 )
Interest income
     21       443       266  
Other
     48       28       —  
 
                  
 
     (2,465 )     (1,724 )     (1,277 )
 
                  
Income (loss) before income taxes
     (2,315 )     637       (61 )
Income tax expense
     21       106       138  
 
                  
Net income (loss)
     (2,336 )     531       (199 )
Less: net loss attributable to noncontrolling interests
     (2,645 )     (1,817 )     —  
 
                  
Net income (loss) attributable to Parent company
   $ 309     $ 2,348     $ (199 )
 
                  
Net income (loss) per share applicable to Parent company
   $ 30.90     $ 234.80     $ (19.90 )
 
                  
Weighted average number of common shares outstanding
     10       10       10  
 
                  
See accompanying Notes to Consolidated Financial Statements.

219

 

Westmoreland Resources, Inc. and Subsidiary
Consolidated Statements of Shareholder’s Equity and Comprehensive Income (Loss)
Years Ended December 31, 2010, 2009 and 2008
(In thousands)
                                                         
                            Accumulated Other                      
            Additional     Advances from (to)     Comprehensive             Noncontrolling     Total Shareholder’s  
    Common stock     paid-in capital     Parent     Income (Loss)     Retained Earnings     Interest     Equity  
Balance, December 31, 2007
   $ 10     $ 15,167     $ (3,164 )   $ —     $ 13,447     $ —     $ 25,460  
Adjustment for utilization of tax losses of Westmoreland Coal Company
     —       138       —       —       —       —       138  
Advances to Parent
     —       —       (1,691 )     —       —       —       (1,691 )
Unrealized gain on available-for-sale securities
     —       —       —       61       —       —       61  
Net loss
     —       —       —       —       (199 )     —       (199 )
 
                                                      
Comprehensive loss
                                                     (138 )
     
Balance, December 31, 2008
   $ 10     $ 15,305     $ (4,855 )   $ 61     $ 13,248     $ —     $ 23,769  
Adjustment for utilization of tax losses of Westmoreland Coal Company
     —       107       —       —       —       —       107  
Advances to Parent
     —       —       (11,316 )     —       —       —       (11,316 )
Unrealized gain on available-for-sale securities
     —       —       —       45       —       —       45  
Net income
     —       —       —       —       2,348       (1,817 )     531  
 
                                                      
Comprehensive income
                                                     576  
       
Balance, December 31, 2009
   $ 10     $ 15,412     $ (16,171 )   $ 106     $ 15,596     $ (1,817 )   $ 13,136  
Contribution of Westmoreland Coal Company common stock to pension plan on the Company’s behalf
     —       93       —       —       —       —       93  
Adjustment for utilization of tax losses of Westmoreland Coal Company
     —       21       —       —       —       —       21  
Advances from Parent
     —       —       2,784       —       —       —       2,784  
Unrealized gain on available-for-sale securities
     —       —       —       14       —       —       14  
Net loss
     —       —       —       —       309       (2,645 )     (2,336 )
 
                                                      
Comprehensive loss
                                                     (2,322 )
       
Balance, December 31, 2010
   $ 10     $ 15,526     $ (13,387 )   $ 120     $ 15,905     $ (4,462 )   $ 13,712  
 
                                          
See accompanying Notes to Consolidated Financial Statements.

220

 

Westmoreland Resources, Inc. and Subsidiary
Consolidated Statements of Cash Flows
Years Ended December 31, 2010, 2009 and 2008
(In thousands)
                         
    2010     2009     2008  
Cash flows from operating activities:
                        
Net income (loss)
   $ (2,336 )   $ 531     $ (199 )
Adjustments to reconcile net income to net cash from operating activities:
                        
Depreciation, depletion and amortization
     7,886       8,252       6,885  
Restructuring charge
     —       —       120  
Accretion of asset retirement obligation and receivable
     3,007       1,346       980  
Postretirement medical benefit costs allocated by Parent, net of payments
     1       81       75  
Pension contributions, net of pension costs allocated by Parent
     (175 )     (30 )     28  
Loss (gain) on sale of assets
     19       78       (6 )
Amortization of deferred financing costs
     450       575       133  
Amortization of intangible assets and liabilities, net
     (67 )     (385 )     (79 )
Utilization of tax losses of Westmoreland Coal Company
     21       107       138  
Change in:
                        
Accounts receivable
     (1,007 )     1,105       1,002  
Inventories
     (534 )     (507 )     (854 )
Accounts payable
     687       (1,946 )     (1,398 )
Payable to related parties
     (1,219 )     802       (361 )
Deferred revenues
     —       (285 )     (445 )
Asset retirement obligation
     (1,814 )     (199 )     (14 )
Other assets and liabilities
     1,941       (2,521 )     3,445  
 
                  
Net cash provided by operating activities
     6,860       7,004       9,450  
 
                  
 
Cash flows from investing activities:
                        
Additions to property, plant and equipment
     (4,240 )     (3,920 )     (2,377 )
Increase in restricted investments and bond collateral
     (1,716 )     (1,399 )     (2,252 )
Proceeds from sales of assets
     41       103       672  
 
                  
Net cash used in investing activities
     (5,915 )     (5,216 )     (3,957 )
 
                  
 
Cash flows from financing activities:
                        
Increase in book overdrafts
     77       227       391  
Borrowings from long-term debt
     —       7,764       —  
Repayments of long-term debt
     (4,440 )     (3,725 )     (2,679 )
Borrowings on revolving line of credit
     91,500       79,116       70,100  
Repayments on revolving line of credit
     (91,000 )     (73,016 )     (71,500 )
Deferred financing costs
     (206 )     (256 )     (225 )
Advances from (to) Parent
     2,784       (11,316 )     (1,794 )
 
                  
Net cash used in financing activities
     (1,285 )     (1,206 )     (5,707 )
 
                  
 
Net increase (decrease) in cash and cash equivalents
     (340 )     582       (214 )
Cash and cash equivalents, beginning of year
     923       341       555  
 
                  
 
Cash and cash equivalents, end of year
   $ 583     $ 923     $ 341  
 
                  
Supplemental disclosures of cash flow information:
                        
Cash paid for interest
   $ 2,238     $ 1,801     $ 1,330  
 
Noncash transactions:
                        
Accrued purchases of property and equipment
   $ 51     $ 26     $ 866  
Capital leases
     —       5,604       914  
See accompanying Notes to Consolidated Financial Statements

221

 

Westmoreland Resources, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(1)   Summary of Significant Accounting Policies
  (a)   Nature of Operations
 
      Westmoreland Resources, Inc., or WRI, or the Company, a wholly owned subsidiary of Westmoreland Coal Company, or WCC, or the Parent, owns a surface coal mining operation located in eastern Montana. Coal produced from the Absaloka Mine is sold to electric utilities based in the north central region of the United States. Westmoreland Coal Company owns and operates the Company. All coal reserves are owned by the Crow Tribe of Indians and the mineral rights to the coal reserves are leased by the Company on a long-term basis.
 
      In various transactions in October 2008, the Company formed a limited liability company, Absaloka Coal LLC, which it owns jointly with a newly formed subsidiary, WRI Partners, Inc., to mine and sell coal from the Absaloka Mine. Absaloka Coal LLC subleases the mineral rights from the Company entitling Absaloka Coal LLC to mine up to 40.0 million tons of coal at the Absaloka Mine through 2012. WRI also assigned to Absaloka Coal LLC all of its contracts to sell coal to third parties. The Company sold a 99% interest in Absaloka Coal LLC to a third-party but continues to consolidate Absaloka Coal LLC as the Company has effective control over its operations.
 
      The Company’s financial statements reflect substantially all of its costs of doing business. Common expenses incurred by the Parent on behalf of the Company are charged to the Company based on proportional cost allocations. The Company believes the allocations used are reasonable. However, these financial statements may not necessarily be representative of a stand-alone company.
 
  (b)   WCC Liquidity
 
      On February 4, 2011 through a private placement offering, WCC issued $150.0 million of Senior Secured Notes due in 2018 together with Westmoreland Partners as co-issuer (hereafter, the Parent Notes). Substantially all of the assets of the Company constitute collateral for the Parent Notes as to which the holders of these notes have a first priority lien. WCC received approximately $135.2 million in proceeds from the Parent Notes offering. WCC used the proceeds to pay the outstanding balance on the Company’s term debt. Also, the Company’s credit facility was terminated in February 2011, as result of the Parent Notes offering.
 
      Following the February 4, 2011 Parent Notes offering, WCC has cash on hand in excess of $45 million. WCC also expects increases in coal operating profits and its heritage health benefit expenditures to continue at their reduced 2010 rates. As a result, WCC anticipates that its cash flows from operations, cash on hand and available borrowing capacity will be sufficient to meet its investing, financing, and working capital requirements for the next several years.
 
      As a result of the Parent Notes offering, the Company recorded the current portion of its term debt as non-current liabilities in its consolidated balance sheet at December 31, 2010.
 
      WCC’s liquidity continues to be affected by its heritage health, pension, capital expenditures and bond collateral obligations. Following the February 4, 2011 Parent Notes offering, WCC expects that distributions from the Company and other subsidiaries will comprise a significant source of liquidity. In addition, the cash at WCC’s subsidiary Westmoreland Mining, LLC, or WML, is available to it through quarterly distributions, although it is subject to certain restrictions.
 
  (c)   Consolidation Policy
 
      The Company consolidates any variable interest entity, or VIE, for which the Company is considered the primary beneficiary. The Company provides for noncontrolling interests in consolidated subsidiaries, which the Company’s ownership is less than 100 percent. All intercompany accounts and transactions have been eliminated.

222

 

Westmoreland Resources, Inc. and Subsidiary
Notes to Consolidated Financial Statements (Cont.)
      A VIE is an entity that is unable to make significant decisions about its activities or does not have the obligation to absorb losses or the right to receive returns generated by its operations. If the entity meets one of these characteristics, then the Company must determine if it is the primary beneficiary of the VIE. The party exposed to the majority of the risks and rewards with the VIE is the primary beneficiary and must consolidate the entity.
      The Company has determined that at December 31, 2010, 2009 and 2008 it was the primary beneficiary in Absaloka Coal LLC, a VIE, in which it holds less than a 50% ownership. As a result, the Company has consolidated this entity within its operations.
 
  (d)   Use of Estimates
      The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
 
  (e)   Cash and Cash Equivalents
      Cash and cash equivalents are stated at cost, which approximate fair value. Cash equivalents consist of highly liquid investments with original maturities of three months or less.
 
  (f)   Accounts Receivable
      Accounts receivable are recorded at the invoiced amount and do not bear interest. The Company evaluates the need for an allowance for doubtful accounts based on a review of collectability. The Company has determined that no allowance is necessary for accounts receivable as of December 31, 2010 and 2009.
 
  (g)   Inventories
      Inventories, which include materials and supplies as well as raw coal, are stated at the lower of cost or market. Cost is determined using the average cost method. Coal inventory costs include labor, supplies, equipment, operating overhead and other related costs.
 
  (h)   Mine Development
      At the existing mine, additional pits may be added to increase production capacity in order to meet customer requirements. These expansions may require significant capital to purchase additional equipment, relocate equipment, expand the workforce, build or improve existing haul roads and create the initial pre-production box cut to remove overburden for new pits at the existing operation. If these pits operate in a separate and distinct area of the mine, the costs associated with initially uncovering coal for production are capitalized and amortized over the life of the developed pit consistent with coal industry practices. Once production has begun, mining costs are then expensed as incurred.
      Where new pits are routinely developed as part of a contiguous mining sequence, the Company expenses such costs as incurred. The development of a contiguous pit typically reflects the planned progression of an existing pit, thus maintaining production levels from the same mining area utilizing the same employee group and equipment.
 
  (i)   Property, Plant, and Equipment
      Property, plant and equipment are recorded at cost. Expenditures that extend the useful lives of existing plant and equipment or increase productivity of the assets are capitalized. Maintenance and repair costs that do not extend the useful life or increase productivity of the asset are expensed as incurred. Coal reserves are recorded at cost, or at fair value in the case of acquired businesses.

223

 

Westmoreland Resources, Inc. and Subsidiary
Notes to Consolidated Financial Statements (Cont.)
      Coal reserves, mineral rights and mine development costs are depleted based upon estimated recoverable proven and probable reserves. Plant and equipment are depreciated on a straight-line basis over the assets’ estimated useful lives as follows:
     
    Years
Buildings and improvements
  15 to 30
Machinery and equipment
  3 to 30
      The Company assesses the carrying value of its property, plant and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability is measured by comparing estimated undiscounted cash flows expected to be generated from such assets to their net book value. If net book value exceeds estimated cash flows, the asset is written down to fair value. When an asset is retired or sold, its cost and related accumulated depreciation and depletion are removed from the accounts. The difference between the net book value of the asset and proceeds on disposition is recorded as a gain or loss. Fully depreciated plant and equipment still in use is not eliminated from the accounts.
 
  (j)   Restricted Investments and Bond Collateral
      The Company has requirements to maintain restricted cash and investments for bonding requirements. Amounts held are recorded as Restricted investments and bond collateral. Funds in the restricted investment and bond collateral accounts are not available to meet the Company’s operating cash needs.
 
  (k)   Contractual Third-Party Reclamation Receivables
      Certain of the Company’s customers have agreed to reimburse the Company for reclamation expenditures as they are incurred. Amounts that are reimbursable by customers are recorded as Contractual third-party reclamation receivables when the related reclamation obligation is recorded.
 
  (l)   Fair Value Measurements
      The Company is required to disclose the fair value of financial instruments where practicable. The carrying amounts of cash equivalents, accounts receivable and accounts payable reflected on the balance sheet approximates the fair value of these instruments due to the short duration to maturities. The fair value of the Company’s Level 1 available-for-sale equity securities is generally based on independent third-party market prices.
 
  (m)   Financial Instruments
      The Company evaluates all of its financial instruments to determine if such instruments are derivatives, derivatives that qualify for the normal purchase normal sale exception, or instruments, which contain features that qualify them as embedded derivatives. Except for derivatives that qualify for the normal purchase normal sale exception, all financial instruments are recognized in the balance sheet at fair value. Changes in fair value are recognized in earnings if they are not eligible for hedge accounting or Accumulated other comprehensive income (loss) if they qualify for cash flow hedge accounting.
      Held-to-maturity financial instruments consist of non-derivative financial assets with fixed or determinable payments and a fixed term, which the Company has the ability and intent to hold until maturity, and, therefore, accounts for them as held-to-maturity securities. Held-to-maturity securities are recorded at amortized cost, adjusted for the amortization or accretion of premiums or discounts calculated on the effective interest method. Interest income is recognized when earned.
      The Company has securities classified as available-for-sale, which are recorded at fair value. The changes in fair values are recorded as unrealized gains (losses) as a component of Accumulated other comprehensive loss in stockholder’s deficit.

224

 

Westmoreland Resources, Inc. and Subsidiary
Notes to Consolidated Financial Statements (Cont.)
      The Company reviews its securities routinely for other-than-temporary impairment. The primary factors used to determine if an impairment charge must be recorded because a decline in value of the security is other than temporary include (i) whether the fair value of the investment is significantly below its cost basis, (ii) the financial condition of the issuer of the security, (iii) the length of time that the cost of the security has exceeded its fair value and (iv) the Company’s intent and ability to retain the investment for a period of time sufficient to allow for any anticipated recovery in market value. Other-than-temporary impairments are recorded as a component of Other income (expense).
 
  (n)   Intangible Assets and Liabilities
      Identifiable intangible assets or liabilities acquired in a business combination must be recognized and reported separately from goodwill. The Company has determined that its most significant acquired identifiable intangible assets and liabilities are related to sales and purchase agreements. Intangible assets result from more favorable market prices than contracted prices in sales and purchase agreements as measured during a business combination. Intangible liabilities result from less favorable market prices than contracted prices in sales and purchase agreements as measured during a business combination. The majority of these intangible assets and liabilities are amortized on a straight-line basis over the respective period of the sales and purchase agreements, while the remainder are amortized on a unit-of-production basis. The intangible liabilities are recorded as Other liabilities in the accompanying consolidated balance sheet.
      Amortization of intangible assets and liabilities recognized as an increase in Revenues was $0.1 million, $0.4 million and $0.1 million in 2010, 2009 and 2008, respectively.
 
  (o)   Postretirement Medical Benefits and Pension Plans
      The Company, through a plan sponsored by WCC, provides certain medical benefits for retired employees and their dependents. Effective September 1, 2009, WCC eliminated these benefits for non-represented employees and retirees. These benefits are provided through an unfunded self-insured program.
      WCC requires the costs of postretirement medical benefits other than pensions to be accrued over the employees’ period of active service. These costs are determined on an actuarial basis and are allocated by the Parent to the Company based on its share of the plan participants. These costs are recorded in Cost of sales with a corresponding decrease in Advances to Parent. The Parent’s consolidated balance sheet reflects the unfunded status of these postretirement medical benefit obligations.
      The Company also participates in the Parent’s noncontributory defined benefit pension plan, which was frozen effective July 1, 2009. The costs to provide the benefits are accrued over the employees’ period of active service and are determined on an actuarial basis. The Company records an allocation of net periodic retirement benefit costs from the Parent in Cost of sales with a corresponding decrease in Advances to Parent. The Parent’s consolidated balance sheet reflects the unfunded status of these defined benefit pension plan obligations.
 
  (p)   Income Taxes
      The Company files consolidated federal and state tax returns with its Parent. As the Company itself is not a taxable entity, the Parent’s tax expense for its income tax return group included on the Parent’s consolidated income tax return is allocated among the members of that group. This allocation is calculated as if each member were a separate taxpayer. This allocation is reflected by the Company in Income tax expense with the offset in Additional paid-in capital. There is no formal tax sharing agreement with the Parent.
      The Company accounts for deferred income taxes using the asset and liability method. Deferred tax liabilities and assets are recognized for the expected future tax consequences of events that have been reflected in the Company’s financial statements based on the difference between the financial statement carrying amounts and tax bases of assets and liabilities, as well as net operating loss and tax credit carryforwards, using enacted tax rates in effect in the years in which the differences are expected to reverse. The Company establishes a valuation allowance against its net deferred tax assets to the extent the

225

 

Westmoreland Resources, Inc. and Subsidiary
Notes to Consolidated Financial Statements (Cont.)
      Company believes that it is more likely than not that it will not realize the net deferred tax assets.
      Accounting guidance prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Under this guidance, a company can recognize the benefit of an income tax position only if it is more likely than not (greater than 50%) that the tax position will be sustained upon tax examination, based solely on the technical merits of the tax position. This standard also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.
 
  (q)   Deferred Financing Costs
      The Company capitalizes costs incurred in connection with borrowings or establishment of credit facilities and issuance of debt securities. These costs are amortized as an adjustment to interest expense over the life of the borrowing or term of the credit facility using the effective interest method. These amounts are recorded in Other assets in the accompanying Consolidated Balance Sheet.
 
  (r)   Asset Retirement Obligations
      The Company’s asset retirement obligation, or ARO, liabilities primarily consist of estimated costs related to reclaiming surface land and support facilities at its mines in accordance with federal and state reclamation laws as established by each mining permit.
      The Company estimates its ARO liabilities for final reclamation and mine closure based upon detailed engineering calculations of the amount and timing of the estimated future costs for a third party to perform the required work. Cost estimates are escalated for inflation, and then discounted at the credit-adjusted risk-free rate. The Company records an ARO asset associated with the initial recorded liability. The ARO asset is amortized based on the units-of-production method over the estimated recoverable, proven and probable reserves at the related mine, and the ARO liability is accreted to the projected settlement date. Changes in estimates could occur due to revisions of mine plans, changes in estimated costs, and changes in the timing of the performance of reclamation activities.
 
  (s)   Coal Revenues
      The Company recognizes coal sales revenue at the time title passes to the customer in accordance with the terms of the underlying sales agreements and after any contingent performance obligations have been satisfied. Coal sales revenue is recognized based on the pricing contained in the coal contracts in place at the time that title passes and any retroactive pricing adjustments to those contracts are recognized as revised agreements are reached with the customers and any performance obligations included in the agreements are satisfied.
  (t)   Other Operating Income (Loss)
      Other operating income in the accompanying Consolidated Results of Operations reflects income from sources other than coal revenues. Income from the Company’s Indian Coal Tax Credit monetization transaction is recorded as Other operating income.
 
  (u)   Exploration and Drilling Costs
      Exploration expenditures are charged to Cost of sales as incurred, including costs related to drilling and study costs incurred to convert or upgrade mineral resources to reserves.
 
  (v)   Earnings (Loss) per Share
      Basic earnings (loss) per share have been computed by dividing the net income (loss) applicable to common shareholders by the weighted average number of shares of common stock outstanding during each period. Net income (loss) applicable to common shareholders includes the adjustment for net income or loss attributable to noncontrolling interest.

226

 

Westmoreland Resources, Inc. and Subsidiary
Notes to Consolidated Financial Statements (Cont.)
(w) Accounting Pronouncements Adopted
      In January 2010, the FASB issued authoritative guidance, which requires additional disclosures and clarifies certain existing disclosure requirements regarding fair value measurements. This guidance is effective for interim and annual reporting periods beginning after December 15, 2009. The Company adopted this guidance effective January 1, 2010. However, none of the specific additional disclosures were applicable at December 31, 2010.
      On January 1, 2009, the Company adopted accounting guidance that establishes accounting and reporting standards for (1) noncontrolling interests in partially owned consolidated subsidiaries and (2) the loss of control of subsidiaries. This guidance requires noncontrolling interests (minority interests) to be reported as a separate component of equity. The amount of net income or loss attributable to the noncontrolling interests will be included in consolidated net income or loss on the face of the income statement. In addition, this guidance requires that a parent recognize a gain or loss in net income or loss when a subsidiary is deconsolidated. Such gain or loss will be measured using the fair value of the noncontrolling equity investment on the deconsolidation date. This guidance also includes expanded disclosure requirements regarding the interests of the parent and its noncontrolling interest. The Company recorded $2.6 million and $1.8 million, respectively, of net loss attributable to noncontrolling interest for the years ended December 31, 2010 and December 31, 2009, which is reflected in the Company’s consolidated financial statements.
(2)   Indian Coal Production Tax Credits (ICTC’s)
 
    In August 2005, the Energy Policy Act of 2005 was enacted. Among other provisions, it contains a tax credit for the production of coal owned by Indian tribes. The tax credit is equal to $2.20 per ton in 2010 and increases annually based on an inflation—adjustment factor. The credit may be used against regular corporate income tax for all years and against alternative minimum taxes for the initial four-year period after the placed in service date of the facility. The Absaloka Mine produces coal that qualifies for this credit.
 
    In July 2008, the Company finalized an agreement with the Crow Tribe covering the treatment of the tax credit in determining royalties payable to the Tribe under its lease agreement with the Tribe.
 
    On October 16, 2008, the Company entered into a series of transactions with a financial institution, or Investor, designed to enable the Company to take advantage of ICTC’s generated by its mining operations.
 
    In these transactions, the Company formed a limited liability company, Absaloka Coal LLC, which it owned jointly with a newly formed subsidiary, WRI Partners, Inc., to mine and sell coal from the Absaloka Mine. Absaloka Coal LLC then entered into a sublease from the Company for the coal leases with the Crow Tribe, entitling Absaloka Coal LLC to mine up to 40.0 million tons of coal at the Absaloka Mine through 2012. WRI also assigned to Absaloka Coal LLC all of its contracts to sell coal to third parties.
 
    On October 16, 2008, the Company sold its interest in Absaloka Coal LLC to the Investor for consideration consisting of an initial payment of $4.0 million, $34.0 million of fixed principal and interest payments, and contingent payments based on 90% of the credits allocated to the Investor in excess of the fixed payments. Based on current forecasts of the Absaloka Mine’s coal sales, the total consideration to be paid by the Investor to the Company is projected to be approximately $55.8 million through December 31, 2012. The Company expects to share approximately $17.1 million of this consideration with the Crow Tribe as royalties.
 
    The Investor will be entitled to 99% of Absaloka Coal LLC’s earnings and related distributions until it has received a 10% return on its initial $4.0 million cash investment, after which it will be entitled to 5% of earnings and distributions.
 
    On October 3, 2008, the Company requested a private letter ruling, or PLR, request with the IRS concerning various issues relating to the validity of the ICTC’s. In March 2009, the Company received a PLR confirming the availability of the ICTC’s under the specific scenario described whereby WRI subleased the right to mine a fixed amount of coal from the Company’s Absaloka Mine to the LLC. The Company recognizes the fixed and contingent payments from the Investor as they are received as income in its consolidated financial statements.

227

 

Westmoreland Resources, Inc. and Subsidiary
Notes to Consolidated Financial Statements (Cont.)
    As part of the purchase agreement, the Company has an option to purchase the Investor’s entire membership interest after October 16, 2013, and Investor is entitled to withdraw at any time from Absaloka Coal LLC. In these events, or on dissolution of the LLC, the Company would be required to pay the Investor the appraised value of its capital account balance.
 
    The Company is the sole manager of Absaloka Coal LLC has entered into a contract mining agreement with Absaloka Coal LLC under which it receives an amount equal to all of its mining costs plus a fee per ton of coal mined. Westmoreland Coal Sales Company acts as the exclusive sales agent on behalf of Absaloka Coal LLC under a sales agency agreement and receives a fee for its services based on the tons of coal sold.
 
(3)   Inventories
 
    Inventory consisted of the following at December 31, 2010 and 2009 (in thousands):
                 
    2010     2009  
Coal
   $ 210     $ 194  
Materials and supplies
     4,155       3,712  
Reserve for obsolete inventory
     (45 )     (120 )
 
            
Total
   $ 4,320     $ 3,786  
 
            
(4)   Restricted Investments and Bond Collateral
 
    The Company’s restricted investments and bond collateral consisted of the following (in thousands):
                 
    December 31,  
    2010     2009  
Reclamation bond collateral
   $ 10,956     $ 9,226  
    The Company’s carrying value and estimated fair value of its restricted investments and bond collateral at December 31, 2010, are as follows (in thousands):
                 
    Carrying Value     Fair Value  
Cash and cash equivalents
   $ 8,402     $ 8,402  
Held-to-maturity securities
     1,259       1,423  
Available-for-sale securities
     1,295       1,295  
 
            
 
   $ 10,956     $ 11,120  
 
            
    Funds in the restricted investment and bond collateral accounts are not available to meet the Company’s operating cash needs. For all of its restricted investments and bond collateral accounts, the Company can select from several investment options for the funds and receives the investment returns on these investments.
 
    As of December 31, 2010, the Company had reclamation bond collateral in place for its active Absaloka Mine. These government-required bonds assure that coal-mining operations comply with applicable federal and state regulations relating to the performance and completion of final reclamation activities. The amounts deposited in the bond collateral account secure the bonds issued by the bonding company.

228

 

Westmoreland Resources, Inc. and Subsidiary
Notes to Consolidated Financial Statements (Cont.)
  a)   Held-to-Maturity and Available-for-Sale Restricted Investments and Bond Collateral
      The amortized cost, gross unrealized holding gains and losses and fair value of held-to-maturity securities at December 31, 2010 and 2009, are as follows (in thousands):
                 
    2010     2009  
Amortized cost
   $ 1,259     $ 2,139  
Gross unrealized holding gains (losses)
     164       (2 )
 
            
Fair value
   $ 1,423     $ 2,137  
 
            
      Maturities of held-to-maturity securities are as follows at December 31, 2010 (in thousands):
                 
    Amortized Cost     Fair Value  
Due in more than ten years
   $ 1,259     $ 1,423  
      The cost basis, gross unrealized holding gains and fair value of available-for-sale securities at December 31, 2010 and 2009, are as follows (in thousands):
                 
    2010     2009  
Cost basis
   $ 1,175     $ 1,175  
Gross unrealized holding gains
     120       106  
 
            
Fair value
   $ 1,295     $ 1,281  
 
            
(5)   Line of Credit, Long-Term Debt and Capital Leases
 
    The amount outstanding at December 31, 2010 and 2009, under the Company’s line of credit, long-term debt and capital leases consisted of the following (in thousands):
                 
    Total Debt Outstanding  
    2010     2009  
Revolving line of credit
   $ 16,900     $ 16,400  
Term debt
     9,600       12,000  
Capital lease obligations
     7,821       9,861  
 
            
Total debt outstanding
     34,321       38,261  
Less current portion
     (2,255 )     (30,517 )
 
            
Total debt outstanding, less current portion
   $ 32,066     $ 7,744  
 
            
      The following table presents aggregate contractual debt maturities of all long-term debt and the revolving credit facilities at December 31, 2010 (in thousands):
                 
            Subsequent to Parent Note  
    As of December 31, 2010     Offering  
2011
   $ 21,555     $ 2,255  
2012
     4,781       2,381  
2013
     3,993       1,593  
2014
     3,330       930  
2015
     662       662  
Thereafter
     —       —  
 
            
 
   $ 34,321     $ 7,821  
 
            
    In December 2010, WRI’s Business Loan Agreement was amended and the $20.0 million revolving line of credit was extended through December 18, 2011. The interest rate for the term debt and the revolver were payable at the prime rate. The term debt and the revolver were both subject to a per annum 8.0% and 7.0% floor, respectively. As described in Note 1, the outstanding balance of the term debt and the revolving line of credit were repaid and the revolving line of credit was terminated in February 2011.

229

 

Westmoreland Resources, Inc. and Subsidiary
Notes to Consolidated Financial Statements (Cont.)
      At December 31, 2010, the Company had $3.1 million of unused borrowings under the revolver. The revolver did not have commitment fees for the unused portion of the available revolving loan.
 
      The two debt instruments were collateralized by a first lien in WRI’s inventory, chattel paper, accounts and notes receivable, and equipment. WCC was the guarantor of the debt under the Agreement and its guaranty was secured by a pledge of WCC’s interest in WRI.
 
      WRI’s Business Loan Agreement required it to comply with numerous covenants and minimum financial ratio requirements primarily related to debt coverage, tangible net worth, capital expenditures, and its operations. Primarily as a result of unfavorable market conditions driving decreases in tonnages sold, WRI was not in compliance with a net worth requirement contained in its Business Loan Agreement at April 30, 2010. As a result of this non-compliance, the interest rates on WRI’s term debt and revolving line of credit were increased 1% (to 8% and 7%, respectively at December 31, 2010). As of December 31, 2010, WRI was in compliance with all covenants, with the exception of the net worth requirement.
 
      WRI leases equipment utilized in its operations at the Absaloka Mine. The weighted average interest rate for these capital leases outstanding at December 31, 2010 and 2009 was 6.65% and 7.60%, respectively.
 
  (6)   Postretirement Medical Benefits
 
      The Company participates in a postretirement medical benefit plan sponsored by the Parent. The plan provided medical benefits for retired employees and their dependents. Effective September 1, 2009, WCC eliminated these benefits for non-represented employees and retirees.
 
      The Company records an allocation of the net periodic postretirement medical benefit cost from the Parent as a component of Cost of sales with a corresponding decrease in Advances to Parent. In 2010 and 2009, the Company did not make medical benefit payments for its retirees who participate in the Parent’s postretirement medical benefit plan. The Company recorded postretirement medical benefit costs of less than $0.1 million in both 2010 and 2009. The benefit obligation attributable to the plan participants that are employees or retirees of the Company was less than $0.1 million at December 31, 2010 and 2009.
 
  (7)   Pension Plan
 
      The Company participates in a noncontributory defined benefit pension plan sponsored by the Parent, which was frozen effective July 1, 2009. This plan covered nearly all of the Company’s full-time employees. Benefits are generally based on years of service, the employee’s average annual compensation for the highest five continuous years of employment as specified in the plan agreement and social security integration levels.
 
      The Company records an allocation of the net periodic pension benefit cost from the Parent as Cost of sales with a corresponding decrease in Advances to Parent. The Company recorded $0.1 million in 2009 and less than $0.1 million was allocated in net periodic pension benefit cost in 2010 and 2008. In 2010 and 2009, the Company contributed $0.2 million and $0.1 million, respectively, for its allocated share of contributions to the pension plan sponsored by the Parent. The accumulated pension benefit obligation attributable to the plan participants that are employees or retirees of the Company was $1.8 million and $1.4 million at December 31, 2010 and December 31, 2009, respectively. This obligation is funded with $1.4 million and $0.9 million of plan assets held by the Parent at December 31, 2010 and 2009, respectively, resulting in a $0.4 million and $0.5 million unfunded liability recorded on the Parent’s consolidated balance sheet at December 31, 2010 and 2009, respectively.
 
      The Company expects to contribute $0.2 million to WCC’s pension plan during 2011.
a) Multi-Employer Pension
The Company contributes to a multiemployer defined benefit pension plan pursuant to collective bargaining agreements. The contributions are based on hours worked and totaled $0.9 million for the years ended December 31, 2010 and 2009 and $0.8 million for year ended December 31, 2008.

230

 

Westmoreland Resources, Inc. and Subsidiary
Notes to Consolidated Financial Statements (Cont.)
(8) Asset Retirement Obligations and Contractual Third Party Reclamation Receivables
     a) Asset Retirement Obligations
          Changes in the Company’s asset retirement obligations during the year ended December 31, 2010 and 2009 were (in thousands):
                 
    2010     2009  
Asset retirement obligations — beginning of year
   $ 32,428     $ 15,487  
Accretion
     3,035       1,346  
Liabilities settled
     (1,842 )     (318 )
Changes due to amount and timing of reclamation
     (1,283 )     15,913  
 
            
Asset retirement obligations — end of year
     32,338       32,428  
Less current portion
     (3,371 )     (4,512 )
 
            
Asset retirement obligations — less current portion
   $ 28,967     $ 27,916  
 
            
      As permittee, the Company is responsible for the total amount. The financial responsibility for a portion of final reclamation of the mine when it is closed has been transferred by contract to one of the Company’s customers.
b) Contractual Third-Party Reclamation Receivables
      The Company has recognized an asset of $0.5 million at December 31, 2010, as a contractual third-party reclamation receivable, representing the present value of the obligation of one of its customers to reimburse the Company for a portion of the asset retirement costs.
(9)   Fair Value Measurements
 
    Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company is required to disclose the fair value of financial instruments where practicable. The carrying amounts of cash equivalents, accounts receivable and accounts payable reflected on the Consolidated Balance Sheet approximate the fair value of these instruments due to the short duration to their maturities. See Note 4 for additional disclosures related to fair value measurements.
 
    Fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy, as defined below, gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.
  •   Level 1, defined as observable inputs such as quoted prices in active markets for identical assets. Level 1 assets include available-for-sale equity securities generally valued based on independent third-party market prices.
  •   Level 2, defined as observable inputs other than Level 1 prices. These include quoted prices for similar assets or liabilities in an active market, quoted prices for identical assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. The Company had no Level 2 inputs at December 31, 2010 and 2009.
  •   Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. The Company had no Level 3 inputs at December 31, 2010 and 2009.

231

 

Westmoreland Resources, Inc. and Subsidiary
Notes to Consolidated Financial Statements (Cont.)
      The table below sets forth, by level, the Company’s financial assets that are accounted for at fair value (in thousands):
                         
    Fair Value at December 31, 2010  
    Level 1     Level 2     Level 3  
Assets:
                        
Available-for-sale investments included in Reclamation investments and bond collateral
   $ 1,295     $ —     $ —  
                         
    Fair Value at December 31, 2009  
    Level 1     Level 2     Level 3  
Assets:
                        
Available-for-sale investments included in Reclamation investments and bond collateral
   $ 1,281     $ —     $ —  
(10)   Income Taxes
 
    Income tax expense attributable to net income before income taxes consists of (in thousands):
                         
    2010     2009     2008  
Current:
                        
Federal
   $ —     $ —     $ —  
State
     21       106       138  
 
                  
Income tax expense
   $ 21     $ 106     $ 138  
 
                  
    Income tax expense attributable to net income before income taxes differed from the amounts computed by applying the statutory federal income tax rate of 34% to pre-tax income as a result of the following (in thousands):
                         
    2010     2009     2008  
Computed tax expense (benefit) at statutory rate
   $ (787 )   $ 216     $ (21 )
Increase in income tax expense resulting from:
                        
Noncontrolling interest
     899       618       —  
State income taxes, net of federal tax benefit
     10       70       25  
State income taxes, return to provision adjustment
     5       —       —  
Minority interest
     —       —       288  
Prior year permanent items tax adjustments
     41       —       —  
Change in valuation allowance for net deferred tax assets
     (167 )     (803 )     8,000  
Domestic production activities deduction
     —       —       (57 )
Indian Coal Tax credit
     —       —       (8,104 )
Other, net
     20       5       7  
 
                  
Actual income tax expense
   $ 21     $ 106     $ 138  
 
                  

232

 

Westmoreland Resources, Inc. and Subsidiary
Notes to Consolidated Financial Statements (Cont.)
    The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below (in thousands):
                 
    2010     2009  
Deferred tax assets:
                
Indian coal tax credit carryforward
   $ 15,848     $ 15,727  
Accruals for following:
                
Asset retirement obligations
     5,548       5,114  
NOL carryforward
     2,414       1,981  
Other accruals
     264       245  
Pension and postretirement medical obligation
     89       —  
Gain on sale of partnership interest
     5,819       7,331  
 
            
Total gross deferred tax assets
     29,982       30,398  
Less valuation allowance
     (17,923 )     (17,365 )
 
            
Net deferred tax asset
     12,059       13,033  
 
            
Deferred tax liabilities:
                
Pension and postretirement medical benefit obligations
     —       (174 )
Property, plant and equipment, due to differences in basis and depreciation, depletion and amortization
     (12,046 )     (12,840 )
Change in accounting method
     (13 )     (19 )
 
            
Total gross deferred tax liabilities
     (12,059 )     (13,033 )
 
            
Net deferred taxes
   $ —     $ —  
 
            
    As of December 31, 2010, the Company has available Federal net operating loss carryforwards to reduce future regular taxable income, which expires as follows:
         
Expiration Date   Regular Tax  
    (In thousands)  
2029
   $ 3,196  
2030
     3,394  
 
      
Total
   $ 6,590  
 
      
    As of December 31, 2010, the Company also has an estimated $6.5 million in State net operating loss carryforwards to reduce future taxable income.
(11)   Commitments
a) Leases
    The gross value of property, plant, equipment and mine development assets under capital leases was $4.6 million and $13.1 million as of December 31, 2010 and December 31, 2009, respectively, related primarily to the leasing of mining equipment. The accumulated amortization for these items was $1.1 million and $2.2 million at December 31, 2010 and December 31, 2009, respectively.

233

 

Westmoreland Resources, Inc. and Subsidiary
Notes to Consolidated Financial Statements (Cont.)
      Future minimum capital and operating lease payments as of December 31, 2010, are as follows (in thousands):
                 
    Year Ended December 31, 2010  
    Capital Leases     Operating Leases  
2011
   $ 2,705     $ 588  
2012
     2,678       245  
2013
     1,751       123  
2014
     1,008       —  
2015
     681       —  
Thereafter
     —       —  
 
            
Total minimum lease payments
   $ 8,824     $ 956  
 
              
Less imputed interest
     (1,003 )        
 
              
Present value of minimum capital lease payments
   $ 7,821          
 
              
    Rental expense under operating leases during the year ending December 31, 2010, 2009 and 2008 totaled $1.0 million, $1.3 million and less than $0.1 million, respectively.
    The Company leases certain of its coal reserves from third parties and pays royalties based on either a per ton rate or as a percentage of revenues received. Royalties charged to expense under all such lease agreements amounted to $9.2 million, $9.6 million and $8.2 million in 2010, 2009 and 2008, respectively.
(12) Coal Sales and Major Customers
    Coal sales to major customers during the year ended December 31, 2010, 2009 and 2008 was as follows (in thousands):
                         
    2010     2009     2008  
Customer A
   $ 45,211     $ 49,670     $ 49,482  
Customer B
     15,171       15,889       18,753  
Customer C
     7,491       6,156       5,895  
 
                  
 
   $ 67,873     $ 71,715     $ 74,130  
 
                  
(13) Related Party Transactions
 
    The Company engages in certain transactions with its Parent and other subsidiaries of the Parent.
 
    During 2010, 2009 and 2008, Western Energy Company, or WECO, a wholly owned subsidiary of WML, sold 0.2 million, 0.3 million and less than 0.1 million tons of coal, respectively, to the Company for approximately $2.1 million, $3.8 million and $0.4 million, respectively.
 
    The Company was allocated audit and tax fees and information technology costs incurred by its Parent. In 2010, 2009 and 2008, these fees were $0.4 million, $0.5 million and $0.4 million, respectively, and are included in Selling and administrative expenses.
 
    Advances to Parent primarily represent the Company’s obligations for long-term loans from the Parent and accruals for postretirement medical benefit costs and pension costs allocated by the Parent, net of payments.

234

 

Westmoreland Resources, Inc. and Subsidiary
Notes to Consolidated Financial Statements (Cont.)
(14)   Quarterly Financial Data (unaudited)
 
    Summarized quarterly financial data is as follows:
                                 
            Three Months Ended        
    March 31     June 30     September 30     December 31  
    (In thousands; except per share data)  
     
2010:
                                
Revenues
   $ 18,801     $ 20,958     $ 18,936     $ 16,302  
Operating income (loss)
     (936 )     1,655       770       (1,339 )
Net income (loss) applicable to Parent company
     (574 )     1,635       (165 )     (587 )
Basic income (loss) per common share
   $ (57.40 )   $ 163.50     $ (16.50 )   $ (58.70 )
 
                                
2009:
                                
Revenues
   $ 19,657     $ 20,210     $ 20,287     $ 18,206  
Operating income (loss)
     (591 )     5,334       (595 )     (1,787 )
Net income (loss) applicable to Parent company
     (925 )     5,551       257       (2,535 )
Basic income (loss) per common share
   $ (92.50 )   $ 555.10     $ 25.70     $ (253.50 )

235

 

WESTMORELAND ENERGY LLC
Report of Independent Registered Public Accounting Firm
The Board of Directors of
Westmoreland Energy LLC
We have audited the accompanying consolidated balance sheets of Westmoreland Energy LLC and subsidiaries (the Company) (a wholly owned subsidiary of Westmoreland Coal Company) as of December 31, 2010 and 2009, and the related consolidated statements of operations, member’s equity and comprehensive income (loss), and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Westmoreland Energy LLC and subsidiaries at December 31, 2010 and 2009, and the results of their operations and their cash flows for the years then ended in conformity with U.S. generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Denver, Colorado
June 3, 2011

236

 

WESTMORELAND ENERGY LLC
Independent Auditors’ Report
The Board of Directors
Westmoreland Energy LLC:
We have audited the accompanying consolidated statements of operations, member’s equity and comprehensive loss, and cash flows of Westmoreland Energy LLC (the Company) ( a wholly owned subsidiary of Westmoreland Coal Company) for the year ended December 31, 2008. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the results of Westmoreland Energy LLC operations and their cash flows for the year ended December 31, 2008, in conformity with U.S. generally accepted accounting principles.
The consolidated financial statements have been prepared assuming the Company will continue as a going concern. During the year ended December 31, 2008, Westmoreland Coal Company had suffered recurring losses from operations, had a working capital deficit, and had a net capital deficiency that raised substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.
/s/ KPMG LLP
Denver, Colorado
June 3, 2011

237

 

Westmoreland Energy LLC
Consolidated Balance Sheets
December 31, 2010 and 2009
                 
    2010     2009  
    (In thousands)  
Assets
                
Current assets:
                
Cash and cash equivalents
   $ 880     $ 138  
Accounts receivable
     14,346       13,737  
Inventories
     1,936       2,571  
Other current assets
     224       176  
 
            
Total current assets
     17,386       16,622  
 
                
Property, plant, and equipment:
                
Land
     1,156       1,156  
Capitalized asset retirement costs
     239       239  
Plant, equipment, and other
     215,851       214,531  
 
            
 
     217,246       215,926  
Less accumulated depreciation and amortization
     (42,156 )     (32,953 )
 
            
 
     175,090       182,973  
Restricted investments
     8,563       8,705  
Intangible assets, net of accumulated amortization $7.4 million at December 31, 2010 and $5.7 million at December 31, 2009
     6,203       7,842  
Other assets
     400       543  
 
            
Total assets
   $ 207,642     $ 216,685  
 
            
 
                
Liabilities and Member’s Equity
                
 
                
Current liabilities:
                
Current portion of long-term debt
     —       9,806  
Accounts payable
     8,549       7,469  
Accrued expenses
     783       944  
Deferred revenue
     8,805       6,840  
 
            
Total current liabilities
     18,137       25,059  
 
Long-term debt, less current installments
     46,648       46,648  
Deferred revenue, less current portion
     67,308       75,283  
Pension
     154       178  
Asset retirement obligation
     715       664  
Intangible liabilities, net of accumulated amortization of $4.6 million at December 31, 2010 and $3.6 million at December 31, 2009
     8,664       9,682  
Other liabilities
     —       30  
 
            
Total liabilities
     141,626       157,544  
 
            
 
                
Member’s equity:
                
Contributed capital
     35       6  
Accumulated other comprehensive income
     (203 )     (164 )
Retained earnings
     66,184       59,299  
 
            
Total member’s equity
     66,016       59,141  
 
            
Total liabilities and member’s equity
   $ 207,642     $ 216,685  
 
            
See accompanying Notes to Consolidated Financial Statements

238

 

Westmoreland Energy LLC
Consolidated Statements of Operations
Years Ended December 31, 2010, 2009 and 2008
                         
    2010     2009     2008  
    (In thousands)  
Revenues
   $ 87,999     $ 82,162     $ 90,006  
Costs and expenses:
                        
Cost of sales
     61,739       60,504       59,761  
Depreciation
     10,131       9,764       9,780  
Selling and administrative
     4,287       4,231       3,867  
Loss (gain) on sale of assets
     122       12       (876 )
 
                  
 
     76,279       74,511       72,532  
 
                  
Operating income
     11,720       7,651       17,474  
Other income (expense):
                        
Interest expense
     (4,659 )     (5,946 )     (9,497 )
Loss on extinguishment of debt
     —       —       (1,345 )
Interest income
     36       120       511  
Other income
     30       448       —  
 
                  
 
     (4,593 )     (5,378 )     (10,331 )
 
                  
Income before income taxes
     7,127       2,273       7,143  
Income tax expense
     368       3,812       11,883  
 
                  
Net income (loss)
   $ 6,759     $ (1,539 )   $ (4,740 )
 
                  
See accompanying Notes to Consolidated Financial Statements.

239

 

Westmoreland Energy LLC
Consolidated Statements of Member’s Equity and Comprehensive Income (Loss)
Years Ended December 31, 2010, 2009 and 2008
                                 
            Accumulated Other             Total Member’s  
    Contributed Capital     Comprehensive Loss     Retained Earnings     Equity  
            (In thousands)          
Balance at December 31, 2007
   $ 1,351     $ (295 )   $ 57,371     $ 58,427  
Distributions
     —       —       (21,000 )     (21,000 )
Warrant repriced in lieu of registration requirement
     355       —       —       355  
Sale of Ft. Lupton interest
     (1 )     —       —       (1 )
Transactions with Parent/affiliates
     —       —       30,151       30,151  
Amortization and adjustment of accumulated actuarial loss of pension plans
     —       189       —       189  
Net loss
     —       —       (4,740 )     (4,740 )
 
                        
Comprehensive loss
                             (4,551 )
 
                        
Balance at December 31, 2008
   $ 1,705     $ (106 )   $ 61,782     $ 63,381  
Distributions
     —       —       (7,706 )     (7,706 )
Cumulative effect of adoption of ASC 815-40
     (1,699 )     —       1,222       (477 )
Transactions with Parent/affiliates
     —       —       5,540       5,540  
Amortization and adjustment of accumulated actuarial loss of pension plans
     —       (58 )     —       (58 )
Net loss
     —       —       (1,539 )     (1,539 )
 
                              
Comprehensive loss
                             (1,597 )
 
                        
Balance at December 31, 2009
   $ 6     $ (164 )   $ 59,299     $ 59,141  
Transactions with Parent/affiliates
     —       —       126       126  
Contributions of Westmoreland Coal Company common stock to pension plan on the Company’s behalf
     29       —       —       29  
Amortization and adjustment of accumulated actuarial loss of pension plans
     —       (39 )     —       (39 )
Net income
     —       —       6,759       6,759  
 
                              
Comprehensive income
                             6,720  
 
                        
Balance at December 31, 2010
   $ 35     $ (203 )   $ 66,184     $ 66,016  
 
                        
See accompanying Notes to Consolidated Financial Statements

240

 

Westmoreland Energy LLC
Consolidated Statements of Cash Flows
Years Ended December 31, 2010, 2009 and 2008
                         
    2010     2009     2008  
    (In thousands)  
Cash flows from operating activities:
                        
Net income (loss)
   $ 6,759     $ (1,539 )   $ (4,740 )
Adjustments to reconcile net income (loss) to net cash from operating activities:
                        
Depreciation
     10,131       9,764       9,780  
Accretion of asset retirement obligation
     51       34       32  
Loss (gain) on the sale of assets
     122       12       (876 )
Amortization of deferred financing costs
     (308 )     (313 )     (105 )
Amortization of intangible assets and liabilities, net
     621       621       620  
Loss on extinguishment of debt
     —       —       1,102  
Gain on derivative
     (30 )     (448 )     —  
Income tax allocation
     —       —       11,883  
Change in:
                        
Accounts receivable
     (609 )     8,341       (3,546 )
Inventories
     635       (730 )     959  
Accounts payable and accrued expenses
     884       (61 )     (406 )
Deferred revenues
     (6,010 )     11,216       28,774  
Other assets and liabilities
     (211 )     (2,427 )     (2,302 )
 
                  
Net cash provided by operating activities
     12,035       24,470       41,175  
 
                  
 
Cash flows from investing activities:
                        
Purchases of property, plant and equipment
     (2,207 )     (4,251 )     (1,711 )
Change in restricted investments
     142       2,266       19,868  
Proceeds from sale of assets
     1       —       876  
 
                  
Net cash provided by (used in) investing activities
     (2,064 )     (1,985 )     19,033  
 
                  
 
Cash flows from financing activities:
                        
Borrowings of long-term debt
     —       —       64,880  
Repayments of long-term debt
     (9,355 )     (25,845 )     (132,070 )
Borrowings on revolving lines of credit
     7,300       —       —  
Repayments on revolving lines of credit
     (7,300 )     —       —  
Deferred financing costs
     —       —       (296 )
Transactions with Parent/affiliates
     126       5,540       18,268  
Distributions
     —       (7,706 )     (21,000 )
 
                  
Net cash used in financing activities
     (9,229 )     (28,011 )     (70,218 )
 
                  
 
Net increase (decrease) in cash and cash equivalents
     742       (5,526 )     (10,010 )
Cash and cash equivalents, beginning of year
     138       5,664       15,674  
 
                  
Cash and cash equivalents, end of year
   $ 880     $ 138     $ 5,664  
 
                  
 
Supplemental disclosure of cash flow information:
                        
Cash paid during the year for:
                        
Interest
   $ 5,159     $ 6,531     $ 9,364  
Income taxes
   $ 10     $ 1,910     $ 2,714  
Noncash transactions:
                        
Accrued purchases of property and equipment
   $ 86     $ 51     $ 408  
See accompanying Notes to Consolidated Financial Statements

241

 

Westmoreland Energy LLC
Notes to Consolidated Financial Statements
1.   Summary of Significant Accounting Policies
  (a)   Nature of Operations
 
      Westmoreland Energy LLC, or WELLC, or the Company, a wholly owned subsidiary of Westmoreland Coal Company, or WCC, or the Parent, is a special purpose Delaware Limited Liability Company formed on December 4, 2000. Through its subsidiaries, the Company owns and operates two cogeneration facilities also known as Roanoke Valley Power Plant, or ROVA, located in Weldon, North Carolina. The first facility, ROVA I, is a 180 MW facility and the second facility, ROVA II, is a 50 MW facility adjacent to ROVA I. ROVA I and ROVA II operate as exempt wholesale generators as determined by the Federal Energy Regulatory Commission, or FERC. ROVA I commenced commercial operation on May 29, 1994. ROVA II commenced commercial operation on June 1, 1995. The Parent provides management and administrative support to WELLC and its subsidiaries, including legal, environmental, sales, and accounting services.
 
      The Company’s financial statements reflect substantially all of its costs of doing business. Common expenses incurred by the Parent on behalf of the Company are charged to the Company based on proportional cost allocations. The Company believes the allocations used are reasonable. However, these financial statements may not necessarily be representative of a stand-alone company.
 
  (b)   WCC’s Liquidity
 
      On February 4, 2011 through a private placement offering, WCC issued $150.0 million of Senior Secured Notes due in 2018 together with Westmoreland Partners, an indirect wholly owned subsidiary of WELLC, as co-issuer (hereafter, the Parent Notes). WCC received approximately $135.2 million in proceeds from the Parent Notes offering. WCC used the proceeds to pay the outstanding balance on the Company’s term debt, which the Company recorded as contributed capital.
 
      Following the February 4, 2011 Parent Notes offering, WCC has cash on hand in excess of $45 million. WCC also expects increases in coal operating profits and heritage health benefit expenditures to continue at their reduced 2010 rates. As a result, WCC anticipates that its cash flows from operations, cash on hand and available borrowing capacity will be sufficient to meet its investing, financing, and working capital requirements for the next several years.
 
      Also, the Company’s credit facility was terminated in February 2011 as a result of the Parent Notes offering. As a result of the Parent Notes offering, the Company recorded the current portion of its term debt as non-current liabilities in its consolidated balance sheet at December 31, 2010.

242

 

Westmoreland Energy LLC
Notes to Consolidated Financial Statements (Cont.)
  (c)   Consolidation Policy
 
      The consolidated financial statements of WELLC includes the accounts of the Company and its wholly owned subsidiaries, after elimination of intercompany balances and transactions.
 
  (d)   Use of Estimates
 
      The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
 
  (e)   Cash and Cash Equivalents
 
      Cash and cash equivalents are stated at cost, which approximate fair value. Cash equivalents consist of highly liquid investments with original maturities of three months or less.
 
  (f)   Accounts Receivable
 
      Accounts receivable are recorded at the invoiced amount and do not bear interest. The Company evaluates the need for an allowance for doubtful accounts based on a review of collectability. The Company has determined that no allowance is necessary for accounts receivable as of December 31, 2010 and 2009.
 
  (g)   Inventories
 
      Inventories, which consist primarily of coal, are stated at the lower of cost or market. Cost is determined using the average cost method.
 
  (h)   Restricted Investments
 
      The Company has requirements to maintain restricted cash and investments for letter of credit requirements. Funds in the restricted investment accounts are not available to meet the Company’s operating cash needs. For all of its restricted investments, the Company can select from several investment options for the funds and receives the investment returns on these investments.
 
  (i)   Property, Plant, and Equipment
 
      Property, plant and equipment are carried at cost and include expenditures for new facilities, those expenditures that substantially increase the productive lives of existing plant and equipment and long-term spare parts inventory. Maintenance and repair costs that do not extend the useful life or increase the productivity of the asset are expensed as incurred. Plant and equipment are depreciated on a straight-line basis over the assets’ estimated useful lives as follows:
         
    Years  
Buildings and improvements
     15 to 30  
Machinery and equipment
     3 to 36  
      Ash monofills are amortized on a cost per ton basis multiplied by tons sent to each monofill. The ash monofills were built as disposal sites for the ash generated during operations. Long-term spare parts inventory begins depreciation when placed in service.

243

 

Westmoreland Energy LLC
Notes to Consolidated Financial Statements (Cont.)
      The Company assesses the carrying value of its property, plant and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability is measured by comparing estimated undiscounted cash flows expected to be generated from such assets to their net book value. If net book value exceeds estimated cash flows, the asset is written down to fair value.
 
      When an asset is retired or sold, its cost and related accumulated depreciation and depletion are removed from the accounts. The difference between the net book value of the asset and proceeds on disposition is recorded as a gain or loss. Fully depreciated plant and equipment still in use is not eliminated from the accounts.
 
  (j)   Intangible Assets & Liabilities
 
      Identifiable intangible assets or liabilities acquired in a business combination must be recognized and reported separately from goodwill. The Company has determined that its acquired identifiable intangible assets and liabilities are related to sales and purchase agreements. Intangible assets result from more favorable market prices than contracted prices in sales and purchase agreements as measured during a business combination. Intangible liabilities result from less favorable market prices than contracted prices in sales and purchase agreements as measured during a business combination. These intangible assets and liabilities are amortized on a straight-line basis over the respective period of the sales and purchase agreements.
 
      Amortization of intangible assets recognized in Cost of sales was $1.6 million in 2010, 2009 and 2008. Amortization of intangible assets and liabilities recognized in Revenues was $1.0 million in 2010, 2009 and 2008.
 
      The estimated aggregate amortization amounts from intangibles assets and liabilities for each of the next five years as of December 31, 2010 are as follows:
         
    Amortization Expense (Revenue)  
    (In thousands)  
2011
   $ 621  
2012
     621  
2013
     621  
2014
     (26 )
2015
     (834 )
  (k)   Fair Value Measurements
 
      The Company is required to disclose the fair value of financial instruments where practicable. The carrying amounts of cash equivalents, accounts receivable and accounts payable reflected on the balance sheet approximates the fair value of these instruments due to the short duration to maturities. The fair value of long-term debt is based on the interest rates available to the Company for debt with similar terms and maturities.
 
  (l)   Financial Instruments
 
      The Company evaluates all of its financial instruments to determine if such instruments are derivatives, derivatives that qualify for the normal purchase normal sale exception, or instruments, which contain features that qualify them as embedded derivatives. Except for derivatives that qualify for the normal purchase normal sale exception, all financial instruments are recognized in the balance sheet at fair value. Changes in fair value are recognized in earnings if they are not eligible for hedge accounting or Accumulated other comprehensive income (loss) if they qualify for cash flow hedge accounting.

244

 

Westmoreland Energy LLC
Notes to Consolidated Financial Statements (Cont.)
  (m)   Pension Plan
 
      The Company participates in the Parent’s noncontributory defined benefit pension plan, which was frozen effective July 1, 2009. The costs to provide the benefits are accrued over the employees’ period of active service and are determined on an actuarial basis. The liability recorded for this obligation was $0.2 million at year ended December 31, 2010 and 2009.
 
  (n)   Deferred Financing Costs
 
      The Company capitalizes costs incurred in connection with borrowings or establishment of credit facilities and issuance of debt securities. These costs are amortized as an adjustment to interest expense over the life of the borrowing or term of the credit facility using the effective interest method. Accumulated amortization as of December 31, 2010 and 2009 was $1.7 million and $1.6 million, respectively.
 
  (o)   Deferred Revenue
 
      Deferred revenues represent funding received upon the negotiation of long-term contracts. The deferred power revenues are recognized as power is delivered on a pro rata basis, based on the payments estimated to be received and recognized over the remaining term of the power sales agreements.
 
  (p)   Asset Retirement Obligation
 
      The Company’s asset retirement obligation, or ARO, liabilities primarily consist of estimated costs related to reclaiming land at its facilities in accordance with federal and state reclamation laws.
 
      The Company estimates its ARO liabilities based upon detailed engineering calculations of the amount and timing of the future costs for a third party to perform the required work. Cost estimates are escalated for inflation, and then discounted at the credit-adjusted risk-free rate. The Company records an ARO asset associated with the initial recorded liability. The ARO asset is amortized on a straight-line basis and the ARO liability is accreted to the projected settlement date. Changes in estimates could occur due to revisions of plant operating plans, changes in estimated costs, and changes in timing of the performance of reclamation activities.
 
      As of December 31, 2010 and 2009, the Company’s obligation recorded in Asset retirement obligation was $0.7 million. Changes in the Company’s asset retirement obligations for the years ended December 31, 2010 and 2009 were as follows:
                 
    2010     2009  
    (In thousands)  
Asset retirement obligation — beginning of period
   $ 664     $ 490  
Accretion
     51       34  
Changes due to amount and timing of reclamation
     —       140  
 
            
Asset retirement obligation — end of period
   $ 715     $ 664  
 
            
  (q)   Income Taxes
 
      The Company is an LLC which is treated as a disregarded entity for U.S. Federal and State income tax purposes and as a result is included in the determination of taxable income or loss of WCC. In preparing these separate financial statements, income taxes have been provided like any other tax-paying enterprise based upon the requirement that single-member LLCs are subsidiaries of the member for financial reporting purposes, and income taxes generally are allocated under ASC paragraphs 740-10-30-27 and 30-28.
 
      The Company files consolidated federal and state tax returns with its Parent. As the Company itself is not a taxable entity, the Parent’s tax expense for its income tax return group included on the Parent’s consolidated income tax return is allocated among the members of that group. This allocation is calculated

245

 

Westmoreland Energy LLC
Notes to Consolidated Financial Statements (Cont.)
      as if each member were a separate taxpayer. This allocation is reflected by the Company in Income tax expense with a corresponding amount in Member’s Equity. There is no formal tax sharing agreement with the Parent.
 
      The Company accounts for deferred income taxes using the asset and liability method. Deferred tax liabilities and assets are recognized for the expected future tax consequences of events that have been reflected in the Company’s consolidated financial statements based on the difference between the financial statement carrying amounts and tax bases of assets and liabilities, as well as net operating loss and tax credit carryforwards, using enacted tax rates in effect in the years in which the differences are expected to reverse. The Company establishes a valuation allowance against its net deferred tax assets to the extent the Company believes that it is more likely than not that it will not realize the net deferred tax assets.
 
      Accounting guidance prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Under this guidance, a company can recognize the benefit of an income tax position only if it is more likely than not (greater than 50%) that the tax position will be sustained upon tax examination, based solely on the technical merits of the tax position. This accounting standard also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.
 
  (r)   Power Revenues
 
      ROVA supplies power under long-term power sales agreements. Under these agreements, ROVA invoices and collects capacity payments based on kilowatt-hours produced if the units are dispatched or for the kilowatt-hours of available capacity if the units are not fully dispatched.
 
      A portion of the capacity payments under the agreements is considered to be an operating lease. The Company is recognizing amounts invoiced under the power sales agreements as revenue on a pro rata basis, based on the weighted average per kilowatt hour capacity payments estimated to be received over the remaining term of the power sales agreements. Under this method of recognizing revenue, $6.0 million of prior deferred revenue was recognized during 2010 while $11.2 million and $28.8 million of amounts invoiced during 2009 and 2008, respectively, were deferred from recognition. The Company began to recognize prior deferred revenue during 2010 at ROVA II and during 2009 at ROVA I.
 
  (s)   Accounting Pronouncements Adopted
 
      In January 2010, the FASB issued authoritative guidance, which requires additional disclosures and clarifies certain existing disclosure requirements regarding fair value measurements. This guidance is effective for interim and annual reporting periods beginning after December 15, 2009. The Company adopted this guidance effective January 1, 2010. However, none of the specific additional disclosures were applicable at December 31, 2010.
 
      On January 1, 2009, the Company adopted accounting guidance that clarifies how to determine whether certain instruments or features are indexed to an entity’s own stock. This guidance was effective for financial statements issued for fiscal years beginning after December 15, 2008 and interim periods within those fiscal years. The Company recorded a cumulative effect of change in accounting principles upon adoption of this guidance. See Note 4 for additional information.

246

 

Westmoreland Energy LLC
Notes to Consolidated Financial Statements (Cont.)
2. Restricted Investments
    The Company’s restricted investments consist of the following at December 31, 2010 and 2009:
                 
    2010     2009  
    (In thousands)  
Letter of credit
   $ 5,989     $ 6,038  
Repairs and maintenance account
     1,067       —  
Debt protection account
     905       2,067  
Ash reserve account
     602       600  
 
            
Total restricted investments
   $ 8,563     $ 8,705  
 
            
      All restricted investments at December 31, 2010, consisted of cash and cash equivalents.
 
      All underlying financial instruments included in the restricted investment accounts have Level I inputs available regarding fair value measurements. Level I inputs are quoted prices in active markets for identical financial instruments that the Company has the ability to access at the fair value measurement date.
 
      Pursuant to the terms of its loan agreement, ROVA was required to maintain either three or six months debt service reserves in its debt protection accounts, which was based on the calculation of its current debt service coverage ratio.
 
      The loan agreement required ROVA to fund an ash reserve account to $0.6 million. The ash reserve account was fully funded at December 31, 2010.
 
      The loan agreement also required ROVA to fund a repairs and maintenance account up to a maximum amount of $2.6 million. The funds for the repairs and maintenance account were required to be deposited every three months based on a formula contained in the agreement.
 
      Following the Parent Notes offering in February 2011, the debt protection, ash reserve, and repairs and maintenance accounts are no longer required and will be available for current operating needs.
3.   Lines of Credit and Long-Term Debt
     Long-term debt at December 31, 2010 and 2009 consisted of the following:
                 
    2010     2009  
    (In thousands)  
Term debt
   $ 46,220     $ 55,575  
Debt premiums
     428       879  
 
            
Total debt outstanding
     46,648       56,454  
Less current portion
     —       (9,806 )
 
            
Total long-term debt
   $ 46,648     $ 46,648  
 
            

247

 

Westmoreland Energy LLC
Notes to Consolidated Financial Statements (Cont.)
    Future principal payments on long-term debt at December 31, 2010 are as follows:
         
    As of  
    December 31, 2010  
    (In thousands)  
2011
   $ 8,025  
2012
     8,820  
2013
     9,645  
2014
     9,470  
2015
     10,260  
Thereafter
     —  
 
      
Total
     46,220  
Plus: debt premium
     428  
 
      
Total debt
   $ 46,648  
 
      
Following the Parent Notes Offering in February 2011, all of the Company’s outstanding debt was paid off.
At December 31, 2010, ROVA’s outstanding fixed rate term debt had interest rates varying from 6.0% to 11.42%. The weighted average interest rate on the fixed rate term debt at December 31, 2010 and 2009 was 9.93% and 10.0%, respectively. As described in Note 1, the outstanding balance of the fixed rate term debt was repaid in February 2011.
ROVA had a $6.0 million revolving loan with interest payable quarterly at the three-month LIBOR rate plus 1.375% (1.68% per annum at December 31, 2010). In addition, a commitment fee of 1.375% of the unused portion of the available revolving loan was payable quarterly. At December 31, 2010, the Company had $6.0 million of unused borrowings under the revolver. ROVA’s revolving line of credit was terminated as part of the Parent Notes offering described in Note 1.
The term debt as well as the revolving loan were secured by a pledge of the quarterly cash distributions from ROVA. ROVA was required to comply with certain loan covenants related to interest and fixed charge coverage. As of December 31, 2010, ROVA was in compliance with such covenants.
The Company calculates the fair value of its long-term debt by using discount rate estimates based on interest rates as of December 31, 2010 and 2009. The carrying value and estimated fair value of the Company’s long-term debt instruments as of December 31, 2010 and 2009 are as follows:
                 
    Carrying Value     Fair Value  
    (In thousands)  
December 31, 2010
   $ 46,648     $ 50,583  
December 31, 2009
   $ 56,455     $ 60,330  
4.   Derivative Instruments
      Adoption of ASC 815-40
 
      On January 1, 2009, the Company adopted ASC 815-40, Determining Whether an Instrument (or Embedded Feature) is Indexed to an Entity’s Own Stock. As part of the adoption of ASC 815-40, the value of the Company’s warrant was recorded as a liability.

248

 

Westmoreland Energy LLC
Notes to Consolidated Financial Statements (Cont.)
The Company recorded the following cumulative effect of change in accounting principle pursuant to its adoption of ASC 815-40:
                         
    Derivative     Other        
    Liability     Paid-In-Capital     Accumulated Deficit  
            (In thousands)          
Record January 1, 2009, derivative instrument liability related to warrant
     477       —       477  
Record the reversal of prior accounting related to the warrant
     —       (1,699 )     (1,699 )
 
                  
 
   $ 477     $ (1,699 )   $ (1,222 )
 
                  
Warrant
The Company’s warrant expired August 20, 2010 and therefore had no value at December 31, 2010. The following assumptions were used for the warrant at December 31, 2009:
                                 
Number of                              
Shares Included in                           Expected Life  
Warrant   Dividend Yield     Volatility     Risk Free Rate     (in years)  
173,228
   None     65 %     0.20 %     1.0  
The fair value of outstanding derivative instruments not designated as hedging instruments on the accompanying Consolidated Balance Sheets were as follows (in thousands):
                         
            December 31,  
Derivative Instruments   Balance Sheet Location     2010     2009  
Warrant
   Other liabilities     —       30  
The effect of derivative instruments not designated as hedging instruments on the accompanying Consolidated Statements of Operations was as follows (in thousands):
                         
            Income Recognized in  
            Earnings on Derivatives  
            Year Ended December 31,  
Derivative   Statement of              
Instruments   Operations Location     2010     2009  
Warrant
   Other income     30       448  
5.   Income Taxes
 
    Income tax expense consists of:
                         
    Year Ended December 31,  
    2010     2009     2008  
    (In thousands)  
Current:
                        
Federal
   $ 296     $ 3,128     $ 9,891  
State
     72       684       1,992  
 
                  
Income tax expense
   $ 368     $ 3,812     $ 11,883  
 
                  

249

 

Westmoreland Energy LLC
Notes to Consolidated Financial Statements (Cont.)
Income tax expense attributable to net income before income taxes differed from the amounts computed by applying the statutory federal income tax rate of 35% to pre-tax income as a result of the following:
                         
    Year Ended December 31,  
    2010     2009     2008  
    (In thousands)  
Computed tax expense at statutory rate
   $ 2,495     $ 829     $ 2,500  
Increase (decrease) in income tax expense resulting from:
                        
State tax, net of federal benefit
     47       445       1,295  
Prior year permanent items tax return true-up
     (34 )     —       —  
Adjustments to deferred tax assets attributable to prior years
     38       —       27  
Change in valuation allowance for net deferred tax assets
     (2,170 )     2,693       8,690  
Domestic production and activities deduction
     —       —       (631 )
Other, net
     (8 )     (155 )     2  
 
                  
Income tax expense
   $ 368     $ 3,812     $ 11,883  
 
                  
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below:
                 
    December 31,  
    2010     2009  
    (In thousands)  
Deferred tax assets:
                
Accruals for the following:
                
Pension and postretirement medical benefit obligation
   $ 61     $ 71  
Deferred revenue
     30,157       32,538  
Reclamation
     228       208  
MBO bonus
     284       191  
Other accruals
     59       9  
 
            
Total gross deferred tax assets:
     30,789       33,017  
Less valuation allowance
     (11,816 )     (14,176 )
 
            
Net deferred tax assets
     18,973       18,841  
Deferred tax liabilities:
                
Debt issuance costs
     (200 )     (252 )
Other
     (868 )     (774 )
Property, plant, and equipment, principally due to differences in depreciation, depletion, and amortization
     (17,905 )     (17,815 )
 
            
Total gross deferred tax liabilities:
     (18,973 )     (18,841 )
 
            
Net deferred tax asset
   $ —     $ —  
 
            
6.   Commitments
Coal Supply Agreement
Westmoreland Partners, which owns ROVA, has two coal supply agreements with contracts expiring in 2014 and 2015. If Westmoreland Partners continues to purchase coal under these contracts at the current volume and pricing, then Westmoreland Partners would be obligated to pay $28.6 million in each of the years of 2011, 2012, 2013, $17.1 million for 2014 and $2.8 million for 2015.
7.   Power Sales and Major Customers
Substantially all of the Company’s power sales during the years ended December 31, 2010, 2009 and 2008 were made to one customer. ROVA supplies power to Dominion Virginia Power under long-term contracts, which expire in 2019 and 2020. The Company can extend, by mutual consent, the contracts with Dominion Virginia Power for five-year terms at mutually agreeable pricing.

250

 

Westmoreland Energy LLC
Notes to Consolidated Financial Statements (Cont.)
8.   Related-Party Transactions
The Company incurred various costs which were paid to WCC relating to accounting services and are included in Selling and administrative expenses. Fees paid totaled $0.3 million in the years ended December 31, 2010, 2009 and 2008.
In addition, WCC allocated $0.2 million in 2010 and 2008 and $0.1 million in 2009, of audit and tax fees to the Company, which are included in Selling and administrative expenses.
9.   Quarterly Financial Data (unaudited)
Summarized quarterly financial data is as follows:
                                 
    Three Months Ended  
    March 31     June 30     September 30     December 31  
            (In thousands)          
2010:
                                
Revenues
   $ 22,889     $ 21,174     $ 23,598     $ 20,338  
Operating income
     4,170       1,307       5,058       1,185  
Net income
     2,943       117       3,890       266  
 
2009:
                                
Revenues
   $ 21,845     $ 23,551     $ 20,696     $ 16,070  
Operating income (loss)
     2,961       5,189       680       (1,179 )
Net income (loss)
     1,557       3,434       (448 )     (2,332 )

251

 

(LOGO)
WESTMORELAND COAL COMPANY
WESTMORELAND PARTNERS
Offer to Exchange
$150,000,000 10.75% Senior Secured Notes due 2018
for $150,000,000 10.75% Senior Secured Notes due 2018
that have been registered under the Securities Act of 1933
 
June 3, 2011
 

252

 

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Officers and Directors
Registrants under the laws of Delaware
     Section 102 of the Delaware General Corporation Law allows a corporation to eliminate or limit the personal liability of directors of a corporation to the corporation or its stockholders for monetary damages for a breach of fiduciary duty as a director, except where the director breached his duty of loyalty, failed to act in good faith, engaged in intentional misconduct or knowingly violated a law, authorized the payment of a dividend or approved a stock repurchase in violation of Delaware corporate law or obtained an improper personal benefit. Our Restated Certificate of Incorporation limits the liability of directors to the extent permitted by Delaware law.
     Section 145 of the Delaware General Corporation Law provides that a corporation has the power to indemnify a director, officer, employee or agent of the corporation and certain other persons serving at the request of the corporation in related capacities against amounts paid and expenses incurred in connection with an action or proceeding to which he is or is threatened to be made a party by reason of such position, if such person shall have acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, in any criminal proceeding, if such person had no reasonable cause to believe his conduct was unlawful; provided that, in the case of actions brought by or in the right of the corporation, indemnification is limited to expenses and no indemnification shall be made with respect to any matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the adjudicating court determines that such indemnification is proper under the circumstances. Section 145 also permits us to purchase and maintain insurance on behalf of any person who is or was our director, officer, employee or agent, or is or was serving at our request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person’s status as such, whether or not we would have the power to indemnify such person against such liability.
     Our bylaws obligate us to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, either civil, criminal, administrative or investigative, by reason of the fact that he is or was a director, officer or supervisor or manager of us or a constituent corporation absorbed in a consolidation or merger, or while our director, officer or supervisor or manager is or was serving at our request or at the request of a constituent corporation absorbed in a consolidation or merger, as a director, officer or supervisor or manager of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding, whether or not the indemnified liability arises or arose from any threatened, pending or completed action by or in the right of the corporation to the extent that such person is not otherwise indemnified and to the extent such indemnification is not prohibited by applicable law. Our bylaws also obligate us to pay any such person’s expenses in advance of the final disposition of any such proceeding, if such person undertakes to repay any amount so advanced if it shall ultimately be determined that he is not entitled to be indemnified by us.
     Under our bylaws, our obligation to indemnify, including the duty to advance expenses, is a contract between our company and each person entitled to indemnification, and no modification or repeal of our bylaws may affect, to the detriment of any such person, our obligations in connection with a claim based on any act or failure to act occurring before such modification or repeal.
     Our bylaws also permit us to purchase and maintain insurance, and we have purchased insurance on behalf of our directors and officers.
     Under our bylaws, the rights to indemnification and advance of expenses are not exclusive of any other right to which an indemnified person may be entitled, and all such rights shall inure to the benefit of the indemnified person and his or her heirs, executors and administrators.
Registrants under the laws of Virginia
     Westmoreland-North Carolina Power, LLC is a limited liability company organized under the laws of the State of Virginia. Section 13.1-1009 of the Virginia LLC law empowers a Virginia limited liability company to indemnify any persons who are, or are threatened to be made, parties to any threatened, pending or completed legal action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of such limited liability company), by reason of the fact that such person is or was an officer, director, member, employee or agent of such

II-1

 

company, or is or was serving at the request of such company as a director, officer, member, employee or agent of another company, corporation, partnership, joint venture, trust or other enterprise. The indemnity may include expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, provided that such officer or director acted in good faith and in a manner he reasonably believed to be in or not opposed to the company’s best interests, and, for criminal proceedings, had no reasonable cause to believe his conduct was unlawful. A Virginia limited liability company may indemnify officers and directors against expenses (including attorneys’ fees) in an action by or in the right of the company under the same conditions, except that no indemnification is permitted without judicial approval if the officer or director is adjudged to be liable to the company. Where an officer or director is successful on the merits or otherwise in the defense of any action referred to above, the company must indemnify him against the expenses which such officer or director actually and reasonably incurred. The Operating Agreement of Westmoreland-North Carolina Power, LLC grants it the power to indemnify any person.
     Westmoreland Partners is a partnership formed under the laws of the state of Virginia. Under the Virginia Partnership Act, a partnership is obligated to reimburse a partner for payments made and indemnify a partner for liabilities incurred by the partner in the ordinary course of the business of the partnership or for the preservation of its business or property. The partnership agreement provides that each partner will indemnify and hold harmless the other partners and their affiliates, directors, officers, employees and agents and the partnership from and against all claims, loss, damage, demands, liabilities, obligations or rights of action, arising as a result of anything done or omitted to be done through the gross negligence or willful misconduct of the indemnifying partner or its officers, directors, employees, agents.
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits
The following instruments and documents are included as Exhibits to this Registration Statement.
     
Exhibit    
Number   Exhibit Description
3.1
  Restated Certificate of Incorporation of Westmoreland Coal Company
3.2
  Certificate of Correction to the Restated Certificate of Incorporation of Westmoreland Coal Company
3.3
  Certificate of Amendment to the Restated Certificate of Incorporation of Westmoreland Coal Company
3.4
  Certificate of Amendment to the Restated Certificate of Incorporation of Westmoreland Coal Company
3.5
  Amended and Restated Bylaws of Westmoreland Coal Company
3.6
  Amended and Restated Partnership Agreement of Westmoreland Partners
3.7
  Amendment No. 1 to Amended and Restated Partnership Agreement of Westmoreland Partners
3.8
  Amendment No. 2 to Amended and Restated Partnership Agreement of Westmoreland Partners
3.9
  Certificate of Formation of Westmoreland Energy LLC
3.10
  Operating Agreement of Westmoreland Energy LLC
3.11
  Certificate of Formation of Westmoreland — North Carolina Power LLC
3.12
  Operating Agreement of Westmoreland — North Carolina Power LLC
3.13
  Certificate of Incorporation of WEI — Roanoke Valley, Inc.
3.14
  Certificate of Amendment to Certificate of Incorporation of WEI — Roanoke Valley, Inc.
3.15
  Bylaws of WEI — Roanoke Valley, Inc.
3.16
  Certificate of Limited Partnership of Westmoreland Roanoke Valley LP
3.17
  Amendment to Certificate of Limited Partnership of Westmoreland Roanoke Valley LP
3.18
  Agreement of Limited Partnership of Westmoreland Roanoke Valley LP
3.19
  Certificate of Incorporation of Westmoreland Resources, Inc.
3.20
  Certificate of Amendment of Certificate of Incorporation of Westmoreland Resources, Inc.
3.21
  Certificate of Amendment of Certificate of Incorporation of Westmoreland Resources, Inc.
3.22
  Bylaws of Westmoreland Resources, Inc.
3.23
  Certificate of Incorporation of WRI Partners, Inc.
3.24
  Bylaws of WRI Partners, Inc.
3.25
  Certificate of Incorporation of Westmoreland Mining Services, Inc.
3.26
  Bylaws of Westmoreland Mining Services, Inc.
3.27
  Certificate of Incorporation of Westmoreland Coal Sales Company, Inc.
3.28
  Certificate of Amendment of Certificate of Incorporation of Westmoreland Coal Sales Company, Inc.
3.29
  Bylaws of Westmoreland Coal Sales Company, Inc.
3.30
  Certificate of Incorporation of WCC Land Holding Company, Inc.
3.31
  Bylaws of WCC Land Holding Company, Inc.
3.32
  Certificate of Incorporation of Westmoreland Power, Inc.
3.33
  Certificate of Amendment of Certificate of Incorporation of Westmoreland Power, Inc.
3.34
  Certificate of Amendment of Certificate of Incorporation of Westmoreland Power, Inc.
3.35
  Bylaws of Westmoreland Power, Inc.

II-2

 

     
Exhibit    
Number   Exhibit Description
4.1
  Indenture, dated as of 2/04/2011, by and between Westmoreland Coal Company, Westmoreland Partners and Wells Fargo Bank, NA, as trustee and note collateral agent.
4.2
  Form of 10.75% Senior Notes due 2018 (included as Exhibit A in Exhibit 4.11).
4.3
  Registration Rights Agreement, dated 2/04/2011, among Westmoreland Coal Company and Westmoreland Partners and Gleacher & Company Securities, Inc., as initial purchaser
4.4
  Pledge and Security Agreement dated as of 2/04/ 2011, by Westmoreland Coal Company and Westmoreland Partners in favor of Wells Fargo Bank, NA, as note collateral agent
5.1
  Opinion of Davis Graham & Stubbs LLP as to the validity of the new notes.
12.1
  Statement Regarding Computation of Ratios.
21.1
  Subsidiaries of the Registrant.
23.1
  Consent of Ernst & Young LLP
23.2
  Consent of KPMG LLP
23.3
  Consent of KPMG LLP
23.4
  Consent of Norwest Corporation
23.5
  Consent of Davis Graham & Stubbs LLP (included in Exhibit 5.1)
24.1
  Power of Attorney (included on signature page)
25.1
  Statement of Eligibility on Form T-1 of Wells Fargo Bank, National Association
99.1
  Letter of Transmittal
Item 22. Undertakings
     The undersigned Registrants hereby undertake:
     (a) (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
  (i)   To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
  (ii)   To reflect in the prospectus any fact or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and
  (iii)   To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.
     (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
     (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unexchanged at the termination of the offering.
     (4) That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness; provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such

II-3

 

first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
     (5) That, for the purpose of determining liability of the registrants under the Securities Act of 1933 to any purchaser in the initial distribution of the securities, in a primary offering of securities of the undersigned registrants pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrants will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser.
  (i)   any preliminary prospectus or prospectus of the undersigned registrants relating to the offering required to be filed pursuant to Rule 424;
  (ii)   any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrants or used or referred to by the undersigned registrants;
  (iii)   the portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrants or their securities provided by or on behalf of the undersigned registrants; and
  (iv)   any other communication that is an offer in the offering made by the undersigned registrants to the purchaser.
     (b) That, for purposes of determining any liability under the Securities Act of 1933, each filing of a registrant’s annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
     (c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.
     (d) To respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request.
     (e) To supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective.

II-4

 

SIGNATURES
     Pursuant to the requirements of the Securities Act of 1933, each Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Colorado Springs, State of Colorado on June 3, 2011.
         
  WESTMORELAND COAL COMPANY
 		  
  By:   /s/ KEITH E. ALESSI    
    Name:   Keith E. Alessi   
    Title:   Chief Executive Officer and President   
 
POWER OF ATTORNEY
     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Keith E. Alessi and Kevin A. Paprzycki, and each of them, his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this registration statement (including post-effective amendments and registration statements filed pursuant to Rule 462 or otherwise) and to file the same, with all exhibits thereto, and the other documents in connection therewith, with the Securities and Exchange Commission, and hereby grants to such attorneys-in-fact and agents and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or his or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
     Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
         
Signature   Title   Date
 
        
/s/ Keith E. Alessi
 
Keith E. Alessi
  President and
Chief Executive Officer
(Principal Executive Officer) 		  June 3, 2011
 
        
/s/ Kevin A. Paprzycki
 
Kevin A. Paprzycki
  Chief Financial Officer and Treasurer
(Principal Financial Officer) 		  June 3, 2011
 
        
/s/ Russel H. Werner
 
Russel H. Werner
  Corporate Controller
(Principal Accounting Officer) 		  June 3, 2011
 
        
/s/ Thomas J. Coffey
 
Thomas J. Coffey
  Director    June 3, 2011
 
        
/s/ Michael R. D’Appolonia
 
Michael R. D’Appolonia
  Director    June 3, 2011
 
        
/s/ Gail E. Hamilton
 
Gail E. Hamilton
  Director    June 3, 2011
 
        
/s/ Richard M. Klingaman
 
Richard M. Klingaman
  Director    June 3, 2011
 
        
/s/ Jan B. Packwood
 
Jan B. Packwood
  Director    June 3, 2011
 
        
/s/ Robert C. Scharp
 
Robert C. Scharp
  Director    June 3, 2011

II-5

 

         
  WESTMORELAND PARTNERS
 		  
  By:   WESTMORELAND-NORTH CAROLINA POWER, LLC, General Partner    
     
  By:   /s/ Donald Keisling    
    Name:   Donald Keisling   
    Title:   Chief Executive Officer
(Principal Executive Officer) 		  
     
  By:   WESTMORELAND ENERGY LLC, Limited Partner    
     
  By:   /s/ Donald Keisling    
    Name:   Donald Keisling   
    Title:   Chief Executive Officer
(Principal Executive Officer) 		  

II-6

 

         
         
  WESTMORELAND ENERGY LLC
 		  
  By:   /s/ Donald Keisling    
    Name: Donald Keisling   
    Title: Chief Executive Officer
(Principal Executive Officer) 		  
 
POWER OF ATTORNEY
     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Russel H. Werner as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this registration statement (including post-effective amendments and registration statements filed pursuant to Rule 462 or otherwise) and to file the same, with all exhibits thereto, and the other documents in connection therewith, with the Securities and Exchange Commission, and hereby grants to such attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.
     Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
         
Signature   Title   Date
 
        
/s/ Donald Keisling
 
Donald Keisling
  Chief Executive Officer
(Principal Executive Officer) 		  June 3, 2011
 
        
/s/ Russel Werner
 
Russel Werner
  Treasurer and Controller
(Principal Accounting Officer) 		  June 3, 2011
 
        
/s/ Jennifer Grafton
 
Jennifer Grafton
  Director    June 3, 2011
 
        
/s/ Douglas Kathol
 
Douglas Kathol
  Director    June 3, 2011
 
        
/s/ Kevin Paprzycki
 
Kevin Paprzycki
  Director    June 3, 2011

II-7

 

         
  WESTMORELAND ROANOKE VALLEY, L.P.
 		  
  By:   WEI-Roanoke Valley, Inc., General Partner    
 
  By:   /s/ Donald Keisling    
    Name:   Donald Keisling   
    Title:   Chief Executive Officer
(Principal Executive Officer) 		  
     
  By:   Westmoreland Energy LLC, Limited Partner    
     
  By:   /s/ Donald Keisling    
    Name:   Donald Keisling   
    Title:   Chief Executive Officer
(Principal Executive Officer) 		  

II-8

 

         
         
  WEI — ROANOKE VALLEY, INC.
 		  
  By:   /s/ Donald Keisling    
    Name:   Donald Keisling   
    Title:   Chief Executive Officer
(Principal Executive Officer) 		  
 
POWER OF ATTORNEY
     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Russel H. Werner as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this registration statement (including post-effective amendments and registration statements filed pursuant to Rule 462 or otherwise) and to file the same, with all exhibits thereto, and the other documents in connection therewith, with the Securities and Exchange Commission, and hereby grants to such attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.
     Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
         
Signature   Title   Date
 
        
/s/ Donald Keisling
 
Donald Keisling
  Chief Executive Officer
(Principal Executive Officer) 		  June 3, 2011
 
        
/s/ Russel Werner
 
Russel Werner
  Treasurer and Controller
(Principal Accounting Officer) 		  June 3, 2011
 
        
/s/ Jennifer Grafton
 
Jennifer Grafton
  Director    June 3, 2011
 
        
/s/ Douglas Kathol
 
Douglas Kathol
  Director    June 3, 2011
 
        
/s/ Kevin Paprzycki
 
Kevin Paprzycki
  Director    June 3, 2011

II-9

 

         
  WESTMORELAND NORTH CAROLINA POWER LLC
 		  
  By:   /s/ Donald Keisling    
    Name:   Donald Keisling   
    Title:   Chief Executive Officer
(Principal Executive Officer) 		  
 
POWER OF ATTORNEY
     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Russel H. Werner as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this registration statement (including post-effective amendments and registration statements filed pursuant to Rule 462 or otherwise) and to file the same, with all exhibits thereto, and the other documents in connection therewith, with the Securities and Exchange Commission, and hereby grants to such attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.
     Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
         
Signature   Title   Date
 
        
/s/ Donald Keisling
 
Donald Keisling
  Chief Executive Officer
(Principal Executive Officer) 		  June 3, 2011
 
        
/s/ Russel Werner
 
Russel Werner
  Treasurer and Controller
(Principal Accounting Officer) 		  June 3, 2011
 
        
/s/ Jennifer Grafton
 
Jennifer Grafton
  Director    June 3, 2011
 
        
/s/ Douglas Kathol
 
Douglas Kathol
  Director    June 3, 2011
 
        
/s/ Kevin Paprzycki
 
Kevin Paprzycki
  Director    June 3, 2011

II-10

 

         
  WESTMORELAND RESOURCES, INC.
 		  
  By:   /s/ Jerome Gillespie    
    Name:   Jerome Gillespie   
    Title:   President
(Principal Executive Officer) 		  
 
POWER OF ATTORNEY
     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Jerome Gillespie as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this registration statement (including post-effective amendments and registration statements filed pursuant to Rule 462 or otherwise) and to file the same, with all exhibits thereto, and the other documents in connection therewith, with the Securities and Exchange Commission, and hereby grants to such attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.
     Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
         
Signature   Title   Date
 
        
/s/ Jerome Gillespie
 
Jerome Gillespie
  President
(Principal Executive Officer) 		  June 3, 2011
 
        
/s/ Susan Mateel
 
Susan Mateel
  Controller and Treasurer
(Principal Accounting Officer) 		  June 3, 2011
 
        
/s/ Jennifer Grafton
 
Jennifer Grafton
  Director    June 3, 2011
 
        
/s/ Douglas Kathol
 
Douglas Kathol
  Director    June 3, 2011
 
        
/s/ Kevin Paprzycki
 
Kevin Paprzycki
  Director    June 3, 2011

II-11

 

         
  WRI PARTNERS, INC.
 		  
  By:   /s/ Kevin Paprzycki    
    Name:   Kevin Paprzycki   
    Title:   Chief Executive Officer
(Principal Executive Officer) 		  
 
POWER OF ATTORNEY
     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Kevin Paprzycki as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this registration statement (including post-effective amendments and registration statements filed pursuant to Rule 462 or otherwise) and to file the same, with all exhibits thereto, and the other documents in connection therewith, with the Securities and Exchange Commission, and hereby grants to such attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.
     Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
         
Signature   Title   Date
 
        
/s/ Kevin Paprzycki
 
Kevin Paprzycki
  Chief Executive Officer
(Principal Executive Officer) 		  June 3, 2011
 
        
/s/ Susan Mateel
 
Susan Mateel
  Controller and Treasurer
(Principal Accounting Officer) 		  June 3, 2011
 
        
/s/ Jennifer Grafton
 
Jennifer Grafton
  Director    June 3, 2011
 
        
/s/ Douglas Kathol
 
Douglas Kathol
  Director    June 3, 2011
 
        
/s/ Kevin Paprzycki
 
Kevin Paprzycki
  Director    June 3, 2011

II-12

 

         
  WESTMORELAND MINING SERVICES, INC.
 		  
  By:   /s/ John O’Laughlin    
    Name:   John O’Laughlin   
    Title:   President
(Principal Executive Officer) 		  
 
POWER OF ATTORNEY
     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Russel H. Werner as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this registration statement (including post-effective amendments and registration statements filed pursuant to Rule 462 or otherwise) and to file the same, with all exhibits thereto, and the other documents in connection therewith, with the Securities and Exchange Commission, and hereby grants to such attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.
     Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
         
Signature   Title   Date
 
        
/s/ John O’Laughlin
 
John O’Laughlin
  President
(Principal Executive Officer) 		  June 3, 2011
 
        
/s/ Russel Werner
 
Russel Werner
  Treasurer
(Principal Accounting Officer) 		  June 3, 2011
 
        
/s/ Jennifer Grafton
 
Jennifer Grafton
  Director    June 3, 2011
 
        
/s/ Douglas Kathol
 
Douglas Kathol
  Director    June 3, 2011
 
        
/s/ Kevin Paprzycki
 
Kevin Paprzycki
  Director    June 3, 2011

II-13

 

         
  WESTMORELAND COAL SALES COMPANY, INC.
 		  
  By:   /s/ Jonathan Barr    
    Name:   Jonathan Barr   
    Title:   President
(Principal Executive Officer) 		  
 
POWER OF ATTORNEY
     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Russel H. Werner as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this registration statement (including post-effective amendments and registration statements filed pursuant to Rule 462 or otherwise) and to file the same, with all exhibits thereto, and the other documents in connection therewith, with the Securities and Exchange Commission, and hereby grants to such attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.
     Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
         
Signature   Title   Date
 
        
/s/ Jonathan Barr
 
Jonathan Barr
  President
(Principal Executive Officer) 		  June 3, 2011
 
        
/s/ Russel Werner
 
Russell Werner
  Controller
(Principal Accounting Officer) 		  June 3, 2011
 
        
/s/ Jennifer Grafton
  Director   June 3, 2011
  Jennifer Grafton
        
 
        
/s/ Douglas Kathol
  Director   June 3, 2011
  Douglas Kathol
        
 
        
/s/ Kevin Paprzycki
  Director   June 3, 2011
  Kevin Paprzycki
        

II-14

 

         
  WESTMORELAND POWER, INC.
 		  
  By:   /s/ Douglas Kathol    
    Name:   Douglas Kathol   
    Title:   Chief Executive Officer
(Principal Executive Officer) 		  
 
POWER OF ATTORNEY
     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Russel H. Werner as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this registration statement (including post-effective amendments and registration statements filed pursuant to Rule 462 or otherwise) and to file the same, with all exhibits thereto, and the other documents in connection therewith, with the Securities and Exchange Commission, and hereby grants to such attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.
     Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
         
Signature   Title   Date
 
        
/s/ Douglas Kathol
 
Douglas Kathol
  Chief Executive Officer
(Principal Executive Officer) 		  June 3, 2011
 
        
/s/ Russel Werner
 
Russel Werner
  Controller and Treasurer
(Principal Accounting Officer) 		  June 3, 2011
 
        
/s/ Jennifer Grafton
 
Jennifer Grafton
  Director    June 3, 2011
 
        
/s/ Douglas Kathol
 
Douglas Kathol
  Director    June 3, 2011
 
        
/s/ Kevin Paprzycki
 
Kevin Paprzycki
  Director    June 3, 2011

II-15

 

         
  WCC LAND HOLDING COMPANY, INC.
 		  
  By:   /s/ Thomas Durham    
    Name:   Thomas Durham   
    Title:   President
(Principal Executive Officer) 		  
 
POWER OF ATTORNEY
     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Russel H. Werner as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this registration statement (including post-effective amendments and registration statements filed pursuant to Rule 462 or otherwise) and to file the same, with all exhibits thereto, and the other documents in connection therewith, with the Securities and Exchange Commission, and hereby grants to such attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.
     Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
         
Signature   Title   Date
 
        
/s/ Thomas Durham
 
Thomas Durham
  President
(Principal Executive Officer) 		  June 3, 2011
 
        
/s/ Russel Werner
 
Russel Werner
  Treasurer
(Principal Accounting Officer) 		  June 3, 2011
 
        
/s/ Jennifer Grafton
 
Jennifer Grafton
  Director    June 3, 2011
 
        
/s/ Douglas kathol
 
Douglas Kathol
  Director    June 3, 2011
 
        
/s/ Kevin Paprzycki
 
Kevin Paprzycki
  Director    June 3, 2011

II-16

 

INDEX TO EXHIBITS
     
Exhibit    
Number   Exhibit Description
3.1
  Restated Certificate of Incorporation of Westmoreland Coal Company
3.2
  Certificate of Correction to the Restated Certificate of Incorporation of Westmoreland Coal Company
3.3
  Certificate of Amendment to the Restated Certificate of Incorporation of Westmoreland Coal Company
3.4
  Certificate of Amendment to the Restated Certificate of Incorporation of Westmoreland Coal Company
3.5
  Amended and Restated Bylaws of Westmoreland Coal Company
3.6
  Amended and Restated Partnership Agreement of Westmoreland Partners
3.7
  Amendment No. 1 to Amended and Restated Partnership Agreement of Westmoreland Partners
3.8
  Amendment No. 2 to Amended and Restated Partnership Agreement of Westmoreland Partners
3.9
  Certificate of Formation of Westmoreland Energy LLC
3.10
  Operating Agreement of Westmoreland Energy LLC
3.11
  Certificate of Formation of Westmoreland — North Carolina Power LLC
3.12
  Operating Agreement of Westmoreland — North Carolina Power LLC
3.13
  Certificate of Incorporation of WEI — Roanoke Valley, Inc.
3.14
  Certificate of Amendment to Certificate of Incorporation of WEI — Roanoke Valley, Inc.
3.15
  Bylaws of WEI — Roanoke Valley, Inc.
3.16
  Certificate of Limited Partnership of Westmoreland Roanoke Valley LP
3.17
  Amendment to Certificate of Limited Partnership of Westmoreland Roanoke Valley LP
3.18
  Agreement of Limited Partnership of Westmoreland Roanoke Valley LP
3.19
  Certificate of Incorporation of Westmoreland Resources, Inc.
3.20
  Certificate of Amendment of Certificate of Incorporation of Westmoreland Resources, Inc.
3.21
  Certificate of Amendment of Certificate of Incorporation of Westmoreland Resources, Inc.
3.22
  Bylaws of Westmoreland Resources, Inc.
3.23
  Certificate of Incorporation of WRI Partners, Inc.
3.24
  Bylaws of WRI Partners, Inc.
3.25
  Certificate of Incorporation of Westmoreland Mining Services, Inc.
3.26
  Bylaws of Westmoreland Mining Services, Inc.
3.27
  Certificate of Incorporation of Westmoreland Coal Sales Company, Inc.
3.28
  Certificate of Amendment of Certificate of Incorporation of Westmoreland Coal Sales Company, Inc.
3.29
  Bylaws of Westmoreland Coal Sales Company, Inc.
3.30
  Certificate of Incorporation of WCC Land Holding Company, Inc.
3.31
  Bylaws of WCC Land Holding Company, Inc.
3.32
  Certificate of Incorporation of Westmoreland Power, Inc.
3.33
  Certificate of Amendment of Certificate of Incorporation of Westmoreland Power, Inc.
3.34
  Certificate of Amendment of Certificate of Incorporation of Westmoreland Power, Inc.
3.35
  Bylaws of Westmoreland Power, Inc.
4.1
  Indenture, dated as of 2/04/2011, by and between Westmoreland Coal Company, Westmoreland Partners and Wells Fargo Bank, NA, as trustee and note collateral agent.
4.2
  Form of 10.75% Senior Notes due 2018 (included as Exhibit A in Exhibit 4.1).
4.3
  Registration Rights Agreement, dated 2/04/2011, among Westmoreland Coal Company and Westmoreland Partners and Gleacher & Company Securities, Inc., as initial purchaser
4.4
  Pledge and Security Agreement dated as of 2/04/ 2011, by Westmoreland Coal Company and Westmoreland Partners in favor of Wells Fargo Bank, NA, as note collateral agent
5.1
  Opinion of Davis Graham & Stubbs LLP as to the validity of the new notes.
12.1
  Statement Regarding Computation of Ratios.
21.1
  Subsidiaries of the Registrant.
23.1
  Consent of Ernst & Young LLP
23.2
  Consent of KPMG LLP
23.3
  Consent of KPMG LLP
23.4
  Consent of Norwest Corporation
23.5
  Consent of Davis Graham & Stubbs LLP (included in Exhibit 5.1)
24.1
  Power of Attorney (included on signature page)
25.1
  Statement of Eligibility on Form T-1 of Wells Fargo Bank, National Association
99.1
  Letter of Transmittal

II-17

EX-3.1 2 d82642exv3w1.htm EX-3.1 exv3w1
Exhibit 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
WESTMORELAND COAL COMPANY
WESTMORELAND COAL COMPANY, a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows:
1. The name of the corporation is Westmoreland Coal Company, and the name under which the corporation was originally incorporated is Stonega Coke and Coal Company. The date of filing of its original Certificate of Incorporation with the Secretary of State was May 4, 1910.
2. This Restated Certificate of Incorporation only restates and integrates and does not further amend the provisions of the Certificate of Incorporation of this corporation as heretofore amended or supplemented and there is no discrepancy between those provisions and the provisions of this Restated Certificate of Incorporation.
3. The text of the Certificate of Incorporation as amended or supplemented heretofore is hereby restated without further amendments or changes to read as herein set forth in full:
          FIRST: The name of this corporation is WESTMORELAND COAL COMPANY.
          SECOND: The location of its principal office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the city of Wilmington, County of New Castle. The name of the Agent therein and in charge thereof is The Corporation Trust Company.
          THIRD: The purposes of the corporation are to mine, produce, process, manufacture, buy, sell, own, lease, deal in and dispose of coal, oil, gas, and all types of minerals and their products; and in addition to produce, process, manufacture, buy, sell, own, lease, deal in and dispose of all kinds of property and to engage in all kinds of enterprises.
          FOURTH: The aggregate number of shares of all classes of stock which the corporation has authority to issue is 25,000,000, of which (a) 5,000,000 shall be Preferred Stock of the par value of $1 per share, issuable in series, and (b) 20,000.000 shall be Common Stock of the par value of $2.50 per share.
          The designations and the powers, preferences and rights of such classes of stock, and the qualifications, limitations and restrictions thereof, which are fixed by this Certificate of Incorporation, and the authority of the Board of

 

 

Directors of the corporation (“Board of Directors”) to fix by resolution or resolutions providing for the issue of any series of the Preferred Stock and the designations, preferences and rights of any such series, and the qualifications, limitations and restrictions thereof, which are not fixed by the Certificate of Incorporation, are as follows:
PREFERRED STOCK
          1. Issue in Series. The Preferred Stock may be issued from time to time in one or more series. Each series shall have the terms stated herein and in the resolution of the Board of Directors providing for their issue. All shares of anyone series of Preferred Stock shall be identical.
          2. Creation of Series. The Board of Directors shall have authority by resolution to divide the Preferred Stock into one or more series and to determine and fix with respect to each series, at any time prior to the issuance of any shares of such series, the designations, preferences and rights, and the qualifications, limitations and restrictions thereof, which may vary as to shares of different series, subject to limitations provided by law and herein. All series of Preferred Stock may have voting rights on such terms as the Board of Directors shall determine, as shall be permitted by applicable law. The authority of the Board of Directors shall include, but not be limited to, the determination or fixing of the following:
          (a) The designation of and the number of shares which shall constitute the series, which number may be increased or decreased (but not below the number of shares then outstanding) from time to time by action of the Board of Directors;
          (b) The dividend rate and time of payment of dividends on the shares of the series, whether dividends shall be cumulative, and, if so, from what date or dates, and whether and to what extent the shares of the series shall have participation rights;
          (c) The price or prices at which, and the terms and conditions on which, the shares of the series may be redeemed at the option of the Corporation;
          (d) Whether or not the shares of the series shall be entitled to the benefit of a retirement or sinking fund to be applied to the purchase or redemption of such shares, and, if 80 entitled, the annual amount of such fund and the terms and provisions relative to the operation thereof;
          (e) Whether or not the shares of the series shall be Convertible into, or exchangeable for, shares of any other class or classes or of any other series of the same or any other class or classes of stock of the Corporation, and if

 

 

80 convertible or exchangeable, the conversion price or prices, or the rates of exchange, and any adjustments thereof, if any, at which such conversion or exchange may be made, and any other terms and conditions of such conversion or exchange;
          (f) The rights of the shares of the series in the event of voluntary or involuntary liquidation, dissolution or winding up of the corporation;
          (g) Whether or not the shares of the series shall be entitled to the benefit of limitations restricting the payment of dividends on, or the making of other distributions in respect of stock of any class ranking junior to the shares of the series as to dividends or assets, or restricting the purchase or redemption of the shares of any such junior class, and the terms of any such restrictions;
          (h) The terms, 88 applicable, of the voting rights, in addition to the voting rights provided by law, of any series issued on or after the effective date of this amendment; and
          (i) Any other relative rights, preferences and limitations of that series.
COMMON STOCK
          3. Dividends. Holders of Common Stock shall be entitled to receive such dividends 88 may be declared by the Board of Directors except that the corporation will not declare, pay or set apart for payment any dividend on shares of Common Stock (other than dividends payable in Common Stock), or directly or indirectly make any distribution on, redeem, purchase or otherwise acquire any such shares, if at the time of such action the Corporation is in default with respect to any dividend payable on or any sinking fund or purchase fund requirement relative to shares of Preferred Stock.
          4. Distribution of Assets. In the event of the voluntary or involuntary liquidation of the corporation, holders of Common Stock shall be entitled to receive pro rata all of the remaining assets of the corporation available for distribution to its stockholders after all amounts to which the holders of Preferred Stock are entitled have been paid or set aside in cash for payment.
GENERAL
          5. Voting Rights. Except BS otherwise required by law, the holders of Common Stock and the holders of each series of Preferred Stock shall exclusively possess voting power in the election of directors and for all other purposes.

 

 

DESIGNATION OF SERIES A CONVERTIBLE
EXCHANGEABLE PREFERRED STOCK
          Section 1. Designation of Amount. The shares of such series shall be designated as “Series A Convertible Exchangeable Preferred Stock” (the Series A Preferred Stock”) and the authorized number of shares constituting such series shall be 575,000. The par value of the Series A Preferred Stock shall be $1.00 per share.
          Section 2. Dividends.
          (a) The holders of shares of the Series A Preferred Stock will be entitled to receive, when, as and if declared by the Board of Directors out of funds of the Corporation legally available therefor, cumulative cash dividends on the shares of the Series A Preferred Stock at the rate of $8.50 per annum per share of Series A Preferred Stock, and no more, payable in equal quarterly installments on April 1, July I, October 1, and January 1 in each year, commencing October I, 1992. Such dividends shall be cumulative from the date of original issue of each share of the Series A Preferred Stock. Each such dividend shall be paid to the holders of record of the shares of the Series A Preferred Stock as they appear on the stock records of the Corporation on such record date, not more than 30 days nor less than 10 days preceding the dividend payment date thereof, as shall be fixed by the Board of Directors or a duly authorized committee thereof. If a holder converts a share or shares of the Series A Preferred Stock after the close of business on the record date for a dividend and before the opening ofbusines8 on the payment date for such dividend, then, pursuant to Section 6 hereof, the holder will be required to pay to the Corporation at the time of such conversion the amount of such dividend.
          (b) If dividends are not paid in full, or declared in full and sums set apart for the payment thereof, upon the shares of the Series A Preferred Stock and shares of any other preferred stock ranking on a parity as to dividends with the Series A Preferred Stock, all dividends declared upon shares of the Series A Preferred Stock and of any other preferred stock ranking on a parity as to dividends shall be paid or declared pro rata so that in all cases the amount of dividends paid or declared per share on the Series A Preferred Stock and such other shares of preferred stock shall bear to each other the same ratio that accumulated dividends per share, including dividends accrued or in arrears, if any, on the shares of the Series A Preferred Stock and such other shares of preferred stock bear to each other. Except as provided in the preceding sentence, unless full cumulative dividends on the shares of the Series A Preferred Stock have been paid or declared in full and sums set aside for the payment thereof, no dividends (other than dividends in shares of, or options, warrants or rights to subscribe for or purchase shares of the Common Stock (as hereinafter defined) or in shares of any other capital stock of the Corporation ranking junior to the Series A Preferred Stock as to dividends and distribution of assets upon liquidation) shall be paid or

 

 

declared and set aside for payment or other distribution made upon the Corporation’s Common Stock, par value $2.50 per share (the “Common Stock”), or any other capital stock of the Corporation ranking junior to or on a parity with the Series A Preferred Stock as to dividends, nor shall any shares of the Common Stock or shares of any other capital stock of the Corporation ranking junior to or on a parity with the Series A Preferred Stock as to dividends be redeemed, purchased or otherwise acquired for any consideration (or any payment made to or available for a sinking fund for the redemption or any such shares) by the Corporation or any subsidiary of the Corporation (except by conversion into or 8llchange for shares of capital stock of the Corporation ranking junior to the Series A Preferred Stock as to dividends and distribution of assets upon liquidation). Holders of share8 of the Series A Preferred Stock shall not be entitled to any dividends, whether payable in cash, property or shares of capital stock, in excess of full accrued and cumulative dividends as herein provided. No interest or sum of money in lieu of interest shall be payable in respect of any dividend payment or payments on the shares of the Series A Preferred Stock that may be in arrears.
          The terms “accrued dividends,” “dividends accrued” and “dividends in arrears,” whenever need herein with reference to shares of preferred 8tock shall be deemed to mean an amount which shall be equal to dividends thereon at the annual dividend rates per share for the respective series from the date or dates on which such dividends commence to accrue to the end of the then current quarterly dividend period for such preferred stock, (or, in the ease of redemption. to the date of redemption), less the amount of all dividends paid, or declared in full and sums set aside for the payment thereof, upon such shares of preferred stock.
          (e) Dividends payable on the shares of the Series A Preferred Stock for any period less than a full quarterly dividend period shall be computed on the basis of a 360-day year of twelve 3O-day months and the actual number of days elapsed in the period for which payable.
          Section 3. Optional Redemption.
          (a) The shares of the Series A Preferred Stock will be redeemable at the option of tile Corporation by resolution of its Board of Directors, in whole or from time to time in part, at any time on or after July 1, 1995, subject to the limitations set forth below, at the following redemption prices per share plus, in each case, all dividends accrued and unpaid on the shares of the Series A Preferred Stock up to the date fixed for redemption, upon giving notice as provided herein below:

 

 

         
If redeemed during      
the twelve-month      
period beginning      
July 1,   Price  
1996
   $ 105.10  
1997
   $ 104.25  
1998
   $ 103.40  
1999
   $ 102.55  
2000
   $ 101.70  
2001
   $ 100.85  
2002 and thereafter
   $ 100.00  
          (b) If less than all of the outstanding shares of the Series A Preferred Stock are to be redeemed, the number of shares to be redeemed shall be determined by the Board of Directors and the shares to be redeemed shall be determined, pro rata or by lot or in such other manner and subject to such regulations as the Board of Directors in its sole discretion shall prescribe.
          (c) At least 30 days but not more than 60 days prior to the date fixed for the redemption of shares of the Series A Preferred Stock, a written notice shall be mailed to each holder of record of shares of the Series A Preferred Stock to be redeemed in a postage prepaid envelope addressed to such bolder at his post office address as shown on the records of the Corporation, notifying such holder of tile election of the Corporation to redeem such shares, stating the date fixed for redemption thereof (the “Redemption Date”), and calling upon such holder to surrender to the Corporation on the Redemption Date at the place designated in such notice his certificate or certificates representing the number of shares specified in such notice of redemption. On or after the Redemption Date each holder of shares of the Series A Preferred Stock to be redeemed shall present and surrender his certificate or certificates for such shares to the Corporation at the place designated in such notice and thereupon the redemption price of such shares shall be paid to or on the order of the person whose name appears on such certificate or certificates as the owner thereof and each surrendered certificate shall be cancelled. In case leas than all the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares. From and after the Redemption Date (unless default shall be made by the Corporation in payment of the redemption price), all dividends on the shares of the Series A Preferred Stock designated for redemption in such notice shall cease to accrue, and all rights of the holders thereof as stockholders of the Corporation, except the right to receive the redemption price of such shares (including all accrued and unpaid dividends up to the Redemption Date) upon the surrender of certificates representing the same, shall cease and terminate and such shares shall not thereafter be transferred (except with the consent of the Corporation) on the books of the Corporation, and such shares shall not be deemed to be outstanding for any purpose whatsoever. At its election, the

 

 

Corporation prior to the Redemption Date may deposit the redemption price (including all accrued and unpaid dividends up to the Redemption Date) of shares of the Series A Preferred Stock 80 called for redemption in trust for the holders thereof with a bank or trust company (having a capital surplus and undivided profits aggregating not less than $50,000,000) in the Borough of Manhattan, City and State of New York, or in any other city in which the Corporation at the time shall maintain a transfer agency with respect to such shares, in which case the aforesaid notice to holders of shares of the Series A Preferred Stock to be redeemed shall state the date of such deposit, shall specify the office of such bank or trust company as the place of payment of the redemption price, and shall call upon such holders to surrender the certificates representing such shares at such place on or after the date fixed in such redemption notice (which shall not be later than the Redemption Date) against payment of the redemption price (including all accrued and unpaid dividends up to the Redemption Date). Any interest accrued on such funds shall be paid to the Corporation from time to time. Any moneys 80 deposited which shall remain unclaimed by the holders of such shares of the Series A Preferred Stock at the end of two years after the Redemption Date shall be returned by such bank or trust company to the Corporation.
          If a notice of redemption has been given pursuant to this Section 3 and any holder of shares of this Series A Preferred Stock shall, prior to the close of business on the last business day preceding the Redemption Date, give written notice to the Corporation pursuant to Section 6 below of the conversion of any or all of the shares to be redeemed held by such holder (accompanied by a certificate or certificates for such shares, duly endorsed or assigned to the Corporation, and any necessary transfer tax payment, as required by Section 6 below), then such redemption shall not become effective as to such shares to be converted, such conversion shall become effective as provided in Section 6 below and any moneys set aside by the Corporation for the redemption of such shares of converted Series A Preferred Stock shall revert to the general funds of the Corporation.
          (d) Shares of the Series A Preferred Stock redeemed, repurchased or retired pursuant to the provisions of this Section 3 or surrendered to the Corporation upon conversion or exchange shall thereupon be retired and may not be reissued as shares of the Series A Preferred Stock but shall thereafter have the status of authorized but unissued shares of the Preferred Stock, without designation as to series until such shares are once more designated as part of a particular series of the Preferred Stock.
          Section 4. Voting Rights.
          (a) In addition to the voting rights provided in Section 4(b), 7(b) or 9, and as required by law, the holders of shares of the Series A Preferred Stock shall be entitled to vote on any matter on which the holders of the Common Stock of the Corporation shall be entitled to vote, and when voting on matters on which the holders of Common Stock of the Corporation are entitled to vote, each

 

 

share of the Series A Preferred Stock shall entitle the holder thereof to four votes. In the event the Corporation shall at any time (i) declare any dividend on Common Stock payable in shares of Common Stock, (li) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the number of votes per share to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction the numerator of which is the number of shares of Common Stock outstanding (which in the case of (i) above shall include such shares of Common Stock payable pursuant to such dividend) immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. An adjustment made pursuant to the immediately preceding sentence shall become effective immediately after such event. When the holders of the Series A Preferred Stock vote on any matter as members of a class which does not include the holders of Common Stock, the holders of Series A Preferred Stock shall be entitled to an aggregate number of votes which is in the same proportion to the total number of class votes as the aggregate liquidation preference of the outstanding shares of Series A Preferred Stock bears to the aggregate liquidation preference of all shares of capital stock in the class; and each holder of Series A Preferred Stock shall be entitled to his or her proportionate share of the aggregate number of votes to which the hold.ere of Series A Preferred Stock are entitled.
          (b) In the event that the Corporation shall have failed to declare and pay or set apart for payment in full the dividends accumulated on the outstanding shares of the Series A Preferred Stock for any six quarterly dividend payment periods, whether or not consecutive (a “Preferential Dividend Non-Payment”), the number of directors of the Corporation shall be increased by two and the holders of outstanding shares of the Series A Preferred Stock, voting together as a class with all other classes or series of preferred stock of the Corporation ranking on a parity with the Series A Preferred Stock with respect to dividends and distribution of assets upon liquidation and then entitled to vote on the election of such additional directors, shall be entitled to elect such additional directors until the full dividends accumulated on all outstanding shares of the Series A Preferred Stock have been declared and paid or set apart for payment. Upon the occurrence of a Preferential Dividend Non-Payment, the Board of Directors shall within a reasonable period call a special meeting of the holders of shares of the Series A Preferred Stock and all holders of other classes or series of preferred stock of the Corporation ranking on a parity with the Series A Preferred Stock with respect to the payment of dividends and distribution of assets upon liquidation who are then entitled to vote on the election of such additional directors for the purpose of electing the additional directors provided by the foregoing provisions. If and when all accumulated dividends on the shares of the Series A Preferred Stock have been declared and paid or set aside for payment in full, the holders of shares of the Series A Preferred Stock shall be divested of the special voting rights provided by this Section 4(b), subject to revesting in the

 

 

event of each and every subsequent Preferential Dividend Non-Payment. Upon termination of such special voting rights attributable to all holders of shares of the Series A Preferred Stock and shares of any other class or Series of preferred stock of the Corporation ranking on a parity with the Series A Preferred Stock with respect to payment of dividends and distribution of assets upon liquidation, the term of o8ice of each director elected by the holders of shares of the Series A Preferred Stock and such parity Preferred Stock (a “Preferred Stock Director”) pursuant to such special voting rights shall forthwith terminate and the number of voting rights shall forthwith terminate and the number of directors constituting the entire Board of Directors shall be reduced by the number of Preferred Stock Directors. Any Preferred Stock Director may be removed by, and shall not be removed otherwise than by, the vote of the holders of record of a majority of the outstanding shares of the Series A Preferred Stock and all other series of Preferred Stock ranking on a parity with the Series A Preferred Stock with respect to the payment of dividends who were entitled to vote in such Preferred Stock Director’s election, voting as a separate class, at a meeting called for such purpose.
          (c) So long as any shares of this Series are outstanding, the By-Laws of the Corporation shall contain provisions ensuring that the number of Directors constituting the entire Board of Directors of the Corporation shall at all times be such that the exercise, by the holders of shares of the Series A Preferred Stock and the holders of parity Preferred Stock, of the right to elect Directors under the circumstances provided for in subclause (a) of this Section 4, will not contravene any provision of this Certificate of Incorporation restricting the number of Directors which may constitute the entire Board of Directors of the Corporation.
          (d) Directors elected pursuant to subclause (a) of this Section 4- shall serve until the earlier of (x) the next annual meeting of the stockholders of the Corporation and the election (by the holders of shares of the Series A Preferred. Stock and the holders of parity Preferred Stock) and qualification of their respective successors or (y) the next annual meeting of the stockholders of the Corporation following the date upon which all dividends in default on the shares of the Series A Preferred Stock shall have been paid in full.
          (e) So long as a Preferential Dividend Non-Payment shall continue, any vacancy in the office of a Preferred Stock Director may be filled by written consent of the Preferred Stock Director remaining in office or, if none remains in office, by vote of the holders of record of a majority of the outstanding shares of the Series A Preferred Stock and all other series of Preferred Stock ranking on a parity with the Series A Preferred Stock with respect to the payment of dividends and distribution of assets upon liquidation who are then entitled to vote in the election of such Preferred Stock Directors as provided above. As long as the Preferential Dividend Non-Payment shall continue, holders of shares of the Series A Preferred Stock shall not, as such stockholders, be entitled to vote on the election or removal of directors other than Preferred Stock Directors, but shall not

 

 

be divested of any other voting rights provided to such stockholders by law with respect to any other matter to be acted upon by the stockholders of the Corporation.
          Section 5. Liquidation Rights.
          (a) In the event of any liquidation, dissolution or winding up of the affairs of the Corporation, whether voluntary or otherwise, after payment or provision for payment of the debts and other liabilities of the Corporation, the holders of shares of the Series A Preferred Stock shall be entitled to receive, in cash, out of the remaining net assets of the Corporation, the amount of One-Hundred Dollars ($100.00) for each share of the Series A Preferred Stock, plus an amount equal to all dividends accrued and unpaid on each such share up to the date fixed for distribution, before any distribution shall be made to the holders of shares of the Common Stock or any other capital stock of the Corporation ranking (as to any such distribution) junior to the Series A Preferred Stock. If upon any liquidation, dissolution or winding up of the Corporation, the assets distributable among the holders of shares of the Series A Preferred Stock and all other classes and aeries of preferred stock ranking (as to any such distribution) on a parity with the Series A Preferred Stock are insufficient to permit the payment in full to the holders of all such shares of all preferential amounts payable to all such holders, then the entire assets of the Corporation thus distributable shall be distributed ratably among the holders of the shares of the Series A Preferred Stock and such other classes and series of preferred stock ranking (as to any such distribution) on a parity with the Series A Preferred Stock in proportion to the respective amounts that would be payable per share if such assets were sufficient to permit payment in full.
          (b) For purposes of this Section 5, a distribution of assets in any dissolution, winding up or liquidation shall not include (i) any consolidation or merger of the Corporation with or into any other corporation. (ii) any dissolution, liquidation, winding up or reorganization of the Corporation immediately followed by reincorporation of another corporation or (iii) a sale of other disposition of all or substantially all of the Corporation’s assets to another corporation; provided, however, that, in each case, effective provision is made in the certificate of incorporation of the resulting and surviving corporation or otherwise for the protection of the rights of the holders of shares of the Series A Preferred Stock.
          (e) After the payment of the full preferential amounts provided for herein to the holders of shares of the Series A Preferred Stock or funds necessary for such payment have been set aside in trust for the holders thereof, such holders shall be entitled to no other or further participation in the distribution of the assets of the Corporation.

 

 

          Section 6. Conversion.
          (a) Holders of shares of the Series A Preferred Stock shall have the right, exercisable at any time and from time to time, except in the case of shares of tile Series A Preferred Stock called for redemption or to be exchanged for Debentures (as described in Section 7 hereof), to convert all or any such shares of tile Series A Preferred Stock into shares of the Common Stock (calculated 8S to each conversion to the nearest l/100th of a share) at the conversion price of $14.64 per share of the Common Stock (equivalent to a conversion rate of 6.8306 shares of the Common Stock for each share of the Series A Preferred Stock so converted), subject to adjustment as described below. In the case of shares of the Series A Preferred Stock called for redemption or to be exchanged for Debentures (as described in Section 7 hereof), conversion rights will expire at the close of business on the last business day preceding the Redemption Date or the last business day preceding the Exchange Date (118 hereinafter defined), as the case may be. Notice of an optional redemption or exchange must be mailed not less than 30 days and not more than 60 days prior to the Redemption Date or Exchange Date, as the case may be. Upon conversion or exchange, no adjustment or payment will be made for dividends or interest, but if any holder surrenders a share of the Series A Preferred Stock for conversion after the close of business on the record date for the payment of a dividend and prior to the opening of business on the next dividend payment date, then, notwithstanding such conversion, the dividend payable on such dividend payment date will be paid to the registered holder of such share on such record date. In such event, such share, when surrendered for conversion during the period between the close of business on any dividend payment record date and the opening of business on the corresponding dividend payment date, must be accompanied by payment of an amount equal to the dividend payable on such dividend payment date on the share so converted.
          (b) Any holder of a share or shares of the Series A Preferred Stock electing to convert such share or shares thereof shall deliver the certificate or certificates therefor to the principal office of any transfer agent for the Common Stock, with the form of notice of election to convert as the Corporation shall prescribe fully completed and duly executed and (if so required by the Corporation or any conversion agent) accompanied by instruments of transfer in form satisfactory to the Corporation and to any conversion agent, duly executed by the registered holder or his duly authorized attorney, and transfer taxes, stamps or funds therefor or evidence of payment thereof if required pursuant to Section 6(a) or 6(d) hereof. The conversion right with respect to any such shares shall be deemed to have been exercised at the date upon which the certificates therefor accompanied by such duly executed notice of election and instruments of transfer and such taxes, stamps, funds, or evidence of payment shall have been so delivered, and the person or persons entitled to receive the shares of the Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of the Common Stock upon said date.

 

 

          (c) No fractional shares of the Common Stock or scrip representing fractional shares shall be issued upon conversion of shares of the Series A Preferred Stock. If more than one share of the Series A Preferred Stock shall be surrendered for conversion at one time by the S8me holder, the number of full shares of the Common Stock which shall be issuable upon conversion thereof shall be computed on the basis of the aggregate number of shares of the Series A Preferred Stock so surrendered. Instead of any fractional shares of the Common Stock which would otherwise be issuable upon conversion of any shares of tile Series A Preferred Stock, the Corporation shall pay a cash adjustment in respect of such fraction in an amount equal to the same fraction of the closing price for the Common Stock on the last business day preceding the date of conversion. The closing price for such day shall be the last reported tI8les price regular way or, in case no such reported sale takes place on such date, the average of the reported closing bid and asked prices regular way, in either case on the New York Stock Exchange, or if the Common Stock is not listed or admitted to trading on such Exchange, on the principal national securities exchange on which the Common Stock is listed or admitted to trading or, if not listed or admitted to trading on any national securities exchange, the closing sale price of the Common Stock or in case no reported sale takes place, the average of the closing bid and asked prices, on NASDAQ or any comparable system. If the Common Stock is not quoted on NASDAQ or any comparable system, the Board of Directors shall in good faith determine the current market price on the basis of such quotation as it considers appropriate.
          (d) If a holder converts a share or shares of the Series A Preferred Stock, the Corporation shall pay any documentary, stamp or similar issue or transfer tax due on the issue of Common Stock upon the conversion. The holder, however, shall pay to the Corporation the amount of any tax which is due (or shall establish to the satisfaction of the Corporation payment thereof) if the shares are to be issued in name other than the name of such holder and shall pay to the Corporation any amount required by the last sentence of Section 6(a) hereof.
          (e) The Corporation shall reserve and shall at all times have reserved out of its authorized but unissued shares of the Common Stock enough shares of the Common Stock to permit the conversion of the then outstanding shares of the Series A Preferred Stock. All shares of Common Stock which may be issued upon conversion of shares of the Series A Preferred Stock shall be validly issued, fully paid and nonassessable. In order that the Corporation may issue shares of the Common Stock upon conversion of shares of the Series A Preferred Stock, the Corporation will endeavor to comply with all applicable Federal and State securities laws and will endea.vor to list such shares of the Common Stock to be issued upon conversion on each securities exchange on which the Common Stock is listed.

 

 

          (f) The conversion rate in effect at any time shall be subject to adjustment from time to time as follows:
     (i) In case the Corporation shall (1) pay a dividend in shares of the Common Stock to holders of the Common Stock, (2) make a distribution in abates of the Common Stock to holders of the Common Stock, (3) subdivide the outstanding abates of the Common Stock into a greater number of shares of the Common Stock or (4) combine the outstanding shares of the Common Stock into a smaller number of shares of the Common Stock, the conversion rate immediately prior to such action shall be adjusted so that the holder of any shares of the Series A Preferred Stock thereafter surrendered for conversion shall be entitled to receive the number of shares of the Common Stock which he would have owned immediately following such action had such shares of the Series A Preferred Stock been converted immediately prior thereto. An adjustment made pursuant to this Section 6(f)(i) shall become effective immediately after the record date in the case of a dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision or combination.
     (ii) In case the Corporation shall issue rights or warrants to substantially all holders of the Common Stock entitling them (for a period commencing no earlier than the record date for the determination of holders of the Common Stock entitled to receive such rights or warrants and expiring not more than 45 days after such record date) to subscribe for or purchase shares of the Common Stock (or securities convertible into shares of the Common Stock) at a price per share less than the current market price (as determined pursuant to Section 6(f)(iv) ) of the Common Stock on such record date, the number of shares of the Common Stock into which each share of the Series A Preferred Stock shall be convertible shall be adjusted so that the same shall be equal to the number determined by multiplying the number of shares of the Common Stock into which such share of the Series A Preferred Stock was convertible immediately prior to such record date by a fraction of which the numerator shall be the number of shares of the Common Stock outstanding on such record date plus the number of additional shares of the Common Stock offered (or into which the convertible securities so offered are convertible), and of which the denominator shall be the number of shares of the Common Stock outstanding OD such record date. plus the number of shares of the Common Stock which the aggregate offering price of the offered shares of the Common Stock (or the

 

 

aggregate conversion price of the convertible securities so offered) would purchase at such current market price. Such adjustments shall become effective immediately after such record date.
     (iii) In case the Corporation shall distribute to all holders of the Common Stock shares of any class of capital stock. other than the Common Stock, evidences of indebtedness or other assets (other than cash dividends out of current or retained earnings), or shall distribute to substantially all holders of the Common Stock rights or warrants to subscribe for securities (other than those referred to in Section 6(f)(ii), then in each such case the number of shares of the Common Stock into which each share of the Series A Preferred Stock shall be convertible shall be adjusted so that the same shall equal the number determined by multiplying the number of shares of the Common Stock into which such share of the Series A Preferred Stock was convertible immediately prior to the date of 8uch distribution by a fraction of which the numerator shall be the current market price (determined as provided in Section 6(l)(iv) of the Common Stock on the record date mentioned below, and of which the denominator shall be such current market price of the Common Stock, less the then fair market value (as determined by the Board of Directors, whose determination shall be conclusive evidence of such fair market value) of the portion of the assets so distributed or of such subscription rights or warrants applicable to one share of the Common Stock. Such adjustment shall become effective immediately after the record date for the determination of the holders of the Common Stock entitled to receive such distribution. Notwithstanding the foregoing, in the event that the Corporation shall distribute rights or warrants (other than those referred to in Section 6(f)(ii) (“Rights”) pro rata to holders of the Common Stock, the Corporation may, in lieu of making any adjustment pursuant to this Section 6(f)(iii), make proper provision so that each holder of a share of Series A Preferred Stock who converts such share after the record date for such distribution and prior to the expiration or redemption of the Rights shall be entitled to receive upon such conversion, in addition to the shares of the Common Stock issuable upon such conversion (the “Conversion Shares”), a number of Rights to be determined as follows: (i) if such conversion occurs on or prior to the date for the distribution to the holders of Rights of separate certificates evidencing such Rights (the “Distribution Date”), the same number of Rights to which a holder of a number of shares of the Common Stock equal to the number of Conversion Shares is entitled at the time of such conversion in accordance with the terms and provisions of and

 

 

applicable to the Rights; and (ii) if such conversion occurs after the Distribution Date, the same number of Rights to which a holder of a number of shares of the Common Stock into which a share of the Series A Preferred Stock 110 converted was convertible immediately prior to the Distribution Date would have been entitled on the Distribution Date in accordance with the terms and provisions of and applicable to the Rights.
(iv) The current market price per share of the Common Stock: on any date shall be deemed to be the average of the daily closing prices for thirty consecutive trading days commencing forty-five trading days before the day in question. The closing price for each day shall be the last reported sales price regular way or, in case no such reported sale takes place on such date, the average of the reported closing bid and asked prices regular way, in either case on the New York Stock Exchange, or if the Common Stock is not listed or admitted to trading on such Exchange, on the principal national securities exchange on which the Common Stock is listed, or admitted to trading or, if not listed or admitted to trading on any national securities exchange, the closing sale price of the Common Stock, or in case no reported sale takes place, the average of the closing bid and asked prices, on NASDAQ or any comparable system, or if the Common Stock is not quoted on NASDAQ or any comparable system, the closing sale price or, in case no reported sale takes place, the average of the closing bid and asked prices, as furnished by any two members of the National Association of Securities Dealers, Inc. selected from time to time by the Corporation for that purpose.
(v) In any case in which this Section 6 shall require that an adjustment be made immediately following a record date, the Corporation may elect to defer (but only until five business days following the mailing of the notice described in Section 6(j)) issuing to the holder of any share of the Series A Preferred Stock converted after such record date the shares of the Common Stock and other capital stock of the Corporation issuable upon such conversion over and above the shares of the Common Stock and other capital stock of the Corporation issuable upon such conversion only on the basis of the conversion rate prior to adjustment; and, in lieu of the shares the issuance of which is 110 deferred, the Corporation shall issue or cause its transfer agents to issue due bills or other appropriate evidence of the right to receive such shares.
     (g) No adjustment in the conversion rate shall be required until cumulative adjustments result in a concomitant change of 1% or more of the

 

 

conversion price as existed prior to the last adjustment of the conversion rate; provided, however, that any adjustments which by reason of this Section 6(g) are not required to be made shall be carried forward and, taken into account in any subsequent adjustment. All calculations under this Section 6 shall be made to the nearest cent or to the nearest one hundredth of a share, as the case may be. No adjustment to the conversion rate shall be made for cash dividends.
     (h) In the event that, as a result of an adjustment made pursuant to Section 6(f), the holder of any share of the Series A Preferred Stock thereafter surrendered for conversion shall become entitled to receive any shares of capital stock of the Corporation other than shares of the Common Stock, thereafter the number of such other shares so receivable upon conversion of any shares of the Series A Preferred Stock shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Common Stock contained in this Section 6.
     (i) The Corporation may make such increases in the conversion rate, in addition to those required by Sections 6(f)(i), (ii) and (iii), as it considers to be advisable in order that any event treated for Federal income tax purposes as a dividend of stock or stock rights shall not be taxable to the recipients thereof.
     (j) Whenever the conversion rate is adjusted, the Corporation shall promptly mail to all holders of record of shares of the Series A Preferred Stock a notice of the adjustment and shall cause to be prepared a certificate signed by a principal financial officer of the corporation setting forth the adjusted conversion rate and a brief statement of the facts requiring such adjustment and the computation thereof; such certificate shall forthwith be filed with each transfer agent for the shares of the Series A Preferred Stock.
     (k) In the event that:
  (1)   the Corporation takes any action which would require an adjustment in the conversion rate,
 
  (2)   the Corporation consolidates or merges with, or transfers all or substantially all of its assets to, another corporation and stockholders of the Corporation must approve the transaction, or
 
  (3)   there is a dissolution or liquidation of the Corporation,
a holder of shares of the Series A Preferred Stock may wish to convert some or all of such shares into shares of the Common Stock prior to the record date for, or the effective date of, the transaction so that he may receive the rights, warrants, securities or assets which a holder of shares of the Common Stock on that date may receive. Therefore, the Corporation shall mail to holders of shares of the

 

 

Series A Preferred Stock a notice stating the proposed record or effective date of the transaction, as the case may be. The Corporation shall mail the notice at least 10 days before such date; however, failure to mail such notice or any defect therein shall not affect the validity of any transaction referred to in clause m, (2) or (3) of this Section 6(k).
     (l) If any of the following shall occur, namely; (i) any reclassification or change of outstanding shares of the Common Stock issuable upon conversion of shares of the Series A Preferred Stock. (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), (ii) any consolidation or merger to which the Corporation is a party other than a merger in which the Corporation is the continuing corporation and which does not result in any reclassification of, or change (other than a change in name, or par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination) in, outstanding shares of the Common Stock or (iii) any 88le or conveyance of all or substantially all of the property or business of the Corporation as an entirety, then the Corporation, or such successor or purchasing corporation, as the case may be, shall, as a condition precedent to such reclassification, change, consolidation, merger, sale or conveyance provide in its certificate of incorporation or other charter document that each share of the Series A Preferred Stock shall be convertible into the kind and amount of shares of capital stock and other securities and property (including cash) receivable upon such reclassification, change, consolidation, merger, sale or conveyance by a holder of the number of shares of the Common Stock deliverable upon conversion of such share of the Series A Preferred Stock immediately prior to such reclassification, change, consolidation, merger, sale or conveyance. Such certificate of incorporation or other charter document shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 6. The foregoing, however, shall not in any way affect the right a holder of a share of the Series A Preferred Stock may otherwise have, pursuant to clause (ii) of the last sentence of Section 6(J)(iii), to receive Rights upon conversion of a share of the Series A Preferred Stock. If, in the case of any such consolidation, merger, sale or conveyance, the stock or other securities and property (including cash) receivable thereupon by a holder of the Common Stock includes shares of capital stock or other securities and property of a corporation other than the successor or purchasing corporation, as the case may be, in such consolidation, merger, sale or conveyance, then the certificate of incorporation or other charter document of such other corporation shall contain such additional provisions to protect the interests of the holders of shares of the Series A Preferred Stock as the Board of Directors sha1l reasonably consider necessary by reason of the foregoing. The provision of this Section 6(1) shall similarly apply to successive consolidations, mergers, sales or conveyances.

 

 

     Section 7. Exchange.
     (a) Requirements of Exchange. At the Corporation’s option, all, but not 1ess than all, of the then outstanding shares of the Series A Preferred Stock may be exchanged on any dividend payment date commencing July I, 1996, subject to certain conditions stated in the immediately following sentence, for the Corporation’s 8 1/2% Convertible Subordinated Exchange Debentures due July 1, 2012 (the “Debentures”) to be issued pursuant to an indenture (the “Indenture”) dated as of July 9, 1992 between the Company and Fidelity Bank. National Association in the form of Exhibit 4.1 to the Corporation’s Registration Statement on Form S-2 (Registration No. 33-47872), as amended, declared effective by the Securities and Exchange Commission on July 1. 1992, at an exchange rate of $100.00 principal amount of the Debentures for each share of the Series A Preferred Stock. Such exchange may be made only if, at the time of exchange (i) the Indenture shall have been qualified under the Trust Indenture Act of 1939, as amended, (ii) there asall be no dividend arrearage (including the dividend payable on the date of exchange) on the shares of the Series A Preferred Stock, and (ill) no Event of Default (as defined in the Indenture) under Indenture shall have occurred and be continuing. In the event that such exchange would result in the issuance of a Debenture in a principal amount which is not an integral multiple of $25, the difference between such principal amount and the highest integral multiple of $25 (which may be zero) which is less than such principal amount shall be paid to the holder in cash.
     (b) Notice of Exchange. The Corporation will mail to each holder of record of shares of the Series A Preferred Stock written notice of its intention to exchange not less than 30 nor more than 60 days prior to the date fixed for the exchange (the “Exchange Date”). Each such notice shall state: (i) the Exchange Date, (ii) the place or places where certificates for such shares of the Series A Preferred Stock are to be surrendered for exchange into Debentures. (iii) that dividends on the shares of the Series A Preferred Stock to be exchanged will cease to accrue on such Exchange Date and (iv) that conversion rights in respect thereof will terminate at the close of business on the last business day proceeding such Exchange Date. Except as may be otherwise required by applicable law, the form of the Indenture may not be amended or supplemented before the Exchange Date without the affirmative vote or consent of the holder of two-thirds (2/3) of the outstanding shares of the Series A Preferred Stock, except that those changes which pursuant to Section 11.02 of the Indenture require the consent of each holder affected thereby shall require the consent of all the holders of the outstanding shares of Series A Preferred Stock. The Corporation will cause the Debentures to be authenticated on the dividend payment date on which the exchange is effective, and the Corporation will pay interest on the Debentures at the rate and on the dates specified in such Indentures from and after the Exchange Date.

 

 

     (e) Rights After Exchange Date. If notice has been mailed as aforesaid, from and after the close of business on the Exchange Date (unless default shall be made by the Corporation in issuing Debentures in exchange for, or in making the final dividend payment on, the outstanding shares of the Series A Preferred Stock on the Exchange Date), dividends on the shares of the Series A Preferred Stock shall cease to accrue, and such shares shall no longer be deemed to be issued and outstanding, and all rights of the holders thereof as stockholders of the Corporation (except the right to receive from the Corporation the Debentures) shall cease and terminate. Upon surrender in accordance with said notice of the certificates for any shares of the Series A Preferred Stock so exchanged (properly endorsed or assigned for transfer, if the Corporation shall so require and the notice shall so state), such shares shall be exchanged by the Corporation into Debentures as aforesaid. Dividends due on the quarterly dividend payment date on which the exchange is affected will be mailed to holders in the regular course.
     Section 8. Ranking. With regard to rights to receive dividends and distributions upon dissolution of the Corporation, the Series A Preferred Stock shall rank prior to the Common Stock and on a parity with any other Preferred Stock issued by the Corporation, unless the terms of such other Preferred Stock provide otherwise and, if applicable, the requirements of Section 9 hereof have been complied with.
     Section 9. Limitations. In addition to any other rights provided by applicable law, so long as any shares of tile Series A Preferred Stock are outstanding, the Corporation shall not, without the affirmative vote, or the written consent as provided by law, of the holders of at least two-thirds (2/3) of the outstanding shares of the Series A Preferred Stock, voting separately,
     (a) create, authorize or issue any class or series of capital stock or rights to subscribe to or acquire any class or series of capital stock ranking as to payment of dividends or distribution of assets upon liquidation prior to or on a parity with the Series A Preferred Stock; or
     (b) amend, alter or appeal, whether by merger, consolidation or otherwise, any of the provisions of the Certificate of Incorporation (including this Certificate of Designation) that would change the preferences, rights or powers with respect to the Series A Preferred Stock so as to affect the Series A Preferred Stock adversely;
but (except as otherwise required by applicable law) nothing herein contained shall require such a vote or consent (i) in connection with any increase in the total number of authorized shares of the Common Stock, or (ii) in connection with the authorization or increase of any class or series of shares ranking, as to dividends and distribution of assets upon liquidation, junior to the Series A Preferred Stock; provided, however, that no such vote or written consent of the holders of the

 

 

shares of the Series A Preferred Stock shall be required if, at or prior to the time when the issuance of any such shares ranking prior to the Series A Preferred Stock is to be made or any such change is to take effect, as the case may be, provision is made for the redemption of all the then outstanding shares of the Series A Preferred Stock.
     Section 10. No Preemptive Rights. No holder of shares of the Series A Preferred Stock will possess any preemptive rights to subscribe for or acquire any unissued shares of capital stock of the Corporation (whether now or hereafter authorized) or securities of the Corporation convertible into or carrying a right to subscribe to or acquire shares of capital stock of the Corporation.

 

 

DESIGNATIONS OF
SERIES B JUNIOR PARTICIPATING PREFERRED STOCK
     Section 1. Designation and Amount. The shares of such series shall be designated as “Series B Junior Participating Preferred Stock” (the “Series B Preferred Stock”) and the number of shares constituting the Series B Preferred Stock shall be 200,000. Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, that no decrease shall reduce the number of shares of Series B Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation convertible into Series B Preferred Stock.
     Section 2. Dividends and Distributions.
     (A) Subject to the rights of the holders of any shares of Series A Convertible Exchangeable Preferred Stock of the Corporation or of any other series of Preferred Stock (or any similar stock) ranking prior and superior to the Series B Preferred Stock with respect to dividends, the holders of shares of Series B Preferred Stock, in preference to the holders of shares of common stock, par value $2.50 per share of the Corporation (the ‘Common Stock”), and of any other junior stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the first day of March, June, September and December in each year (each such date being referred to herein as a “Quarterly Dividend Payment Date”), commencing on the first Quarterly Dividend Payment date after the first issuance of a share or fraction of a share of Series B Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $1 or (b) subject to the provision for adjustment hereinafter set forth, 100 times the aggregate per share amount of all cash dividends, and 100 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the shares of Common Stock since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series B Preferred Stock. In the event the Corporation shall at any time declare or pay any dividend on the shares of Common Stock payable in shares of Common Stock,. or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lell88r number of shares of Common Stock, then in each such case the amount to which holder of shares of Series B Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a

 

 

fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
     (B) The Corporation shall declare a dividend or distribution on the Series B Preferred Stock as provided in paragraph (A) of this Section immediately after it declares a dividend or distribution on the shares of Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the shares of Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $1 per share on the Series B Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date.
     (C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series B Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment date or is a date after the record date for determination of holders of shares of Series B Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series B Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series B Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than 60 days prior to the date fixed for the payment thereof.
     Section 3. Voting Rights. The holders of shares of Series B Preferred Stock shall have the following voting rights:
     (A) Subject to the provision for adjustment hereinafter set forth, each share of Series B Preferred Stock shall entitle the holder thereof to 100 votes on all matters submitted to a vote of the stockholders of the Corporation. In the event the Corporation shall at any time declare or pay any dividend on the shares of Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the number of votes per share to which holders of shares of Series B

 

 

Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
     (B) Except as otherwise provided herein, in any other Certificate of Designations creating a series of Preferred Stock or any similar stock, or by law, the holders of shares of Series B Preferred Stock and the holders of shares of Common Stock and any other capital stock of the Corporation having general voting rights shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation.
     (C) Except as set forth herein, or as otherwise provided by law, holders of Series B Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of shares of Common Stock as set forth herein) for taking any corporate action.
     Section 4. Certain Restrictions.
     (A) Whenever quarterly dividends or other dividends or distributions payable on the Series B Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series B Preferred Stock outstanding shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends, or make any other distributions, on any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series B Preferred Stock;
(ii) declare or pay dividends, or make any other distributions, on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series B Preferred Stock, except dividends paid ratably on the Series B Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series B Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series B Preferred Stock; or

 

 

(iv) redeem or purchase or otherwise acquire for consideration any shares of Series B Preferred Stock, or any shares of stock ranking on a parity with the Series B Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such share, upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective aeries or classes.
     (B) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner.
     Section 5. Reacquired Shares. Any shares of Series B Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock subject to the conditions and restrictions on issuance set forth herein, in the Certificate of Incorporation, or in any other Certificate of Designations creating a series of Preferred Stock or any similar stock or as otherwise required by law.
     Section 6. Liquidation, Dissolution or Winding Up. Upon any liquidation, dissolution or winding up of the Corporation, no distribution shall be made (1) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series B Preferred Stock Unless, prior thereto, the holders of shares of Series B Preferred Stock shall have received $100 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, provided that the holders of shares of Series B Preferred Stock shall be entitled to receive an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount to be distributed per share to holders of shares of Common Stock, or (2) to the holders of shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series B Preferred Stock, eu.ept distributions made ratably on the Series B Preferred Stock and all such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. In the event the Corporation shall at any time declare or pay any dividend on the shares of Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the aggregate amount to which holders of shares of Series B Preferred Stock were entitled immediately

 

 

prior to such event under the proviso in clause (1) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
     Section 7. Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each share of Series B Preferred Stock shall at the same time be similarly exchanged or changed into an amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time declare or pay any dividend on the shares of Common Stock payable in shares of Common Stock. or e1J’ect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series B Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
     Section 8. No Redemption. The shares of Series B Preferred Stock shall not be redeemable.
     Section 9. Rank. The Series B Preferred Stock shall rank, with respect to the payment of dividends and the distribution of assets, junior to all series of any other class of the Corporation’s Preferred Stock including without limitation the Corporation’s Series A Convertible Exchangeable Preferred Stock
        .
     Section 10. Amendment. The Certificate of Incorporation of the Corporation shall not be amended in any manner which would materially altar or change the powers, preferences or special rights of the Series B Preferred Stock 80 as to affect them adversely without the affirmative vote of the holders of at least two-thirds of the outstanding shares of Series B Preferred Stock. voting together as a single class.
     FIFT’H: This corporation is to have perpetual existence,

 

 

     SIXTH: The private property of the stockholders shall not be subject to the payment of corporate debts to any extent whatever.
     SEVENTH: In addition to the powers conferred by statute the board of directors is expressly authorized to (a) make, alter, amend and repeal the bylaws and (b) have one or more offices outside of Delaware and keep the books and records of the corporation in any of such offices except as prohibited by law.
EIGHTH: No director of the corporation shall be liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director’s duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law of the State of Delaware or (iv) for any transaction from which the director derived an improper personal benefit. Any repeal or modification of this article Eighth shall be prospective only, and shall not affect to the detriment of any director, any limitation on the personal liability of a director of the corporation existing at the time of such repeal or modification.
4. This Restated Certificate of Incorporation was duly adopted by the Board of Directors in accordance with Section 245 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF said Westmoreland Coal Company has caused this certificate to be signed by Theodore E. Worcester, its Senior Vice President, this 21st day of February, 1995.
         
  WESTMORELAND COAL COMPANY
 		  
  By:   /s/ Theodore E. Worcester    
    Theodore E. Worcester   
       
 

 

EX-3.2 3 d82642exv3w2.htm EX-3.2 exv3w2
Exhibit 3.2
CERTIFICATE OF CORRECTION
TO THE
RESTATED CERTIFICATE OF INCORPORATION OF
WESTMORELAND COAL COMPANY
     Westmoreland Coal Company, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware,
     DOES HEREBY CERTIFY:
     1. The name of the corporation is Westmoreland Coal Company.
     2. A Restated Certificate of Incorporation (the “Certificate”) was filed with the Secretary of State of the State of Delaware on February 21, 1995. The Certificate merely restated and integrated, but did not further amend, the certificate of incorporation, as theretofore amended or supplemented. Said Certificate requires correction as permitted by subsection (f) of Section 103 of The General Corporation Law of the State of Delaware since the Certificate did not accurately restate and integrate the certificate of incorporation, as theretofore amended or supplemented.
     3. The inaccuracies or defects of said Certificate to be corrected are as follows:
          A. Article FIRST.
               The fourth word of Article FIRST was inadvertently changed from “the” to “this”.
          B. Designation of Series A Convertible Exchangeable Preferred Stock.
               (1) In the penultimate sentence of Section 4(b) of the Designation of Series A Convertible Exchangeable Preferred Stock, set forth in Article FOURTH, the clause “pursuant to such special voting rights shall forthwith terminate and the number of directors constituting the entire Board of Directors shall be reduced” was inadvertently replaced with the clause “pursuant to such special voting rights shall forthwith terminate and the number of voting rights shall forthwith terminate and the number of directors constituting the entire Board of Directors shall be reduced”.
               (2) In clause (iii) of Section 5(b) of the Designation of Series A Convertible Exchangeable Preferred Stock, set forth in Article FOURTH, the word “of” was inadvertently inserted between the words “sale” and “other disposition” in lieu of the word “or”.
               (3) In clause (ii) of the last sentence of Section 6(f)(iii) of the Designation of Series A Convertible Exchangeable Preferred Stock, set forth in Article FOURTH, the words “a number of shares” were inadvertently inserted in lieu of the words “the number”.
               (4) In clause (iii) of the first sentence of Section 6(1) of the Designation of Series A Convertible Exchangeable Preferred Stock, set forth in Article FOURTH, a comma was inadvertently omitted between the words “conveyance” and “provide”.

 

 

               (5) In clause (iii) of Section 7(a) of the Designation of Series A Convertible Exchangeable Preferred Stock set forth in Article FOURTH, the word “the” was inadvertently omitted between the words “under” and “Indenture”.
          C. Designations of Series B Junior Participating Preferred Stock.
               In the second sentence of Section 6 of the Designations of Series B Junior Participating Preferred Stock, set forth in Article FOURTH, the phrase “payable in shares of shares of Common Stock” was inadvertently replaced with the phrase “payable in shares of Common Stock”.
          D. Article SEVENTH.
               The last sentence was inadvertently omitted from Article SEVENTH.
          E. Article EIGHTH.
               A comma was inadvertently omitted between the words “Delaware” and “or” in clause (iii) of Article EIGHTH.
     4. The following provisions of the Restated Certificate of Incorporation are corrected to read as follows:
          A. Article FIRST.
               Article FIRST is corrected to read as follows:
                    The name of the corporation is Westmoreland Coal Company.
          B. Designation of Series A Convertible Exchangeable Preferred Stock.
               (1) Section 4(b) of the Designation of Series A Convertible Exchangeable Preferred Stock, set forth in Article FOURTH, is corrected to read as follows:
     (b) In the event that the Corporation shall have failed to declare and pay or set apart for payment in full the dividends accumulated on the outstanding shares of the Series A Preferred Stock for any six quarterly dividend payment periods, whether or not consecutive (a “Preferential Dividend Non-Payment”), the number of directors of the Corporation shall be increased by two and the holders of outstanding shares of the Series A Preferred Stock, voting together as a class with all other classes or series of preferred stock of the Corporation ranking on a parity with the Series A Preferred Stock with respect to dividends and distribution of assets upon liquidation and then entitled to vote on the election of such additional directors, shall be entitled to elect such additional directors until the full dividends accumulated on all outstanding shares of the Series A Preferred Stock have been declared and paid or set apart for payment. Upon the occurrence of a Preferential Dividend Non-Payment, the Board of Directors shall within a reasonable period call a special meeting of the holders of shares of the Series A Preferred Stock and all holders of other classes or series of preferred

 

 

stock of the Corporation ranking on a parity with the Series A Preferred Stock with respect to the payment of dividends and distribution of assets upon liquidation who are then entitled to vote on the election of such additional directors for the purpose of electing the additional directors provided by the foregoing provisions. If and when all accumulated dividends on the shares of the Series A Preferred Stock have been declared and paid or set aside for payment in full, the holders of shares of the Series A Preferred Stock shall be divested of the special voting rights provided by this Section 4(b), subject to revesting in the event of each and every subsequent Preferential Dividend Non-Payment. Upon termination of such special voting rights attributable to all holders of shares of the Series A Preferred Stock and shares of any other class or series of preferred stock of the Corporation ranking on a parity with the Series A Preferred Stock with respect to payment of dividends and distribution of assets upon liquidation, the term of office of each director elected by the holders of shares of the Series A Preferred Stock and such parity Preferred Stock (a “Preferred Stock Director”) pursuant to such special voting rights shall forthwith terminate and the number of directors constituting the entire Board of Directors shall be reduced by the number of Preferred Stock Directors. Any Preferred Stock Director may be removed by, and shall not be removed otherwise than by, the vote of the holders of record of a majority of the outstanding shares of the Series A Preferred Stock and all other series of Preferred Stock ranking on a parity with the Series A Preferred Stock with respect to the payment of dividends who were entitled to vote in such Preferred Stock Director’s election, voting as a separate class, at a meeting called for such purpose.
               (2) Section 5(b) of the Designation of Series A Convertible Exchangeable Preferred Stock, set forth in Article FOURTH, is corrected to read as follows:
     (b) For purposes of this Section 5, a distribution of assets in any dissolution, winding up or liquidation shall not include (i) any consolidation or merger of the Corporation with or into any other corporation, (ii) any dissolution, liquidation, winding up or reorganization of the Corporation immediately followed by reincorporation of another corporation or (iii) a sale or other disposition of all or substantially all of the Corporation’s assets to another corporation; provided, however, that, in each case, effective provision is made in the certificate of incorporation of the resulting and surviving corporation or otherwise for the protection of the rights of the holders of shares of the Series A Preferred Stock.
               (3) Section 6(f)(iii) of the Designation of Series A Convertible Exchangeable Preferred Stock, set forth in Article FOURTH, is corrected to read as follows:
     (iii) In case the Corporation shall distribute to all holders of the Common Stock shares of any class of capital stock other than the Common Stock, evidences of indebtedness or other assets (other than cash

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dividends out of current or retained earnings). or shall distribute to substantially all holders of the Common Stock rights or warrants to subscribe for securities (other than those referred to in Section 6(f)(ii), then in each such case the number of shares of the Common Stock into which each share of the Series A Preferred Stock shall be convertible shall be adjusted so that the same shall equal the number determined by multiplying the number of shares of the Common Stock into which such share of the Series A Preferred Stock was convertible immediately prior to the date of such distribution by a fraction of which the numerator shall be the current market price (determined as provided in Section 6(f)(iv) of the Common Stock on the record date mentioned below. and of which the denominator shall be such current market price of the Common Stock, less the then fair market value (as determined by the Board of Directors whose determination shall be conclusive evidence of such fair market value) of the portion of the assets so distributed or of such subscription rights or warrants applicable to one share of the Common Stock. Such adjustment shall become effective immediately after the record date for the determination of the holders of the Common Stock entitled to receive such distribution. Notwithstanding the foregoing in the event that the Corporation shall distribute rights or warrants (other than those referred to in Section 6(f)(ii) (“Rights”) pro rata to holders of the Common Stock the Corporation may. in lieu of making any adjustment pursuant to this Section 6(f)(iii), make proper provision so that each holder of a share of Series A Preferred Stock who converts such share after the record date for such distribution and prior to the expiration or redemption of the Rights shall be entitled to receive upon such conversion, in addition to the shares of the Common Stock issuable upon such conversion (the “Conversion Shares”), a number of Rights to be determined as follows: (i) if such conversion occurs on or prior to the date for the distribution to the holders of Rights of separate certificates evidencing such Rights (the “Distribution Date”), the same number of Rights to which a holder of a number of shares of the Common Stock equal to the number of Conversion Shares is entitled at the time of such conversion in accordance with the terms and provisions of and applicable to the Rights; and (ii) if such conversion occurs after the Distribution Date, the same number of Rights to which a holder of the number of the Common Stock into which a share of the Series A Preferred Stock so converted was convertible immediately prior to the Distribution Date would have been entitled on the Distribution Date in accordance with the terms and provisions of and applicable to the Rights.
               (4) Section 6(1) of the Designation of Series A Convertible Exchangeable Preferred Stock, set forth in Article FOURTH, is corrected to read as follows:
     (1) If any of the following shall occur, namely: (i) any reclassification or change of outstanding shares of the Common Stock issuable upon conversion of shares of the Series A Preferred Stock (other than a change in par value, or from par value to no par value, or from no

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par value to par value, or as a result of a subdivision or combination), (ii) any consolidation or merger to which the Corporation is a party other than a merger in which the Corporation is the continuing corporation and which does not result in any reclassification of, or change (other than a change in name, or par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination) in, outstanding shares of the Common Stock or (iii) any sale or conveyance of all or substantially all of the property or business of the Corporation as an entirety, then the Corporation, or such successor or purchasing corporation, as the case may be, shall, as a condition precedent to such reclassification, change, consolidation, merger, sale or conveyance, provide in its certificate of incorporation or other charter document that each share of the Series A Preferred Stock shall be convertible into the kind and amount of shares of capital stock and other securities and property (including cash) receivable upon such reclassification, change, consolidation, merger, sale or conveyance by a holder of the number of shares of the Common Stock deliverable upon conversion of such share of the Series A Preferred Stock immediately prior to such reclassification, change, consolidation, merger, sale or conveyance. Such certificate of incorporation or other charter document shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 6. The foregoing, however, shall not in any way affect the right a holder of a share of the Series A Preferred Stock may otherwise have, pursuant to clause (ii) of the last sentence of Section 6(f)(iii), to receive Rights upon conversion of a share of the Series A Preferred Stock. If, in the case of any such consolidation, merger, sale or conveyance, the stock or other securities and property (including cash) receivable thereupon by a holder of the Common Stock includes shares of capital stock or other securities and property of a corporation other than the successor or purchasing corporation, as the case may be, in such consolidation, merger, sale or conveyance, then the certificate of incorporation or other charter document of such other corporation shall contain such additional provisions to protect the interests of the holders of shares of the Series A Preferred Stock as the Board of Directors shall reasonably consider necessary by reason of the foregoing. The provision of this Section 6(1) shall similarly apply to successive consolidations, mergers, sales or conveyances.
               (5) Section 7(a) of the Designation of Series A Convertible Exchangeable Preferred Stock, set forth in Article FOURTH, is corrected to read as follows:
     (a) Requirements of Exchange. At the Corporation’s option, all, but not less than all, of the then outstanding shares of the Series A Preferred Stock may be exchanged on any dividend payment date commencing July I, 1996, subject to certain conditions stated in the immediately following sentence, for the Corporation’s 8 1/2% Convertible Subordinated Exchange Debentures due July 1, 2012 (the “Debentures”) to be issued pursuant to an indenture (the “Indenture”) dated as of July 9, 1992

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between the Company and Fidelity Bank, National Association in the form of Exhibit 4.1 to the Corporation’s Registration Statement on Form S-2 (Registration No. 33-47872), as amended, declared effective by the Securities and Exchange Commission on July 1, 1992, at an exchange rate of $100.00 principal amount of the Debentures for each share of the Series A Preferred Stock. Such exchange may be made only if, at the time of exchange (i) the Indenture shall have been qualified under the Trust Indenture Act of 1939, as amended, (ii) there shall be no dividend arrearage (including the dividend payable on the date of exchange) on the shares of the Series A Preferred Stock, and (iii) no Event of Default (as defined in the Indenture) under the Indenture shall have occurred and be continuing. In the event that such exchange would result in the issuance of a Debenture in a principal amount which is not an integral multiple of $25, the difference between such principal amount and the highest integral multiple of $25 (which may be zero) which is less than such principal amount shall be paid to the holder in cash.
          C. Designations of Series B Junior Participating Preferred Stock.
     Section 6 of the Designations of Series B Junior Participating Preferred Stock, set forth in Article FOURTH, is corrected to read as follows:
     Section 6. Liquidation. Dissolution or Winding Up. Upon any liquidation, dissolution or winding up of the Corporation, no distribution shall be made (1) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series B Preferred Stock unless, prior thereto, the holders of shares of Series B Preferred Stock shall have received $100 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, provided that the holders of shares of Series B Preferred Stock shall be entitled to receive an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount to be distributed per share to holders of shares of Common Stock, or (2) to the holders of shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series B Preferred Stock, except distributions made ratably on the Series B Preferred Stock and all such parity stock in proportion to the total amounts to which the holders of ail such shares are entitled upon such liquidation, dissolution or winding up. In the event the Corporation shall at any time declare or pay any dividend on the shares of Common Stock payable in shares of shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the aggregate amount to which holders of shares of Series B Preferred Stock were entitled immediately prior to such event under the proviso in clause (1) of the preceding sentence shall be adjusted by multiplying such

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amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
          D. Article SEVENTH.
Article SEVENTH is corrected to read as follows:
     SEVENTH: In addition to the powers conferred by statute the board of directors is expressly authorized to (a) make, alter, amend and repeal the bylaws and (b) have one or more offices outside of Delaware and keep the books and records of the corporation in any of such offices, except as prohibited by law.
     The stockholders shall have no preemptive right to subscribe to any stock of the corporation.
          E. Article EIGHTH.
Article EIGHTH is corrected to read as follows:
     EIGHTH: No director of the corporation shall be liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director’s duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law of the State of Delaware, or (iv) for any transaction from which the director derived an improper personal benefit. Any repeal or modification of this article Eighth shall be prospective only, and shall not affect, to the detriment of any director, any limitation on the personal liability of a director of the corporation existing at the time of such repeal or modification.
          IN WITTNESS WHEREOF, said Westmoreland Coal Company has caused this Certificate to be signed by W. Michael Lepchitz, its Vice President, General Counsel and Secretary this 5th day of October, 2004.
         
  WESTMORELAND COAL COMPANY
 		  
  By:   /s/ W. Michael Lepchitz    
    W. Michael Lepchitz   
    Vice President, General Counsel and Secretary   

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CERTIFICATE OF CORRECTION
TO THE
CERTIFICATE OF DESIGNATION OF SERIES A CONVERTIBLE
EXCHANGEABLE PREFERRED STOCK OF
WESTMORELAND COAL COMPANY
     Westmoreland Coal Company, a corporation organized and existing under and by virtue of the General Corporation Law of the Stale of Delaware,
     DOES HEREBY CERTIFY:
     1. The name of the corporation is Westmoreland Coal Company.
     2. A Certificate of Designation of Series A Convertible Exchangeable Preferred Stock (the “Certificate”) was filed with the Secretary of Slate of the State of Delaware on July 8, 1992, and said Certificate requires correction as permitted by subsection (f) of Section 103 of The General Corporation Law of the State of Delaware.
     3. The inaccuracies or defects of said Certificate to be corrected are as follows:
          A. In the third sentence of Section 4(a), the misspelled word “immediatley” was inadvertently inserted in the clause “shall become effective immediatley after such event” in lieu of the correctly spelled word “immediately”.
          B. In the provisions to Section 5(b), the word “or” was inadvertently inserted between the words “certificate” and “incorporation” in lieu of the word “of”.
     4. The following provisions of the Certificate are corrected to read as follows:
          A. Section 4(a) is corrected to read as follows:
               (a) In addition to the voting rights provided in Section 4(b), 7(b) or 9, and as required by law, the holders of shares of the Series A Preferred Stock shall be entitled to vote on any matter on which the holders of the Common Stock of the Corporation shall be entitled to vote, and when voting on matters on which the holders of Common Stock of the Corporation are entitled to vote, each share of the Series A Preferred Stock shall entitle the holder thereof to four votes. In the event the Corporation shall at any time (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the number of votes per share to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction the numerator of which is the number of shares of Common Stock outstanding (which in the case of (i) above shall include such shares of Common Stock payable pursuant to such dividend) immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. An adjustment made pursuant to the immediately preceding sentence shall become effective immediately after such event. When the holders of the Series A Preferred Stock vote on any matter as members of a class which does not include the holders of Common Stock, the holders of Series A Preferred Stock shall be entitled to an aggregate number of votes which is in the same proportion to the total number of class votes as the aggregate liquidation preference of the outstanding shares of Series A Preferred Stock bears to the aggregate liquidation preference of all shares of capital stock in the class; and each holder of Series A Preferred Stock shall be entitled to his or her proportionate share of the aggregate number of votes to which the holders of Series A Preferred Stock are entitled.

 

 

          B. Section 5(b) is corrected to read as follows:
               (b) For purposes of this Section 5, a distribution of assets in any dissolution, winding up or liquidation shall not include (i) any consolidation or merger of the Corporation with or into any other corporation, (ii) any dissolution, liquidation, winding up or reorganization of the Corporation immediately followed by reincorporation of another corporation or (iii) a sale or other disposition of all or substantially all of the Corporation’s assets to another corporation; provided, however, that, in each case, effective provision is made in the certificate of incorporation of the resulting and surviving corporation or otherwise for the protection of the rights of the holders of shares of the Series A Preferred Stock.
     IN WITNESS WHEREOF, said Westmoreland Coal Company has caused this Certificate to be signed by W. Michael Lepchitz, its Vice President, General Counsel and Secretary, this 15th day of October, 2004.
         
  WESTMORELAND COAL COMPANY
 		  
  By:   /s/ W. Michael Lepchitz    
    W. Michael Lepchitz   
    Vice President, General Counsel and Secretary   

 

 

         
CERTIFICATE OF CORRECTION
TO THE
CERTIFICATE OF DESIGNATIONS OF SERIES B JUNIOR
PARTICIPATING PREFERRED STOCK OF
WESTMORELAND COAL COMPANY
     Westmoreland Coal Company. a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware.
     DOES HEREBY CERTIFY:
     1. The name of the corporation is Westmoreland Coal Company.
     2. A Certificate of Designations of Series B Junior Participating Preferred Stock (the “Certificate”) was filed with the Secretary of State of the State of Delaware on February 1. 1993, and said Certificate requires correction as permitted by subsection (f) of Section 103 of The General Corporation Law of the State of Delaware.
     3. The inaccuracy or defect of said Certificate to be corrected is as follows:
          In Section 4(A)(iv) the word “on” was inadvertently omitted between the words “ranking” and “a parity”.
     4. Section 4(A)(iv) of said Certificate is corrected to read as follows:
          (iv) redeem or purchase or otherwise acquire for consideration any shares of Series B Preferred Stock, or any shares of stock ranking on a parity with the Series B Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.
     IN WITNESS WHEREOF, said Westmoreland Coal Company has caused this Certificate to be signed by W. Michael Lepchitz, its Vice President, General Counsel and Secretary, this 15th day of October, 2004.
         
  Westmoreland Coal Company
 		  
  By:   /s/ W. Michael Lepchitz    
    W. Michael Lepchitz   
    Vice President, General Counsel and Secretary   
 

 

EX-3.3 4 d82642exv3w3.htm EX-3.3 exv3w3
Exhibit 3.3
CERTIFICATE OF AMENDMENT
TO
RESTATED CERTIFICATE OF INCORPORATION
OF
WESTMORELAND COAL COMPANY
(Pursuant to Section 242 of the General Corporation Law of the State of Delaware)
     WESTMORELAND COAL COMPANY, a corporation organized and existing under and by virtue of the provisions of the General Corporation Law of the State of Delaware (the “Corporation”),
     DOES HEREBY CERTIFY:
     1) That the Board of Directors duly adopted resolutions proposing to amend the Restated Certificate of Incorporation of the Corporation, declaring said amendment to be advisable and in the best interests of the Corporation and its stockholders, and authorizing the appropriate officers of the Corporation to solicit the vote of stockholders therefor, which resolution setting forth the proposed amendment is as follows:
     RESOLVED, that the first paragraph of Article Fourth of the Restated Certificate of Incorporation of the Corporation be amended in its entirety to read as follows:
     FOURTH: The aggregate number of shares of all classes of stock which the corporation has authority to issue is 35,000,000, of which (a) 5,000,000 shall be Preferred Stock of the par value of $1 per share, issuable in series, and (b) 30,000,000 shall be Common Stock of the par value of$2.50 per share.
  2)   That the foregoing amendment was approved by the holders of the requisite number of shares of the Corporation in accordance with the Delaware General Corporation Law.
 
  3)   That said amendment has been duly adopted in accordance with Section 242 of the Delaware General Corporation Law.
     IN WITNESS WHEREOF, this Certificate of Amendment to the Restated Certificate of Incorporation has been executed by a duly authorized officer of the Corporation on this 23rd day of August, 2007.
         
  WESTMORELAND COAL COMPANY
 		  
  By:   /s/ Diane S. Jones    
    Name:   Diane S. Jones   
    Title:   Secretary   

 

EX-3.4 5 d82642exv3w4.htm EX-3.4 exv3w4
         
Exhibit 3.4
CERTIFICATE OF AMENDMENT
OF
DESIGNATIONS OF SERIES B JUNIOR PARTICIPATING PREFERRED STOCK
IN THE RESTATED CERTIFICATE OF INCORPORATION
OF
WESTMORELAND COAL COMPANY
(Pursuant to Section 151 of the General Corporation Law of the State of Delaware)
     Westmoreland Coal Company (hereinafter called the “Corporation”), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, does hereby certify as follows:
     1. That by resolution of the Board of Directors of the Corporation, and by a Certificate of Designation filed in the office of the Secretary of State of Delaware on February 1, 1993, the Corporation authorized a series of 200,000 shares of Series B Junior Participating Preferred Stock, par value $1.00 per share, of the Corporation (the “Series B Preferred Stock”) and established the powers, designations, preferences and relative, participating, optional and other rights of the Series B Preferred Stock and the qualifications, limitations and restrictions thereof.
     2. As of the date hereof no shares of Series B Preferred Stock are outstanding and no shares of Series B Preferred Stock have been issued.
     3. That pursuant to the authority conferred on the Board of Directors of the Corporation by its Restated Certificate of Incorporation (the “Certificate of Incorporation”) and the provisions of Section 151 (g) of the General Corporation Law of the State of Delaware, the Board of Directors of the Corporation at a meeting held on August 16, 2007, adopted the following resolution setting forth an amendment to the Designations of Series B Junior Participating Preferred Stock in the Certificate of Incorporation. The resolution setting forth the amendment is as follows:
RESOLVED:    That Section 1 of the Designations of Series B Junior Participating Preferred Stock in Article FOURTH of the Certificate of Incorporation be deleted in its entirety and that the following paragraph be inserted in lieu thereof:
 
    “Section 1. Designation and Amount. The shares of such series shall be designated as “Series B Junior Participating Preferred Stock” (the “Series B Preferred Stock”) and the number of shares constituting the Series B Preferred Stock shall be 300,000. Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, that no decrease shall reduce the number of shares of Series B Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation convertible into Series B Preferred Stock.”
     IN WITNESS WHEREOF, the Corporation has caused this Certificate to be executed by its duly authorized officer on this 29th of August, 2007.
         
  WESTMORELAND COAL COMPANY
 		  
  By:   /s/ Keith E. Alessi    
    Name:   Keith E. Alessi   
    Title:   President and Chief Executive Officer   

 

EX-3.5 6 d82642exv3w5.htm EX-3.5 exv3w5
Exhibit 3.5
As amended April 9, 2008
WESTMORELAND COAL COMPANY
(A Delaware Corporation)
AMENDED AND RESTATED
BYLAWS
ARTICLE 1
OFFICES
          Section 1.1. Registered Office. The registered office of the Company within the State of Delaware shall be in the City of Wilmington, County of New Castle, State of Delaware.
          Section 1.2. Other Offices. The Company may also have an office or offices other than said registered office at such place or places, either within or without the State of Delaware, as the Board of Directors shall from time to time determine or the business of the Company may require.
ARTICLE 2
MEETINGS OF STOCKHOLDERS
          Section 2.1. Place of Meetings. All meetings of the stockholders for the election of directors of the Company (“Directors”) or for any other purpose shall be held in Colorado Springs, Colorado, or at such place, either within or without the State of Delaware, as shall be designated from time to time by the Board of Directors and stated in the notice of meeting or in a duly executed waiver thereof.
          Section 2.2. Annual Meeting The annual meeting of stockholders shall be held on the third Thursday in May of each year or on such other date and at such time as shall be designated from time to time by the Board of Directors and stated in the notice of meeting or in a duly executed waiver thereof. At such annual meeting, the stockholders shall elect, by a plurality vote, Directors and transact such other business as may properly be brought before the meeting.
          Section 2.3. Special Meetings. Special meetings of stockholders, unless otherwise prescribed by statute, may be called at any time by the chief executive

 

 

officer of the Company or a majority of the Board of Directors. The only business that may be conducted at a special meeting shall be that which is set forth in the notice of special meeting.
          Section 2.4. Notice of Meetings. Except as otherwise expressly required by statute, written notice of each annual and special meeting of stockholders stating the date, place and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be given to each stockholder of record entitled to vote thereat not less than ten nor more than sixty days before the date of the meeting. Notice shall be given personally or by mail and, if by mail, shall be sent in a postage prepaid envelope, addressed to the stockholder at his address as it appears on the records of the Company. Notice by mail shall be deemed given at the time when the same shall be deposited in the United States mail, postage prepaid. Notice may also be given by nationally recognized overnight delivery services such as Federal Express, UPS or Airborne Express; in case notice is given by such service, notice shall be deemed given when deposited with any such service with which the Company or its agent has an account. Notice of any meeting shall not be required to be given to any person who attends such meeting, except when such person attends the meeting in person or by proxy for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened, or who, either before or after the meeting, shall submit a signed written waiver of notice, in person or by proxy. Neither the business to be transacted at, nor the purpose of, an. annual or special meeting of stockholders need be specified in any written waiver of notice.
          Section 2.5. Advance Notice of Business. At the annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) otherwise properly brought before the meeting by or at the direction of the Board of Directors or (c) otherwise properly brought before the meeting by a stockholder. For business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the Company. To be timely, a stockholder’s notice must be delivered to or mailed and received at the principal executive offices of the Company, not less than 90 days nor more than 120 days in advance of the anniversary date of the preceding year’s annual meeting of stockholders (or special meeting in lieu of an annual meeting), except that if no annual meeting (or special meeting in lieu of an annual meeting) was held in the previous year or the date of the annual meeting has been changed by more than 30 calendar days from the anniversary of the preceding year‘s annual meeting date (or date of the special meeting in lieu of an anneal meeting), written

 

 

notice of a stockholder proposal shall be delivered to the Secretary of the Company not later than the close of business on the 10th day following the first public announcement of the date of such annual meeting. In no event shall the public announcement of an adjournment of an annual meeting commence a new time period for the giving of stockholder’s notice. A stockholder’s notice shall set forth as to each matter the stockholder proposes to bring before the annual meeting (a) a description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (b) the name and address, as they appear on the Company’s books, of the stockholder proposing such business, (c) the class and number of shares of capital stock of the Company which are beneficially owned by the stockholder, (d) any material interest of the stockholder in such business and (e) a representation that the stockholder is a holder of record of shares of capital stock of the Company entitled to vote with respect to such business and intends to appear in person or by proxy at the meeting to propose the consideration of such business. Notwithstanding anything in the Bylaws to the contrary, no business shall be conducted at any annual meeting except in accordance with the procedures set forth in this Section 2.5. The chairman of the annual meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting and in accordance with the provisions of this Section 2.5, and if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. For purposes of these Bylaws, “public announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press, PR Newswire, Bloomberg, Reuters or comparable national news service, or in a document publicly filed by the Company with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Securities Exchange Act of 1934, as amended.
          Section 2.6. Advance Notice of Nominees. Only persons who are nominated in accordance with the procedures set forth in this Section 2.6 shall be eligible for election as Directors. Nominations of persons for election to the Board of Directors of the Company may be made at a meeting of stockholders by or at the direction of the Board of Directors or by any stockholder of the Company entitled to vote for the election of Directors at the meeting who complies with the notice procedures set forth in this Section 2.6. For a nomination to be properly brought before a meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the Company. To be timely, a stockholder’s notice must be delivered to or mailed and received at the principal executive offices of the Company: (i) with respect to an election to be held at an annual meeting of stockholders, not less than 90 days nor more than 120 days in advance of the anniversary date of the preceding year’s annual meeting of stockholders (or special meeting in lieu of an anneal meeting), except that if no annual meeting (or special meeting in lieu of an annual meeting) was held in the previous year or the date of the annual meeting has been changed by more than 30 calendar days from the

 

 

anniversary of the preceding year’s annual meeting date (or date of the special meeting in lieu of an annual meeting), written notice of a nominee proposal shall be delivered to the Secretary of the Company not later than the close of business on the 10th day following the first public announcement of the date of such annual meeting and (ii) with respect to an election to be held at a special meeting of stockholders for the election of directors, not later than the close of business on the 10th day following the first public announcement of the date of such meeting. In no event shall the public announcement of an adjournment of any annual or special meeting commence a new time period for the giving of a stockholder‘s notice. A stockholder’s notice shall set forth (a) as to each person whom the stockholder proposes to nominate for election or re-election as a Director, (i) the name, age, business address and residence address of such nominee, (ii) the principal occupation or employment of such nominee, (iii) the class and number of shares of capital stock of the Company which are beneficially owned by such nominee, (iv) a description of all agreements, arrangements or understandings between the stockholder and such nominee and any other person or persons (naming such person or persons) pursuant to which the nomination is to be made by such stockholder, (v) any other information relating to such nominee that is required to be disclosed in solicitations of proxies for election of Directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended and (vi) such nominee’s written consent to being named in the proxy statement as a nominee and to serving as a Director if elected; and (b) as to the stockholder giving the notice, (i) the name and address, as they appear on the Company’s books, of such stockholder, (ii) the class and number of shares of the capital stock of the Company which are beneficially owned by such stockholder and (iii) a representation that the stockholder is a holder of record of capital stock of the Company entitled to vote at such meeting for such nominee and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice. At the request of the Board of Directors any person nominated by the Board of Directors for election as a Director shall furnish to the Secretary of the Company that information required to be set forth in a stockholder’s notice of nomination which pertains to the nominee. No person shall be eligible for election as a Director of the Company unless nominated in accordance with the procedures set forth in this Section 2.6. The chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the provisions of this Section 2.6, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded.
          Section 2.7. List of Stockholders. The officer who has charge of the stock ledger of the Company shall prepare and make, at least 10 days before each meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, showing the address of and the number of shares registered in the name of each-stockholder. Such list shall be open to the

 

 

examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least 10 days prior to the meeting, either at a place within the city, town or village where the meeting is to be held, which place shall be specified in the notice of meeting, or, if not specified, at the place where the meeting is to be held. The list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.
          Section 2.8. Quorum, Adjournments. The presence, in person or by proxy, of the holders of a majority of the voting power of the issued and outstanding stock of the Company entitled to vote thereat shall constitute a quorum for the transaction of business at all meetings of stockholders, except as otherwise provided by statute or by the Certificate of Incorporation. If, however, such quorum shall not be present or represented by proxy at any meeting of stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented by proxy. If a quorum shall be present or represented by proxy, any business may be transacted which might have been transacted at the meeting as originally called. If the adjournment is for more than 30 days, or, if after adjournment a new record date is set, a notice of the adjourned meting shall be given to each stockholder of record entitled to vote at the meeting.
          Section 2.9. Organization of Meetings. At each meeting of stockholders, the Chairman, if one shall have been elected, or, in his absence or if one shall not have been elected, the President, shall act as chairman of the meeting. If the Chairman (if one shall have been elected) and the President shall be absent or unable to act, any officer of the Company designated by the Chairman (if one shall have been elected) or the President (if a Chairman shall not have been elected) shall act as chairman of the meeting. The Secretary or, in his absence or inability to act, the person whom the chairman of the meeting shall appoint secretary of the meeting shall act as secretary of the meeting and keep the minutes thereof.
          Section 2.10. Conduct of Meetings. The agenda or order of business at all meetings of the stockholders shall be as determined by the chairman of the meeting. The date and. time of the opening and closing of the polls for each matter upon which the stockholders will vote at a meeting shall be as determined by the chairman of the meeting and shall be announced at the meeting. The Board of Directors may to the extent not prohibited by law adopt by resolution such rules and regulations for the conduct of the meeting of the stockholders as it shall deem appropriate. Except to the extent inconsistent with such rules.and regulations adopted by the Board of Directors, the chairman of the meeting shall have the right and authority to prescribe

 

 

such rules, regulations and procedures to do all such acts as, in the judgment of such chairman, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board of Directors or prescribed by the chairman of the meeting, may to the extent not prohibited by law include the following: (i) rules and procedures for maintaining order at the meeting and the safety of those present; (ii) limitations on attendance at or participation in the meeting to stockholders of record of the Company, their duly authorized and constituted proxies or such other persons as the chairman of the meeting shall determine; (iii) restrictions on entry to the meeting after the time fixed for the commencement thereof and (iv) limitations on the time allotted to questions or comments by participants. Unless, and to the extent, determined by the Board of Directors or the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with rules of parliamentary procedure.
          Section 2.11. Voting. (a) Except as otherwise provided by statute or by or pursuant to the Certificate of Incorporation, each stockholder of the Company shall be entitled at each meeting of stockholders to one vote for each share of capital stock of the Company standing in his name on the record of stockholders of the Company:
               (1) on the date fixed as the record date for the determination of the stockholders who shall be entitled to notice of and to vote at such meeting; or
               (2) if no such record date shall have been so fixed, then at the close of business on the day next preceding the day on which notice thereof shall be given, or, if notice is waived, at the close of business on the date next preceding the day on which the meeting is held.
          (b) Except as may otherwise be provided by statute, in the Certificate of Incorporation or these Bylaws:
               (1) Directors shall be elected by the affirmative votes of a plurality of the votes of the shares present in person or by proxy at the meeting and entitled to vote on the election of Directors; and
               (2) In all matters other than the election of Directors, the affirmative vote of the majority of shares present in person or by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders.
          (c) Each stockholder entitled to vote at any meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may

 

 

authorize another person or persons to act for him by a proxy signed by such stockholder or his attorney-in-fact, but no proxy shall be voted after three years from its date, unless the proxy provides for a longer period. Any such proxy shall be delivered to the secretary of the meeting or his designee at or prior to the time designated in the order of business for so delivering such proxies.
          (d) Unless required by statute, or determined by the chairman of the meeting to be advisable, the vote on any question need not be by written ballot. On a vote by written ballot, each ballot shall be signed by the stockholder voting, or by his proxy, if there be such proxy.
          Section 2.12. Inspectors. The Company shall, in advance of any meeting of stockholders, appoint one or more inspectors, who may be employees of the Company, to act at such meeting or any adjournment and make a written report thereof. The Company may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting of stockholders, the chairman of the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before entering upon the discharge of the duties of inspector, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of such inspector’s ability. The inspectors shall: (i) ascertain the number of shares outstanding and the voting power of each; (ii) determine the shares represented at a meeting and the validity of proxies and ballots; (iii) count all votes and ballots; (iv) determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors and (v) certify their determination of the number of shares represented at the meeting, and their count of all votes and ballots. The inspectors may appoint or retain other persons or entities to assist the inspectors in the performance of the duties of the inspectors. Such certification and report shall specify such other information as may be required by law. In determining the validity and counting of proxies and ballots cast at my meeting of stockholders of the Company, the inspectors may consider such information as is permitted by applicable law. No person who is a candidate for an office at an election may serve as an inspector at such election. Inspectors need not be stockholders.
          Section 2.13. Consent Solicitation. (a) In order that the Company may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which date shall not be more than ten days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. Any stockholder of record seeking to have the stockholders authorize or take corporate action by written consent shall, by written notice to the Secretary, request the Board of

 

 

Directors to fix a record date. The Board of Directors shall promptly, but in all events within ten days after the date on which such a request is received, adopt a resolution fixing the record date. If no record date has been fixed by the Board of Directors within ten days of the date on which such a request is received, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required by applicable law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Company by delivery to its registered office in the State of Delaware, its principal place of business or an officer or agent of the Company having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Company’s registered office shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by applicable law, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action.
     (b) In the event of the delivery to the Company of a written consent or consents purporting to authorize or take corporate action and/or related revocations (such written consent nor consents together with any related revocations is referred to in this section as a “Consent”), the Secretary of the Company shall provide for the safekeeping of such Consent and shall immediately appoint duly qualified and independent inspectors to: (i) conduct promptly such reasonable ministerial review as such inspectors deem necessary or appropriate for the purpose of ascertaining the sufficiency and validity of such Consent and all matters incident thereto, including whether holders of shares having the requisite voting power to authorize or take the action specified in the Consent have given consent; and (ii) deliver to the Secretary a written report regarding the foregoing. If after such investigation and report the Secretary shall determine that the Consent is valid and that holders of shares having the requisite voting power to authorize or take the action specified in the Consent have given consent, that fact shall be certified on the records of the Company kept for the purpose of recording the proceedings of meetings of stockholders, and the Consent shall be filed in such records, at which time the Consent shall become effective as stockholder action.
          Section 2.14. Voting Rights of Holders of Series A Preferred Stock. Nothing in these Bylaws is intended to provide greater voting rights to the holders of the Series A Convertible Exchangeable Preferred Stock (“Series A Preferred Stock”) than are required by applicable law or the Certificate of Incorporation.

 

 

ARTICLE 3
BOARD OF DIRECTORS
          Section 3.1. General Powers. The business and affairs of the Company shall be managed by or under the direction of the Board of Directors. The Board of Directors may exercise all such authority and powers of the Company and do all such lawful acts and things as are not by statute or the Certificate of Incorporation directed or required to be exercised or done by the stockholders.
          Section 3.2. Number, Election, Term, etc. The number of Directors of the Company shall be fixed, from time to time, by the affirmative vote of a majority of the entire Board of Directors but in no event shall be less than four (4) or more than eleven (11), which number shall include the number of Preferred Stock Directors (as such term is defined in the Certificate of Incorporation). If no number is fixed by the Board, the number of Directors shall be seven (7), which number shall include the number of Preferred Stock Directors. The Directors shall be elected at the annual meeting of stockholders, and each Director shall be elected to hold office until the next annual meeting of stockholders and until his successor shall be elected and qualified, or until his death, or until he shall have resigned or have been removed, as hereinafter provided in these Bylaws. Directors need not be stockholders.
          Section 3.3. Vacancies. Any vacancy in the office of a Preferred Stock Director shall be filled in the manner specified in the Certificate of Incorporation. If any vacancy occurs (other than a vacancy in the office of a Preferred Stock Director) or any new directorship is created by an increase in the authorized number of Directors, such vacancy or newly created directorship shall be filled by a majority vote of the Directors (other than the Preferred Stock Directors) then in office, even if less than a quorum.
          Section 3.4. Resignations. Any Director of the Company may resign at any time by giving written notice of his resignation to the Company. Any such resignation shall take effect at the time specified therein or, if the time when it shall become effective shall not be specified therein, immediately upon its receipt. Unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.
          Section 3.5. Removal of Directors. Any Director may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote for the election of such Directors.

 

 

          Section 3.6. Place of Meetings. Meetings of the Board of Directors shall be held at such place or places, within or without the State of Delaware, as the Board of Directors may from time to time determine or as shall be specified in the notice of any such meeting.
          Section 3.7. Annual Meeting. At its first meeting after each annual meeting of stockholders, the Board of Directors shall meet for the purpose of organization, the election of officers and the transaction of other business. In the event such annual meeting is not held on the same day and at the same place as the annual meeting of stockholders, the annual meeting of the Board of Directors maybe held at such other time or place (within or without the State of Delaware) as shall be specified in a notice thereof given as hereinafter provided in Section 3.10 of this Article 3.
          Section 3.8. Regular Meetings. Regular meetings of the Board of Directors shall be held at such time and place as the Board of Directors may fix. Notice of regular meetings of the Board of Directors need not be given except as otherwise required by statute or these Bylaws.
          Section 3.9. Special Meetings. Special meetings of the Board of Directors may be called by the chief executive officer or the Board of Directors, acting by a majority of its members.
          Section 3.10. Notice of Meetings. Notice of each special meeting of the Board of Directors (and of each regular meeting for which notice shall be required) shall be given by the Secretary as hereinafter provided in this Section 3.10. Such notice shall state the time and place of the meeting, but except as otherwise specifically required by these Bylaws, such notice need not state the purposes of such meeting. Notice of each such meeting shall be mailed, postage prepaid, to each Director, addressed to such person at such person’s residence or usual place of business, by first class mail, at least two days before the day on which such meeting is to be held, or shall be sent addressed to such person at such place by telegraph, cable, telex, overnight delivery service, telecopier or other similar means, or by any other means permitted by Delaware law, or be delivered to such person personally or be given to such person by telephone or other similar means, at least twenty-four hours before the time at which such meeting is to be held. Notice of any such meeting need not be given to any Director who shall, either before or after the meeting, submit a signed waiver of notice or who shall attend such meeting, except when such Director shall attend for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.
          Section 3.11. Quorum and Manner of Acting. A majority of the entire Board of Directors shall constitute a quorum for the transaction of business at

 

 

any meeting of the Board of Directors, and, except as otherwise expressly required by statute or the Certificate of Incorporation or these Bylaws, the vote of a majority of the Directors present at any meeting at which a quorum is present shall be the act of the Board of Directors. In the absence of a quorum at any meeting of the Board of Directors, a majority of the Directors present thereat may adjourn such meeting to another time and place. Notice of the time and place of any such adjourned meeting shall be given to all of the Directors unless such time and place were announced at the meeting at which the adjournment was taken, in which case such notice shall only be given to the Directors who were not present thereat. At any adjourned meeting at which a quorum is present, any business may be transacted which.might have been transacted at the meeting as originally called. The Directors shall act only as a Board and the individual Directors shall have no power as such.
          Section 3.12. Organization. At each meeting of the Board of Directors, the Chairman, if one shall have been elected, or, in the absence of the Chairman or if one shall not have been elected, the Vice Chairman, if one shall have been elected, or in the absence of the Vice Chairman or if one shall not have been elected, the President (or, in his absence, another Director chosen by a majority of the Directors present) shall act as chairman of the meeting and preside thereat. The Secretary or, in his absence, any person appointed by the chairman shall act as secretary of the meeting and keep the minutes thereof.
          Section 3.13. Compensation. The Board of Directors shall have authority to fix the compensation, including fees and reimbursement of expenses, of Directors for services to the Company in any capacity.
          Section 3.14. Committees. (a) The Board of Directors may, by resolution passed by a majority of the entire Board of Directors, designate one or more committees, each committee to consist of one or more of the Directors of the Company. The Board of Directors may designate one or more Directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Except to the extent restricted by statute or the Certificate of Incorporation, each such committee, to the extent provided in a resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors and may authorize the seal of the Company to be affixed to all papers which require it. Each such committee shall serve at the pleasure of the Board of Directors and have such name as may be determined from time to time by resolution adopted by the Board of Directors. Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors.
          (b) Without limiting the generality of the immediately preceding subsection; the Board of Directors by resolution of a majority of the number of

 

 

directors fixed by these Bylaws may designate three or more Directors to constitute an executive committee, which, to the extent provided in such resolution, shall have and may exercise all the authority of the Board of Directors except to amend the Company’s Bylaws. If an executive committee is so designated, it will elect one of its members to be its chairman.
          Section 3.15. Action by Consent. Unless restricted by the Certificate of Incorporation, any action required or permitted to be taken by the Board of Directors or any committee thereof may be taken without a meeting if all members of the Board of Directors or such committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of the proceedings of the Board of Directors or such committee, as the case may be.
          Section 3.16. Telephonic Meeting. Unless restricted by the Certificate of Incorporation, any one or more members of the Board of Directors or any committee thereof may participate in a meeting of the Board of Directors or such committee by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. Participation by such means shall constitute presence in person at a meeting.
ARTICLE 4
OFFICERS
          Section 4.1. Number and Qualifications. The officers of the Company shall be elected by the Board of Directors and shall include the President, the Secretary and the Treasurer. If the Board of Directors wishes, it may also elect as an officer of the Company a Chairman and may elect other officers as may be necessary or desirable for the business of the Company, including one or more Executive Vice Presidents, Senior Vice Presidents, Vice Presidents, Assistant Secretaries and Assistant Treasurers. The chief executive officer of the Company may appoint officers of the Company. Any two or more offices may be held by the same person, and no officer except the Chairman need be a Director. Officers need not be stockholders. Each officer shall hold office until his successor shall have been duly elected and shall have qualified, or until his death, or until he shall have resigned or have been removed, as hereinafter provided in these Bylaws.
          Section 4.2. Resignations. Any officer of the Company may resign at any time by giving written notice of his resignation to the Company. Any such resignation shall take effect at the time specified therein or, if the time when it shall become effective shall not be specified therein, immediately upon receipt. Unless

 

 

otherwise specified therein, the acceptance of any such resignation shall not be necessary to make it effective.
          Section 4.3. Removal Any officer of the Company may be removed, either with or without cause, at anytime, by the Board of Directors at any meeting thereof.
          Section 4.4. Chairman, Vice Chairman and President (a) The Board of Directors, in its discretion, may determine that the Company shall have a Chairman and it may also determine that the Company shall have a Vice Chairman. If the Board of Directors shall so determine, it shall elect a Director as Chairman. If the Board of Directors shall so determine, it shall elect a Director as Vice Chairman. The Chairman shall, if present, preside at each meeting of the Board of Directors or the stockholders. The Chairman shall be an officer of the Company; may, in the discretion of the Board of Directors, be the chief executive officer of the Company; and shall perform such other duties as may from time to time be assigned to him by the Board of Directors. When the Chairman is absent or otherwise unavailable, the Vice Chairman shall act as Chairman and shall perform such other duties as may from time to time be assigned to him by the Board of Directors. Unless the Board of Directors determines otherwise, the Vice Chairman shall be an ex officio member of all committees of the Board of Directors.
          (b) When the office of Chairman is not filled, or when the Chairman is not the chief executive officer of the Company, the President shall be the chief executive officer of the Company: The President shall, in the absence of the Chairman and Vice Chairman or if a Chairman and Vice Chairman shall not have been elected, preside at each meeting of the Board of Directors or the stockholders. He shall perform all duties incident to the office of President and such other duties as may from time to time be assigned to him by the Board of Directors.
          (c) In the event the President shall be the chief executive officer, the Board of Directors may designate an Executive Vice President or Senior Vice President as chief operating officer. In the absence of such designation, the President shall also be the chief operating officer.
          (d) Except as the Board of Directors may otherwise prescribe by resolution, the chief executive officer shall have general supervision over the business and operations of the Company and may act and execute any instrument for the conduct of such business and operations.
          Section 4.5. Other Officers. The duties of the other officers shall be those usually related to their offices or those assigned by the Company’s

 

 

chief executive officer, except as otherwise prescribed by statute; the Certificate of Incorporation, these Bylaws or resolution of the Board of Directors.
          Section 4.6. General. (a) In the absence of the Chairman and President, any officer designated by the Board shall exercise the powers and perform the duties of the chief executive officer or the chief operating officer or both.
          (b) Except as otherwise determined by resolution of the Board of Directors, the Chairman, President or any Executive Vice President, Senior Vice President or Vice President may execute any instrument for the conduct of the Company’s business and operations.
          Section 4.7. Agents. The chief executive officer or any officer or employee authorized by him may appoint, remove or suspend agents or employees of the Company and may determine their duties and compensation.
          Section 4.8. Compensation. The compensation of the officers of the Company for their services as such officers shall be fixed from time to time by or pursuant to authority granted by the Board of Directors. An officer of the Company shall not be prevented from receiving compensation by reason of the fact that he is also a Director of the Company.
ARTICLE 5
STOCK CERTIFICATES AND THEIR TRANSFER
          Section 5.1. Stock Certificates. Shares of the capital stock of the Company may be certificated or uncertificated. Unless the Board of Directors of the Company determines otherwise, all shares of common stock of the Company issued after January 1, 2008 shall be uncertificated, provided that any shares of common stock outstanding on January 1, 2008 and represented by a certificate shall remain certificated until such certificate is surrendered to the Company. Every holder of stock represented by certificates shall be entitled to have a certificate signed by, or in the name of the Company by the chairperson or vice-chairperson of the board of directors, or the president or vice-president, and by the treasurer or an assistant treasurer, or the secretary or an assistant secretary of such Company representing the number of shares registered in certificate form.
          Section 5.2. Facsimile Signatures. Any or all of the signatures on a certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have

 

 

ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Company with the same effect as if he were such officer, transfer agent or registrar at the date of issue.
          Section 5.3. Lost Certificates. The appropriate officers of the Company may direct a new certificate or certificates to be issued in place of any certificates theretofore issued by the Company alleged to have been lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the appropriate officers of the Company may, in their discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his legal representative, to give the Company a bond in such sum as it may direct sufficient to indemnify it against any claim that may be made against the Company on account of the alleged loss, theft or destruction of any such certificate or the iss1iance of such new certificate.
          Section 5.4. Transfers of Stock. Subject to any restrictions on transfer and unless otherwise provided by the Board of Directors, shares of stock may be transferred only on the books of the Company, (i) if such shares are certificated, by the surrender to the Company or its transfer agent of the certificate therefore properly endorsed or accompanied by a written assignment or power of attorney properly executed, with transfer stamps (if necessary) affixed, or (ii) upon proper instructions from the holder of uncertificated shares, in each case with such proof of the authenticity of signature as the Company or its transfer agent may reasonably require. Whenever any transfer of stock shall be made for collateral security, and not absolutely, it shall be so expressed in the entry of transfer, when the certificates (or, in the case of uncertificated shares, the instructions from the holder) are presented to the Company for transfer, both the transferor and the transferee request the Company to do so.
          Section 5.5. Transfer Agents and Registrars. The Board of Directors may appoint, or authorize any officer or officers to appoint, one or more transfer agents and one or more registrars.
          Section 5.6. Regulations. The Board of Directors may make such additional rules and regulations, not inconsistent with applicable law; the Certificate of Incorporation and these Bylaws, as it may deem expedient concerning the issue, transfer and registration of certificates for shares of stock of the Company.
          Section 5.7. Registered Stockholders. The Company shall be entitled to recognize the exclusive right of a person registered on its records as the owner of shares of stock to receive dividends and to vote as such owner and shall not be bound to recognize any equitable or other claim to or interest m such share or shares of stock on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Delaware.

 

 

ARTICLE 6
GENERAL PROVISIONS
          Section 6.1. Dividends. Subject to the provisions of statute and the Certificate of Incorporation, dividends upon the shares of capital stock of the Company may be declared by the Board of Directors at any regular or special meeting. Dividends maybe paid in cash, in property or in shares of stock of the Company, unless otherwise provided by statute or the Certificate of Incorporation.
          Section 6.2. Reserves. Before payment of any dividend, there may be set aside out of any funds of the Company available for dividends such sum or sums as the Board of Directors may, from time to time, in its absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Company or for such other purpose as the Board of Directors may think conducive to the interests of the Company. The Board of Directors may modify or abolish any such reserves in the manner in which it was created.
          Section 6.3. Seal. The seal of the Company shall be in such form as shall be approved by the Board of Directors.
          Section 6.4. Fiscal Year. The fiscal year of the Company shall be the calendar year unless changed by resolution of the Board of Directors.
          Section 6.5. Checks, Notes, Drafts, Etc. All checks, notes, drafts or other orders for the payment of money of the Company shall be signed, endorsed or accepted in the name of the Company by the Treasurer or such other officer, officers, person or persons as from time to time may be designated by the Board of Directors or by an officer or officers authorized by the Board of Directors to make such designation.
          Section 6.6. Execution of Contracts, Deeds, Etc. The Board of Directors may authorize any officer or officers, agent or agents, in the name and on behalf of the Company to enter into or execute and deliver any and all deeds, bonds, mortgages, contracts and other obligations or instruments, and such authority may be general or confined to specific instances.
          Section 6.7. Voting of Stock in Other Corporations. Unless

 

 

otherwise provided by resolution of the Board of Directors, the Chairman or the President, from time to time, may (or may appoint one or more attorneys or agents to) cast the votes which the Company may be entitled to cast as a shareholder or otherwise in any other corporation, any of whose shares or securities may be held by the Company, at meetings of the holders of the shares or other securities of such other corporation. In the event one or more attorneys or agents are appointed, the Chairman or the President may instruct the person or persons so appointed as to the manner of casting such votes or giving such consent. The Chairman or the President may, or may instruct the attorneys or agents appointed to, execute or cause to be executed in the name and on behalf of the Company and under its seal or otherwise such written proxies, consents, waivers or other instruments as may be necessary or proper in the circumstances.
          Section 6.8. Gender Neutrality. If any pronoun or word used in these Bylaws is specific to one gender only, such pronoun or word shall be read and interpreted as applying to both genders equally.
ARTICLE 7
INDEMNIFICATION
          Section 7.1. Right to Indemnification. The Company shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, either civil, criminal, administrative or investigative, by. reason of the fact that he is or was a director, officer or supervisor or manager of the Company or a constituent corporation absorbed in a consolidation or merger, or while a director, officer or supervisor or manager of the Company is or was serving at the request of the Company or a constituent corporation absorbed in a consolidation or merger, as a director, officer or supervisor or manager of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding, whether or not the indemnified liability arises or arose from any threatened, pending or completed action by or in the right of the corporation to the extent that such person is not otherwise indemnified and to the extent such indemnification is not prohibited by applicable law.
          Section 7.2. Advance of Expenses. The Company shall pay the expenses incurred by a director, officer or supervisor or manager of the Company who was or is a party or is threatened to be made a party to any action, suit or proceeding, either civil, criminal, administrative or investigative, by reason of the fact that he is or was a director, officer or supervisor or manager of the Company or a constituent

 

 

corporation absorbed in a consolidation or merger, or while a director, officer or supervisor or manager of the Company is or was serving at the request of the Company or a constituent corporation absorbed in a consolidation or merger, as a director, officer or supervisor or manager of another corporation, partnership, joint venture, trust or other enterprise in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the director, officer or supervisor or manager to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Company.
          Section.7.3. Procedure for Determining Permissibility. The procedure for determining the permissibility of indemnification under the standards contained in this Article 7 (including the advance of expenses) shall be that set forth in Section 145(d) of the Delaware General Corporation Law, provided that, if there has been a change in control of the Company between the time of the action or failure to act giving rise to the claim for indemnification and such claim, and at the option of the person seeking indemnification, the permissibility of indemnification shall be determined by independent legal counsel selected jointly by the Company and the person seeking indemnification. The reasonable expenses of any director, officer or supervisor or manager in prosecuting a successful claim for indemnification, and the fees and expenses of any special legal counsel engaged to determine permissibility of indemnification, shall be borne by the Company.
          Section 7.4. Contractual Obligation. The obligations of the Company to indemnify a director, officer or supervisor or manager under this Article 7, including the duty to advance expenses, shall be considered a contract between the Company and such director, officer or supervisor or manager and no modification or repeal of any provision of this Article 7 shall affect, to the detriment of the director, officer or supervisor or manager, such obligations of the Company in connection with a claim based on any act or failure to act occurring before such modification or repeal.
          Section 7.5. Indemnification Not Exclusive: Inuring of Benefit. The indemnification and advance of expenses provided by this Article 7 shall not be deemed exclusive of any other right to which, one indemnified may be entitled, both as to action in his official capacity and as to action in another capacity while holding such office, and shall inure to the benefit of the heirs, executors and administrators of any such person.
          Section 7.6. Insurance and Other Indemnification. The Board of Directors shall have the power to (i) authorize the Company to purchase and maintain, at the Company’s expense, insurance on behalf of the Company and on behalf of others to the extent that power to do so has not been prohibited by applicable law, and (ii) give other indemnification to the extent permitted by law.

 

 

ARTICLE 8
AMENDMENTS
          These Bylaws may be amended or repealed at any meeting of the Directors or, subject to applicable law and stockholders’ rights thereunder, by the stockholders at any stockholders’ meeting if such business is properly brought before the meeting.

 

EX-3.6 7 d82642exv3w6.htm EX-3.6 exv3w6
Exhibit 3.6
AMENDED AND RESTATED GENERAL PARTNERSHIP AGREEMENT

OF
WESTMORELAND-LG&E PARTNERS

- 1 -

 

TABLE OF CONTENTS
         
Article
   Page No.
ARTICLE 1. DEFINITIONS
     2  
 
        
ARTICLE 2. FORMATION
     8  
 
        
2.1. Formation
     8  
2.2. Partnership Name
     8  
2.3. Address and Principal Place of Business
     8  
2.4. Term
     8  
2.5. Purpose
     8  
2.6. Agent
     8  
2.7. Nature of Partner’s Interest
     9  
2.8. Public Statements
     9  
 
        
ARTICLE 3. CAPITAL AND ALLOCATIONS
     9  
 
        
3.1 Capital Contributions
     9  
3.2 No Other Contributions
     10  
3.3 No Interest on Capital
     10  
3.4 Capital Withdrawals and Returns
     10  
3.5 No priority
     10  
3.6 Capital Accounts
     10  
3.7 Failure to Advance an Additional Capital Contribution
     12  
3.8 Loans from Partners
     14  
 
        
ARTICLE 4. RIGHTS, OBLIGATIONS AND POWERS OF THE GENERAL PARTNER
     15  
 
        
4.1. Management Committee
     15  
4.2. Composition of Management Committee
     16  
4.3. Voting; Quorum
     16  
4.4. Meetings of Management Committee
     17  
4.5. Annual Budget
     18  
4.6. Bank Accounts
     18  
4.7. Delegation of Powers of Management Committee
     18  
4.8. Indemnification
     18  
4.9. Partner Responsibilities
     20  
4.10. Transactions with Affiliates
     20  

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Article
   Page No.
4.11. Partner’s Commitment
     21  
4.12. No compensation to Management Committee
     21  
4.13. Payment of Costs and Expenses: General
     21  
4.14. Payment of Costs and Expenses: Development Expenses
     21  
 
        
ARTICLE 5. OFFICERS AND EMPLOYEES OF THE JOINT VENTURE
     25  
 
        
5.1. Chief Financial officer
     25  
5.2. Operating Employees
     25  
 
ARTICLE 6. INTERESTS IN THE PARTNERSHIP; ALLOCATIONS AND DISTRIBUTION
     25  
 
        
6.1. Interests in the Partnership
     25  
6.2. Distribution of Cash Items
     26  
6.3. Allocations of Profits, Losses and Obligations
     26  
6.4. Allocations to Transferred Partnership Interests
     27  
 
        
ARTICLE 7. REPRESENTATIONS, WARRANTIES AND COVENANTS
     28  
 
        
7.1. The Partners
     28  
7.2. By Westmoreland
     29  
7.3. By LG&E
     30  
 
        
ARTICLE 8. TRANSFER OF PARTNERSHIP INTEREST
     30  
 
        
8.1. Conditions to Transfer of Any Interest
     30  
8.2. Permitted Transfers to Affiliates and Certain Limited Partnerships
     31  
8.3. First Right to Purchase
     31  
8.4. Effect of Improper Acts
     32  
8.5. Terms of Transfer of Partnership Interest
     32  
8.6. Amendment of Statements
     33  
8.7. Specific Performance
     33  
 
        
ARTICLE 9. DISPUTE RESOLUTION
     33  
 
        
9.1. Procedure
     33  
9.2. Arbitration
     33  
9.3. Continuation of Obligations
     35  

- ii -

 

         
Article
   Page No.
ARTICLE 10. DISSOLUTION
     35  
 
        
10.1. Generally
     35  
10.2. Dissolution
     35  
10.3. Bankruptcy and Insolvency
     36  
10.4. Winding Up and Dissolution
     37  
10.5. Priority on Liquidation
     37  
10.6. Statements on Liquidation
     38  
10.7. Distribution in Kind
     38  
10.8. Agreement Governing
     38  
 
        
ARTICLE 11. ACCOUNTING AND REPORTS
     38  
 
        
11.1. Books and Records
     38  
11.2. Accounting Method
     39  
11.3. Fiscal Year
     39  
11.4. Financial Statements
     39  
11.5. Projections
     39  
11.6. Reports
     39  
11.7. Auditors
     39  
11.8. Required Filings
     40  
11.9. Section 754 Election
     40  
11.10. Inspection of Records
     40  
 
        
ARTICLE 12. INCOME TAX RETURNS, TAX ACCOUNTING. TAX ELECTIONS
     40  
 
        
12.1. Tax Returns
     40  
12.2. Tax Matters Partner
     41  
12.3. Miscellaneous
     41  
 
        
ARTICLE 13. DISPOSITION OF DOCUMENTS AND RECORDS
     41  
 
        
ARTICLE 14. CONFIDENTIALITY
     42  
 
        
14.1. Provision of Documents
     42  
14.2. Confidentiality Obligation
     42  
14.3. Termination: Exclusion
     43  
14.4. Survival
     43  

- iii -

 

         
Article
   Page No.
ARTICLE 15. COMPETITION, CONFLICTS AND DISCLOSURE
     43  
 
        
15.1. Partners
     43  
15.2. Affiliates
     43  
 
        
ARTICLE 16. MISCELLANEOUS
     44  
 
        
16.1 Appraisal
     44  
16.2. Notice
     44  
16.3. Number and Gender
     45  
16.4. Partition
     45  
16.5. Consequential Damages
     46  
16.6. Modification
     46  
16.7. Waiver
     46  
16.8. Severability
     46  
16.9. Further Assurances
     46  
16.10. Governing Law
     46  
16.11. Counterparts
     46  
16.12. Limitation on Rights of Others
     46  
16.13. Successors and Assigns
     47  
16.14. Entire Agreement
     47  
16.15. Captions, Titles and Headings
     47  
16.16. Exhibits
     47  

- iv -

 

 
    THIS AMENDED AND RESTATED GENERAL PARTNERSHIP AGREEMENT is made effective as of this 1st day of December 1993, by and between WESTMORELAND-ROANOKE VALLEY, L.P. a Delaware limited partnership (“Westmoreland”), and LG&E ROANOKE VALLEY L.P., a California Limited partnership (formerly known as Hadson Roanoke Valley L.P., a California Limited Partnership, “LG&E”).
RECITALS:
     This Partnership was formed on March 1, 1990, as a general partnership under the Virginia Uniform Partnership Act by LG&E and Westmoreland.
     LG&E is a limited partnership of which LG&E Power 16 Incorporated, a California corporation, is the general partner. Westmoreland is a limited partnership of which WEI-Roanoke Valley, Inc., a Delaware corporation, is the general partner.
     The Partnership has changed its name from Westmoreland-Hadson Partners to Westmoreland-LG&E Partners.
     Westmoreland and LG&E desire to confirm the formation as of March 1, 1990, of the general partnership, whose purpose is to construct, own, operate and maintain a 165 MW coal-fired electric cogeneration facility and a 44 MW coal-fired electric cogeneration facility, both located on the same project site near the city of Weldon, North Carolina and to sell the electricity generated therefrom to Virginia Electric and Power Company (operating in North Carolina as “North Carolina Power”), and to sell the steam produced therefrom for use by an industrial host.
     LG&E and Westmoreland wish to amend and restate the terms and conditions applicable to the Partnership and the Partners in order to supersede the terms and conditions set forth in that certain General Partnership Agreement dated January 16, 1991 by and between LG&E and Westmoreland (the “Prior Partnership Agreement”).
     NOW, THEREFORE, in consideration of the premises and mutual covenants set forth herein, the parties, agree as follows:

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ARTICLE 1.
DEFINITIONS
     The following terms shall have the meanings indicated:
     1.1 “Act” means the Virginia uniform Partnership Act as in effect on the date hereof and as it may be amended from time to time.
     1.2. “Adjusted Book Basis” means, with respect to each item of Partnership property, the property’s adjusted basis for federal income tax purposes, except that in the case of any property contributed to the partnership (either actually or constructively upon a constructive liquidation and reconstruction of the Partnership for federal income tax purposes pursuant to section 708(b) (1) (B) of the Code), or any property with respect to which the decision to revalue the same has been made pursuant to section 3.6(c), the Adjusted Book Basis of such property shall be the gross fair market value of such property, as determined by the Management Committee, at the time of such contribution or revaluation, as the case may be, adjusted from time to time by Book Depreciation allowable with respect to such property.
     1.3. “Affiliate” means with respect to a Partner or any Person, any Person which, directly or indirectly, controls, is controlled by or is under common control with such Partner or Person. For purposes of this definition, “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such individual or entity, whether through the ownership of voting securities, by contract or otherwise.
     1.4. “Agreement” means this General Partnership Agreement (including all exhibits and appendices attached hereto) as it may be amended from time to time.
     1.5. “Available Cash” means at a particular time, all cash of the Partnership which at the time is in excess of the amount which the Management Committee determines is then required to meet the Partnership’s obligations and working capital requirements.
     1. 6. “Book Depreciation” means the deduction or allowance for depreciation, depletion or amortization (as the case may be) that shall be allowable to the Partnership with respect to an item of Partnership property, determined in the manner set forth below. Consistent with the provisions of Section 1.704-1(b) (2) (iv) (g) (3) of the Regulations, the Book Depreciation

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with respect to each item of Partnership property for a fiscal year or other period shall equal the amount that bears the same relationship to the Adjusted Book Basis of such item of Partnership property as the Tax Depreciation with respect to such item of Partnership property for such year or other period bears to the “adjusted basis” (within the meaning of Section 1011 (a) of the Code) of such item of Partnership property. Notwithstanding the foregoing, if an item of Partnership property shall have an “adjusted basis” (as defined above) equal to zero, Book Depreciation shall be determined under a reasonable method which shall be selected by the Management Committee.
     1.7. “Capital Account” means, as to any Partner, the account maintained by the Partnership pursuant to section 3.6 of this Agreement.
     1.8. “Capital Contributions” means contributions made or to be made to the capital of the Partnership by the Partners pursuant to section 3.1 of this Agreement.
     1.9. “Chief Financial Officer” means the person who is appointed by the Management committee pursuant to section 5.1 hereof to manage the Partnership’s financial affairs, subject to the direction and control of the Management Committee.
     1.10. “Code” means the United States Internal Revenue Code of 1986, as amended from time to time, and the corresponding provisions of any law which may succeed it.
     1.11. “Coal Supply Contracts” means the contract or contracts under which the Partnership will purchase the necessary coal fuel for the Facilities, including related transportation contracts.
     1.12. “Equity Funding Agreement” means any equity funding agreements to be entered into by the Partners in connection with the financing of the Facilities on the same terms and conditions.
     1.13. “Facilities” shall mean collectively, the RVI Facility and the RVII Facility.
     1.14. “Facility Operating Agreement” means the Amended and Restated Facility Operating Agreement dated as of December 1, 1993 between the Partnership and UC Operating Services, an Affiliate of LG&E, pursuant to which the Facilities will be operated and maintained.
     1.15. “Failed Partner” means a Partner which is deemed to be bankrupt or insolvent, or in the case of a Partner that is a partnership where any of the general partners of such partnership is deemed to be bankrupt or insolvent, pursuant to section 10.3(a).

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     1.16. “Fair Market Value” means the value described in section 16.1 hereof.
     1.17. “Fiscal Year” means the tax year of the Partnership as set forth in section 11.3.
     1.18. “Gain or Loss on Disposition” means the gain or loss from the sale, exchange or other taxable disposition of all of the Partnership’s property, or any material portion thereof (excluding gain or loss from sales of services or property in the ordinary course of the business of the Partnership), determined in accordance with the accounting methods followed by the Partnership for federal income tax purposes with reference, however, to the Adjusted Book Basis of the property rather than the adjusted tax basis of such property.
     1.19. “Management Committee” means the committee formed by the Partners for the purposes of managing the business of the Partnership pursuant to Section 4.1 of this Agreement.
     1.20. “Net Capital Receipts” means the net proceeds remaining from any sale or disposition or taking of all or part of the Partnership’s property or any financing or refinancing of the Partnership’s property after the payment of all costs and expenses related thereto, and the payment for any capital expenditures or expenses for which such proceeds are to be used and the satisfaction of any mortgage debt and the setting aside of any reserves as reasonably determined by the Management Committee.
     1.21. “Notice” means a writing containing the information required by this Agreement to be communicated to a Person and delivered Pursuant to section 16.2 of this Agreement.
     1.22. “Partner Loan” means a loan made to the Partnership pursuant to section 3.8.
     1.23. “Partners” means LG&E and Westmoreland or their respective successors or permitted assigns.
     1.24. “Partnership” means the general partnership created by this Agreement.
     1.25. “Partnership Interest” means a Partner’s interest in all the property and assets, income, gains, losses, deductions,

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expenses, obligations, liabilities, credits and distributions of the Partnership, expressed in terms of a percentage as set forth for each Partner in Section 6.1 and as such interest may be adjusted from time to time in accordance with this Agreement.
     1.26. “Person” means a natural person, corporation, partnership, trust, association, joint venture, real estate investment trust or business trust (including any beneficiary thereof), unincorporated association, and any other form of business or legal entity.
     1.27. “Prime Rate” means the per annum interest rate which is publicly announced (whether or not actually charged in each instance) from time to time by Bank of America N.T. & S.A., or such other bank as may be approved by the Management committee for purposes of ascertaining the Prime Rate, as its “reference rate” or “prime rate.”
     1.28. “Profits” and “Losses” mean for each fiscal year or other period the Partnership’s taxable income or loss, respectively, for such year or period determined in accordance with section 703(a) of the Code (for this purpose, all items of income, gain, loss or deduction required to be stated separately pursuant to section 703(a) (1) of the Code shall be included in taxable income or loss) with the following adjustments: (i) any income of the Partnership that is exempt from federal income tax and not otherwise taken into account in computing Profits or Losses pursuant to this section shall be added to such taxable income or loss: (ii) any expenditures of the Partnership described in Code Section 705(a) (2) (B), or treated as an expenditure so described pursuant to Regulations Section 1.704-1(b) (2) (iv) (i), and not otherwise taken into account in computing Profits or Losses pursuant to this Section, shall be subtracted from such taxable income or loss; (iii) in lieu of the depreciation, amortization and other cost recovery deductions taken into account in computing such taxable income or loss, Profits and Losses shall be determined by taking into account Book Depreciation with respect to the Partnership’s property; (iv) in lieu of any gain or loss on the sale of Partnership property taken into account in computing such taxable income or loss, subject to clause (y) below Profits and Losses shall be determined by taking into account gain or loss on the sale of such Partnership property calculated with reference to the Adjusted Book Basis of such property; (v) any Gain or Loss on Disposition shall not be taken into account in determining Profits or Losses; and (vi) Profits and Losses shall be determined without regard to amounts allocated under Sections 6.3(d).

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     1.29. “Property” means the Facilities and all the other real and personal assets of the partnership.
     1.30. “RVI Construction Contract” means the Contract for Engineering, Procurement and Construction Services for Roanoke Valley Project dated as of January 16, 1991, as amended, modified or supplemented from time to time, between the Partnership and LG&E Power Engineers and Constructors Inc. (formerly known as Ultrasystems Engineers and Constructors, Incorporated), LG&E Power Constructors Inc., Affiliates of LG&E, and LG&E Engineering N.C., P.C., pursuant to which the RVI Facility will be designed, engineered, procured and constructed.
     1.31. “RVII Construction Contract” means the Contract for Engineering, Procurement and Construction Services for Roanoke Valley II Project dated as of December 1, 1993, as amended, modified or supplemented from time to time, between the Partnership and LG&E Power Engineers and constructors Inc. and LG&E Power Constructors Inc., Affiliates of LG&E, and LG&E Engineering N.C., P.C., pursuant to which the RVII Facility will be designed, engineered, procured and constructed.
     1.32. “RVI Facility” means the 165 MW coal-fired electric cogeneration facility to be located in or near the town of Weldon, North Carolina, which the Partnership will construct, own, operate and maintain and which is being designed, engineered, procured and constructed pursuant to the RVI Construction Contract.
     1.33. “RVII Facility” means the 44 MW coal-fired electric cogeneration facility to be located in or near the town of Weldon, North Carolina, which the Partnership will construct, own, operate and maintain and which is being designed, engineered, procured and constructed pursuant to the RVII Construction Contract.
     1.34. “RVI Power Purchase Agreement” means the Second Amendment and Restatement dated November 15, 1991 of the Power Purchase and Operating Agreement effective January 11, 1989 and executed January 24, 1989 by and between the Partnership, as successor in interest to Beckley Cogeneration Company, and Virginia Electric and Power Company, as amended, modified or supplemented from time to time.
     1.35. “RVII Power Purchase Agreement” means the Amendment and First Restatement of the Power Purchase and Operating Agreement dated April 29, 1993 by and between Virginia Electric and Power Company and the Partnership, as amended, modified or supplemented from time to time.

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     1.36. “Regulations” means the Federal Income Tax Regulations promulgated by the Internal Revenue Service pursuant to the Code, as amended from time to time.
     1.37. “Tax Depreciation” means, with respect to each item of Partnership property, the deduction or allowance for depreciation, depletion or amortization (as the case may be) that shall be allowable with respect to such item of Partnership property for federal income tax purposes.
     1. 38. “Tax Matters Partner” means such Partner as is designated pursuant to Section 11.2 hereof.
     1.39. “Transfer” means any sale, transfer, assignment, gift, mortgage, hypothecation, pledge, exchange or any other disposition, whether made directly, indirectly, voluntarily, by operation of law or otherwise of a Partnership Interest, but excluding any adjustment of a Partner’s Capital Account pursuant to section 3.8 of this Agreement.
     1.40. Terms defined elsewhere in this Agreement:
         
Term   Section
“Additional Capital Contributions”
    3.1 (a)
“Budget”
    4.5  
“Chief Financial Officer”
    5.1  
“Contributing Partner”
    3.7 (b)
“Contribution Date”
    3.1 (b)
“Deemed Contribution Amount”
    3.7 (a)
“Exempt Wholesale Generator”
    7.1 (h)
“Internal Costs”
    4.15 (a)
“Loan Date”
    3.8 (c)
“Noncontributing Partner”
    3.7 (b)
“Optional Advance”
    3.7 (b)
“Qualifying Facility”
    7.1 (h)
“Third Party Costs”
    4.14 (a)
“Third Party Costs Due Upon
        
“Closing of Construction Financing”
    4.14 (a)
     1.41. “Venture Management Agreement” shall mean that Amended and Restated Venture Management Agreement dated as of the date hereof by and between LG&E Power Operations Inc. (“LG&E Operations”), Westmoreland Energy, Inc. (“WEI”) and the Partnership, regarding the provision of venture management services by LG&E Operations and WEI to the Partnership.

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ARTICLE 2.

FORMATION
     2.1. Formation. The Partners hereby confirm the formation as of March 1, 1990, of the Partnership pursuant to the provisions of the Act and in accordance with the further terms and conditions hereof. The rights and liabilities of the Partners shall be, except as herein otherwise expressly provided, as provided in the Act. Each of the Partners shall have authority to bind the Partnership and the other Partners only in accordance with the provisions of this Agreement.
     2.2. Partnership Name. The name of the Partnership shall be “Westmoreland-LG&E Partners.” All business of the Partnership shall be conducted under such name and under such variations thereof as the Partners deem necessary or appropriate to comply with the requirements of law in any other jurisdiction in which the Partnership may elect to do business.
     2.3. Address and Principal Place of Business. The address and principal place of business of the Partnership shall be at Highway 158, Weldon, North Carolina, or such other place as the Partners may from time to time determine.
     2.4. Term. The Partnership commenced on March 1, 1990, and shall continue to exist until terminated pursuant to Article 10 hereof
     2.5. Purpose.
               (a) The purposes of the Partnership shall be to develop, design, finance, construct, maintain, own and operate the Facilities and to sell the thermal energy and electricity generated thereby and to engage in such activities which are incidental or necessary to the foregoing, including, without limitation, the following: (i) to acquire, by purchase, lease or otherwise, any real or personal property which may be necessary, proper or advisable to the accomplishment of such purposes; (ii) to develop, finance, construct, operate, maintain and improve, and to own, sell, convey, assign, mortgage or lease, any real estate and any personal property necessary, proper or advisable to the accomplishment of such purposes; ,and (iii) to borrow money and issue evidences of indebtedness and’ to secure indebtedness by mortgage, pledge or other lien on any assets of the Partnership.
     2.6. Agent. The agent of the Partnership for service of process in Virginia is CT Corporation System, subject to replacement by direction of the Management Committee.

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     2.7. Nature of Partner’s Interest. The interests of the Partners in the partnership will be personal property for all purposes. All property owned by the Partnership, whether real or personal, tangible or intangible, will be owned by the Partnership as an entity, and no partner, individually, will have any ownership of such property.
     2.8. Public Statements. No Partner shall issue any public statements or press releases relating to the transactions contemplated by this Agreement without the prior consent of all Partners, which consent shall not be unreasonably withheld. However, nothing herein shall (i) prevent any Partner from supplying such information or making such statements relating to this Agreement as may be required by any governmental authority or as may be considered necessary in connection with obtaining equity or debt financing for any of the Facilities, or (ii) prevent any Partner from making public statements or press releases regarding its involvement in any of the Facilities which do not disclose the terms hereof. In the event of a disclosure pursuant to governmental authority, the Partner which is required to give such disclosure shall give the other Partner reasonable notice and opportunity to prevent or limit such disclosure. Public statements and press releases regarding the transactions contemplated by this Agreement shall mention the names of all Partners where appropriate.
ARTICLE 3.
CAPITAL AND ALLOCATIONS
     3.1. Capital Contributions.
               (a) Each of the Partners has made an initial capital Contribution of $1.00. The Partners shall make additional Capital Contributions (“Additional Capital Contributions”), pro rata, in accordance with their respective Partnership Interests if the Management Committee determines in accordance with the terms of this Agreement that additional capital is necessary or if the Partners are required to make .contributions to the partnership pursuant to the Equity Funding Agreement.
               (b) A call for Additional Capital Contributions to the Partnership shall be made by Notice, which shall specify the amount to be contributed in the aggregate and by each Partner and which shall be sent to all Partners and shall be executed by the Chief Financial Officer or his designated representative. To

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satisfy a call for Additional capital contributions, a Partner shall have paid into the Partnership cash funds in the full amount of its proportionate share of the aggregate amount of such call for Additional capital contributions on or before the date specified in such Notice (the “Contribution Date”), which date shall not be less than thirty (30) days following the date of the Notice. All Additional Capital Contributions shall be credited to the respective Capital Accounts of the Partners as of such specified date.
     3.2. No Other Contributions. No Partner will make contributions to the capital of the Partnership in excess of the amounts determined by the Management Committee pursuant to section 3.1(a), without the prior written consent of the other Partner.
     3.3. No Interest on Capital. No interest shall be paid to any Partner on all or a portion of its Capital contributions or on a balance in its Capital Account.
     3.4. Capital Withdrawals and Returns. No Partner shall have the right to withdraw or reduce its contributions to the capital of the partnership or to receive property or assets other than cash in return thereof, except in accordance with this Agreement.
     3.5. No Priority. Except as provided in this Agreement, neither Partner shall be entitled to priority over the other Partner with respect to a return of its contribution to the capital of the partnership, to the property and assets of the Partnership, or to allocations of income, gains, losses, deductions, expenses, obligations, liabilities, credits or distributions.
     3.6. Capital Accounts.
               (a) A Capital Account shall be established for each Partner and shall be determined and maintained in accordance with the provisions of section 1.704-1-(b) (2) (iv) of the Regulations. The Capital Account of each Partner as of the date hereof is $1.00. Except as otherwise provided in section 1.704-I(b) of the regulations, (i) the balance of each Partner’s Capital Account shall be increased by (1) the amount of money contributed by such Partner to the Partnership; (2) the fair market value of property contributed by such Partner to the Partnership (net of any liabilities secured by such contributed property that the Partnership is considered to assume or take subject to under Section 752 of the Code); and (3) allocations to such Partner of partnership Profits or Gain on Disposition (or

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items thereof); and (ii) the balance of each Partner’s capital Account shall be decreased by (A) the amount of any money distributed to such Partner by the Partnership; (8) the fair market value of any property distributed to such Partner by the Partnership (net of any liabilities secured by such distributed property that the recipient Partner is considered to assume or take subject to under section 752 of the Code); and (C) allocations to such Partner of Partnership Losses or Loss on Disposition (or items thereof).
               (b) The Capital Accounts of the Partners prior to any distribution in-kind shall be adjusted, if necessary, in accordance with the provisions of Section 1.704-l(b) (2) (iv) (e) of the Regulations.
               (c) The Partnership shall not revalue Partnership property as permitted under section 1.704-l(b) (2) (iv) (f) of the Regulations unless the Management Committee chooses to do so.
               (d) A Partner’s Capital Account shall be decreased for (i) allocations of Partnership Losses or Loss on Disposition (or items thereof) that, as of the end of such taxable year, reasonably are expected to be made to such Partner pursuant to sections 704(e) (2) and 706(d) of the Code and Section 1.751-l(b) (2) (ii) of the Regulations, and (ii) Partnership distributions that, as of the end of such taxable year, reasonably are expected to be made to such Partner, to the extent such distributions exceed offsetting increases (exclusive of increases attributable to such Partner’s allocable share of minimum gain, as defined in section 1.704-l(b) (4) (iv) (b) of the Regulations) to such Partner’s Capital Account that reasonably are expected to occur during (or prior to) the Partnership taxable years in which such Partnership distributions reasonably are expected to be made, and shall be increased for (i) such Partner’s allocable share of minimum gain determined in accordance with Section 6.3(a), (ii) such Partner’s allocable share of partner funded minimum gain determined pursuant to Section 6.3(b), and (iii) the amount such Partner is unconditionally obligated to contribute to the capital of the Partnership pursuant to the provisions of this Agreement or under state law.
               (e) The provisions of this section are to be interpreted and applied in a manner consistent with the rules contained in section 1.704-l(b) (2) (iv) of the Regulations. To the extent these provisions are determined to be inconsistent with section 1.704-1(b) (2) (iv) of the Regulations or fail to address any situation covered by such Regulations, the rules prescribed in such Section of the Regulations shall govern. In

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the event that at any time during the term of the Partnership it shall be determined that the Capital Accounts of the Partners shall not have been maintained as required by section 1.704-I(b) (2) (iv) of the Regulations, then said capital Accounts shall be retroactively adjusted so that the same shall conform to such Section of the Regulations.
     3.7. Failure to Advance an Additional Capital Contribution.
               (a) Should a Partner not have contributed by the Contribution Date an Additional capital Contribution called for as provided in section 3.1, the partnership Interest of each Partner, effective as of the date the contribution was required to be paid, shall be the fraction (expressed as a percentage) determined by dividing Capital Contributions made to the Partnership by such Partner (including any Capital Contributions made by such partner in response to the call or upon conversion of an Optional Advance) plus the maximum equity funding commitments of all Partners set forth in any Equity Funding Agreement by the Capital Contributions made to the Partnership by all Partners (including capital Contributions made by all Partners in response to the call or upon conversion of Optional Advances) plus the aggregate amount of the maximum equity funding commitments of all Partners set forth in any Equity Funding Agreement; provided, that such Percentage Interest shall in no event be changed if the effect of such change is to cause the RVII Facility to lose its status as a “Qualifying Facility” or the RVI Facility to lose its status as a “Qualifying Facility” (if the Partnership is not then an Exempt Wholesale Generator with respect to its ownership and operation of such Facility). In which case, in lieu of changing such Percentage Interest, the Additional Capital Contribution made by the contributing Partner shall be treated as a Partner Loan made by such Partner. A change in Partnership Interest shall not affect, or be taken into account in determining, the Partners’ Capital Accounts or other rights to the capital of the Partnership existing as of the date of such change.
               (b) In the event that a call for Additional Capital Contributions shall be issued as provided herein and one or more Partners shall not have made their required Additional Capital Contributions in response to such call on or before the Contribution Date (hereinafter the “Noncontributing Partner(s)”), any Partner that has made its Additional Capital contribution in response to such call (hereinafter the “Contributing Partner(s)”) may elect to make on behalf of the Noncontributing Partner(s) all or any portion of the unmade Additional Capital contribution of the Noncontributing Partner(s) as hereinafter provided. If a

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Contributing Partner elects to make such payment (subject to the allocation provisions in Section 3.7(c), the Contributing Partner shall notify the Noncontributing Partner of the making of such payment within five (5) days after doing so. Any such payment shall be referred to herein as an “Optional Advance,” shall be deemed to be a loan by the Contributing Partner to either the Noncontributing Partner or to the Partnership as a Partner Loan, as the contributing Partner may elect in its Notice to the Noncontributing Partner, shall bear interest at the lesser of the rate of two (2) percentage points above the Prime Rate and the highest rate permitted under applicable law and shall be subject to any restriction contained in any financing documents to which the Partnership is a party. Such applicable rate shall be adjusted on the date of any change in the Prime Rate. Interest on an optional Advance shall be calculated, charged and paid on the basis of a 365-day year. In the case of a loan by the Contributing Partner to the Partnership, the Partnership shall be deemed to have been made a loan (the “Mirror Loan”) to the Noncontributing Partner in the same principal amount and at the same interest rate as the optional Advance, which Mirror Loan also shall be subject to any restrictions set forth in any financing documents to which the Partnership is a party.
     In the case of an Optional Advance to the Noncontributing Partner, the Noncontributing Partner shall have the right to repay to the Contributing Partner the principal amount of the optional Advance plus accrued interest thereon within 45 days from the date that such optional Advance was made. In the case of an Optional Advance to the Partnership, the Noncontributing Partner shall have the right to repay to the Partnership the principal amount of any Mirror Loan plus accrued interest thereon within 45 days from the date that such optional Advance was made, and the Partnership shall thereupon repay to the contributing Partner the principal amount of the Optional Advance plus all accrued interest thereon.
     Until full repayment has been made by the Noncontributing Partner, all distributions which a Noncontributing Partner would be entitled to receive, but for this provision, shall be distributed by the Partnership directly to the Contributing Partner. Such distribution shall be applied against (x) the Optional Advance, in the case of optional Advances to the Noncontributing Partner, or the Mirror Loan, in the case of Optional Advances to the Partnership, and (y) in both cases, plus accrued interest. Any amount applied against a Mirror Loan shall thereupon be applied by the Partnership against the optional Advance. In the event of the dissolution of the Partnership, the unpaid principal amount of all optional Advances

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and Mirror Loans plus all accrued interest thereon shall be repaid in accordance with section 10.5.
               If an Optional Advance plus accrued interest thereon has not been fully repaid within 45 days from the date that such Optional Advance was made, the Contributing Partner shall have the option to convert the unpaid principal amount of the optional Advance plus accrued interest thereon into a Capital contribution by the contributing Partner, and the Optional Advance shall cease to be deemed to be an Additional Capital contribution on behalf of the Noncontributing Partner. Upon such conversion of an optional Advance, any corresponding Mirror Loan shall be cancelled. The contributing Partner shall provide Notice to the Noncontributing Partner in the event it elects to convert such Optional Advance within 10 days after the expiration of such 45-day period. If the contributing Partner elects to convert such optional Advance, effective upon the date of the Notice, the partnership Interest of each Partner shall be adjusted as provided Section 3.7(a), subject to the proviso set forth therein.
               (c) In the event that there shall be more than one Contributing Partner, and the aggregate amount so elected would exceed the amount of the Additional Capital Contribution(s) which shall not have been made by the Noncontributing Partner(s), then each such electing Contributing Partner shall be entitled to make a portion of such unmade Additional Capital contribution(s) equal to the ratio which its Partnership Interest bears to the aggregate Partnership Interests of all such electing Contributing Partners.
     3.8. Loans from Partners;
                (a) Except as provided in sections 3.1 and 3.7, the money to finance the business of the Partnership shall be derived from loans to the Partnership from third parties and from the revenues of the Partnership.
               (b) Upon notice from the Chief Financial Officer pursuant to paragraph (c) of this section 3.8, and subject to any restriction contained in any financing documents to which the Partnership is a party, each Partner shall have the right, but not the obligation, to advance as a loan to the Partnership its proportionate share (based upon the partnership Interests of the Partners) of the amount so required from time to time (any amounts advanced by the Partners pursuant to this section 3.8 being called “Partner Loans”). All amounts paid by the Partners hereunder shall be loans by the Partners to the Partnership and shall be repayable on such terms as the Management Committee

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shall agree, provided that such Partner Loans shall bear interest compounded quarterly at a floating rate not to exceed the Prime Rate plus two percent (2%). All payments shall first be applied to accrued but unpaid interest and then to principal. Should Partner Loans be made by the Partners pursuant to this section 3.8 on more than one occasion, such Partner Loans shall be repaid in the order in which such Partner Loans were made to the Partnership provided that interest may be paid on a loan made after another loan if all payments on the earlier loan are current and, in the case of contemporaneous Partner Loans, on a pari passu basis. The Partnership may not make distributions of Available Cash to the Partners unless and until all outstanding Partner Loans have been repaid.
               (c) A call for Partner Loans to the Partnership may be issued by or on behalf of the Chief Financial Officer by notice (in accordance with section 4.3(c)(vi», which shall specify the amount to be lent in the aggregate and by the Partner to which or to whom the call is directed, shall be sent to all Partners and shall be executed by the Chief Financial Officer or his designated representative. No Partner shall be obligated to satisfy any such call. To satisfy a call for Partner Loans, a Partner shall have lent to the Partnership cash funds in the full amount of its proportionate share of the aggregate amount of such call for Partner Loans on or before a date thirty (30) days following the date of the notice, which shall be the “Loan Date” for such loans. If a Partner does not elect to satisfy its portion of a call for Partner Loans, it shall so notify the other Partners, in which event such other Partners may, at any time within thirty (30) days after the date of such notice, elect to make all or any portion of the Partner Loan not made by the Partner giving such notice. In the event there shall be more than one Partner that so elects, and the aggregate amount so elected would exceed the amount of the Partner Loan not made, then each such electing Partner shall be entitled to make a portion of such unmade Partner Loan equal to the ratio which its partnership Interest bears to the aggregate Partnership Interests of all such electing Partners.
ARTICLE 4.
RIGHTS, OBLIGATIONS AND POWERS OF THE GENERAL
PARTNER
     4.1. Management Committee. The Partnership will be managed, consistent with prudent business practices, with the objective of maximizing the long-term profitability of the Partnership, and each Partner will use its best efforts to achieve that objective. The management of the business of the

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Partnership will be vested in a management committee (the “Management Committee”) which will be empowered to set policy for and to make all decisions in respect of the business and operations of the Partnership subject to the limitations set forth in this Agreement. The Management Committee may act through Partners or qualified employees and agents of the Partnership as provided in section 4.7. The acts of the Management Committee shall bind the Partners and the Partnership when within the scope of its authority.
     4.2. Composition of Management Committee. The Management Committee shall at all times consist of two members, one of which shall be appointed by LG&E and one of which shall be appointed by Westmoreland. Each Partner may appoint one or more alternates for each member appointed by it to the Management committee. Each alternate shall have all the powers of the regular Management Committee member in the regular Management Committee member’s absence or inability to serve. Each Partner shall have the power to remove any member or alternative member of the Management Committee appointed by it by Notice of such removal to the Partnership and to the other Partner. Vacancies on the Management committee shall be filled by the Partner who appointed the Management Committee member previously holding the position that is then vacant.
     4.3. Voting; Quorum.
               (a) All actions of the Management Committee shall require the affirmative vote of the members (present and voting) representing a majority of Partnership Interests in the Partnership. Notwithstanding the foregoing, the following actions shall at all times require the unanimous vote of the members of the Management Committee representing all Partnership Interests in the Partnership:
                    (i) approval of any contract or agreement (x) with either Partner or any Affiliate of either Partner or (y) which obligates the Partnership to pay for goods or services during it~ term in excess of an aggregate of $100,000:
                    (ii) approval of any contract or agreement relating to the sale or other disposition of the bulk of the Partnership’s property, and approval of the termination or modification of any such contract or agreement or of the waiving of compliance with the terms thereof:

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                    (iii) approval of any amendment to either the RVI Power Purchase Agreement or the RVII Power Purchase Agreement;
                    (iv) approval of any plan to expand materially the Partnership’s business, either by addition of new facilities or otherwise;
                    (v) any plan of liquidation of the Partnership; and
                    (vi) except as the Partners may agree in the Equity Funding Agreements, determination of the amounts of Additional Capital Contributions and Partner Loans to be requested and the time(s) when such Additional Capital Contributions and Partner Loans shall be accepted by the Partnership.
               (b) The Management Committee member or members representing a Partner at a meeting of the Management Committee shall be entitled to vote such Partner’s Percentage Interest with respect to any decision to be made by the Management Committee. Two members of the Management Committee each representing different Partners shall constitute a quorum.
     4.4. Meetings of Management Committee.
               (a) The Management Committee shall meet at least once each quarter (unless such meeting shall be waived by all members thereof) or at the request of any two members, upon ten (10) days’ written Notice to all members, at such places as may be determined from time to time by the Management Committee. The meetings may be held by telephone conference. A written agenda for each meeting shall be prepared in advance, in consultation with each Partner, by the member of the Management Committee selected from time to time. The Management Committee may act without a meeting if the action is approved in writing by members of the Management Committee entitled to vote the percentage Interest of each partner.
               (b) The Management Committee shall select one of its members to be the chairman of the Management Committee. The chairman shall preside at meetings of the Management Committee.
               (c) The Management Committee shall select one of its members to be the secretary of the Management Committee. The secretary shall cause written minutes of each meeting of the Management Committee to be prepared and shall cause a copy of all minutes and Written consent actions to be distributed to each

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member of the Management Committee within ten (10) days after the date of the meeting or written consent action.
     4.5. Annual Budget. At the Management committee meeting occurring prior to December 1 of each Fiscal Year, the Management Committee will consider and adopt a written budget (the “Budget”) setting forth in reasonable detail the anticipated receipts and expenditures of the Partnership for the coming fiscal year and the succeeding four years as well as the amount and kind of expenditures in addition to those anticipated which may be made on behalf of the Partnership without further action by the Management Committee. The Chief Financial Officer will cause the initial draft of the Budget to be prepared and submitted to all Management committee members at least by October 1 of each year. At each meeting of the Management Committee, the Chief Financial Officer will report on the receipts and expenditures of the Partnership as of a date reasonably close to the date of the meeting and will recommend to the Management Committee any changes in the Budget which he considers necessary or appropriate.
     4.6. Bank Accounts. The Chief Financial Officer will maintain accounts for the deposit and disbursement of all funds of the Partnership at such banks as the Management Committee shall approve. All funds of the Partnership will be deposited promptly in such accounts. The Management Committee will from time to time authorize signatories for such accounts.
     4.7. Delegation of Powers of Management Committee. The Partners hereby expressly consent to the delegations of powers set forth in section 4.9 and Article 5 of this Agreement. The Management Committee may by unanimous written resolution delegate other of its powers, but not its responsibilities, to any Partner, employees of a Partner or to any other person, joint venture or partnership.
     4.8. Indemnification. The Partnership shall indemnify the Partners, their Affiliates, and the employees, officers, agents, directors and partners of such entities, and shall hold them harmless, from any claim, demand, judgment, cost or expense (including but not limited to counsel fees and expenses) arising out of or related to any act or omission by the Partners or the agents, employees and contractors of the partnership or the Partners in connection with the business and affairs of the Partnership, except (i) for any act or omission which is performed or omitted to be performed in bad faith or which constitutes gross negligence, willful misconduct or breach of fiduciary duty attributable to the Partner seeking indemnity hereunder, or (ii) for which liability arises under the

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provisions of a written agreement (other than this Agreement) between such Partner and the Partnership.
               If any Partner pays or otherwise satisfies a Partnership liability (other than a liability arising under circumstances that, as to such partner, were not in compliance with the terms of this Agreement) in excess of such Partner’s Partnership Interest (including liabilities arising in the manner described in the first paragraph of this Section 4.8 but for which funds for indemnification are unavailable), such Partner shall have a claim against the other Partner for contribution for a proportionate share of such Partnership liability in addition to any other remedy available to such Partner at law or in equity.
               Westmoreland shall indemnify, defend and hold harmless LG&E for any and all liability to (a) Stone and Webster Development corporation, Pyropower Development Corporation and their respective Affiliates (except for LG&E’s liabilities to Pyropower pursuant to the Transfer Agreement dated as of June 30, 1989, between Pyropower and Westmoreland Covington, Inc.), in connection with the Development Agreement dated December 13, 1988, among Westmoreland Energy, Inc., Pyropower Development Corporation and Stone and Webster Development corporation and (b) Wheelabrator Tidewater, Inc. and its Affiliates (“Wheelabrator”) (except for (i) LG&E’s liabilities pursuant to the Development Agreement dated May 1, 1992, as amended, between WEI and LG&E Development Corporation (now known as LG&E Power Development Inc., “LG&E Development”) and (ii) LG&E’s obligation to pay one-half of the amounts (up to $1.4 million) which Westmoreland’s Affiliate, Westpower-Covington, L.P. (“Covington”), actually pays to Wheelabrator under section 1.2(b) of that certain Assignment dated December 21, 1990 between Covington and Wheelabrator, which obligation shall in no event exceed $700,000 in the aggregate).
               Nothing in this Article 4 shall be deemed to supersede the indemnification provisions contained in any agreement between the Partnership and an Affiliate of a Partner, and any such indemnification provisions shall exclusively govern any such agreement.
               The agreements contained in this section 4.8 shall survive the withdrawal of any Partner or any termination or dissolution of the Partnership.
               Amounts payable in respect of the indemnification obligations under this Section 4.8 shall be calculated after taking into account (a) any realized tax effects attributable to (i) the claim, demand, judgment cost or expense giving rise to

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the indemnification obligation, (ii) the payment of indemnification and (iii) the receipt of an indemnification payment, and (b) any realized insurance or other recoveries from third parties.
     4.9. Partner Responsibilities.
               (a) The Partners agree that:
                    (i) Westmoreland shall be responsible with respect to (A) negotiating the ash disposal and transportation contracts and the water services agreement(s) and (B) negotiating and representing the Partnership in connection with the RVI Construction Contract and the RVII Construction Contract and the Facility Operating Agreement:
                    (ii) LG&E shall be responsible for (A) obtaining permits, (B) arranging project financing for the Facilities and all treasury and insurance functions, and (C) negotiating and representing the Partnership in connection with lime supply and transportation agreement(s) and the Partnership’s interests under the Coal Supply Contracts:
                    (iii) LG&E and Westmoreland shall have joint responsibility for negotiating and administering the RVI Power Purchase Agreement and the RVII Power Purchase Agreement, the energy sales agreement(s) (for thermal energy sales from the Facilities to the Host), community relations, managing due diligence activities of third party project finance lenders, selecting and managing outside legal counsel and completing the issuance of tax-exempt bonds for the Facilities. Lead responsibility for these matters ‘shall be determined by the Management Committee from time to time.
               (b) In the event it is proposed that one of the Partners or an Affiliate thereof should provide goods or services to the Partnership, the other Partner shall be responsible for negotiating, on behalf of the Partnership, any contract with respect thereto and otherwise representing the Partnership in connection therewith.
               (c) In representing the Partnership in connection with a contract between the Partnership and an affiliate of a Partner the responsible Partner shall consult with the other Partner concerning administration of the contract and any disputes arising thereunder.
     4.10. Transactions with Affiliates. The Partnership may acquire goods or services from Affiliates of the Partners. All

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such transactions shall be negotiated on behalf of the Partnership in accordance with Section 4.9(b). The Partners acknowledge that the Facility Operating Agreement, the Venture Management Agreement, the RVI Construction Contract and the RVII Construction Contract and the Coal Supply Contracts which have been entered into with and/or involving Affiliates of Westmoreland and with TECO Coal Corporation and its Affiliates have been approved by each of the Partners. Except as provided in section 4.14 or any other express agreement approved by all Partners, no Partner or Affiliate of a Partner, shall receive any salary or fee for service rendered to or on behalf of the partnership, nor shall services be regarded as a capital contribution.
     4.11. Partner’s Commitment. Each Partner shall devote so much of its time and effort to the management and other affairs of the Partnership with respect to the matters as to which it is responsible as may be reasonably required to promote the purposes of the Partnership, in an efficient, effective and diligent manner and shall use its best efforts to perform its duties hereunder in a professional manner.
     4.12. No Compensation to Management Committee. Unless otherwise agreed to by the Partners, the members of the Management Committee shall not receive compensation from the Partnership for serving on such committee.
     4.13. Payment of Costs and Expenses: General. The partnership shall be responsible for paying all costs and expenses of the activities of the Partnership. Any such costs and expenses which have been incurred, or are hereafter incurred, and paid by a Partner on behalf of the Partnership shall, to the extent the Partnership has available funds, be reimbursed monthly by the Partnership if such cost or expense is approved by the Management Committee. The Partner seeking reimbursement shall provide a description of such costs and expenses in sufficient detail to permit the Partnership to review them.
     4.14. Payment of Costs and Expenses: Development Expenses.
               (a) Notwithstanding Section 4.13, prior to the date on which construction financing becomes available for a Facility from a Person which is not an affiliate of either Partner, each Partner shall (i) bear its own Internal Costs relating to the development of such Facility, (ii) pay its percentage Interest of all Third Party Costs, and (iii) bear, or cause one of its Affiliates to bear, its own Third party Costs Due Upon Closing of Construction Financing. “Internal Costs”

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shall mean the reasonable cost of wages and salaries paid by a Partner or one of its Affiliates during such period (unless such Affiliate is compensated for such costs under separate agreement with the partnership) for such time as is devoted to development of the Facility plus one hundred seventy-five percent (175%) thereof (as an approximation of the costs of overhead) plus out-of-pocket expenses listed on Exhibit A. “Third Party Costs Due Upon Closing of Construction Financing” shall mean the remaining reasonable costs and expenses due and payable to a Partner or its Affiliate upon successful closing of construction financing with a Person which is not an Affiliate of either Partner and which are listed on Exhibit A. “Third Party Costs” shall mean the costs and expenses paid to third parties in connection with the development of the Facilities, including, without limitation (i) amounts owed to a Partner or its Affiliate which are due and payable currently and are not subject to the obtaining of construction financing, (ii) amounts paid to outside counsel and consultants of the Partners during such period, and (iii) the Third Party Costs listed as such on Exhibit A. Internal Costs, Third Party Costs Due Upon Closing of Construction Financing and Third Party Costs shall collectively be defined as “Development Costs”. Invoices for such costs shall be accompanied by a description thereof in sufficient detail to permit the Partnership and Partners to review them.
               (b) The Partners will endeavor to negotiate with the Partnership’s lenders to permit maximum reimbursement of Development Costs and payment to WEI and LG&E Operations pursuant to the Venture Management Agreement of a $1,500,000 Venture Management Fee for the RVI Facility (for overseeing the business affairs of the RVI Facility prior to completion of construction thereof) and a $500,000 Venture Management Fee for the RVII Facility (for overseeing the business affairs of the RVII Facility prior to completion of construction thereof) and development fees for each of the Facilities. When proceeds of construction financing from any Person which is not an Affiliate of either Partner (“Lender”) become available to reimburse Development Costs and to pay fees due to the Partners, such amounts shall be paid to the Partners or their Affiliates in the following order of priority with respect to each of the Facilities:
     For the RVI Facility:
                    (i) all documented Third Party Costs incurred in connection with the RVI Facility shall be paid to the Partners in proportion to their Percentage Interest;

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                    (ii) all documented Third Party costs Due Upon Closing of Construction Financing incurred in connection with the RVI Facility shall be paid to the Partner which directly or through its Affiliates incurred such costs:
                    (iii) each of the Partners’ documented Internal Costs for the RVI Facility shall be paid to the Partner which directly or through its Affiliates incurred such costs:
                    (iv) fees, in the following priority: (x) the first $500;000 of any development fees permitted by the Lender providing construction financing for the RVI Facility to WEI, (y) all other development fees divided equally between LG&E Development and WEI, and (z) the preoperational RVI Facility venture Management Fee of $1,500,000 divided equally between LG&E Operations and WEI, as provided in section 4.14(d) hereof, and the operational RVI Facility venture Management Fee to LG&E Operations and WEI, as provided in the-Venture Management Agreement; and
     For the RVII Facility:
                    (i) payment to LG&E and Westmoreland of their share of any amounts previously paid to Wheelabrator for acquisition of the RVII Power Purchase Agreement and any amounts hereinafter paid to Wheelabrator in respect of any amounts (up to $1.4 million in the aggregate) not previously paid and which are then payable to Wheelabrator;
                    (ii) payment under the RVII Construction contract of all amounts owed to LG&E Power Engineers and Constructors Inc. under the Work Authorization and Payment Agreement dated April 1, 1993 by and among WEI, LG&E Power Systems Inc. (now known as LG&E Power Inc.) and LG&E Power Engineers and Constructors Inc., as amended;
                    (iii) all documented Third-Party costs incurred after February 1, 1992 in connection with the development and financing of the Facility, shall be paid to the Partners in proportion to their Percentage Interest and on a passu basis with the payment to Westmoreland of its or its Affiliates’ documented Third-Party costs (estimated as of February 1, 1992 at $215,000) incurred for acquisition and early development of the RVII Facility opportunity-prior to February 1, 1992;
                    (iv) Westmoreland documented Internal costs incurred prior to February 1, 1992 (estimated as of February 1,

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1992 at $245,000) for acquisition and early development of the RVII Facility opportunity shall be paid to Westmoreland;
                    (v) all documented Third-Party costs Due Upon Closing of Construction Financing incurred in connection with the RVII Facility shall be paid to the Partner which directly or through its Affiliates incurred such costs;
                    (vi) each of the Partners documented Internal Costs (other than those described in clause (iii) above) shall be paid to the Partner which directly or through its Affiliates incurred such costs; and
                    (vii) fees, in the following priority (w) the first $2,500,000 of any development fees permitted by the Lender providing construction financing for the RVII Facility shall be divided equally between LG&E Development and WEI, (x) the next $1,000,000 of such development fees to WEI, (y) any remaining development fees divided equally between LG&E Development and WEI, and (z) preoperational RVII Facility venture Management Fee of $500,000 divided equally between LG&E operations and WEI, as provided in section 4.14(d) hereof and the operational RVII Facility venture Management Fee to LG&E Operations and WEI in reimbursement of their costs, as provided in the venture Management Agreement.
               (c) Any Development Costs which are unreimbursed to a Partner as of any date on which any Requested Amount must be paid shall be deemed to be Capital Contributions made as of such date and the amount of cash which such Partner is obligated to contribute to the Partnership on such date shall be reduced by the amount thereof.
               (d) The preoperational Venture Management Fee for the RVI Facility shall be paid in 36 equal successive monthly installments beginning at the later of the giving of the Notice to Proceed under the RVI Construction Contract or the payment to the Partnership of the proceeds of construction financing for the RVI Facility from any Person not an Affiliate of any Partner. The preoperational venture Management Fee for the RVII Facility as set forth in the venture Management Agreement shall be paid in 27 equal successive monthly installments beginning on April 1, 1993; provided, however that installments of such fee shall accrue and not actually be paid until such time as the Partnership receives proceeds of construction financing for the RVII Facility from any Person not an Affiliate of any Partner in order to make such payment, at which time all such accrued installments shall be paid, without any interest thereon.

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ARTICLE 5.
OFFICERS AND EMPLOYEES OF THE JOINT VENTURE
     5.1. Chief Financial Officer. The Management Committee shall appoint a Chief Financial Officer who will be empowered to manage the financial affairs of the Partnership, including without limitation the activities set forth below, subject to the direction and control of the Management Committee:
               (a) to issue calls for Capital Contributions and Partner Loans pursuant to Article 3 hereof;
               (b) to be responsible for and have custody of all funds and securities of the Partnership;
               (c) to open and close accounts in the name of the Partnership at such banks, savings and loans, trust companies and other financial institutions as may be approved by the Management Committee;
               (d) to oversee expenditures and disbursements made by officers and employees of the Partnership; and (e) to manage the cost accounting and budgeting functions of the Partnership, and to perform those duties delegated to the Chief Financial Officer under Articles 4 and 11 of this Agreement.
     5.2. Operating Employees. Officers and employees performing services for the Partnership may be employed directly by the Partnership or may be loaned to the Partnership by the Partners (in which case they shall remain employees of the loaning Partner). In the case of loaned officers or employees, the Partnership shall reimburse the loaning Partner for the services of loaned officers and employees pursuant to the terms and conditions set forth in the venture Management Agreement or in such other agreements as may be entered into between each loaning Partner and the Partnership.
ARTICLE 6.
INTERESTS IN THE PARTNERSHIP;
ALLOCATIONS AND DISTRIBUTION
     6.1. Interests in the Partnership. The Partnership Interests of the Partners shall be as follows:

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LG&E -
    50 %
Westmoreland -
    50 %
These interests shall be subject to adjustment as required by Section 3.7.
     6.2. Distribution of Cash Items.
               (a) All Available Cash shall be distributed no less often than quarterly.
               (b) The Partnership will distribute Available Cash to the Partners ratably in accordance with their respective Partnership Interests.
               (c) Net Capital Receipts, when available, shall be distributed to the Partners (if any) then having a positive balance in their respective capital Accounts up to the amount of such positive Capital Account balances, with any remaining funds being distributed to the Partners ratably in accordance with their respective Partnership Interests.
 
    6.3. Allocations of Profits, Losses and Obligations.
               (a) Commencing on the date hereof and continuing over the term of this Agreement, all Profits, Losses, credits and Partnership obligations shall be allocated to the Partners ratably in accordance with their respective Partnership Interests.
               (b) Any Gain on Disposition shall be allocated as follows: first, to the Partners ratably in accordance with any negative balances in their respective capital Accounts until such Capital Accounts have been restored to zero: and second, to the Partners ratably in accordance with their respective Partnership Interests.
               (c) Any Loss on Disposition shall be allocated as follows: first, to the Partners ratably in accordance with any positive balances in their respective Capital Accounts until such Capital Accounts have been reduced to zero: and second, to the Partners ratably in accordance with their respective Partnership Interests.
               (d) Notwithstanding the foregoing, in accordance with Code Section 704(c) and the Regulations thereunder, income, gain, loss and deduction with respect to Section 704(c) Property (as defined hereinbelow) shall, solely for tax purposes, be allocated between the Partners so as to take account of any

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variation between the adjusted basis of such property to the Partnership for federal income tax purposes and its Adjusted Book Basis. As used herein, “Section 704(c) property” means (i) each item of partnership property which was contributed to the Partnership and to which section 704(c) of the Code or section 1.704-l(b)(2)(iv)(d) of the Regulations applies, and (ii) each item of Partnership property which, as contemplated by section 1.704-l(b)(4)(i) or any analogous provision of the Regulations, is governed by the principles of section 704(c) of the Code (or principles analogous to the principles contained in section 704(c) of the Code). Any elections or other decisions relating to such allocations shall be made by the Management Committee in any manner that is consistent with the provisions of Code Section 704(c) and the Regulations thereunder and that reasonably reflects the purpose and intention of this Agreement. Allocations pursuant to the foregoing provisions of this section 6.3(d) are solely for the purposes of federal, state and local income and franchise taxes and shall not affect, or in any way be taken into account in computing, any Partner’s Capital Account or share of Profits, Losses, Gain or Loss on Disposition, distributions or other items pursuant to any provision in this Agreement. Except as provided in the foregoing provisions of this Section 6.3(d) all items of income, gain, loss and deduction of the Partnership shall be allocated between the Partners for tax purposes in the same manner that the corresponding items are allocated for book purposes in accordance with Section 6.2(a), (b) and (c) above, or if there are no corresponding items so allocated, in accordance with the provisions of Section 1.704-l(b)(3) of the Regulations.
     6.4. Allocations to Transferred partnership Interests. Profits, gains, losses, deductions and credits allocated to a Partnership Interest assigned or reissued during a Fiscal Year shall be allocated to each Person who was the holder of the Partnership Interest during such Fiscal Year, in proportion to the number of days that each such holder was recognized as the owner of such Partnership Interest during such Fiscal Year or during an interim period in respect of which the books of the Partnership shall be closed, as the case may be, or in any other manner permitted by the Code and selected by the Management Committee in accordance with this Agreement, without regard to the results of partnership operations or the date, amount or recipient of any distributions which may have been made with respect to such Partnership Interest. The effective date of the assignment shall be (a) in the case of a voluntary assignment, the actual date the assignment as recorded on the books of the Partnership, or (b) in the case of involuntary assignment, the date of the operative event.

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ARTICLE 7.
REPRESENTATIONS, WARRANTIES AND COVENANTS
     7.1. The Partners. Each of the Partners hereby represents, warrants to and covenants with the Partnership and to each other as follows:
               (a) Such Partner is a limited partnership duly organized, validly existing and in good standing under the laws of its state of organization and has all requisite power and authority to own or lease its properties and assets as now owned or leased, to carry on its business as and where now being conducted and to execute and deliver and to perform this Agreement.
               (b) The execution, delivery and performance of this Agreement have been duly authorized by all necessary partnership action on the part of such Partner. This Agreement has been duly executed and delivered by such Partner and constitutes the legal, valid and binding obligations of such Partner, enforceable against it in accordance with its terms.
               (c) No consent, approval or authorization of, or registration or filing with, any person, including any governmental authority or other regulatory agency, is required in connection with the execution and delivery of this Agreement or the performance by such Partner of its obligations hereunder, other than those consents, approvals or authorizations previously obtained.
               (d) Each Partner shall furnish to the Partnership all information regarding such Partner or its Affiliates required for inclusion in any documents to be prepared or filed in connection with the business of the Partnership, and all such information will be true and correct in all material respects and will not omit to state any material fact necessary to be stated therein in order that such information not be misleading.
               (e) While conducting the business of the Partnership, each of the Partners shall not act in any manner which may cause the Partnership to be treated for federal income tax purposes as an association taxable as a corporation.
               (f) Each of the Partners shall comply with:
                    (i) all applicable governmental laws and regulations, and all required governmental and other approvals

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applicable to or required for the operation of the Facility or otherwise; and
                    (ii) all material conditions and requirements of any contract entered into on behalf of the partnership or related to its operation and maintenance of the Facility, except where failure to comply will have no material adverse effect on the business of the Partnership.
               (g) Each Partner shall, not later than the next business day following the receipt thereof, forward to the other Partner a copy of any notice received by such Partner of any default under any document related to any debt for borrowed money or any default under any other agreement or instrument relating to borrowed money to which the Partnership is a party or by which its assets are affected.
               (h) Each Partner covenants that it and its Affiliates will refrain from taking any action or omitting to take action where the effect of such action or omission is to cause (x) the RVII Facility to cease to be a qualifying cogeneration facility (“Qualifying Facility”) under the Public utility Regulatory Policies Act of 1978 and the regulations promulgated thereunder by the Federal Energy Regulatory commission or (y) the RVI Facility to cease to be a Qualifying Facility unless the Partnership is designated as an exempt wholesale generator (“Exempt Wholesale Generator”) with respect to its ownership and operation of such Facility, as defined under the Public utility Holding Company Act of 1935 and the regulations promulgated thereunder by the Federal Energy Regulatory Commission, and such action is permitted under the RVI Power Purchase Agreement. Each Partner also covenants that it and its Affiliates will refrain from taking any action or omitting to take action where the effect of such action or omission is to cause the Partnership or any Partner to become regulated as a utility, public utility or public utility holding company under any applicable state or federal law, rule or regulation.
     7.2. By Westmoreland. Westmoreland hereby represents and warrants to LG&E that without waiving the right of Westmoreland to rely on the representations and warranties of LG&E herein, Westmoreland and its Affiliates have performed their own independent investigation, with due diligence, of the investment represented by participation in this Partnership and have formed their own independent assessments of the risks and potential returns of the Partnership. Westmoreland and its Affiliates have been afforded adequate opportunity to question the management of

- 29 -

 

LG&E concerning the Partnership and to review all partnership agreements and records.
     7.3. By LG&E. LG&E hereby represents and warrants to Westmoreland that without waiving the right of LG&E to rely on the representations and warranties of Westmoreland herein, LG&E and its Affiliates have performed their own independent investigation, with due diligence, of the investment represented by participation in this Partnership and have formed their own independent assessments of the risks and potential returns of the Partnership. LG&E and its Affiliates have been afforded adequate opportunity to question the management of Westmoreland concerning the Partnership and to review all Partnership agreements and records.
ARTICLE 8.
TRANSFER OF PARTNERSHIP INTEREST
     8.1. Conditions to Transfer of Any Interest. Except as set forth in sections 8.2, 8.3, and 10.3(b), unless the Management Committee otherwise unanimously shall consent, no Partner may Transfer all or any part of its Partnership Interest or any interest in such Partner (it being understood that this Article 8 shall in no event apply to the transfer of a limited partnership interest in a Partner which is a limited partnership). In addition, no Transfer shall be permitted, whether pursuant to this Section 8.1, sections 8.2, 8.3 or otherwise which would:
               (a) result, directly or indirectly, in termination of the Partnership for federal income tax purposes,
               (b) result in a violation of federal or state securities laws or other applicable laws or regulations,
               (c) violate the terms of, constitute an event of default under, or result in an acceleration of any indebtedness under any note, mortgage, loan agreement or other instrument to which the Partnership is a party, including without limitation the Equity Funding Agreement,
               (d) result in either Facility’s loss of status as a “Qualifying Facility,” or in the Partnership’s loss of status as an “Exempt Wholesale Generator” or subject the Partnership or either Partner to regulation as a utility, public utility or public utility holding company as described in section 7.1(h) above, or

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               (e) conflict with the restrictions on transfer set forth in the RVI Power purchase Agreement or the RVII Power Purchase Agreement.
     8.2. Permitted Transfers to Affiliates and certain Limited Partnerships. Subject to the restrictions set forth in section 8.1 (except the requirement for Management committee consent), any Partner may Transfer, without the consent of the other Partner, its Partnership Interest or any interest in the Partner either in whole or in part (a) to anyone hundred percent Affiliate-, (b) to a limited partnership in which the transferor or a one hundred percent Affiliate is the sole general partner (c) solely as security for its obligations in connection with financing for the Project provided that any Transfers other than to the secured party shall be subject to section 8.3, or (d) pursuant to and in accordance with the Pledge and Security Agreement dated April 13, 1993 by Westmoreland in favor of LG&E Energy Systems Inc., LG&E, and LG&E Power or the Pledge and Security Agreement dated April 13, 1993 by WEI-Roanoke Valley, Inc. in favor of LG&E Energy Systems Inc., LG&E, and LG&E Power, as applicable.
     8.3. First Right to Purchase.
               (a) Except as provided in section 8.2, if at any time a Partner (the “Offering Partner”) shall desire to transfer all or any portion of its Partnership Interest, either directly or through sale of an interest in such Partner, the Offering Partner shall give to the other Partners (the “Non-Offering Partners”) a notice (an “Offering Notice”) of the interest to be sold (the “Offered Interest”), the price (which shall be a dollar sum), and all other terms of sale. Each Non-Offering Partner shall have the right, irrevocable for a period of 45 days after the giving of the Offering Notice (the “Offer Period”) to purchase the entire Offered Interest specified in the Offering Notice at the price and upon the terms set forth therein.
     (b) If a Non-Offering Partner shall elect to exercise its right to purchase, notice of such election (an “Election Notice”) shall be given to the Offering Partner within the Offer Period, which Election Notice shall specify a closing date not less than fifteen (15) or more than thirty (30) Days after the giving thereof, and on the date so specified the Offering Partner shall sell, and the Non-Offering Partner shall purchase, the interest specified in the Offering Notice at the price and upon the terms set forth therein. In the event that more than one Non-Offering Partner gives such an Election Notice, then each such Non-Offering Partner shall be entitled to purchase a portion of such Offered Interest equal to the ratio which its

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Partnership Interest bears to the aggregate Partnership Interests of all such Non-Offering Partners. Notwithstanding anything to the contrary in this Section 8.3, each of the Non-Offering Partners may deliver an Election Notice with respect to any portion of the Offered Interest provided that the sum of the portions specified in each such Election Notice is equal to the entire Offered Interest.
               (c) If a right to purchase pursuant to the foregoing paragraphs (a) or (b) shall not be exercised within the Offer Period or shall be waived, the Offering Partner thereafter may sell the interest specified in the Offering Notice at a price equal to or greater than that offered pursuant to (a) and upon terms not materially different than the terms set forth in the Offering Notice. However, if the interest specified in the Offering Notice is not so sold within one year after the giving of the Offering Notice, or if the Offering Partner elects to sell the interest at a lower price than specified in the Offering Notice or upon terms materially different than specified in the Offering Notice, then this section 8.3 shall be applicable to any subsequent sale of such interest.
     8.4. Effect of Improper Acts. If a Partner makes a Transfer in violation of this Agreement, such Transfer shall be null, void and of no effect, ab initio. If a Partner voluntarily dissolves or withdraws from the Partnership in violation of this Agreement, its interest shall automatically vest in the other Partner, effective as of the date of such dissolution or withdrawal, and the dissolved or withdrawing Partner shall be liable to the Partnership for such damages as the Partnership may sustain a result of such dissolution or withdrawal.
     8.5. Terms of Transfer of Partnership Interest. The transfer by a Partner of its Partnership Interest pursuant to section 8.2 or Section lO.3(b) shall be subject to all liabilities and obligations of the Partnership and those incurred with authority on its behalf matured or unmatured, absolute or contingent, and upon the consummation of such sale, the purchasing Partner shall execute and deliver to the selling Partner, in form satisfactory to the selling Partner, an instrument assuming all such liabilities and obligations of the Partnership, together with a covenant to hold the selling Partner and its Affiliates harmless from and against all liabilities, obligations and guarantees incurred through or for the benefit of the Partnership, except as may be attributable to the selling Partner’s gross negligence, bad faith or fraud. The purchasing Partner shall make every reasonable effort to obtain from third parties the release of the selling Partner and its Affiliates from all such liabilities, obligations and guarantees.

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     8.6. Amendment of statements. In the event of an assignment or transfer of an interest in the Partnership pursuant to section 8.2, the continuing members of the Partnership promptly thereafter will cause to be filed and published an appropriate Fictitious Business Name statement and will cause to be recorded an amended statement of Partnership in order to reflect such change.
     8.7. Specific Performance. Each of the Partners acknowledges that the rights and obligations provided by this Article 8 are of unique value to it and the payment of monetary damages could not adequately compensate the other Partners for any breach of the obligations set forth in sections 8.1 through 8.5. Accordingly, the rights of the Partners set forth in sections 8.1 through 8.4. shall be specifically enforceable in accordance with their terms.
ARTICLE 9.
DISPUTE RESOLUTION
     9.1. Procedure. In the event a dispute arises between the Partners regarding the interpretation of any provisions of this Agreement, the aggrieved Partner shall promptly notify the Management Committee of the dispute within ten (10) days after such dispute arises. If the Management Committee shall have failed to resolve the dispute within ten (10) days after delivery of such notice, each Partner shall, within five (5) days thereafter, nominate a senior officer of its management to meet at the principal office of the Partnership, or at any other mutually agreed location, to resolve the dispute.’ Should the Partners be unable to resolve the dispute within twenty (20) days after such nomination after their best efforts to do so, each Partner shall have the right to submit the matter to arbitration pursuant to the procedures set forth in section 9.2.
     9.2. Arbitration. In any circumstances requiring arbitration under this Agreement, the issue shall be submitted to arbitration by a panel of up to three arbitrators pursuant to the following procedure:
               (a) If the issue involves two Partners or sides, the issue shall be decided by a panel of up to three arbitrators, who shall be selected as provided in this Section 9.2(a). At any time following the 30th day after delivery of notice to a Partner of an intent to submit an issue to arbitration, any partner(s) (for purposes of this Section 9.2, the “Initiating Partner(s)”) may give notice to the other Partner(s) that it has designated an

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arbitrator. Within 30 days of the delivery of the aforesaid notice of designation the other Partner (“other Partner”) shall be required to either (i) agree to permit the arbitrator designated by the Initiating Partner to decide the issue, or (ii) designate a second arbitrator and notify the Initiating Partner of such designation. Within 20 days of the designation of a second arbitrator (if one is so designated), the two designated arbitrators shall meet and shall jointly designate a third arbitrator, who shall be neutral and impartial.· The Partners express their mutual intention to designate arbitrators highly qualified by education and experience in the subject matter to be arbitrated; however, the qualifications of the arbitrators designated by the parties shall not be subject to question. The arbitrator (if any) designated by the party appointed arbitrators shall also be highly qualified by education and experience in the subject matter to be arbitrated: however, except as to his neutrality and impartiality, his qualifications shall not be subject to question. If a three-person panel is selected, the arbitrator designated by the party-appointed arbitrators shall be the Chairman of the arbitration panel, and a determination by a majority of the panel shall be binding. If for any reason, (i) the Other Partner(s) shall fail timely to either consent to a sole arbitrator or to designate an arbitrator after notice of designation is delivered by the Initiating Partner(s) or (ii) the two party-appointed arbitrators fail timely to designate a third arbitrator, or the third arbitrator shall fail for any reason to serve, said arbitrator shall be designated by the American Arbitration Association upon the demand of any Partner.
               (b) If the issue involves more than two Partners or sides, the matter shall be decided by a single arbitrator, who shall be selected as provided in this section 9.2(b). At any time following the 30th day after delivery of a notice to the Partners of an intent to submit to arbitration an issue as to which the Partners (or the arbitrators selected pursuant to section 9.2(a» certify, in good faith, that there are more than two sides, the Partners (or any of them) shall apply to the American Arbitration Association for a listing of arbitrators meeting the standards enumerated in Section 9.2(a) for the “third arbitrator”. Such listing shall contain at least one proposed arbitrator more than the number of Partners or sides in the arbitration. Each partner or side shall have the right to delete from the list, peremptorily, one proposed arbitrator. If more than one proposed arbitrator remains after review by each Partner or side in the arbitration, the list shall be reduced to one proposed arbitrator by each Partner or side, in turn, in descending order according to their interests in the Partnership (i.e., largest interest through smallest interest). If, for any reason, an arbitrator is not selected by the foregoing process

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within thirty (30) days, said arbitrator shall be appointed by the American Arbitration Association upon the demand of any Partner.
               (c) All proceedings before the arbitrators shall be held at such place as the parties may agree. Failing such agreement, they shall be held in Washington, D.C.
               (d) The Partners agree that the issue being resolved hereunder shall be determined by arbitration pursuant to the provisions set forth herein and pursuant to the applicable rules of the American Arbitration Association then in effect insofar as such rules are not inconsistent with the provisions set forth herein. Reasonable discovery will be allowed.
               (e) The participating Partners shall share equally the costs and fees of such arbitration and further agree that said costs shall include compensation to the arbitrators for their time spent in arriving at their determination. In order to secure highly qualified arbitrators the participating Partners agree to compensate the arbitrators at a daily rate generally commensurate with the regular daily compensation of persons of such caliber.
               (f) The authority of the arbitrators shall be limited to the specific issue(s) submitted to them by the Partners for determination.
     9.3. Continuation of Obligations. Pending final resolution of any dispute, the Partners shall continue to fulfill their respective obligations hereunder.
ARTICLE 10.
DISSOLUTION
     10.1. Generally. The Partnership shall continue unless terminated as set forth herein.
     10.2. Dissolution. The business of the Partnership shall be continued by the Partners pursuant to this Agreement, notwithstanding the occurrence of any event which would result in a dissolution of the Partnership pursuant to the law of the Commonwealth of Virginia, and neither Partner shall be released or relieved of any duty or obligation hereunder by reason thereof: provided, however, that the business of the Partnership shall be

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terminated, its affairs wound up and its property and assets distributed on the earlier to occur of:
               (a) a determination by both Partners that the Partnership shall be terminated;
               (b) bankruptcy or insolvency of the Partnership;
               (c) after bankruptcy or insolvency of a Partner or any general partner of a Partner that is a partnership, upon the determination of the remaining Partner to terminate the Partnership pursuant to the provisions of section 10.3; or
               (d) the sale or other disposition (including condemnation or casualty loss) of all or substantially all of the property and assets of the Partnership or, in the event of an installment sale, after the final payment is received.
     10.3. Bankruptcy and Insolvency.
               (a) For the purposes of this Agreement, bankruptcy shall be deemed to have occurred when the Partnership or the Partner or in the case of a Partner that is a partnership where any of the general partners of such partnership (i) files or suffers a voluntary or involuntary petition under any federal or state bankruptcy law or such a petition is filed against it and is not dismissed, discharged or stayed within a period of sixty (60) days from the date of filing; or (ii) makes a general assignment for the benefit of creditors; or (iii) applies for, seeks, consents to or acquiesces in the appointment of a receiver for all or substantially all of its assets. Insolvency shall be deemed to have occurred when such entity shall be unable to pay liabilities as they mature and such entity shall admit in writing its inability to pay its debts generally as they become due.
               (b) If a Partner (or a person which controls a Partner) shall become bankrupt or insolvent, the other Partner shall have the right, exercisable by written Notice to the Failed Partner, to terminate the Partnership and acquire the Failed Partner’s interest in the Partnership pursuant to this section 10.3(b). The price shall be computed by multiplying the Failed Partner’s Partnership interest times the Fair Market Value of the Partnership’s Property, including real property and tangible and intangible personal property determined as of the date that the bankruptcy or insolvency occurred (or the date of the first such occurrence, if more than one) after deducting from the Fair Market Value all liabilities and obligations of the Partnership, including, without limitation, (i) all accrued Partnership operating expenses, (ii) the unpaid principal balance of all

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outstanding loans and accrued interest thereon and (iii) a reasonable reserve for contingent obligations of the partnership, and after taking into account the tax consequences, if any, resulting from a termination of the Partnership under Section 708 of the Code or otherwise. The closing of the purchase and sale of the Failed Partner’s Partnership Interest shall take place on a date specified in the Notice but in any event not more than ninety (90) days after the date of such Notice.
     10.4. Winding Up and Dissolution. Upon the dissolution of the Partnership, the Partnership shall be liquidated in accordance with this Article 10 unless the Partners unanimously elect otherwise. The dissolution and liquidation of the Partnership shall be conducted and supervised by the Management Committee or by a person who shall be designated for such purposes by the Management Committee (the Management Committee or such person so designated, as the case may be, being hereinafter called the “Liquidating Agent”). The Liquidating Agent shall have all of the rights and powers with respect to the assets and liabilities of the Partnership, in connection with the liquidation and dissolution of the Partnership, which the Partners have with respect to the assets and liabilities of the Partnership during the term of the Partnership, and the Liquidating Agent is hereby expressly authorized and empowered to execute any and all documents necessary or desirable to effectuate the dissolution and liquidation of the Partnership and the transfer of any property of the Partnership.
     10.5. Priority on Liquidation. The Liquidating Agent shall, to the extent feasible, liquidate the assets of the Partnership as promptly as shall be practicable. The proceeds of such liquidation shall be applied first, to the payment of matured debts and liabilities of the Partnership (including interest and principal on Partner Loans) and the costs and expenses of dissolution and liquidation of the Partnership, second, to the setting up of any reserves which the Liquidating Agent may deem reasonably necessary for contingent or unforeseen liabilities of the Partnership, and third, to the Partners in the manner provided for Net Capital Receipts pursuant to section 6.2(C) provided, however, that if a Partner is a Noncontributing Partner at the time of liquidation, the balance of such proceeds payable to the Noncontributing Partner shall be distributed to the Contributing Partner to the extent 9f, and on account of, any accrued and unpaid interest on, and the principal on any outstanding Optional Advance. If, immediately following the liquidating distributions described above, and after giving effect to the allocations described in section 6.2, there is a negative balance in the Capital Account of any Partner, each such Partner shall contribute in cash to the Partnership the amount of

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its negative Capital Account balance such amounts shall be distributed to the Partners (if any) then having a positive balance in their respective Capital Accounts, up to the amount of such positive Capital Account balances, with any remaining funds available for distribution being distributed to the Partners in accordance with their respective Partnership Interests, or otherwise paid to creditors of the Partnership. A Partner’s obligation to contribute cash to the Partnership in the amount of the negative balance in its Capital Account shall not be deemed an asset of the Partnership or the personal liability of any such Partner to a third party creditor of the Partnership.
     10.6. Statements on Liquidation. Each of the Partners shall be furnished with a statement which shall set forth the assets and liabilities of the Partnership as at the date of complete liquidation, and the shares of each Partner thereof.
     10.7. Distribution in Kind. No Partner shall have the right to demand and receive property other than cash in payment of any distribution hereunder. Nonetheless, upon the dissolution and liquidation of the Partnership, the Management Committee may make distributions in liquidation in kind. In any such event, the assets so distributed in kind shall be treated for purposes of Article 6 as if sold by the partnership for the fair market value thereof at the time of such distribution, and appropriate preliquidation adjustments shall be made to the Capital Accounts of the Partners to reflect how such gain or loss would have been allocated if such property had been sold at the assigned values.
     10.8. Agreement Governing. No Partner shall have any right to receive the return of its Capital Contributions or any profit of the Partnership other than as provided in this Agreement.
ARTICLE 11.
ACCOUNTING AND REPORTS
     11.1. Books and Records. At all times during the continuance of the Partnership, the Chief Financial Officer shall keep or cause to be kept books of account in which shall be entered fully and accurately each transaction of the Partnership in accordance with generally accepted accounting principles. The books of account, records and all documents and other writings of the Partnership shall be kept and maintained at the principal office of the Partnership. . Each Partner and its representatives shall have access to such books, records and documents during

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reasonable business hours and may inspect and make copies of any of them.
     11.2. Accounting Method. The partnership shall adopt the accrual method of accounting for financial reporting and federal income tax purposes. The financial reports of the Partnership shall be prepared on an accrual basis in accordance with generally accepted accounting principles.
     11.3. Fiscal Year. The fiscal year of the Partnership shall be the calendar year for financial reporting and Federal income tax purposes.
     11.4. Financial Statements. The Chief Financial Officer shall cause statements of the financial position, income (net profit or net loss), changes in Partners’ capital accounts and statement of cash flows of the Partnership to be prepared as of the last day of each month. Copies of such statements shall be furnished to each Partner within 30 days after the end of each month. In addition, the Chief Financial Officer shall cause an unaudited annual statement of the financial position, income (net profit or net loss), changes in Partners’ capital accounts and statement of cash flows of the Partnership to be furnished to each Partner within 45 days after the close of the Fiscal Year. The foregoing statements shall be prepared on the accrual basis of accounting in accordance with GAAP and so certified by the preparer thereof. All such statements of income shall be accompanied by the budgets for the same periods and date and by similar statements for the comparable periods in the prior year.
     11.5. Projections. The Chief Financial Officer shall cause to be prepared quarterly projections of the net income or net loss for the remainder of the year, and in the case of the third quarter of each fiscal year, such projections shall also be prepared for the succeeding Fiscal Year. The Chief Financial Officer shall cause the projections to be furnished to each Partner within 30 days of the end of each quarter.
     11.6. Reports. Copies of all accounts, reports and other writings pertaining to the Partnership furnished by a Partner or the Partnership to any Person shall contemporaneously be delivered to all Partners. Copies of all reports, notices and other writings pertaining to the Partnership furnished to a Partner by the accountants for the Partnership shall promptly be delivered to all the Partners.
     11.7. Auditors. The Management Committee shall engage independent auditors for the Partnership. The independent auditors shall (a) audit the records and accounts of the

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Partnership, and (b) render their opinion on the statement of financial position of the Partnership as of the end of each Fiscal Year and of the results of its operations, the changes in its financial position and its Partner’s Capital Accounts for each Fiscal Year, as prepared by the accountants for the partnership.
     11.8. Required Filings. The Chief Financial Officer shall cause the Partnership to file, on or before the dates the same may be due, giving effect to extensions obtained, all reports, returns and applications which may be required by any governmental or quasi-governmental body having jurisdiction. The Chief Financial” Officer shall use reasonable efforts to furnish draft copies of all such reports, returns and applications to the Partners no less than forty-five (45) days before the same are filed. All reports, returns and applications which may be required by any taxing authority shall be handled by the Tax Matters Partner, subject to the approval of the Management Committee, pursuant to the provisions of Article 11.
     11.9. Section 754 Election. The Partnership shall make the election referred to in Section 754 of the Code, or any corresponding or similar provisions of any subsequent revenue act, or under any similar state statute, if in the reasonable determination of the Management Committee it is determined to be in the best interest of the partnership.
     11.10. Inspection of Records. Each Partner and its authorized certified public accountants and other representatives shall have the right to inspect and examine the books, records, files, securities and other documents of the Partnership and to make copies thereof at all reasonable times and upon prior notice reasonably given.
ARTICLE 12.
INCOME TAX RETURNS, TAX ACCOUNTING, TAX ELECTIONS
     12.1. Tax Returns. Federal, state and local income tax returns of the Partnership shall be prepared at the direction of the Chief Financial Officer and reviewed by the independent auditors designated under Section 10.7 unless otherwise directed by the Management Committee. Copies of “all tax returns of the Partnership shall be furnished for review and approval by each Partner at least 15 days prior to the statutory date for filing such returns, including any extensions thereof. If either Partner shall fail to approve any such return, an application for

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extension of time to file shall be timely filed by the partnership.
     12.2. Tax Matters Partner. LG&E shall be the tax matters partner pursuant to section 623l(a) (7) of the Code, and shall serve in a similar capacity under any applicable state or local law, unless otherwise determined by the Management Committee. The tax matters partner shall not take any action without the concurrence of the other Partner. The tax matters partner shall represent the Partnership on behalf of the Partners in connection with all administrative and judicial proceedings with respect to Partnership affairs involving or resulting from examinations by any and all federal, state or other tax authorities (including, but not limited to, examinations by the Internal Revenue service), and may expend Partnership funds for professional services and costs in connection therewith as it deems advisable and necessary; provided, that, except as otherwise provided in this Agreement or by law, the tax matters partner does not assume any obligations or responsibilities with respect to the foregoing.
     12.3. Miscellaneous.
               (a) Tax decisions and any necessary or available elections for the Partnership, including without limitation any decision whether or not to make an election under section 754 of the Code or any successor provision, shall be made by the Management Committee.
               (b) Prompt Notice shall be given to each Partner upon receipt of advice that the Internal Revenue Service or any other government agency intends to examine any Partnership tax returns. In the event of an audit of the tax returns of the Partnership by the Internal Revenue Service or any other government agency, the Tax Matters Partner under the direction of the Management Committee shall supervise, participate in and retain professionals to participate in such audit and shall contest any assertions by such agency that may be adverse to the Partners or the partnership.
ARTICLE 13.
DISPOSITION OF DOCUMENTS AND RECORDS
     All documents and records of the partnership, including, without limitation, all financial records, vouchers, cancelled checks and bank statements, shall be retained by the applicable Partner responsible therefor for a period of seven years

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(regardless of any termination of the partnership) or such longer period as shall be required by law. In the event that a Partner ceases to be a member of the Partnership at any time “prior to termination of the Partnership, and the Partnership is continued without such withdrawing Partner, the other Partner agrees that all documents and records of the Partnership created prior to the date of the termination of the withdrawing Partner’s interest, shall be maintained by such other Partner, its successors and assigns, for a period of not less than seven years thereafter, or such longer period as may be required by law, and during such period shall be available for inspection and examination by such withdrawing Partner in the same manner as provided in section 11.10.
ARTICLE 14.
CONFIDENTIALITY
     14.1. Provision of Documents. Each Partner shall provide the other Partner with copies of all material Facility documents, including, without limitation, Facility plans, specifications, drawings, studies and permits, Facility legal opinions and legal documents and Facility financing proposals within such Partner’s possession.
     14.2. Confidentiality Obligation. The Partners acknowledge that certain information relating to the Facility which may be provided by each Partner to the other may include confidential or proprietary data. The Partner receiving such information which has been designated as confidential or proprietary by the other Partner shall exercise reasonable precautions to safeguard the confidential and proprietary nature of such information and to prevent the use or disclosure thereof, or any part thereof, by or to any third party, except with the disclosing Partner’s prior written consent. Notwithstanding the foregoing, if a Partner receives a request to disclose such confidential information pursuant to a valid and effective subpoena, civil investigative or discovery demand, interrogatories, request for information or production of documents, order of a court of competent jurisdiction or governmental entity or similar process, such Partner will promptly notify the other in writing of the existence, terms and circumstances surrounding such request, so that the Partner that provided such information may seek a protective order. If such protective order or other remedy is not obtained, the Partner subject to such compulsion will furnish only that portion of the confidential information or take only such action as is legally

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required and will exercise reasonable efforts to obtain an order or other reasonable assurance that confidential treatment will be accorded the confidential information.
     14.3. Termination: Exclusion. The obligations of the Partners under this Article 13 shall terminate five (5) years from the date of receipt of such information and shall not apply with respect to any information disclosed hereunder which: (i) is generally available to the public as of the date of disclosure; (ii) was known by the receiving Partner prior to the date of disclosure and such knowledge was documented in the recipient’s written records prior to such date; (iii) becomes generally available to .the public (provided that such public disclosure did not result, directly or indirectly, from any act, omission or fault of the recipient or any of its agents with respect to such confidential information); or (iv) becomes available to the recipient on a nonconfidential basis from a third party which had a right to disclose it.
     14.4. Survival. The foregoing obligations as to confidentiality shall survive any dissolution of the Partnership.
ARTICLE 15.
COMPETITION, CONFLICTS AND DISCLOSURE
     15.1. Partners. Each of the Partners has been organized solely for the purposes of the business of the partnership and has not engaged, and will not engage, in any activities whatsoever except with respect to such business.
     15.2. Affiliates. Each Partner understands that the Affiliates of the other Partner may be interested, directly or indirectly, in various other businesses and undertakings not included in, and in competition with, the Partnership. Each Partner understands that the conduct of the business of the Partnership may involve business dealings with other businesses or undertakings of Affiliates of the Partners. Except as set forth herein, the Partners hereby agree that the creation of the Partnership and the assumption by each of the Partners of its duties hereunder shall be without prejudice to the rights of its Affiliates to engage in such other interests and activities and to receive and enjoy profits or compensation therefrom, and each Partner waives any rights it might otherwise have to share or participate in such other interests or activities of the Affiliates of the other Partner.

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ARTICLE 16.
MISCELLANEOUS
     16.1. Appraisal. In the event that a determination of the Fair Market Value of the property or of the Partnership Interest of a Partner in the Partnership is required for the purpose of section 10.3 or 10.4, such value, if not otherwise agreed upon by the Partners, shall be determined by firms of recognized national standing in appraising or such other entities as the Management Committee may approve. Each Partner shall appoint one of such firms within 10 days after a request to do so and the third firm shall be selected by the two appointed firms. If a Partner shall fail to appoint a firm timely, the one appointed firm shall select the second firm within 10 days after such Partner’s failure to appoint. If the property being valued is the Partnership Interest of a Partner, the firms shall determine the value of such interest by determining the Fair Market Value of all the Partnership’s assets (net of all partnership liabilities) and multiplying that value by the Partnership Interest being valued. Any valuation made pursuant to this section 16.1 shall be at the sole expense of the Partnership and shall be submitted to the Partners within 30 days after the panel of three firms is selected provided, however, that if any valuation deviates more than ten percent (10) from the median of all such valuations, the “Fair Market Value” shall be deemed to be the average of such median and the valuation closest to the median.
     16.2. Notice. All notices and other communications required or permitted by this Agreement or by law to be served upon or given to a party hereto by any other party hereto shall be deemed duly served and given when received after being delivered by hand or courier service or sent by confirmed telecopy or certified mail, return receipt requested, postage prepaid, addressed as follows:
         
 
   To:   LG&E Roanoke Valley L.P.
 
       c/o LG&E Power 16 Incorporated
 
       2030 Main Street
 
       Irvine, California 92714
 
       Attn: President
 
       Telecopy: 714-955-4363

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    with a copy to:
 
        
 
       LG&E Power Development Inc.
 
       12500 Fair Lakes Circle
 
       Suite 260
 
       Fairfax, Virginia 22033-3822
 
       Attn: President
 
       Telecopy: 703-968-5458
 
        
    To: WEI-Roanoke Valley, L.P.
 
       c/o Westmoreland Energy, Inc.
 
       Citizens Commonwealth Building
 
       300 Preston Avenue, 5th Floor
 
       Charlottesville, VA 22902
 
       Attn: President
 
       Telecopy: 804-980-5225
 
        
    with a copy to:
 
        
 
       Westmoreland Coal Company
 
       700 The Bellevue
 
       200 S. Broad Street
 
       Philadelphia, PA 19102
 
       Attn: General Counsel
 
       Telecopy: 215-546-1584
Notices sent by confirmed telecopy to the applicable address indicated above shall be deemed given on the date of confirmation of receipt of such telecopy, provided said Notice is confirmed by any other means provided hereinabove and such confirmation is sent within one business day thereafter (or, in the case of hand or courier service delivery, received within one business day thereafter). Each Partner may change its address for the purposes of this section 16.2 by giving written Notice of change to the other Partners in the manner provided in this Section 16.2.
     16.3. Number and Gender. Whenever the context requires, references in this Agreement to the singular number shall include the plural, and words denoting gender shall include masculine, feminine and neuter.
     16.4. Partition. Except as specifically authorized by this Agreement, neither Partner shall be entitled to a partition of any property or assets of the Partnership during the term of this Agreement and neither Partner shall make application to any court or authority having jurisdiction in the matter or commence or prosecute any action or proceeding for partition or dissolution of any property or asset of the Partnership or the

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sale thereof upon any breach of the provisions of this section 16.4 by a Partner, the other Partner shall be entitled to a decree or order restraining and enjoining such application, action or proceeding in addition to any rights, remedies at law or at equity such Partner may have or claim.
     16.5. Consequential Damages. Notwithstanding anything to the contrary elsewhere in this Agreement, no Partner or its Affiliates shall, in any event, be liable to any other Partner or its Affiliates for any indirect, incidental, special or consequential damages, including but not limited to, loss of revenue, cost of capital, loss of business reputation or opportunity whether such liability arises out of contract, tort (including negligence), strict liability or otherwise.
     16.6. Modification. No change or modification of this Agreement shall be of any force unless such change or modification is in writing and has been signed by all of the Partners.
     16.7. Waiver. No waiver of any breach of the terms of this Agreement shall be effective unless such waiver is in writing and signed by the Partner against whom such waiver is claimed. No waiver of any breach shall be deemed to be a waiver of any other or subsequent breach.
     16.8. Severability. If any provisions of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.
     16.9. Further Assurances. Each Partner shall execute such deeds, assignments, endorsements, evidences of transfer and other instruments and documents and shall give further assurances as shall be necessary to perform its obligations hereunder.
     16.10. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia, exclusive of choice-of-laws provisions which would direct the application of the laws of another jurisdiction.
     16.11. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which shall constitute One and the same agreement.
     16.12. Limitation on Rights of Others. No Person other than a Partner shall have any legal or equitable right, remedy or claim under or in respect of this Agreement.

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     16.13. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Partners and their respective successors and permitted assigns.
     16.14. Entire Agreement. This Agreement supersedes all prior agreements and understandings among the Partners and their Affiliates with respect to the subject matter hereof, including without limitation the Prior Partnership Agreement and, to the extent applicable to the Facilities, the provisions of the Agreement dated May 1, 1992, as amended, by and between LG&E Development and WEI. To the extent lawful, the relationship of the Partners among themselves shall be governed by the provisions of this Agreement.
     16.15. Captions, Titles and Headings. Captions, titles and headings used in this Agreement are for convenience of reference only and are not interpretive of text.
     16.16. Exhibits. The information and provisions set forth in Exhibit A attached hereto are intended to be fully incorporated herein as if they were included in the body of this Partnership Agreement.
     IN WITNESS WHEREOF, the parties hereto have hereunto affixed their signatures as of the day and year first above written.
                     
        Westmoreland-Roanoke Valley, L.P.,
        a Delaware limited partnership, a
        general partner
Attest:
      By:   WEI-Roanoke Valley, Inc.,    
 
          a Delaware corporation, its    
 
          general partner    
 
                    
 
Matthew S. Sakurada
          By:   /s/ James S. Brown
 
    
Title:                                              
LG&E Roanoke Valley L.P.,
        a California Limited Partnership
        a general partner
 
                    
Attest:       By:   LG&E Power 16 Incorporated,    
            a California corporation, its    
            general partner    
 
                    
/s/ Barry A. Weiss
 
 Barry A. Weiss
          By:   /s/ William R. Ford, Jr.
 
William R. Ford, Jr. 		   
Assistant Secretary
              Treasurer    

- 47 -

EX-3.7 8 d82642exv3w7.htm EX-3.7 exv3w7
Exhibit 3.7
EXECUTION COPY
AMENDMENT NO.1 TO AMENDED AND RESTATED GENERAL PARTNERSHIP
AGREEMENT OF WESTMORELAND-LG&E PARTNERS
     This AMENDMENT NO. 1 TO AMENDED AND RESTATED PARTNERSHIP AGREEMENT OF WESTMORELAND-LG&E PARTNERS (this “Amendment”), dated as of June 29, 2006, is entered into by and between WESTMORELAND-ROANOKE VALLEY, L.P., a Delaware limited partnership (“Westmoreland”), and WESTMORELAND-NORTH CAROLINA POWER, L.L.C., a Virginia limited liability company (“Westmoreland - North Carolina Power”\ such parties to be referenced individually as a “Party” and collectively as the “Parties.”
WITNESSETH
     WHEREAS, Westmoreland-LG&E Partners, a Virginia general partnership (the “Partnership”), owns and operates a 165 MW coal-fired generating facility and a 44 MW coal-fired generating facility, both located in Weldon Township, Halifax County, North Carolina, together known as The Roanoke Valley Energy Facility;
     WHEREAS, LG&E Roanoke Valley L.P., a California limited partnership (“LG&E”), owns a 50% general partnership interest (the “LG&E Interest”) in the Partnership;
     WHEREAS, Westmoreland owns the other 50% general partnership interest in the Partnership;
     WHEREAS, Westmoreland Coal Company (“WCC”) owns 100% of the membership interests in Westmoreland Energy, LLC (“Westmoreland Energy”), which in turn owns (i) a 90% limited partnership interest in Westmoreland, (ii) 100% of the shares of WEI-Roanoke Valley, Inc. (“WEI”) and (iii) 100% of the membership interests in Westmoreland-North Carolina Power, LLC (the “New Westmoreland Partner”);
     WHEREAS, WEI owns a 10% general partnership interest in Westmoreland;
     WHEREAS, the New Westmoreland Partner desires to purchase from LG&E and LG&E desires to sell to the New Westmoreland Partner the LG&E Interest (the “Transfer”);
     WHEREAS, LG&E and Westmoreland are parties to the Amended and Restated General Partnership Agreement of Westmoreland-LG&E Partners, (the “Partnership Agreement”), dated as of December I, 1993; and
     WHEREAS, in connection with the Transfer, the Parties hereto desire to amend certain provisions of the Partnership Agreement in order to (i) reflect the succession of the New Westmoreland Partner to the interests of LG&E and (ii) certificate the Partnership

 

 

Interests (as defined in the Partnership Agreement) in accordance with revised Article 8 of the UCC (as defined below).
     NOW THEREFORE, in consideration of the premises and of the representations, warranties and covenants herein contained, the Parties agree as follows:
     1. All references to LG&E contained in the Partnership Agreement shall, from and after the date hereof, refer to the New Westmoreland Partner.
     2. Amendment of Section 16 of the Partnership Agreement. The Partnership Agreement is hereby amended by adding the following provisions after Section 16.16 thereof:
    “16.17 Partnership Interests Certificated Securities.
(a) Certificated Securities. The Partnership Interests shall constitute “securities” within the meaning of, and governed by, (i) Article 8 of the Uniform Commercial Code (including Section 8-1 02(a)(I 5) thereof) as in effect from time to time in the Commonwealth of Virginia and in the State of New York (the “UCC”) (ii) Article 8 of the UCC of any other applicable jurisdiction that now or hereafter substantially includes the 1994 revisions to Article 8 thereof as adopted by the American Law Institute and the National Conference of Commissioners on Uniform State Laws and approved by the American Bar Association on February 14, 1995. Notwithstanding any provision of this Agreement to the contrary, to the extent that any provision of this Agreement is inconsistent with any non-waivable provision of Article 8 of the UCC, such provision of Article 8 of the DCC shall be controlling.
(b) Issuance of Certificates. The Partnership Interests shall be evidenced by a “Partnership Interest Certificate” executed by each Partner and shall be in substantially the form attached hereto as Exhibit A. The Partnership Interest Certificate shall state on its face (i) the restrictions of transfer set forth in this Agreement, and (ii) that it is subject to the terms and conditions of this Agreement.
(c) Registered Owner. The Partnership shall be entitled to treat the registered owner of a Partnership Interest Certificate as the owner of the Partnership Interests described therein for all purposes and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such Partnership Interests, regardless of whether it shall have actual or other notice thereof, by a Person other than the registered owner of such certificate.

 

 

(d) The Partnership shall issue a new Partnership Interest Certificate in place of any Partnership Interest Certificate previously issued if the original holder thereof:
(i) makes proof by affidavit, in form and substance satisfactory to the Partnership, that such previously issued Partnership Interest Certificate has been lost, stolen or destroyed;
(ii) requests the issuance of a new Partnership Interest Certificate before the Partnership has notice that such previously issued Partnership Interest Certificate has been acquired by a purchaser for value in good faith and without notice of an adverse claim;
(iii) if requested by the Partnership, delivers to the Partnership a bond, in form and substance satisfactory to the Partnership, with such surety or sureties as the Partnership may direct, to indemnify the Partnership against any claim that may be made on account of the alleged loss, destruction or theft of the previously issued Partnership Interest Certificate; and
(iv) satisfies any other reasonable requirements imposed by the Partnership.”
     3. Limited Effect. Except as expressly amended hereby, all of the provisions of the Partnership Agreement shall continue to be, and shall remain, in full force and effect in accordance with their terms.
     4. Counterparts. This Amendment may be executed in any number of counterparts, all of which shall constitute one and the same instrument.
     5. GOVERNING LAW. THIS AMENDMENT SHALL BE INTERPRETED, AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED, IN ACCORDANCE WITH THE LA WS OF THE COMMONWEALTH OF VIRGINIA, EXCLUSIVE OF CONFLICTS OF LAW PROVISIONS WHICH WOULD DIRECT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.
[Signature pages follow.]

 

 

          IN WITNESS WHEREOF, this Amendment has been duly executed by the Parties as of the date set forth at the outset hereof.
                 
    WESTMORELAND-ROANOKE VALLEY, L.P.    
 
                
 
      By:   WEI-ROANOKE VALLEY, INC.,
as general partner		    
 
                
 
      By:   /s/ Roger D. Wiegley
 
Name: Roger D. Wiegley 		   
 
          Title: General Counsel    
 
                
    WESTMORELAND-NORTH CAROLINA POWER, L.L.C.    
 
                
 
      By:   /s/ Doug Kathol
 
Name: Doug Kathol 		   
 
          Title: Vice President    

 

 

Exhibit A
PARTNERSHIP INTEREST CERTIFICATE
WESTMORELAND-LG&E PARTNERS
a Virginia general partnership
Percentage: Cert. No.1
General Partner Interest
     THIS CERTIFIES THAT __________________________ is the owner of a Fifty Percent (50%) Partnership Interest in Westmoreland-LG&E Partners, a Virginia general partnership (the “Partnership”). Such Partnership Interest is not transferable except as provided in the (i) General Partner Security Agreement (as defined in Exhibit X to the Credit Agreement, dated as of December 1, 1993, by and among the Partnership, the Lenders, the Institutional Lenders, the Issuing Bank, the Bond L/C Issuing Bank, the Co-Agents and Agent (each, as defined therein), as amended and as may be further amended, modified or supplemented from time to time) and (ii) Amended and Restated General Partnership Agreement, dated as of December I, 1993, as amended, modified or restated from time to time (as so amended, modified or restated, the “Partnership Agreement”), and is otherwise subject to the terms and conditions of the General Partner Security Agreement and the Partnership Agreement. Capitalized terms used herein, and not otherwise defined, are used as defined in the Partnership Agreement.
     THIS CERTIFICATE is not negotiable or transferable except in connection with the transfer of the Partnership Interest evidenced hereby and as provided in the General Partner Security Agreement and in Section 8 of the Partnership Agreement; provided, however, that this Partnership Interest certificate, when coupled with the partnership power in the form set forth on the reverse hereof, duly executed in blank or assigned to the named assignee, may be deposited with the continuing partners of the Partnership and shall constitute direction by the registered owner of this Partnership Interest certificate to such continuing partners of the Partnership to register the change of ownership of the Partnership Interest evidenced hereby to such assignee and to issue a new certificate reflecting such change of ownership to such assignee. The Partnership Interest evidenced by this Partnership Interest certificate shall constitute “securities” within the meaning of and governed by (i) Article 8 of the Uniform Commercial Code (including Section 8-102(a)(15) thereof) as in effect from time to time in the Commonwealth of Virginia and in the State of New York and (ii) the law of any other applicable jurisdiction that presently or hereafter is substantially similar to such Article 8.

 

 

                     
    WESTMORELAND-LG&E PARTNERS    
 
                    
    By:   WESTMORELAND-ROANOKE VALLEY, L.P.    
        as general partner    
 
                    
        By:   WESTMORELAND-ROANOKE VALLEY, L.P.    
            as general partner

    
 
          By:        
 
             
 
Name: 		   
 
              Title:    
THIS SECURITY HAS NOT BEEN REGISTERED OR QUALIFIED PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAYBE OFFERED AND SOLD ONLY IF SO REGISTERED AND QUALIFIED OR IF AN EXEMPTION FROM SUCH REGISTRATION AND QUALIFICATION EXISTS.

 

 

FORM OF PARTNERSHIP POWER
     FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
     ______________________,all of its partnership interests(s) in Westmoreland-LG&E Partners, a Virginia general partnership, standing in its name on the books of Westmoreland-LG&E Partners, represented by the following certificate(s) ___________________, and irrevocably appoints as ___________________________ as attorney to transfer such certificated securities with full power of substitution in the premises.
         
Date:                      [NAME OF GENERAL PARTNER]
 		  
  By:      
    Name:      
    Title:      
 
In the presence of:

 

EX-3.8 9 d82642exv3w8.htm EX-3.8 exv3w8
Exhibit 3.8
Executed
AMENDMENT NO.2 TO AMENDED AND RESTATED GENERAL PARTNERSHIP
AGREEMENT OF WESTMORELAND-LG&E PARTNERS
     This AMENDMENT NO.2 TO AMENDED AND RESTATED PARTNERSHIP AGREEMENT OF WESTMORELAND-LG&E PARTNERS (this “Amendment”), dated as of July 25, 2006, is entered into by and between WESTMORELAND-ROANOKE VALLEY, L.P., a Delaware limited partnership (“Westmoreland”), and WESTMORELAND-NORTH CAROLINA POWER, L.L.C., a Virginia limited liability company (“Westmoreland - North Carolina Power”\ such parties to be referenced individually as a “Party” and collectively as the “Parties.”
W I T N E S S E T H
     WHEREAS, Westmoreland-LG&E Partners, a Virginia general partnership (the “Partnership”), owns and operates a 165 MW coal-fired generating facility and a 44 MW coal-fired generating facility, both located in Weldon Township, Halifax County, North Carolina, together known as The Roanoke Valley Energy Facility;
     WHEREAS, Westmoreland owns a 50% general partnership interest in the Partnership, and Westmoreland -North Carolina Power owns the other 50% general partnership interest in the Partnership;
     WHEREAS, Westmoreland and Westmoreland- North Carolina Power are parties to the Amended and Restated General Partnership Agreement of Westmoreland LG&E Partners dated as of December 1, 1993, as amended by Amendment No.1 executed as of June 29, 2006 (collectively, the “Partnership Agreement”); and
     WHEREAS, the Parties desire to amend the Partnership Agreement to change the name of the Partnership to “Westmoreland Partners”.
     NOW THEREFORE, in consideration of the premises and of the representations, warranties and covenants herein contained, the Parties covenant and agree as follows:
     1. Amendment of Section 2.2 of the Partnership Agreement. The Partnership Agreement is hereby amended by deleting Section 2.2 in its entirety and substituting therefor the following:
2.2 Partnership Name. The name of the Partnership shall be “Westmoreland Partners.” All business of the Partnership shall be conducted under such name and under such variations thereof as the Partners shall deem necessary or appropriate to comply with the

 

 

requirements of law in any other jurisdiction in which the Partnership may elect to do business.
     3. Name References. All references in the Partnership Agreement to the name “Westmoreland — LG&E Partners” or to the term “Partnership” shall refer to “Westmoreland Partners.”
     4. Limited Effect. Except as expressly amended hereby, all of the provisions of the Partnership Agreement shall continue to be, and shall remain, in full force and effect in accordance with their terms.
     5. Counterparts. This Amendment may be executed in any number of counterparts, all of which shall constitute one and the same instrument.
     6. GOVERNING LAW. THIS AMENDMENT SHALL BE INTERPRETED, AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED, IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF VIRGINIA, EXCLUSIVE OF CONFLICTS OF LAW PROVISIONS THAT WOULD DIRECT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.
     IN WITNESS WHEREOF, this Amendment has been duly executed by the Parties as of the date set forth at the outset hereof.
                 
    WESTMORELAND-ROANOKE VALLEY, L.P.    
 
                
 
      By:   WEI-ROANOKE VALLEY, INC.,    
 
          as general partner    
 
                
 
      By:   /s/ Roger D. Wiegley    
 
         
 
Roger D. Wiegley 		   
 
          Counsel and Assistant Secretary    
 
                
    WESTMORELAND-NORTH CAROLINA POWER, L.L.C.    
 
                
 
      By:   /s/ Douglas P. Kathol
 
Douglas P. Kathol 		   
 
          Manager and Vice President    

 

EX-3.9 10 d82642exv3w9.htm EX-3.9 exv3w9
Exhibit 3.9
     
 
  STATE OF DELAWARE
 
  SECRETARY OF STATE
 
  DIVISION OF CORPORATIONS
 
  FILED 11:30 AM 03/27/2002
 
  020199872 - 2167615
CERTIFICATE OF FORMATION
OF
WESTMORELAND ENERGY LLC
This Certificate of Westmoreland Energy LLC (the “LLC”) is being duly executed and filed by Deborah A. Bentley, as an authorized person, to form a limited liability company under the Delaware Limited Liability Company Act.
FIRST. The name of the limited liability company formed hereby is Westmoreland Energy LLC.
SECOND. The address of the registered office of the LLC in the State of Delaware is c/o The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, County of New Castle, Wilmington, Delaware 19801.
THIRD. The name and address of the registered agent for service of process on the LLC in the State of Delaware is The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, County of New Castle, Wilmington, Delaware 19801.
FOURTH. This Certificate of Formation will be effective as of March 31, 2002.
     
/s/ Deborah A. Bentley
 
Deborah A. Bentley
   
Authorized Person
    

EX-3.10 11 d82642exv3w10.htm EX-3.10 exv3w10
Exhibit 3.10
OPERATING AGREEMENT
OF
WESTMORELAND ENERGY, LLC
This Operating Agreement, dated effective as of January 1,2008 (the “Operating Agreement”) is made by Westmoreland Coal Company, a Delaware corporation (the “Initial Member”), as the sole member of Westmoreland Energy, LLC, a Delaware limited liability company (the “Company”), to set forth the terms and conditions on which the management, business and financial affairs of the Company shall be conducted.
Section 1
Organization and Purpose
1.01 Formation of Company. The Company was organized as a limited liability company under the Delaware Limited Liability Company Act, (the “Act”). A Certificate of Conversion from a Corporation to a Limited Liability company pursuant to Section 266 of the Delaware General Corporation Law and a Certificate of Formation was issued on March 27, 2002.
1.02 Purpose. The primary purpose of the Company is to engage in any lawful act or activity for which limited liability companies may be organized under the Act.
Section 2
Capital Contributions and Allocation of Profits and Losses
2.01 Capital Contributions. Capital Contributions shall be made at such times and in such amounts as the Initial Member shall determine in its sole discretion.
2.02 Membership Interests. The percentage interest of the Initial Member in the Company (the “Membership Interest” or “Interest”) shall be 100%.
2.03 Member. The term “Member” shall include the Initial Member and any other contributor of capital for a Membership Interest, as well as any assignee, transferee, successor, legatee or dispose of all or any part of a Membership Interest, who is admitted to the Company as a Member pursuant to Section 7.
2.04 Distributions. Distributions shall be made by the Company to the Member at such times as the Member shall determine in its sole discretion.
2.05 Member Compensation. The Member may be reasonably compensated for his services to the Company.
2.06 Loans to Company. Nothing in this Operating Agreement shall prevent the Member from making secured or unsecured loans to the Company by agreement with the Company.
Section 3
Rights and Obligations of Member
3.01 Powers and Duties of Member. The Member in its capacity as a member of the Company shall not participate in the business affairs of the Company, transact any business on behalf of the Company, or have any power or authority to bind or obligate the Company. The Member shall, however, be entitled to vote on those matters requiring Member approval set forth in this Operating Agreement.

 

 

3.02 Action by Member. Any action to be taken by the Member may be taken without a meeting if the action is evidenced by one or more written consents describing the action taken, signed by the Member.
3.03 Liability of Member. The Member shall have no individual liability whatsoever, whether to the Company or to the creditors of the Company, for the debts of the Company or any of its losses or liability.
Section 4
Management of Company
4.01 Management of the Company. Pursuant to the Act, as amended from time to time, the Member hereby unanimously agrees that, except as otherwise expressly provided in the Certificate of Formation or this Operating Agreement, the business and affairs of the Company shall be managed under the direction of one or more Managers, who shall be called individually a “Manager,” and collectively, the “Managers.” The Company shall have three (3) Managers.
4.02 General Powers of the Managers. Except as otherwise limited in this Operating Agreement, the Managers shall have exclusive right to manage the business of the Company and to make all decisions regarding the business of the Company. The Managers shall carry out the policies, directions, orders and resolutions of the Member in the manner described in this Operating Agreement and as authorized and directed by the Member from time to time. To the extent not inconsistent with the Act, the Certificate of Formation or the express provisions of this Operating Agreement, each of the Managers shall have the same rights, powers and authority with respect to the Company. The Managers may delegate prescribed functions to any officer, employee, agent or consultant.
4.03 Election, Etc. of Manager. The Member hereby agrees that Keith E. Alessi, David J. Blair and Morris W. Kegley shall serve as Managers of the Company until such time that either resigns or is removed from office in the event by vote of the Member.
4.04 Action by Manager. Unless otherwise expressly provided by the Act, the Certificate of Formation, or the terms of this Operating Agreement, each Manager shall be entitled to exercise all powers set forth in this Section 4 and take any action on behalf of the Company that the Managers are authorize to take pursuant to the Act and the Certificate of Formation. Unless otherwise expressly provided by the Act, the Certificate of Formation, or the terms of this Operating Agreement, the signature of one Manager shall be required on any documents executed and delivered by the Company.
4.05 Reliance by Other Persons. Any Person dealing with the Company, other than a Member, may rely on the authority of the Manager in taking any action in the name of the Company.
4.06 Manager’s Expenses and Fees. A Manager shall be entitled to receive reasonable compensation for services rendered on behalf the Company or in his capacity as a Manager. The Company shall reimburse any Manager for reasonable out-of-pocket expenses which were or are incurred by the Manager on behalf of the Company with respect to the operation of the Company, the on-going conduct of the Company’s business, or the dissolution and winding up of the company and its business.
4.07 Officers. The Managers may appoint officers of the Company with such titles as they may elected, to act on behalf of the Company with such power and authority as the Managers may delegate in writing to any such person. The officers of the Company may consist of a President, one or more Vice Presidents, a Secretary and an Assistant Secretary. The same individual may simultaneously hold more than one office.

 

 

4.08 Election of Officers. All officers of the Company shall be appointed by the Member and shall serve until their removal, resignation, death, disability or withdrawal from the Company. The initial officers are:
     
CEO & President:
  Keith E. Alessi
CFO & Treasurer
  David J. Blair
Secretary
  Diane S. Jones
VP & General Counsel
  Morris W. Kegley
Controller
  Kevin A. Paprzycki
 
4.09 Term of Office. All officers shall hold office until their successors have been duly elected and have qualified, or until removed as hereinafter provided. Any officer may be removed with or without cause by the action of the Member.
 
4.10 Duties of the Officer. The duties and powers of the officers of the Company shall be as generally pertain to their titles or as set by resolution of the Member.
 
4.11 Authority of the Member, the Managers and the Officers to Engage in Other Businesses. The Member, the Managers and the officers may engage in and possess an interest in other business ventures of any nature and description, independently or with others; and neither Company nor the Member shall have any right by virtue of this Operating Agreement, in or to any independent venture or to any income or profits derived therefrom.
 
4.12 Liability of Managers. A Manager shall have no individual liability whatsoever, whether to the Company, to the Member or to the creditors of the Company, for the debts of the Company or any of its losses or liabilities, except to the extent specifically set forth in the Act.
Section 5
Tax Matters
5.01 Tax Status. It is intended that the Company be treated as a single member entity within the meaning of Section 301.7701-2(c)(2) of the Treasury Regulations and, accordingly, disregarded as a separate entity for tax purposes.
5.02 Tax Matters Member. The Initial Member shall be the “Tax Matters Member” for federal income tax purposes, and as such shall represent the Company in dealing with the Internal Revenue Service or other state or federal tax authorities, and shall be the Member to whom all official government tax notices shall be sent.
Section 6
Indemnification
6.01 Indemnification.
     (a) The Company shall indemnify any Person who was or is a party, or is threatened to be made a party, to any threatened pending or completed action, suite or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Company) by reason of the fact that he, she or it is or was a Member, Manager, officer, employee or agent of the company, or who is or was serving at the request of the Company as a manager, director, officer, employee or agent of another limited liability company, corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and

 

 

reasonably incurred by such Person in connection with such action, suit or proceeding, if such Person acted in good faith and in a manner he, she or it reasonably believed to be in, or not opposed to the best interests of the Company, and with respect to any criminal action or proceeding, had no reasonable cause to believe his, her or its conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or on a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the Person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal action or proceeding, that the person had reasonably cause to believe that such Person’s conduct was unlawful.
     (b) The Company shall indemnify any Person who was or is a party, or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Company to procure a judgment in its favor by reason of the fact that such Person is or was a Member, Manager, officer, employee or agent of the Company, or is or was serving at the request of the Company as a manager, director, officer, employee or agent of another limited liability company, corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees) actually and reasonably incurred by such Person in connection with the defense or settlement of such action or suit, if such Person acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Company, provided that no indemnification shall be made with respect to any claim, issue, or matter as to which such Person has been adjudged to have been liable to the Company, unless, and only to the extent that the court in which such action or suit was brought shall determine on application that, despite the adjudication of liability, but in view of all the circumstances of the case, such Person is fairly and reasonably entitled to indemnity for such expenses as the court shall deem proper.
     (c) Any indemnification under the first two paragraphs of this Section 6.01 (unless ordered by a court) shall be made by the Company only as authorized in the specific case, on a determination that indemnification of the person is proper in the circumstances because he has met the applicable standard of conduct set forth in the said two paragraphs. Such determination shall be made by the Managers, unless a Manager was a party to such action, suit or proceeding; in which case by a majority vote of the disinterested Managers.
6.02 Expenses. Expenses incurred in defending a civil or criminal action, suit or proceeding shall be paid by the Company in advance of the final disposition of such action, suit or proceeding on receipt of an undertaking by or on behalf of the Person seeking indemnification to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Company as authorized in this Section 6.
6.03 Non-Exclusivity. The indemnification and advancement of expenses provided by or granted under this Sectional shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any other agreement, vote of disinterested Managers or disinterested member, or otherwise.
6.04 Insurance. The Company shall have power to purchase and maintain insurance on behalf of any Person who is or was a Member, Manager, officer, employee or agent of the Company, or who is or was serving at the request of the Company as a manager, director, officer, employee or agent of another limited liability company, corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against such Person and incurred by such Person in any such capacity, or arising out of his, her or its status as such, whether or not the Company would have the power to indemnify such Person against such liability under the provisions of this Section.

 

 

6.05 Continuation. The indemnification and advancement of expenses provided by or granted under this Section shall continue as to a Person who has ceased to be a Member, Manager, director, officer, employee, or agent and shall inure to the benefit of the heirs, executors, administrators, successors and assigns of that Person.
Section 7
Admission of a New Member
7.01 Admission of a New Member. Additional Membership Interests may be issued and additional Members may be admitted to the Company upon the election and in the sole discretion of the Initial Member. No admission of any person or entity shall be effective unless and until this Operating Agreement is first amended by the Initial member to serve as the operating agreement of a multiple member limited liability company. Other terms applicable to the admission of new Members will be as determined by the Initial member at that time.
Section 8
Dissolution and Termination
8.01 Events Resulting in Dissolution. The Company will be dissolved upon the decision of the Member or as required by the Act.
8.02 Conclusion of Affairs. Except as otherwise provided in this Section 8, in the event of the dissolution of the Company for any reason, the Member shall proceed promptly to wind up the affairs of and liquidate the Company. Except as otherwise provided in this Operating Agreement, the Member shall continue to receive distributions and tax allocations during the period of liquidation in the same manner as before the dissolution.
8.03 Liquidating Distributions. After providing for the payment of all debts and liabilities of the Company and all expenses of liquidation, and subject to the decision of the Member to set up such reserves as it may deem reasonably necessary for any contingencies or unforeseen liabilities or obligations of the Company, the proceeds of the liquidation and any other assets of the company shall be distributed to or for the benefit of the member in accordance with this Operating Agreement.
8.04 Order of Priority in Liquidation. If the Company is terminated, the Member will proceed with the liquidation of the Compa.’1Y as provided in the previous section and the proceeds from the liquidation will be applied as set forth in the Act.
8.05 Termination. Upon completion of the liquidation of the Company and the distribution of all the Company’s assets, the Company shall terminate, and the Member shall execute and record a Certificate of Cancellation of the Company as well as any and all other documents required to effectuate the dissolution and termination of the Company.
Section 9
Notices
9.01 Form; Delivery. Whenever, under the provisions of the Act or other law, the Certificate of Formation or this Operating Agreement, notice is required hereunder to be given to any person or entity, it shall not be construed to mean exclusively personal notice unless otherwise specifically provided, but such notice may be given in writing, by mail, addressed to the Company at its principle office from time to time and to any other person or entity, at his address as it appears on the records of the Company, with postage thereon prepaid. Any such notice shall be deemed to have been given at the time it is deposited,

 

 

postage prepaid, in the United States mail. Notice to a person may also be given personally or by telegram or telecopy sent to his address as it appears on the records of the Company.
9.02 Waiver. Whenever any notice is required to be given under the provisions of the law, the Certificate of Formation or this Operating Agreement, a written waiver thereof, signed by the person or persons entitled to said notice and filed with the records of the meeting, whether before or after the time stated therein, shall be conclusively deemed to be equivalent to such notice.
Section 10
Miscellaneous Provisions
10.01 Bank Accounts. The Company shall maintain such bank accounts as the Member may determine to be appropriate from time to time.
10.02 Books of Account and Records. At all times during the term of the Company, the Member shall keep, or cause to be kept, full and faithful books of account, records and supporting documents, which shall reflect, completely, accurately and in reasonable detail, each transaction of the Company (including, without limitation, transactions with the member). The books of account, records, and all documents and other writings of the Company shall be kept and maintained at the principal office of the Company. The member or its designated representative shall have access to such financial books, records and documents during reasonable business hours and may inspect and make copies of any of them at the Members own expense. The Member shall cause the Company to keep at its principal office the information required by the Act.
10.03 Application of Delaware law. This Operating Agreement, and the interpretation hereof, shall be governed exclusively by its terms and by the laws of the State of Delaware, without reference to its choice of law provisions, and specifically the Act.
10.04 Amendment. This Operating Agreement may only be modified or amended, or the requirements of any provision hereof waived, by a written instrument. Except as otherwise required by law, such amendment or waiver may only be made by and upon the approval of the Initial Member. The Initial Member further agrees to execute any amendment to this Operating Agreement as may be considered necessary by legal counsel to the Company in order for it to be treated as a partnership for federal and state income tax purposes.
10.05 Construction. Whenever the singular number is used in this Operating Agreement and when required by the context, the same shall include the plural, and the masculine gender shall include the feminine and neuter genders, and vice versa.
10.06 Headings. The headings in this Operating Agreement are inserted for convenience only and are in no way intended to describe, interpret, define, or limit the scope, extent or intent of this Operating Agreement or any provision hereof.
10.07 Rights and Remedies Cumulative. The rights and remedies provided by this Operating Agreement are cumulative and the use of anyone right or remedy by any party shall not preclude or waive the right to use any or all other remedies. Such rights and remedies are given in addition to any other rights the parties may have by law, statute, ordinance or otherwise.
10.08 Severability. If any provision of this Operating Agreement or the application thereof to any person or circumstance shall be invalid, illegal or unenforceable to any extent, the remainder of this

 

 

Operating Agreement and the application thereof shall not be affected and shall be enforceable to the fullest extent permitted by law.
10.09 Creditors and Third-Party Beneficiaries. None of the provisions of this Operating Agreement shall be for the benefit of or enforceable by any creditor of the Company. The specific intent of the undersigned is that there shall be no third-party beneficiaries of this Operating Agreement.
10.10 Enforceability. The waiver by any party to this Operating Agreement of a breach of any provision of this Operating Agreement will not operate or be construed as a waiver of any subsequent breach by any party. The invalidity or unenforceability of any particular provision of this Operating Agreement shall not affect the other provisions, and this Operating Agreement shall be construed in all respects as if such invalid and unenforceable provision were omitted.

 

 

10.11 Binding Effect. This Operating Agreement will inure to the benefit of and be binding upon the parties to this Agreement, their successors, heirs, personal representatives and assigns.
10.12 Further Assurances. The Member hereby agrees to execute and deliver such further instruments, provide all information and take or forbear such further acts and things as may be reasonably required or useful to carry out the intent and purpose of this Operating Agreement and as are not inconsistent with the terms hereof.
10.13 Obligation of Good Faith and Reasonableness. The Member agrees to exercise good faith and reasonableness in the interpretation and implementation of the provisions of this Operating Agreement.
10.14 Entire Agreement. This Operating Agreement contains the entire understanding and supersedes any prior written or oral agreements respecting the subject matter within. There are no representations, agreements, arrangements or understandings, oral or written, relating to the subject matter of this Operating Agreement, which are not fully expressed herein.
10.15 Counterparts. This Operating Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF the parties have signed this Operating Agreement as of the date first above written
             
MEMBER:
  Westmoreland Coal Company,
A Delaware Corporation 		   
 
            
 
  BY:   /s/ Keith E. Alessi
 
Name: Keith E. Alessi 		   
 
      Title: CEO and President    
 
            
ACCEPTANCE OF MANAGER APPOINTMENT:   /s/ Keith Alessi    
         
    Keith E. Alessi    
 
            
    /s/ David J. Blair    
         
    David J. Blair    
 
            
    /s/ Morris W. Kegley    
         
    Morris W. Kegley    

 

EX-3.11 12 d82642exv3w11.htm EX-3.11 exv3w11
Exhibit 3.11
Articles of Organization
Of
Westmoreland -North Carolina Power, L.L.C.
     The undersigned sets forth the following for the purpose of forming a limited liability company under the provisions of the Virginia Limited Liability Company Act, Chapter 12, Title 13.1 of the Code of Virginia of 1950, as amended:
     First: The name of the limited liability company shall be Westmoreland — North Carolina Power, L.L.C. (the “Company”).
     Second: The initial registered office of the Company shall be located in the City of Charlottesville, Virginia, and the post office address of the initial registered office of the Corporation is 321 East Main Street Suite 400, Charlottesville, Virginia 22902-3200.
     Third: The initial registered agent of the Company shall be Michael Lepchitz, who is a resident of the Commonwealth of Virginia and a member of the Virginia State Bar, and whose business address is identical with that of the initial registered office of the Company.
     Fourth: The principal office of the Company, where the records will be maintained pursuant to Virginia Code Section 13.1-1028, as amended, shall be located at 2302 Hunters Way Charlottesville, Virginia 22911.
     In Witness Whereof, the undersigned organizer has set forth her signature this 22nd day of March, 2006.
         
 
  /s/ Beth G. Hungate-Noland
 
Beth G. Hungate-Noland, Organizer 		   

EX-3.12 13 d82642exv3w12.htm EX-3.12 exv3w12
Exhibit 3.12
OPERATING AGREEMENT
OF
WESTMORELAND-NORTH CAROLINA POWER, L.L.C.
     This Operating Agreement, dated as of March 29, 2006 (the “Operating Agreement”) is made by Westmoreland Energy, LLC, a Delaware limited liability company (the “Initial Member”), as the sole member of Westmoreland -North Carolina Power, L.L.C., a Virginia limited liability company (the “Company”), to set forth the terms and conditions on which the management, business and financial affairs of the Company shall be conducted.
Section 1
Organization and Purpose
     1.01 Formation of Company. The Company was organized as a limited liability company under the Virginia Limited Liability Company Act, Virginia Code §13.1-1 000, et seq. (the “Act”). The Articles of Organization of the Company (the “Articles”) were filed with the Virginia State Corporation Commission and a Certificate of Organization was issued on March 29, 2006.
     1.02 Purpose. The primary purpose of the Company is to acquire, hold and own a partnership interest in Westmoreland-LG&E Partners, a Virginia general partnership. The Company may further engage in any and all other lawful activities as may be necessary, incidental or convenient to carrying out the business of the Company as contemplated in this Operating Agreement. The Company may also pursue any other lawful activity that is approved by the Initial Member.
Section 2
Capital Contributions and Allocation of Profits and Losses
     2.01 Capital Contributions. Capital Contributions shall be made at such times and in such amounts as the Initial Member shall determine in its sole discretion.
     2.02 Membership Interests. The percentage interest of the Initial Member in the Company (the “Membership Interest” or “Interest”) shall be 100%.
     2.03 Member. The term “Member” shall include the Initial Member and any other contributor of capital for a Membership Interest, as well as any assignee, transferee, successor, legatee or dispose of all or any part of a Membership Interest, who is admitted to the Company as a Member pursuant to Section 7.
     2.04 Distributions. Distributions shall be made by the Company to the Member at such times as the Member shall determine in its sole discretion.
     2.05 Member Compensation. The Member may be reasonably compensated for his services to the Company.
     2.06 Loans to Company. Nothing in this Operating Agreement shall prevent the Member from making secured or unsecured loans to the Company by agreement with the Company.
Section 3
Rights and Obligations of Member
     3.01 Powers and Duties of Member. The Member in its capacity as a member of the Company shall not participate in the business affairs of the Company, transact any business on behalf of the

 

 

Company, or have any power or authority to bind or obligate the Company. The Member shall, however, be entitled to vote on those matters requiring Member approval set forth in this Operating Agreement.
     3.02 Action by Member. Any action to be taken by the Member may be taken without a meeting if the action is evidenced by one or more written consents describing the action taken, signed by the Member.
     3.03 Liability of Member. The Member shall have no individual liability whatsoever, whether to the Company or to the creditors of the Company, for the debts of the Company or any of its losses or liabilities.
Section 4
Management of Company
     4.01 Management of the Company. Pursuant to Virginia Code Section 13.1-1024, as amended from time to time, the Member hereby unanimously agrees that, except as otherwise expressly provided in the Articles or this Operating Agreement, the business and affairs of the Company shall be managed under the direction of one or more Managers, who shall be called individually a “Manager,” and collectively, the “Managers.” The Company shall have three (3) Managers.
     4.02 General Powers of the Managers. Except as otherwise limited in this Operating Agreement, the Managers shall have exclusive right to manage the business of the Company and to make all decisions regarding the business of the Company. The Managers shall carry out the policies, directions, orders and resolutions of the Member in the manner described in this Operating Agreement and as authorized and directed by the Member from time to time. To the extent not inconsistent with the Act, the Articles or the express provisions of this Operating Agreement, each of the Managers shall have the same rights, powers and authority with respect to the Company. The Managers may delegate prescribed functions to any officer, employee, agent or consultant.
     4.03 Election, Etc. of Manager. The Member hereby agrees that Robert H. Holzwarth, Gregory S. Woods and Douglas P. Kathol shall serve as the Managers of the Company until such time that either resigns or is removed from office by vote of the Member. In the event a Manager resigns or is removed, a new Manager shall be elected by vote of the Member.
     4.04 Action by Manager. Unless otherwise expressly provided by the Act, the Articles, or the terms of this Operating Agreement, each Manager shall be entitled to exercise all powers set forth in this Section 4 and to take any action on behalf of the Company that the Managers are authorized to take pursuant to the Act, the Article or this Operating Agreement. Unless otherwise expressly provided by the Act, the Articles, or the terms of this Operating Agreement, the signature of one Manager shall be required on any documents executed and delivered by the Company.
     4.05 Reliance by Other Persons. Any Person dealing with the Company, other than a Member, may rely on the authority of the Manager in taking any action in the name of the Company.
     4.06 Manager’s Expenses and Fees. A Manager shall be entitled to receive reasonable compensation for services rendered on behalf of the Company or in his capacity as a Manager. The Company shall reimburse any Manager for reasonable out-of-pocket expenses which were or are incurred by the Manager on behalf of the Company with respect to the operation of the Company, the on-going conduct of the Company’s business, or the dissolution and winding up of the Company and its business.

Page 2

 

     4.07 Officers. The Managers may appoint officers of the Company with such titles as they may elect, to act on behalf of the Company with such power and authority as the Managers may delegate in writing to any such person. The officers of the Company may consist of a President, one or more Vice Presidents, a Secretary and an Assistant Secretary. The same individual may simultaneously hold more than one office.
     4.08 Election of Officers. All officers of the Company shall be appointed by the Member and shall serve until their removal, resignation, death, disability or withdrawal from the Company. The initial officers are:
     
President:
  Robert W. Holzwart
Vice President:
  Douglas P. Kathol
Vice President:
  Ronald H. Beck
Executive Vice President:
  Gregory S. Woods
Secretary and General Counsel:
  Roger D. Wiegley
Assistant Secretary:
  Donna S. Linthicum
     4.09 Term of Office. All officers shall hold office until their successors have been duly elected and have qualified, or until removed as hereinafter provided. Any officer may be removed with or without cause by the action of the Member.
     4.10 Duties of the Officer. The duties and powers of the officers of the Company shall be as generally pertain to their titles or as set by resolution of the Member.
     4.11 Authority of the Member, the Managers and the Officers to Engage in Other Businesses. The Member, the Managers and the officers may engage in and possess an interest in other business ventures of any nature and description, independently or with others; and neither Company nor the Member shall have any right by virtue of this Operating Agreement, in or to any independent venture or to any income or profits derived there from.
     4.12 Liability of Managers. A Manager shall have no individual liability whatsoever, whether to the Company, to the Member or to the creditors of the Company, for the debts of the Company or any of its losses or liabilities, except to the extent specifically set forth in the Act.
Section 5
Tax Matters
     5.01 Tax Status. It is intended that the Company be treated as a single member entity within the meaning of Section 301.7701-2(c)(2) of the Treasury Regulations and, accordingly, disregarded as a separate entity for tax purposes.
     5.02 Tax Matters Member. The Initial Member shall be the “Tax Matters Member” for federal income tax purposes, and as such shall represent the Company in dealing with the Internal Revenue Service or other state or federal tax authorities, and shall be the Member to whom all official government tax notices shall be sent.

Page 3

 

Section 6
Indemnification
          6.01 Indemnification.
          (a) The Company shall indemnify any Person who was or is a party, or is threatened to be made a party, to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Company) by reason of the fact that he, she or it is or was a Member, Manager, officer, employee or agent of the Company, or who is or was serving at the request of the Company as a manager, director, officer, employee or agent of another limited liability company, corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such Person in connection with such action, suit or proceeding, if such Person acted in good faith and in a manner he, she or it reasonably believed to be in, or not opposed to the best interests of the Company, and with respect to any criminal action or proceeding, had no reasonable cause to believe his, her or its conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or on a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the Person did not act in good faith and in a manner which such Person reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal action or proceeding, that the person had reasonable cause to believe that such Person’s conduct was unlawful.
          (b) The Company shall indemnify any Person who was or is a party, or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Company to procure a judgment in its favor by reason of the fact that such Person is or was a Member, Manager, officer, employee or agent of the Company, or is or was serving at the request of the Company as a manager, director, officer, employee or agent of another limited liability company, corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees) actually and reasonably incurred by such Person in connection with the defense or settlement of such action or suit, if such Person acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Company, provided that no indemnification shall be made with respect to any claim, issue, or matter as to which such Person has been adjudged to have been liable to the Company, unless, and only to the extent that the court in which such action or suit was brought shall determine on application that, despite the adjudication of liability, but in view of all the circumstances of the case, such Person is fairly and reasonably entitled to indem.11ity for such expenses as the court shall deem proper.
          (c) Any indemnification under the first two paragraphs of this Section 6.01 (unless ordered by a court) shall be made by the Company as authorized in the specific case, on a determination that indemnification of the Person is proper in the circumstances because he has met the applicable standard of conduct set forth in the said two paragraphs. Such determination shall be made by the Managers, unless a Manager was a party to such action, suit or proceeding; in which case by a majority vote of the disinterested Managers.
     6.02 Expenses. Expenses incurred in defending a civil or criminal action, suit or proceeding shall be paid by the Company in advance of the final disposition of such action, suit or proceeding on receipt of an undertaking by or on behalf of the Person seeking indemnification to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Company as authorized in this Section 6.
     6.03 Non-Exclusivity. The indemnification and advancement of expenses provided by or granted under this Section shall not be deemed exclusive of any other rights to which those seeking

Page 4

 

indemnification or advancement of expenses may be entitled under any other agreement, vote of disinterested Managers or disinterested Member, or otherwise.
     6.04 Insurance. The Company shall have power to purchase and maintain insurance on behalf of any Person who is or was a Member, Manager, officer, employee or agent of the Company, or who is or was serving at the request of the Company as a manager, director, officer, employee or agent of another limited liability company, corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against such Person and incurred by such Person in any such capacity, or arising out of his, her or its status as such, whether or not the Company would have the power to indemnify such Person against such liability under the provisions of this Section.
     6.05 Continuation. The indemnification and advancement of expenses provided by or granted under this Section shall continue as to a Person who has ceased to be a Member, Manager, director, officer, employee, or agent and shall inure to the benefit of the heirs, executors, administrators, successors and assigns of that Person.
Section 7
Admission of a New Member
     7.01 Admission of a New Member. Additional Membership Interests may be issued and additional Members may be admitted to the Company upon the election and in the sole discretion of the Initial Member. No admission of any person or entity shall be effective unless and until this Operating Agreement is first amended by the Initial Member to serve as the operating agreement of a multiple member limited liability company. Other terms applicable to the admission of new Members will be as determined by the Initial Member at that time.
Section 8
Dissolution and Termination
     8.01 Events Resulting in Dissolution. The Company will be dissolved upon the decision of the Member or as required by the Act.
     8.02 Conclusion of Affairs. Except as otherwise provided in this Section 8, in the event of the dissolution of the Company for any reason, the Member shall proceed promptly to wind up the affairs of and liquidate the Company. Except as otherwise provided in this Operating Agreement, the Member shall continue to receive distributions and tax allocations during the period of liquidation in the same manner as before the dissolution.
     8.03 Liquidating Distributions. After providing for the payment of all debts and liabilities of the Company and all expenses of liquidation, and subject to the decision of the Member to set up such reserves as it may deem reasonably necessary for any contingencies or unforeseen liabilities or obligations of the Company, the proceeds of the liquidation and any other assets of the Company shall be distributed to or for the benefit of the Member in accordance with this Operating Agreement.
     8.04 Order of Priority in Liquidation. If the Company is terminated, the Member will proceed with the liquidation of the Company as provided in the previous section and the proceeds from the liquidation will be applied as set forth in Section 13.1-1049 of the Code of Virginia, as amended.
     8.05 Termination. Upon completion of the liquidation of the Company and the distribution of all the Company’s assets, the Company shall terminate, and the Member shall execute and record a Certificate of Cancellation of the Company as well as any and all other documents required to effectuate the dissolution and termination of the Company.

Page 5

 

Section 9
Notices
     9.01 Form; Delivery. Whenever, under the provisions of the Act or other law, the Articles or this Operating Agreement, notice is required hereunder to be given to any person or entity, it shall not be construed to mean exclusively personal notice unless otherwise specifically provided, but such notice may be given in writing, by mail, addressed to the Company at its principal office from time to time and to any other person or entity, at his address as it appears on the records of the Company, with postage thereon prepaid. Any such notice shall be deemed to have been given at the time it is deposited, postage prepaid, in the United States mail. Notice to a person may also be given personally or by telegram or telecopy sent to his address as it appears on the records of the Company.
     9.02 Waiver. Whenever any notice is required to be given under the provisions of law, the Articles or this Operating Agreement, a written waiver thereof, signed by the person or persons entitled to said notice and filed with the records of the meeting, whether before or after the time stated therein, shall be conclusively deemed to be equivalent to such notice.
Section 10
Miscellaneous Provisions
     10.01 Bank Accounts. The Company shall maintain such bank accounts as the Member may determine to be appropriate from time to time.
     10.02 Books of Account and Records. At all times during the telll1 of the Company, the Member shall keep, or cause to be kept, full and faithful books of account, records and supporting documents, which shall reflect, completely, accurately and in reasonable detail, each transaction of the Company (including, without limitation, transactions with the Member). The books of account, records, and all documents and other writings of the Company shall be kept and maintained at the principal office of the Company. The Member or its designated representative shall have access to such financial books, records and documents during reasonable business hours and may inspect and make copies of any of them at the Member’s own expense. The Member shall cause the Company to keep at its principal office the infolll1ationrequired by Section 13.1-1028 of the Code of Virginia, as amended.
     10.03 Application of Virginia Law. This Operating Agreement, and the interpretation hereof, shall be governed exclusively by its terms and by the laws of the Commonwealth of Virginia, without reference to its choice of law provisions, and specifically the Act.
     10.04 Amendment. This Operating Agreement may only be modified or amended, or the requirements of any provision hereof waived, by a written instrument. Except as otherwise required by law, such amendment or waiver may only be made by and upon the approval of the Initial Member. The Initial Member further agrees to execute any amendment to this Operating Agreement as may be considered necessary by legal counsel to the Company in order for it to be treated as a partnership for federal and state income tax.
     10.05 Construction. Whenever the singular number is used in this Operating Agreement and when required by the context, the same shall include the plural, and the masculine gender shall include the feminine and neuter genders, and vice versa.

Page 6

 

     10.06 Headings. The headings in this Operating Agreement are inserted for convenience only and are in no way intended to describe, interpret, define, or limit the scope, extent or intent of this Operating Agreement or any provision hereof.
     10.07 Rights and Remedies Cumulative. The rights and remedies provided by this Operating Agreement are cumulative and the use of anyone right or remedy by any party shall not preclude or waive the right to use any or all other remedies. Such rights and remedies are given in addition to any other rights the parties may have by law, statute, ordinance or otherwise.
     10.08 Severability. If any provision of this Operating Agreement or the application thereof to any person or circumstance shall be invalid, illegal or unenforceable to any extent, the remainder of this Operating Agreement and the application thereof shall not be affected and shall be enforceable to the fullest extent permitted by law.
     10.09 Creditors and Third-Party Beneficiaries. None of the provisions of this Operating Agreement shall be for the benefit of or enforceable by any creditor of the Company. The specific intent of the undersigned is that there shall be no third-party beneficiaries of this Operating Agreement.
     10.10 Enforceability. The waiver by any party to this Operating Agreement of a breach of any provision of this Operating Agreement will not operate or be construed as a waiver of any subsequent breach by any party. The invalidity or unenforceability of any particular provision of this Operating Agreement shall not affect the other provisions, and this Operating Agreement shall be construed in all respects as if such invalid and unenforceable provision were omitted.
     10.11 Binding Effect. This Operating Agreement will inure to the benefit of and be binding upon the parties to this Agreement, their successors, heirs, personal representatives and assigns.
     10.12 Further Assurances. The Member hereby agrees to execute and deliver such further instruments, provide all information and take or forbear such further acts and things as may be reasonably required or useful to carry out the intent and purpose of this Operating Agreement and as are not inconsistent with the terms hereof.
     10.13 Obligation of Good Faith and Reasonableness. The Member agrees to exercise good faith and reasonableness in the interpretation and implementation of the provisions of this Operating Agreement.
     10.14 Entire Agreement. This Operating Agreement contains the entire understanding and supersedes any prior written or oral agreements respecting the subject matter within. There are no representations, agreements, arrangements or understandings, oral or written, relating to the subject matter of this Operating Agreement, which are not fully expressed herein.
     10.15 Counterparts. This Operating Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.
[SIGNATURES FOLLOW]

Page 7

 

{Signature page to the Operating Agreement ojWestmoreland -North Carolina Power, LLC}
          IN WITNESS WHEREOF the parties have signed this Operating Agreement as of the date first above written.
             
MEMBER:   Westmoreland Energy, LLC    
    a Delaware limited liability company    
 
            
 
  By:
Name: 		  /s/ Roger D. Wiegley
 
Roger D. Wiegley 		   
 
  Title:   General Counsel and Secretary    
         
ACCEPTANCE OF MANAGER APPOINTMENT:
        
 
        
 
  /s/ Robert W. Holzwarth
 
Robert W. Holzwarth 		   
 
        
 
  /s/ Gregory S. Woods
 
Gregory S. Woods 		   
 
        
 
  /s/ Doug P. Kathol
 
Doug P. Kathol 		   

Page 8

EX-3.13 14 d82642exv3w13.htm EX-3.13 exv3w13
Exhibit 3.13
CERTIFICATE OF INCORPORATION
OF
WESTMORELAND-BECKLEY, INC.
     1. Name. The name of the Corporation is Westmoreland-Beckley, Inc.
     2. Registered Office and Agent. The address of the Corporation’s registered office in the state of Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of the Corporation’s registered agent at such address is The Corporation Trust Company.
     3. Purpose. The purposes for which the Corporation is formed are to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware and to possess and exercise all of the powers and privileges granted by such law and any other law of Delaware.
     4. Authorized Capital. The aggregate number of shares of stock which the Corporation shall have authority to issue is one thousand (1,000) shares, all of which are of one class and are designated as Common Stock and each of which has a par value of one dollar ($1.00).
     5. Incorporator. The name and mailing address of the incorporator are Margaret S. Lyon, 3400 Centre Square West, 1500 Market Street, Philadelphia, Pennsylvania 19102.
     6. Bylaws. The board of directors of the Corporation is authorized to adopt, amend or repeal the bylaws of the Corporation, except as otherwise specifically provided therein.
     7. Elections of Directors. Elections of directors need not be by written ballot unless the bylaws of the Corporation shall so provide.
     8. Right to Amend. The Corporation reserves the right to amend any provision contained in this Certificate as the same may from time to time be in effect in the manner now or hereafter prescribed by law, and all rights conferred on stockholders or others hereunder are subject to such reservation.

 

 

     9. Limitation on Liability. The directors of the Corporation shall be entitled to the benefits of all limitations on the liability of directors generally that are now or hereafter become available under the General Corporation Law of Delaware. Without limiting the generality of the foregoing, no director of the Corporation shall be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director’s duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. Any repeal or modification of this section 10 shall be prospective only, and shall not affect, to the detriment of any director, any limitation on the personal liability of a director of the Corporation existing at the time of such repeal or modification.
Dated: December 20, 1988
         
 
  /s/ Margaret S. Lyon
 
Margaret S. Lyon, Incorporator 		   

 

EX-3.14 15 d82642exv3w14.htm EX-3.14 exv3w14
Exhibit 3.14
STATE OF DELAWARE
SECRETARY OF STATE DIVISION
OF CORPORATIONS FILED
10:30 AM 06/11/1990 901625247 -2181866
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
Westmoreland-Beckley, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY:
     FIRST, That the Board of Directors of said corporation, at a meeting duly held, adopted a resolution proposing and declaring advisable the following amendment to the Certificate of Incorporation of said corporation:
          RESOLVED, That the Certificate of Incorporation of Westmoreland-Beckley, Inc. be amended by changing Article 1 thereof so that, as amended, said Article shall be and read as follows:
          “The name of the corporation is WEI-Roanoke Valley, Inc.”
     SECOND, That in lieu of a meeting and vote of stockholders, the sale stockholder has given written consent to said amendment in accordance with the provisions of Section 2280f the General Corporation Law of the State of Delaware.
     THIRD, That the aforesaid amendment was duly adopted in accordance with the applicable provisions of Sections 242 and 228 of the General Corporation Law of the State of Delaware.
     IN WITNESS WHEREOF, said Westmoreland-Beckley, Inc. has caused this certificate to be signed by R. Page Henley, Jr., its Vice President, and attested by Philip D. Weinstock, its Assistant Secretary, this 7th day of June 1990.
             
 
  By:   /s/ R. Page Henley Jr.
 
    
 
            
ATTEST:
         
 
            
By: /s/ Phillip D. Weinstock
 
      
 
 

EX-3.15 16 d82642exv3w15.htm EX-3.15 exv3w15
Exhibit 3.15
BYLAWS
OF
WESTMORELAND-BECKLEY, INC.
ARTICLE I
STOCKHOLDERS
     1.1 Meetings.
          (a) Place. Meetings of the stockholders shall be held at such place as may be designated by the board of directors.
          (b) Annual Meeting. An annual meeting of the stockholders for the election of directors and for other business shall be held on such date and at such time as may be fixed by the board of directors.
          (c) Special Meetings. Special meetings of the stockholders may be called at any time by the president, or the board of directors, or the holders of a majority of the outstanding shares of stock of the Company entitled to vote at the meeting.
          (d) Quorum. The presence, in person or by proxy, of the holders of a majority of the outstanding shares of stock of the Company entitled to vote on a particular matter shall constitute a quorum for the purpose of considering such matter.
     1.2 Voting Rights. Except as otherwise provided herein, in the certificate of incorporation or by law, every stockholder shall have the right at every stockholders’ meeting to one vote for every share standing in his name on the books of the company which is entitled to vote at such meeting. Every stockholder may vote either in person or by proxy.

 

 

ARTICLE II
DIRECTORS
      2.1 Number and Term. The board of directors shall have authority to (i) determine the number of directors to constitute the board and (ii) fix the terms of office of the directors.
     2.2 Meetings.
          (a) Place. Meetings of the board of directors shall be held at such place as may be designated by the board or in the notice of the meeting.
          (b) Regular Meetings. Regular meetings of the board of directors shall be held at such times as the board may designate. Notice of regular meetings need not be given.
          (c) Special Meetings. Special meetings of the board may be called by direction of the president or any two members of the board on three days’ notice to each director, either personally or by mail, telegram or facsimile transmission.
          (d) Quorum. A majority of all the directors in office shall constitute a quorum for the transaction of business at any meeting.
          (e) Voting. Except as otherwise provided herein, in the certificate of incorporation or by law, the vote of a majority of the directors present at any meeting at which a quorum is present shall constitute the act of the board of directors.
     2.3 Committees. The board of directors may, by resolution adopted by a majority of the whole board, designate one or more committees, each committee to consist of one or more directors and such alternate members (also directors) as may be designated by the board. Unless otherwise provided herein, in the absence or disqualification of any member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another director to act at the meeting in the place of any such absent or disqualified member. Except as otherwise provided herein, in the certificate of incorporation

- 2 -

 

or bylaws, any such committee shall have and may exercise the powers of the full board of directors to the extent provided in the resolution of the board directing the committee.
ARTICLE III
OFFICERS
      3.1 Election. At its first meeting after each annual meeting of the stockholders, the board of directors shall elect a president, treasurer, secretary and such other officers as it deems advisable.
     3.2 Authority, Duties and Compensation. The officers shall have such authority, perform such duties and serve for such compensation as may be determined by resolution of the board of directors. Except as otherwise provided by board resolution, (i) the president shall be the chief executive officer of the Company, shall have general supervision over the business and operations of the Company, may perform any act and execute any instrument for the conduct of such business and operations and shall preside at all meetings of the board and stockholders, (ii) the other officers shall have the duties customarily related to their respective offices, and (iii) any vice president, or vice presidents in the order determined by the board, shall in the absence of the president have the authority and perform the duties of the president.
ARTICLE IV
INDEMNIFICATION
     4.1 Right to Indemnification. The Company shall indemnify any person who was or is party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a “proceeding”), by reason of the fact that such person is or was a director or officer of the company or a constituent corporation absorbed in a consolidation or merger, or is or was serving at the request of the company or a constituent corporation absorbed in a consolidation or merger, as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, or is or was a director or officer of the Company serving at its request as an administrator, trustee or other fiduciary of one or more of the employee benefit plans of the Company or other enterprise, against expenses (including

- 3 -

 

attorneys’ fees), liability and loss actually and reasonably incurred or suffered by such person in connection with such proceeding, whether or not the indemnified liability arises or arose from any threatened, pending or completed proceeding by or in the right of the Company, except to the extent that (i) such person is not otherwise indemnified and (ii) such indemnification is not prohibited by applicable law.
     4.2 Advance of Expenses. Expenses incurred by a director or officer of the Company in defending a proceeding shall be paid by the Company in advance of the final disposition of such proceeding subject to the provisions of any applicable statute.
     4.3 Procedure for Determining Permissibility. To determine whether any indemnification or advance of expenses under this Article IV is permissible, the board of directors by a majority vote of a quorum consisting of directors not parties to such proceeding may, and on request of any person seeking indemnification or advance of expenses shall be required to, determine in each case whether the applicable standards in any applicable statute have been met, or such determination shall be made by independent legal counsel if such quorum is not obtainable, or, even if obtainable, a majority vote of a quorum of disinterested directors so directs, provided that, if there has been a change in control of the Company between the time of the action or failure to act giving rise to the claim for indemnification or advance of expenses and the time such claim is made, at the option of the person seeking indemnification or advance of expenses, the permissibility of indemnification or advance of expenses shall be determined by independent legal counsel. The reasonable expenses of any director or officer in prosecuting a successful claim for indemnification, and the fees and expenses of any special legal counsel engaged to determine permissibility of indemnification or advance of expenses shall be borne by the Company.
     4.4 Contractual Obligation. The obligations of the Company to indemnify a director or officer under this Article IV, including the duty to advance expenses, shall be considered a contract between the Company and such director or officer, and no modification or repeal of any provision of this Article IV shall affect, to the detriment of the director or officer, such obligations of the Company in connection with a claim based on any act or failure to act occurring before such modification or repeal.

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     4.5 Indemnification Not Exclusive; Inuring of Benefit. The indemnification and advance of expenses provided by this Article IV shall not be deemed exclusive of any other right to which one indemnified may be entitled under any statute, provision of the Certificate of Incorporation, these bylaws, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person’s official capacity and as to action in another capacity while holding such office, and shall inure to the benefit of the heirs, executors and administrators of any such person.
          4.6 Insurance and Other Indemnification. The board of directors shall have the power to (i) authorize the Company to purchase and maintain, at the Company’s expense, insurance on behalf of the Company and on behalf of others to the extent that power to do so has not been prohibited by statute, (ii) create any fund of any nature, whether or not under the control of a trustee, or otherwise secure any of its indemnification obligations, and (iii) give other indemnification to the extent permitted by statute.
ARTICLE V
TRANSFER OF SHARE CERTIFICATES
          Transfers of share certificates and the shares represented thereby shall be made on the books of the Company only by the registered holder or by duly authorized attorney. Transfers shall be made only on surrender of the share certificate or certificates.
ARTICLE VI
AMENDMENTS
          These bylaws may be amended or repealed at any regular or special meeting of the board of directors by vote of a majority of all directors in office or at any annual or special meeting of stockholders by vote of holders of a majority of the outstanding stock entitled to vote. Notice of any such annual or special meeting of stockholders shall set forth the proposed change or a summary thereof.

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EX-3.16 17 d82642exv3w16.htm EX-3.16 exv3w16
Exhibit 3.16
CERTIFICATE OF
LIMITED PARTNERSHIP
OF
WESTPOWER — BECKLEY, L.P.
     This Certificate of Limited Partnership of Westpower — Beckley, L.P. (the “Partnership”) is being executed by the undersigned for the purpose of forming a limited partnership pursuant to the Delaware Revised Uniform Limited partnership Act.
  1.   The name of the partnership is:
 
      Westpower — Beckley, L.P.
 
  2.   The address of the registered office of the Partnership in Delaware is 1209 Orange Street, Wilmington, New Castle County, Delaware. The Partnership’s registered agent at that address is The Corporation Trust Company.
 
  3.   The name and business address of the general partner is: Westmoreland — Beckley, Inc., c/o Westmoreland Coal company, 700 The Bellevue, Broad Street, Philadelphia, PA 19109.
     IN WITNESS WHEREOF, the undersigned, being the sole general partner of the partnership, has caused this Certificate of Limited Partnership to be duly executed as of the 15th day of March, 1989.
         
  WESTMORELAND — BECKLEY, INC.,
        as general partner
 		  
  By:   /s/ R. Page Henley    
    Title: Vice President   
       
 

EX-3.17 18 d82642exv3w17.htm EX-3.17 exv3w17
Exhibit 3.17
AMENDMENT
TO
CERTIFICATE OF LIMITED PARTNERSHIP
OF
WESTPOWER — BECKLEY, L. P.
     The undersigned, a limited partnership organized under the laws of Delaware, does hereby certify:
     1. The name of the limited partnership is
          WESTPOWER — BECKLEY, L. P.
     2. The limited partnership was organized under the laws of Delaware on July 5, 1989.
     3. Article 1 of the Certificate of Limited Partnership is being amended to read as follows:
          The name of the Partnership is:
          Westmoreland — Roanoke Valley, L.P.
     IN WITNESS WHEREOF, the undersigned, being the sole general partner of the partnership, has caused this certificate to be duly executed as of this 12th day of June 1990.
         
  WEI — ROANOKE VALLEY, INC.,
       GENERAL PARTNER.
 		  
  By:   /s/ R. Page Henley    
    Title: Vice President   
       
 

EX-3.18 19 d82642exv3w18.htm EX-3.18 exv3w18
Exhibit 3.18
 
WESTPOWER — BECKLEY, L.P.
 
AGREEMENT
OF
LIMITED PARTNERSHIP
AMONG
WESTMORELAND ENERGY, INC.
AND
WESTMORELAND — BECKLEY, INC.
 

 

 

WESTPOWER — BECKLEY, L.P.
AGREEMENT OF LIMITED PARTNERSHIP
     THIS IS AN AGREEMENT OF LIMITED PARTNERSHIP (the “Agreement”), between WESTMORELAND — BECKLEY, INC., a Delaware corporation, as the sole general partner (the “General Partner”), and WESTMORELAND ENERGY, INC., a Delaware corporation, as the initial limited partner (the “Limited Partner”). The General Partner and the Limited Partner may be referred to as the “Partners,” or individually as a “Partner.”
WITNESSETH:
     WHEREAS, the parties hereto desire to form a limited partnership to be known as “Westpower - Beckley, L.P.” (the “partnership”) under and pursuant to the Delaware Revised Uniform Limited Partnership Act (the “Act”); and
     WHEREAS, the parties hereto desire to set forth in full all of their agreements and understandings concerning the Partnership.
TERMS
     NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth and other good and valuable consideration, the parties hereto, intending to be legally bound, hereby agree as follows:
Section 1. DEFINITIONS.
     The following terms when used in this Agreement shall have the meanings set forth below:
          “Additional Capital Contributions” means additional contributions in cash or the fair market value of property or services by the Partners to the capital of the Partnership made following the Initial capital Contribution, pursuant to Section 3.4 below.
          “Capital Account” shall have the meaning ascribed to it in section 3.2 hereof.
          “Capital Contributions” means Initial Capital contributions plus Additional Capital Contributions, if any.

 

 

          “Code” means the Internal Revenue Code of 1986, as amended from time to time.
          “Initial Capital Contributions” means the cash or fair market value of property or services contributed to the capital of the Partnership by the Partners as of the date hereof, as set forth on Exhibit 1 hereto, or as of the date of admission of additional Partners.
          “Limited Partner” shall mean the initial Limited Partner and additional Limited Partners, if any, who shall both acquire an interest as a limited partner in the Partnership and be admitted to the Partnership pursuant to this Agreement following the date hereof.
          “Loss” means for each fiscal year of the Partnership an amount equal to the Partnership’s taxable loss for such period, as determined under section 703(a) of the Code.
          “Net Cash Flow” means with respect to any fiscal period shall mean Net Income of the Partnership for the fiscal period and, to the extent the following items are not otherwise reflected in the determination of Net Income, shall be: (1) reduced by (a) any repayments by the Partnership of principal on loans (excluding Partner Loans, the principal amounts of which are payable out of Net Cash Flow), (b) any capital expenditures, prepaid expenses, or other expenses, and (c) reasonable additions to a reserve retained for working capital and contingencies and expenses of the Partnership, including anticipated debt service for the 12 months following any determination of Net Cash Flow; and (2) increased by (a) amounts deducted by the Partnership for depreciation of tangible assets or amortization of capitalized expenditures, other capital accounts or other items, (b) the amounts of any expenses incurred in a fiscal period which were prepaid in a prior fiscal period, and (c) the amounts of any decreases in the reserve retained for working capital and other contingencies.
          “Net Income” means with respect to any fiscal period shall mean the net income or loss of the partnership as reported on the Partnership’s federal tax returns, determined on an accrual basis. Net Income may be estimated by the General Partner in respect of fiscal periods ending prior to the end of the fiscal year in which they occur and any distributions to the Partners made on the basis of such estimated Net Income shall be subject to adjustment as of the end of such fiscal year.
          “Operating Budget” shall have the meaning ascribed to it in section 6.2 hereof.
          “Participation Percentage” means each Partner’s distributive share of the partnership’s income, profits, gains, losses, deductions and credits, as set forth on Exhibit 1 hereto or on any amendment thereof upon admission of

 

 

additional Partners. Participation Percentages shall be adjusted during the term of the Partnership to reflect additional Limited Partners, if any.
          “Partners” and “Partner” means, respectively, all or anyone of the General Partners and Limited Partners. “Partner Loans” means amounts loaned by Partners to the Partnership, pursuant to section 3.3 below.
Section 2. THE PARTNERSHIP
     2.1. Formation. The Partners hereby form a limited partnership pursuant to this Agreement and to the provisions of the Act.
     2.2. Name. The name of the limited partnership shall be “Westpower — Beckley, L.P.”
     2.3. Purposes. The purposes of the Partnership shall be to acquire, own, develop, and operate cogeneration and small power production facilities in the United states of America and to pay all expenses incident thereto, and to finance, lease, maintain, encumber, dispose of, or otherwise deal with cogeneration and small power production facilities. In order to carry out such purposes, the Partnership shall have the power to do any and all acts and things necessary, appropriate, proper, advisable, incidental to or convenient for the furtherance and accomplishment of such purposes, and for the protection and benefit of cogeneration and small power production facilities.
     2.4. Place of Business. The Partnership’s specified office and registered agent will be at the addresses designated on Exhibit 1 hereto. The Partnership may have such other or additional places of business as the General Partner may from time to time designate.
     2.5. Term. The term of the Partnership will commence upon filing of a Certificate of Limited Partnership (the “Certificate”) as required by the Act, and will continue until the Partnership is dissolved pursuant to section 8 hereof.
     2.6. Interest and Authority. The interests of the Partners in the Partnership shall be personal property for all purposes. All property owned by the partnership, whether real or personal, tangible or intangible, shall be owned by the Partnership as an entity, and no Partner individually shall have any ownership of such property. No Partner shall take any action on behalf of or in the name of the partnership or enter into any agreement binding the Partnership except as expressly provided for under this Agreement or expressly authorized or directed by the Partners.
     2.7 Fiscal Year. The fiscal and taxable year of the Partnership shall be the calendar year.

 

 

     2.8 Other Businesses. No Partner shall be prohibited from owning, operating or investing in, either directly or indirectly, any other cogeneration or small power production facility either in the Commonwealth of Virginia or elsewhere, or from engaging or possessing an interest in other businesses of any nature or description, independently or with others, whether or not in competition with the Partnership in any of such cases, and the other Partners shall not have any rights by virtue of this Agreement in respect of such other businesses or the income or profits derived therefrom.
Section 3. CAPITAL CONTRIBUTIONS; PARTNER LOANS
     3.1. Initial Capital Contributions.
          (a) The Limited Partner has, concurrently with the execution of this Agreement, contributed the sum set forth on Exhibit 1 hereto, to the Partnership for the interest being acquired by such Limited Partner, and such Partner’s percentage interest being acquired by the Limited Partner is set forth in Exhibit 1.
          (b) The General Partner has, concurrently with the execution of this Agreement, contributed the sum set forth on Exhibit 1 hereto.
     3.2. Capital Accounts. The Partnership will maintain for each Partner an account to be designated its capital Account, to which will be added the Partner’s (i) Initial Capital Contributions, (ii) Additional Capital Contributions, (iii) the fair market value of any property contributed by the Partner to the Partnership (net of liabilities secured by such property that the Partnership is considered to assume or take subject to under section 752 of the Code), and (iv) distributive share of the income or gain of the Partnership; and against which will be deducted the Partner’s (i) distributive share of distributions and losses of the Partnership, (ii) distributive share of the expenditures of the Partnership described in section 705(a) (2) (B) of the Code, (iii) all cash distributions made to the Partner, and (iv) the fair market value of the property distributed to the Partner by the Partnership (net of liabilities secured by such property that the Partner is considered to assume or to take subject under section 752 of the Code, and after adjusting the Partners’ capital Accounts by the Partners’ shares of the unrealized income, gain, loss and deduction inherent in such property, and not reflected in such Capital Accounts previously, as if the property had been sold for its fair market value). A Partner’s capital Account may, at any point in time, have a negative balance resulting from the Partner’s share of distributions and losses in excess of the Partner’s share of profits, Initial Capital Contributions and Additional Capital contributions. Except as provided in the Act or otherwise in this Agreement, a Partner with a negative balance in its Capital Account shall have no obligation to restore such negative balance.

 

 

     3.3. Use of Capital contributions and Loans. The Capital Contributions of the Partners and all proceeds of any Partnership borrowings shall be used only for Partnership purposes, as shall be determined by the General Partner.
     3.4. Additional Capital contributions and Partners’ Loans.
          (a) No Partner shall be required to make any Additional capital contributions or Partner Loans or any other contributions, loans or advances to the Partnership in excess of such Partner’s Initial Capital Contribution.
          (b) A Partner may make Additional capital Contributions or Partner Loans to the Partnership only if (i) the General Partner approves such contribution or loan in writing and (ii) the General Partner first offers to all Partners (in accordance with their respective Participation Percentages) the opportunity to participate in any such contribution or loan on the same terms and conditions that are offered to another Partner. The foregoing offer by the General Partner shall be forwarded by written notice delivered in accordance with the requirements of Section 9.9 of this Agreement, and must be accepted (or will be deemed to have been rejected) within fifteen (15) days thereafter by a written notice to the General Partner likewise delivered in accordance with the requirements of Section 9.9 hereof. Following the expiration of such fifteen (15) day period, the General Partner shall have the power to accept Additional Capital Contributions or Partner Loans, as the case may be, from any Partner (without regard to the Partner’s participation Percentage or whether any other Partner may have accepted the offer) on the same terms and conditions as were offered to all Partners; provided, however, that if all Partners accept the General Partner’s offer within the time limits specified herein, each Partner shall have the right to contribute or loan, as the case may be, an amount which is proportionate to its participation Percentage.
          (c) If any Partner advances any funds to the Partnership after the date of this Agreement (except in the case of Additional capital Contributions), such advances will be treated as Partner Loans, will not increase such Partner’s Participation Percentage, and the amount thereof will be a debt due from the Partnership to such Partner, entitled to the priorities described in sections 4.1 and 8.2 hereof, and to be repaid with interest at an annual rate equal to one percent (1%) above the “prime rate” of interest being charged from time to time by Fidelity Bank, Philadelphia, Pennsylvania on short-term floating loans to its responsible and substantial commercial borrowers in effect on the date such Partner Loan is made, or such other interest rate as may be agreed upon among the Partners.
     3.5. No Liability. No Partner will in any case be liable for the return of all or any part of the Capital Contributions or Partner Loans, if any, of the other Partners, it being expressly understood that any return of capital or repayment of loans to a Partner will be made solely from the assets of the Partnership.

 

 

     3.6. General Partner as Limited Partner. A General Partner may also be a Limited Partner to the extent that it purchases or becomes a transferee of all or any part of the interest of a Limited Partner, as otherwise allowed by this Agreement, and to such extent shall be treated in all respects as a Limited Partner.
Section 4. DISTRIBUTIONS; ALLOCATIONS
     4.1. Distributions. Net Cash Flow of the Partnership, if any, shall be distributed in available cash to the Partners annually, within 120 days after the end of each fiscal year of the Partnership. All such Net Cash Flow, if any, shall be distributed in the following order of priority: (a) to the Partners in repayment of the entire principal amounts of the Partner Loans, together with all accrued but unpaid interest thereon, first on account of accrued interest thereon and then in repayment of the principal amounts thereof; repayments of Partner Loans shall be applied (i) first, in the order of their seniority and (ii) second, pro rata in accordance with the amounts outstanding under Partner Loans made as of the same date; and, thereafter, (b) to the Partners in accordance with their respective Participation Percentages. No Partner shall be entitled to return of its Capital contribution except as otherwise provided in sections 7.5 and 8.2 hereof. No Partner shall be entitled to interest on its Capital Contribution or any property from the partnership other than cash.
     4.2. Allocations.
          (a) In General. All Partnership items of income, gain, loss, deduction or credit shall be allocated to the Partners in accordance with their respective Participation Percentages for both book and tax purposes; provided, however, that Loss which is attributable to liabilities of the Partnership which are not nonrecourse liabilities within the meaning of Treasury Regulation section 1.704-1(b) (4) (iv) (g) (including Loss attributable to the Partner Loans) shall be allocated to the Partners in the proportion in which they would bear such Loss as provided in said Treasury Regulation section 1.704- l(b) (4) (iv) (g).
          (b) Stop-Loss. Notwithstanding paragraph (a) of this section 4.2, no item of loss, deduction or expense in excess of the sum of:
               (i) (I) the balance of such Limited Partner’s capital Account (which may be a negative number if such Capital Account has a negative balance), reduced by (II) the amount of any distributions that as of the end of the Partnership’s fiscal year (“Fiscal Year”), reasonably are expected to be made to such Limited Partner, to the extent they exceed offsetting increases to such Limited Partner’s Capital Account that reasonably are expected to occur during (or prior to) the Fiscal Years in which such distributions are expected to be made; and

 

 

               (ii) such Limited Partner’s interest in the “minimum gain” of the Partnership, which “minimum gain” of the Partnership shall be the amount, determined at the end of the Fiscal Year, by which the outstanding principal balance of the partnership’s nonrecourse indebtedness (including the portion of any nonrecourse indebtedness of partnerships in which the Partnership, either directly or through intermediate partnerships, is a partner that is allocable to the Partnership) exceeds the adjusted basis (computed for Federal income tax purposes) of the partnership properties securing such indebtedness (or in the case of the Partnership’s share of any nonrecourse indebtedness of another partnership, the other partnership’s adjusted basis of the properties securing such indebtedness),
will be allocated to a Limited Partner, but such item will instead be allocated to the General Partner. If at any time a Limited Partner has a deficit balance in its Capital Account (after reduction by the amount described in clause (II) of subparagraph (i) above) that exceeds the amount described in subparagraph (ii) above, the items of Partnership income, gain, loss, deduction or expense shall be allocated in the manner that reduces such excess as rapidly as possible consistent with the provisions of Income Tax Regulation 1.704-1(b) (2) (ii) (d). To the extent that any item of Partnership income, gain, loss, deduction or expense has been specially allocated pursuant to this Section 4.2(b), subsequent items of income, gain, loss, deduction and expense of the Partnership shall be allocated to the extent possible in a manner, consistent herewith, that negates as rapidly as possible the effect of all previous allocations under this section 4.2(b).
Section 5. MANAGEMENT.
     5.1. General Partner. The Partnership will be managed and the conduct of its business will be controlled solely by the General Partner. The General Partner will possess all of the powers and rights of a partner in a partnership without limited partners and, without limiting the generality of the foregoing, the General Partner shall have the following powers and duties and is authorized on behalf of the Partnership to do the following, subject to the limitations set forth in section 5.2 below:
          (a) Be responsible for the management of the activities and business of the partnership, prepare the Operating Budget, and do all things which, in the opinion of the General Partner, are necessary or desirable to carry on the business of the Partnership, including, without limitation, execution and filing of all certificates and documents necessary or desirable in connection with the formation, continuation and qualification of the Partnership in appropriate jurisdictions.
          (b) Maintain the books of account and records of the partnership, in accordance with generally accepted accounting principles, reflecting the activities of the Partnership.

 

 

          (c) Open and maintain bank accounts in the name of the Partnership in which shall be deposited the Partnership’s funds, without commingling of any other funds.
          (d) Provide office space, secretarial service, telephone service and other related services as needed by the Partnership.
          (e) Borrow, repay and reborrow money for any Partnership purpose and, if security is required therefor, mortgage, pledge or encumber any portion or all of the assets of the Partnership; and execute and deliver, in the name and on behalf of the Partnership, all notes, mortgages, deeds of trust, pledges, and other instruments or documents necessary in connection therewith.
          (f) Pay all taxes and assessments levied against the assets of the Partnership, or any part thereof, sign and file all tax returns, and make any and all elections, as required, under federal, state and local tax laws.
          (g) Employ and dismiss from employment any and all employees, and obtain all management, legal, leasing, accounting, bookkeeping and other services necessary in connection with the business of the Partnership.
          (h) Pay, collect, compromise, arbitrate, resort to legal action or otherwise adjust claims or demands of or against the Partnership.
          (i) Sell, exchange, lease or otherwise dispose of all or any portion of the partnership property on behalf of the Partnership.
          (j) Be reimbursed by the Partnership for all of the General Partner’s costs and expenses incurred on behalf of the Partnership and for all goods and services furnished to the Partnership by the General Partner (including the amount of allocated internal costs including, without limitation, employees’ compensation).
          (k) Generally do all things necessary in connection with any of the foregoing; execute all documents and other instruments on behalf of the Partnership in connection therewith; pay as a partnership expense all costs and expenses connected with the organization, operation or management of the Partnership; and sign or accept all checks, notes and drafts on the Partnership’s behalf (provided, however, that the General Partner shall not receive compensation for its services hereunder other than as provided for above).
     5.2. Major Decisions. Prior to the Partnership’s undertaking any of the following actions, all of the Partners shall consent thereto in writing:

 

 

          (a) Any sale, conveyance, lease, assignment, pledge, hypothecation, transfer or other disposition or encumbrance of any portion of Partnership property with a fair market value in excess of $100,000.
          (b) Any settlement of any dispute or litigation on behalf of the Partnership which would require payment to or by the Partnership of more than $100,000.
          (c) The admission of any new or additional Partner to the Partnership.
          (d) The incurrence, assumption or guarantee of indebtedness in excess of $100,000 in aggregate at any one time outstanding.
          (e) The assumption or creation of any contractual obligation if the anticipated expenditure or liability of the Partnership over the term thereof shall be anticipated to be more than $100,000.
          (f) Implementation of the Operating Budget.
     5.3. No Liability. Neither the General Partner nor any of its directors, officers, employees or agents will be liable to the Partnership or to any Partner for any act or omission performed or omitted by it or any of them in good faith hereunder. The General Partner will not be liable for the return of all or any part of the Initial Capital Contributions, Additional Capital contributions or Partner Loans, if any, of the Limited Partners and any returns of capital or repayment of loans to a Partner will be made solely from the ‘assets of the Partnership; nor will the General Partner be required to pay to the Partnership or to the Limited Partners any capital deficits upon dissolution or otherwise.
     5.4. Limited Partners. The Limited Partners shall not take part in the management or control of the business of the Partnership nor participate, except as expressly provided for in this Agreement, in making the decisions of the Partnership; provided, however, that the Limited Partners may engage in those activities in connection with the Partnership which may be enumerated in the Act as not being within the meaning of “control.” No Limited Partner shall have any personal liability with respect to liabilities and obligations of the partnership, except as may be expressly agreed to by such Limited Partner. No Limited Partner shall take any action which would, if taken, cause a dissolution of the Partnership. The General Partner may participate in, and make contributions to and share in profits, losses, and distributions of the Partnership, as a limited partner.
     5.5. Indemnification. To the fullest extent permitted by law, the Partnership shall indemnify, defend and hold harmless the Partners and their respective directors, officers, shareholders, agents, employees and other representatives (individually an “indemnitee”) against any loss, expense, damage,

 

 

claim, liability, obligation, judgment or injury suffered or sustained by such indemnitee by reason of any act, omission or alleged act or omission by such indemnitee arising out of its activities on behalf of the partnership or in furtherance of the interests of the Partnership, including, without limitation, any judgment, award, settlement, attorneys’ fees and other costs or expenses incurred in connection with the defense of any actual or threatened actions, proceedings or claims in which such indemnitee may be involved, or threatened to be involved, by reasons of such activities, all costs of which shall be charged to and paid by the Partnership as incurred; provided, however, that (a) the acts, omissions or alleged acts or omissions upon which such actual or threatened actions, proceedings or claims are based were not fraudulent or a result of willful misconduct by such indemnitee, and (b) the indemnification hereunder shall be payable only from and out of the assets of the Partnership and not from or out of the assets of any General Partner or Limited Partner.
Section 6. STATEMENTS; OPERATING BUDGET; TAXES
     6.1. Statements. Within 45 days after the end of eachof the first three quarters of each fiscal year of the Partnership and within 90 days after the close of each fiscal year of the Partnership, the General Partner shall furnish to each Partner with respect to such period, a balance sheet, income statement and cash flow statement. The foregoing quarterly financial statements shall be unaudited and the foregoing annual financial statements shall be audited by such certified public accountants as are acceptable to the Partners, and the cost of preparing the statements and such audit shall be borne by the Partnership.
     6.2. Operating Budget. Not less than 45 days prior to the commencement of each fiscal year, the General Partner shall cause to be prepared a proposed operating and capital expenditures budget (“Operating Budget”) for the approval of all Partners setting forth the estimated operating and capital expenditures and receipts of the Partnership for the following year.
     6.3. Inspection. All books of account and all other records of the Partnership (including the certificate, and all amendments thereto, and this Agreement) shall be kept by the General Partner at the Partnership’s principal place of business and may be inspected there at any reasonable time by the Partners.
     6.4. Taxes. The General Partner shall be the “tax matters partner” (as that term is used in the Code) of the Partnership. The General Partner shall cause, at Partnership expense, all tax returns and notices to be prepared and filed for the Partnership and shall furnish copies thereof to all Partners. The General Partner shall make such elections under the Internal Revenue Code, including the method of depreciation and amortization, as all of the Partners shall direct. The General Partner shall furnish to the Partners a copy of the Partnership’s Schedule K-1 (or successor form) with the annual financial statements under section 6.1 above.

 

 

Section 7. ADDITIONAL PARTNERS; TRANSFERS; WITHDRAWAL
     7.1. Additional Partners. Additional limited partners may be admitted to the Partnership only upon the written consent of the General Partner and only on the terms and conditions set forth in the instrument evidencing any such consent.
     7.2. Transfers.
          7.2.1. No Limited Partner shall, without the prior written consent of the General Partner, sell, convey, lease, assign, pledge, hypothecate, transfer or otherwise dispose of or encumber all or any part of its interest in the Partnership, except as otherwise specifically permitted in this Section 7.
          7.2.2. The Partnership interest of any Limited Partner, or any part thereof, may not be transferred or assigned, and no such transferee or assignee may be admitted as a substituted partner of the Partnership, unless: (a) a duly executed and acknowledged instrument of assignment, setting forth the intention of the assignor that the assignee become a substituted limited partner, is delivered to the General Partner; (b) the assignor and assignee execute and acknowledge such other instruments as the General Partner reasonably may deem necessary or desirable to effect such admission, including the written acceptance and adoption by the assignee of the provisions of this Agreement and the assumption of any unperformed obligations of the assignor; (c) an opinion of counsel, satisfactory to the General Partner, that such proposed transfer will not result in (i) violation of any applicable federal or state securities law or regulation, (ii) termination of the partnership under Section 708 of the Code or otherwise result in the Partnership’s being adversely affected under any federal or state tax law or regulation, or (iii) the status of any facility as a “qualifying facility” under the Public utility Regulatory Policies Act of 1978, as amended, being lost or adversely affected; and (d) the General Partner, in its sole discretion, consents to the proposed assignment or transfer and the admission of such assignee to the Partnership.
          7.2.3. All Partners will, no later than 30 days after the date of compliance with the provisions of this section, amend the certificate to reflect the admission of such assignee as a substituted limited partner.
     7.3. Expenses. Expenses of the partnership or of any Partners occasioned by transfers of interests held by Partners shall be reimbursed to the Partnership or Partners, as the case may be, by the substitute Partner.
     7.4. Bankruptcy. Upon the bankruptcy of a Limited Partner, the Partnership interest of such Limited Partner shall be assigned to the General Partner, which shall purchase such interest for an amount equal to the amount credited to such Limited Partner in its Capital Account at the time of such assignment.

 

 

     7.5. Withdrawal of Limited Partner. No Limited Partner may voluntarily withdraw or resign from the partnership without the prior written consent of the General Partner. Upon withdrawal and to the extent permitted by the Act, a Limited Partner shall be entitled to receive the balance, if any, in his Capital Account, within 60 days following the end of the fiscal quarter of the Partnership in which such withdrawal occurs, less any amount which the General Partner deems necessary to reserve therefrom in respect of contingent liabilities or obligations of the Partnership.
     7.6. Withdrawal of General Partner. The General Partner may withdraw or resign from the Partnership upon 30 days’ prior written notice to all of the Partners.
     7.7. Election to Continue the Business of the Partnership. Upon the insolvency or adjudication of bankruptcy of the General Partner, or upon the General Partner’s withdrawal or resignation from the partnership (the “Event Date”), the Partnership shall not terminate but the interest of such General Partner shall forthwith be converted into a limited partnership interest with the same interest in Partnership profits, losses, Net Cash Flow, distributions and Capital Balance as before said conversion. The remaining Partners, upon written notice by any one or more of them to all of the other Partners, may hold a meeting and elect by a majority vote of interests in the Partnership of Limited Partners, an entity to serve as the general partner subject to all the terms, conditions and liabilities to which the former General Partner was subject, and to continue the Partnership for the remainder of the term. In the event that the Partners fail to elect a successor general partner within 6 months of the Event Date, the Partnership shall be dissolved and liquidated as hereinafter set forth. The procedures set forth in this section 7.7 shall be applicable to the original General Partner and any successor general partner serving hereunder.
Section 8. Dissolution
     8.1. Dissolution. The Partnership will be dissolved upon the occurrence of any of the following:
          (a) December 31, 2038; or
          (b) the insolvency or adjudication of bankruptcy of the General Partner or upon the withdrawal or resignation of the General Partner, if the other Partners do not elect to continue the business of the partnership and select a successor general partner pursuant to section 7.7 hereof; or
          (c) the unanimous agreement of all the Partners to dissolve the Partnership; or

 

 

          (d) the sale, transfer or other disposition of all or substantially all of the assets of the Partnership.
     8.2. Distributions. Upon the dissolution of the Partnership, the General Partner shall wind up the Partnership, liquidate its property and terminate the Partnership. Upon the winding up of the Partnership, the assets of the Partnership shall be distributed in the following order of priority: (a) first, to the expenses of liquidation; (b) second, to the creditors of the Partnership (other than creditors who are Partners); (c) third, to the setting up of such reserves as may be reasonably necessary for any contingent or unforeseen liabilities or obligations of the Partnership arising out of or in connection with the Partnership business; provided that any such reserve will be held for the purpose of disbursing such reserves in payment of such contingencies and, at the expiration of such period as appears reasonable, the balance remaining, if any, shall be distributed in the manner hereinafter provided; (d) fourth, to the repayment of Partner Loans (in the order set forth in section 4.1(a) above); and (e) fifth, to all of the Partners in repayment of their then positive outstanding Capital Accounts, all in proportion to the respective amounts of each Partner’s Capital Accounts. For purposes of determining the Partner’s Capital Accounts under this section 8.2, the Capital Accounts will first be adjusted by the Partners’ shares of income, gains and losses realized on the liquidation of the assets of the Partnership. If any of the assets are to be distributed in kind, the fair market value of such assets shall be determined as of the time of distribution. There shall be allocated among the Partners, in accordance with Section 4.2, the amount of gain or loss, if any, which would have been realized by the Partnership if such assets had been sold by the Partnership for prices equal to their respective fair market values as so determined.
     8.3. Actions of the General Partner; statements of Account. During the period of liquidation (which will be such reasonable time as may be required for the orderly completion of liquidation and distribution as set forth above), the General Partner, as liquidating trustee for the benefit of all Partners as tenants in common, will take any and all action necessary or appropriate to complete such liquidation and distribution as provided in this section 8, having for such purpose all of the powers numerated in Section 5 appropriate to accomplish the same. The General Partner promptly will prepare a final statement of the accounts of the Partnership as of the date of termination (such statement to set forth the actual or contemplated application and distribution of the assets of the Partnership), and will furnish a copy thereof to each Partner. Upon completion of the distribution as required hereby, a further statement for the period of liquidation will be so prepared by the General Partner and furnished to each Partner.
     8.4. Property. No Partner may demand or receive property other than cash in return for his contributions, loans or advances at any time or upon dissolution as provided herein, except upon the prior written approval of the General Partner.

 

 

     8.5. Cancellation. Upon the dissolution of the Partnership, its certificate shall be cancelled as required by the Act.
Section 9. GENERAL
     9.1. Filings. The Partners agree that: (a) a signed and acknowledged certificate shall be filed as required by the Act; and (b) they shall sign, acknowledge and file from time to time all writings to amend the certificate as are required by the Act.
     9.2. Power of Attorney. The Limited Partners, by their execution of this Agreement, hereby irrevocably constitute and appoint the General Partner as their true and lawful attorney to make, execute, sign, acknowledge and file and record in their name; place and stead: (a) the Certificate, as well as amendments thereto and a statement of cancellation thereof under the laws of any state or jurisdiction, as necessary; and (b) any other instrument or document which may be required to be filed by the Partnership under the laws of the United states or any state, or by any governmental agency, or which the General Partner deems advisable to file.
     9.3. Bank Accounts. All funds of the partnership will be deposited in such Partnership bank account or accounts as designated from time to time by the General Partner. Withdrawals from any such bank account or accounts will be made upon such signature or signatures as the General Partner may from time to time designate.
     9.4. Partial Invalidity. The invalidity or unenforceability of a portion of this Agreement will not affect the validity or enforceability of the remainder hereof.
     9.5. Governing Law; Binding Effect. This Agreement will be governed by the laws of the state of Delaware and will bind and inure to the benefit of the successors and assigns of the Partners.
     9.6. Amendment. This Agreement may be amended only by the written consent of all of the Partners.
     9.7. Captions. All article, section or paragraph titles or captions contained in this Agreement are for convenience only and are not deemed part of the context hereof.
     9.8. Pronouns. All pronouns and any variations thereof are deemed to refer to the masculine, feminine, neuter, singular or plural as the identity of the person or persons may require.
     9.9. Notices. To be effective hereunder, notices shall be in writing and shall be deemed to have been duly given when personally delivered or, if mailed,

 

 

when mailed by U.S. certified or registered mail, postage prepaid, to the other parties at the addresses set forth on Exhibit I hereto (or at such other address as shall be given in writing by a party to the other parties).
     9.10. Limitation on Rights of Others. No person other than a Partner shall have any legal or equitable right, remedy, or claim under or in respect to this Agreement.
     9.11. Entire Agreement. This Agreement and the Exhibits hereto contain the entire understanding among the Partners, and supersedes any prior understandings and agreements among them respecting the subject matter hereof.
     IN WITNESS WHEREOF, the parties have executed this Agreement as of this 15th day of March, 1989.
                     
Limited Partner       General Partner    
 
                    
WESTMORELAND ENERGY, INC       WESTMORELAND ENERGY, INC    
 
                    
By:
  /s/ Larry Zalkin
 
Title: Director 		      By:   /s/ R. Page Henley
 
Title: Vice President 		   

 

 

EXHIBIT 1
                 
Name & Address   Initial        
Of   Capital     Participation  
Limited Partner   Contribution     Percentage  
Westmoreland Energy, Inc.
c/o Westmoreland Coal Company
700 The Bellevue
200 South Broad Street
Philadelphia, PA 19102
   $ 10       1 %
 
                
Name & Address
of the
General Partner
                
Westmoreland — Beckley, Inc.
c/o Westmoreland Coal Company
700 The Bellevue
200 South Broad Street
Philadelphia, PA 19102
   $ 990       99 %
 
            
 
                
AGGREGATE CAPITAL
CONTRIBUTIONS
OF ALL PARTNERS
   $ 1,000       100 %
Specified Office
of the Partnership
c/o Westmoreland Coal Co.
700 The Bellevue
200 South Broad Street
Philadelphia, PA 19102
Registered Agent
of the Partnership
The Corporation Trust Company
1209 Orange Street
Wilmington
New Castle County
Delaware

 

 

FIRST AMENDMENT TO AGREEMENT OF LIMITED
PARTNERSHIP OF WESTPOWER — BECKLEY. L.P.
     This is the First Amendment to the Partnership Agreement (the “Agreement”) dated as of March 15, 1989 of West power — Beckley, L.P., a Delaware limited partnership (the “Partnership”).
     Capitalized terms used but not defined herein shall have the respective meanings ascribed to them in the Agreement.
     Intending to be legally bound, the undersigned agree as follows:
     1. The name of the Partnership’s sole general partner, Westmoreland — Beckley, Inc., has, as of June 11, 1990, been amended to read, “WEI — Roanoke Valley, Inc.”, and hereinafter, all references to the sole general partner shall bear that amended name.
     2. The name of the Partnership, has, pursuant to the laws of Delaware, as of June 13, 1990, been amended to read, “Westmoreland — Roanoke Valley, L.P.”, and hereinafter, all references to the Partnership shall bear that amended name.
     3. Effective September 30, 1990, by Instrument of Assignment and Assumption, WEI — Roanoke Valley, Inc. has assigned, conveyed and transferred to Westmoreland Energy, Inc., the Partnership’s sole limited partner, 89% of its interest in the Partnership, reducing WEI — Roanoke Valley, Inc.’s general partnership interest to 10%.
     4. Effective September 30, 1990, Westmoreland Energy, Inc. has accepted the assignment of 89% of WEI — Roanoke Valley, Inc.’s interest in the Partnership, increasing Westmoreland Energy, Inc.’s limited partnership interest to 90%.
     5. Except for the provisions of the above paragraphs, the Agreement shall continue in full force and effect in accordance with its terms.
     In witness whereof, the undersigned have executed this Amendment on the 30th day of September, 1990.
                 
LIMITED PARTNER       GENERAL PARTNER
 
                
WESTMORELAND ENERGY, INC.       WEI — ROANOKE VALLEY, INC.
 
                
BY:
  /s/ R. Page Henley
 
TITLE 		      By:   /s/ James S. Brown
 
TITLE
 
              James S. Brown
 
              Vice President

 

 

 
WESTMORELAND-ROANOKE VALLEY, L.P.
 
AGREEMENT
OF
LIMITED PARTNERSHIP
BETWEEN
WESTMORELAND ENERGY, INC.
AND
WEI-ROANOKE VALLEY, INC.

 

 

WESTMORELAND-ROANOKE VALLEY, L.P.
AGREEMENT OF LIMITED PARTNERSHIP
     THIS IS AN AGREEMENT OF LIMITED PARTNERSHIP (the “Agreement”), between WEI-ROANOKE VALLEY, INC., (the “General Partner”), and WESTMORELAND ENERGY, INC. (the “Limited Partner”). The General Partner and the Limited Partner may be referred to as the “Partners,” or individually as a “Partner.”
WITNESSETH:
     WHEREAS, the parties hereto desire to form a limited partnership (the “Partnership”) under and pursuant to the Delaware Revised Uniform Limited Partnership Act (the “Act”); and
     WHEREAS, the parties hereto desire to set forth in full all of their agreements and understandings concerning the Partnership.
TERMS
     NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth and other good and valuable consideration, the parties hereto, intending to be legally bound, hereby agree as follows:
Section I. DEFINITIONS.
     The following terms when used in this Agreement shall have the meanings set forth below:
     “Additional Capital Contributions” means additional contributions in cash or the fair market value of property or services by the Partners to the capital of the Partnership made following the Initial Capital Contribution, pursuant to Section 3.4 below.
     “Capital Account” shall have the meaning ascribed to it in Section 3.2 hereof.
     “Capital Contribution” means Initial Capital Contributions plus Additional Capital Contributions, if any.
     “Code” means the Internal Revenue Code of 1986, as amended from time to time.

 

 

     “Initial Capital Contributions” means the cash or fair market value of property or services contributed to the capital of the Partnership by the Partners as of the date hereof, as set forth on Exhibit 1 hereto, or as of the date of admission of additional Partners.
     “Limited Partner” shall mean the initial Limited Partner and additional Limited Partners, if any, who shall both acquire an interest as a limited partner in the Partnership and be admitted to the Partnership pursuant to this Agreement following the date hereof.
     “Loss” means for each fiscal year of the Partnership an amount equal to the Partnership’s taxable loss for such period, as determined under Section 703 (a) of the Code.
     “Net Cash Flow” means with respect to any fiscal period the Net Income of the Partnership for the fiscal period and, to the extent the following items are not otherwise reflected in the determination of Net Income, shall be: (1) reduced by (a) any repayments by the Partnership of principal on loans (excluding Partner Loans, the principal amounts of which are payable out of Net Cash Flow), (b) any capital expenditures, prepaid expenses, or other expenses, and (c) reasonable additions to a reserve retained for working capital and contingencies and expenses of the Partnership, including anticipated debt service for the 12 months following any determination of Net Cash Flow; and (2) increased by (a) amounts deducted by the Partnership for depreciation of tangible assets or amortization of capitalized expenditures, other capital accounts or other items, (b) the amounts of any expenses incurred in a fiscal period which were prepaid in a prior fiscal period, and (c) the amounts of any decreases in the reserve retained for working capital and other contingencies.
     “Net Income” means with respect to any fiscal period the net income or loss of the Partnership as reported on the Partnership’s federal tax returns, determined on an accrual basis. Net Income may be estimated by the General Partner in respect of fiscal periods ending prior to the end of the fiscal year in which they occur and any distributions to the Partners made on the basis of such estimated Net Income shall be subject to adjustment as of the end of such fiscal year.
     “Operating Budget” shall have the meaning ascribed to it in Section 6.2 hereof.
     “Participation Percentage” means each Partner’s distributive share of the
Partnership’s income, profits, gains, losses, deductions and credits, as set forth on Exhibit 1 hereto or on any amendment thereof upon admission of additional Partners. Participation Percentages shall be adjusted during the term of the Partnership to reflect additional Limited Partners, if any.

 

 

     “Partners” and “Partner” means, respectively, all or anyone of the General Partners and Limited Partners.
     “Partner Loans” means amounts loaned by Partners to the Partnership, pursuant to Section 3.3 below.
Section 2. THE PARTNERSHIP
     2.1 Formation. The Partners hereby form a limited partnership pursuant to this Agreement and to the provisions of the Act.
     2.2 Name. The name of the limited partnership shall be “Westmoreland — Roanoke Valley, L.P.”
     2.3 Purposes. The purposes of the Partnership shall be to acquire, own, develop, and operate cogeneration and small power production facilities in the United States of America and to pay all expenses incident thereto, and to finance, lease, maintain, encumber, dispose of, or otherwise deal with cogeneration and small power production facilities. In order to carry out such purposes, the Partnership shall have the power to do any and all acts and things necessary, appropriate, proper, advisable, incidental to or convenient for the furtherance and accomplishment of such purposes, and for the protection and benefit of cogeneration and small power production facilities.
     2.4 Place of Business. The Partnership’s specified office and registered agent will be at the addresses designated on Exhibit 1 hereto. The Partnership may have such other or additional places of business as the General Partner may from time to time designate.
     2.5 Thrill. The term of the Partnership will commence upon filing of a Certificate of Limited Partnership (the “Certificate”) as required by the Act, and will continue until the Partnership is dissolved pursuant to Section 8 hereof.
     2.6 Interest and Authority. The interests of the Partners in the Partnership shall be personal property for all purposes. All property owned by the Partnership, whether real or personal, tangible or intangible, shall be owned by the Partnership as an entity, and no Partner individually shall have any ownership of such property. No Partner shall take any action on behalf of or in the name of the Partnership or enter into any agreement binding the Partnership except as expressly provided for under this Agreement or expressly authorized or directed by the Partners.
     2.7 Fiscal Year. The fiscal and taxable year of the Partnership shall be the calendar year.

 

 

2.8 Other Businesses. No Partner shall be prohibited from owning, operating or investing in, either directly or indirectly, any other cogeneration or small power production facility either in the Commonwealth of Virginia or elsewhere, or from engaging or possessing an interest in other businesses of any nature or description, independently or with others, whether or not in competition with the Partnership in any of such cases, and the other Partners shall not have any rights by virtue of this Agreement in respect of such other businesses or the income or profits derived therefrom.
Section 3. CAPITAL CONTRIBUTIONS; PARTNER LOANS
     3.1 Initial Capital Contributions.
     (a) The Limited Partner has, concurrently with the execution of this Agreement, contributed the sum set forth on Exhibit 1 hereto, to the Partnership for the interest being acquired by such Limited Partner, and such Partner’s percentage interest being acquired by the Limited Partner is set forth in Exhibit 1.
     (b) The General Partner has, concurrently with the execution of this Agreement, contributed the sum set forth on Exhibit 1 hereto.
     3.2 Capital Accounts. The Partnership will maintain for each Partner an account to be designated its Capital Account, to which will be added the Partner’s (i) Initial Capital Contributions, (ii) Additional Capital Contributions, (iii) the fair market value of any property contributed by the Partner to the Partnership (net of liabilities secured by such property that the Partnership is considered to assume or take subject to under Section 752 of the Code), and (iv) distributive share of the income or gain of the Partnership; and against which will be deducted the Partner’s (i) distributive share of distributions and losses of the Partnership, (ii) distributive share of the expenditures of the Partnership described in Section 705(a) (2) (B) of the Code, (iii) all cash distributions made to the Partner, and (iv) the fair market value of the property distributed to the Partner by the Partnership (net of liabilities secured by such property that the Partner is considered to assume or to take subject under Section 752 of the Code, and after adjusting the Partners’ Capital Accounts by the Partners’ shares of the unrealized income, gain, loss and deduction inherent in such property, and not reflected in such Capital Accounts previously, as if the property had been sold for its fair market value). A Partner’s Capital Account may, at any point in time, have a negative balance resulting from the Partner’s share of distributions and losses in excess of the Partner’s share of profits, Initial Capital Contributions and Additional Capital Contributions. Except as provided in the Act or otherwise in this Agreement, a Partner with a negative balance in its Capital Account shall have no obligation to restore such negative balance.

 

 

     3.3 Use of Capital Contributions and Loans. The Capital Contributions of the Partners and all proceeds of any Partnership borrowings shall be used only for Partnership purposes, as shall be determined by the General Partner.
     3.4 Additional Capital Contributions and Partners’ Loans.
          (a) No Partner shall be required to make any Additional Capital Contributions or Partner Loans or any other contributions, loans or advances to the Partnership in excess of such Partner’s Initial Capital Contribution.
          (b) A Partner may make Additional Capital Contributions or Partner Loans to the Partnership only if (i) the General Partner approves such contribution or loan in writing and (ii) the General Partner first offers to all Partners (in accordance with their respective Participation Percentages) the opportunity to participate in any such contribution or loan on the same terms and conditions that are offered to another Partner. The foregoing offer by the General Partner shall be forwarded by written notice delivered in accordance with the requirements of Section 9.9 of this Agreement, and must be accepted (or will be deemed to have been rejected) within fifteen (15) days thereafter by a written notice to the General Partner likewise delivered in accordance with the requirements of Section 9.9 hereof. Following the expiration of such fifteen (15) day period, the General Partner shall have the power to accept Additional Capital Contributions or Partner Loans, as ul.e case may be, from any Partner (without regard to the Partner’s Participation Percentage or whether any other Partner may have accepted the offer) on the same terms and conditions as were offered to all Partners; provided, however, that if all Partners accept the General Partner’s offer within the time limits specified herein, each Partner shall have the right to contribute or loan, as the case may be, an amount which is proportionate to its Participation Percentage.
          (c) If any Partner advances any funds to the Partnership after the date of this Agreement (except in the case of Additional Capital Contributions), such advances will be treated as Partner Loans, will not increase such Partner’s Participation Percentage, and the amount thereof will be a debt due from the Partnership to such Partner, entitled to the priorities described in Sections 4.1 and 8.2 hereof, and to be repaid with interest at an annual rate equal to one percent (1% ) above the “prime rate” of interest being charged form time to time by Fidelity Bank, Philadelphia, Pennsylvania on short-term floating loans to its responsible and substantial commercial borrowers in effect on the date such Partner Loan is made, or such other interest rate as may be agreed upon among the Partners.
     3.5 No Liability. No Partner will in any case by liable for the return of all or any part of the Capital Contributions or Partner Loans, if any, of the other Partners, it being expressly understood that any return of capital or repayment of loans to a Partner will be made solely from the assets of the Partnership.

 

 

     3.6 General Partner as Limited Partner. A General Partner may also be a Limited Partner to the extent that it purchases or becomes a transferee of all or any part of the interest of a Limited Partner, as otherwise allowed by this Agreement, and to such extent shall be treated in all respects as a Limited Partner.
Section 4. DISTRIBUTIONS · ALLOCATIONS
     4.1 Distributions. Net Cash Flow of the Partnership, if any, shall be distributed in available cash to the Partners annually, within 120 days after the end of each fiscal year of the Partnership. All such Net Cash Flow, if any, shall be distributed in the following order of priority: (a) to the Partners in repayment of the entire principal amounts of the Partner Loans, together with all accrued but unpaid interest, first on account of accrued interest thereon and then in repayment of the principal amounts thereof; repayments of Partner Loans shall be applied (i) first, in the order to their seniority and (ii) second, pro rata in accordance with the amounts outstanding under Partner Loans made as of the same date; and, thereafter, (b) to the Partners in accordance with their respective Participation Percentages. No Partner shall be entitled to return of its Capital Contribution except as otherwise provided in Sections 7.5 and 8.2 hereof. No Partner shall be entitled to interest on its Capital Contribution or any property from the Partnership other than cash.
     4.2 Allocations.
          (a) In General. All Partnership items of income, gain, loss, deduction or credit shall be allocated to the Partners in accordance with their respective Participation Percentages for both book and tax purposes; provided, however, that Loss which is attributable to liabilities of the Partnership which are not non-recourse liabilities within the meaning of Treasury Regulation Section 1.704-1 (b) (4) (iv) (g) (including Loss attributable to the Partner Loans) shall be allocated to the Partners in the proportion in which they would bear such Loss as provided in said Treasury Regulation Section 1.704-1 (b) (4) (iv) (g).
          (b) Stop-Loss. Notwithstanding paragraph (a) of this Section 4.2, no item of loss, deduction or expense in excess of the sum of:
          (i) (I) the balance of such Limited Partner’s Capital Account (which may be a negative number if such Capital Account has a negative balance), reduced by (II) the amount of any distributions that as of the end of the Partnership’s fiscal year (“Fiscal Year”), reasonably are expected to be made to such Limited Partner, to the extent they exceed offsetting increases to such Limited Partner’s Capital Account that reasonably are expected to occur during (or prior to) the Fiscal Years in which such distributions are expected to be made; and
          (ii) such Limited Partner’s interest in the “minimum gain” of the Partnership, which “minimum gain” of the Partnership shall be the amount,

 

 

determined at the end of the Fiscal Year, by which the outstanding principal balance of the Partnership’s non-recourse indebtedness (including the portion of any non-recourse indebtedness of partnerships in which the Partnership, either directly or through intermediate partnerships, is a partner that is allocable to the Partnership) exceeds the adjusted basis (computed for Federal income tax purposes) of the Partnership properties securing such indebtedness (or in the case of the Partnership’s share of any non-recourse indebtedness of another partnership, the other partnership’s adjusted basis of the properties securing such indebtedness), will be allocated to a Limited Partner, but such item will instead be allocated to the General Partner. If at any time a Limited Partner has a deficit balance in its Capital Account (after reduction by the amount described in clause (II) of subparagraph (i) above) that exceeds the amount described in subparagraph (ii) above, the items of Partnership income, gain, loss, deduction or expense shall be allocated in the manner that reduces such excess as rapidly as possible consistent with the provisions of Income Tax Regulation 1.704-1 (b) (2) (ii) (d). To the extent that any item of Partnership income, gain, loss, deduction or expense has been specially allocated pursuant to this Section 4.2 (b), subsequent items of income, gain, loss, deduction and expense of the Partnership shall be allocated to the extent possible in a manner, consistent herewith, that negates as rapidly as possible the effect of all previous allocations under this Section 4.2 (b).
Section 5. MANAGEMENT.
     5.1 General Partner. The Partnership will be managed and the conduct of its business will be controlled solely by the General Partner. The General Partner will possess all of the powers and rights of a partner in a partnership without limited partners and, without limiting the generality of the foregoing, .the General Partner shall have the following powers and duties and is authorized on behalf of the Partnership to do the following, subject to the limitations set forth in Section 5.2 below:
          (a) Be responsible for the management of the activities and business of the Partnership, prepare the Operating Budget, and do all things which, in the opinion of the General Partner, are necessary or desirable to carry on the business of the Partnership, including, without limitation, execution and filing of all certificates and documents necessary or desirable in connection with the formation, continuation and qualification of the Partnership in appropriate jurisdictions.
          (b) Maintain the books of account and records of the Partnership, in accordance with generally accepted accounting principles, reflecting the activities of the Partnership.
          (c) Open and maintain bank accounts in the name of the Partnership in which shall be deposited the Partnership’s funds, without commingling of any other funds.

 

 

          (d) Provide office space, secretarial service, telephone service and other related services as needed by the Partnership.
          (e) Borrow, repay and re-borrow money for any Partnership purpose and, if security is required therefor, mortgage, pledge or encumber any portion or all of the assets of the Partnership; and execute and deliver, in the name and on behalf of the Partnership, all notes, mortgages, deeds of trust, pledges, and other instruments or documents necessary in connection therewith.
          (f) Pay all taxes and assessments levied against the assets of the Partnership, or any part thereof, sign and file all tax returns, and make any and all elections, as required, under federal, state and local tax laws.
          (g) Employ and dismiss from employment any and all employees, and obtain all management, legal, leasing, accounting, bookkeeping and other services necessary in connection with the business of the Partnership.
          (h) Pay, collect, compromise, arbitrate, resort to legal action or otherwise adjust claims or demands of or against the Partnership.
          (i) Sell, exchange, lease or otherwise dispose of all or any portion of the Partnership property on behalf of the Partnership.
          (j) Be reimbursed by the Partnership for all for the General Partner’s costs and expenses incurred on behalf of the Partnership and for all goods and services furnished to the Partnership by the General Partner (including the amount of allocated internal costs including, without limitation, employees’ compensation).
          (k) Generally do all things necessary in connection with any of the foregoing; execute all documents and other instruments on behalf of the Partnership in connection therewith; pay as a Partnership expense all costs and expenses connected with the organization, operation or management of the Partnership; and sign or accept all checks, notes and drafts on the Partnership’s behalf (provided, however, that the General Partner shall not receive compensation for its services hereunder other than as provided for above).
     5.2 Major Decisions. Prior to the Partnership’s undertaking any of the following actions, all for the Partners shall consent thereto in writing:
          (a) Any sale, conveyance, lease, assignment, pledge, hypothecation, transfer or other disposition or encumbrance of any portion of partnership property with a fair market value in excess of $100,000.

 

 

          (b) Any settlement of any dispute or litigation on behalf of the Partnership which would require payment to or by the Partnership of more than $100,000.
          (c) The admission of any new or additional partner to the Partnership.
          (d) The incurrence, assumption or guarantee of indebtedness in excess of $1 00,000 in aggregate at any one time outstanding.
          (e) The assumption or creation of any contractual obligation if the anticipated expenditure or liability of the Partnership over the term thereof shall be anticipated to be more than $100,000.
          (f) Implementation of the Operation Budget.
     5.3 No Liability. Neither the General Partner nor any of its directors, officers, employees or agents will be liable to the Partnership or to any Partner for any act or omission performed or omitted by it or any of them in good faith hereunder. The General Partner will not be liable for the return of all or any part of the Initial Capital Contributions, Additional Capital Contributions or Partner Loans, if any, of the Limited Partners and any returns of capital or repayment of loans to a Partner will be made solely from the assets of the Partnership; nor will the General Partner be required to pay to the Partnership or to the Limited Partners any capital deficits upon dissolution or otherwise.
     5.4 Limited Partners. The Limited Partners shall not take part in the management or control of the business of the Partnership nor participate, except as expressly provided for in this Agreement, in malting the decisions of the Partnership; provided, however, that the Limited Partners may engage in those activities in connection with the Partnership which may be enumerated in the Act as not being within the meaning of “control.” No Limited Partner shall have any personal liability with respect to liabilities and obligations of the Partnership, except as may be expressly agreed to by such Limited Partner. No Limited Partner shall take any action which would, if taken, cause a dissolution of the Partnership. The General Partner may participate in, and make contributions to and share in profits, losses, and distributions of the Partnership, as a limited partner.
     5.5 Indemnification. To the fullest extent permitted by law, the Partnership shall indemnify, defend and hold harmless the Partners and their respective directors, officers, shareholders, agents, employees and other representatives (individually an “indemnitee”) against any loss, expense, damage, claim, liability, obligation, judgment or injury suffered or sustained by such indemnitee by reason of any act, omission or alleged act or omission by such indemnitee arising out of its activities on behalf of the Partnership, or in furtherance of the interests of the Partnership, including, without limitation, any

 

 

judgment, award, settlement, attorneys’ fees and other costs or expenses incurred in connection with the defense of any actual or threatened actions, proceedings or claims in which such indemnitee may be involved, or threatened to be involved, by reasons of such activities, all costs of which shall be charged to and paid by the Partnership as incurred; provided, however, that (a) the acts, omissions or alleged acts or omissions upon which such actual or threatened actions, proceedings or claims are based were not fraudulent or a result of willful misconduct by such indemnitee, and (b) the indemnification hereunder shall be payable only from and out of the assets of the Partnership and not from or out of the assets of any General Partner or Limited Partner.
Section 6. STATEMENTS’ OPERATING BUDGET: TAXES
     6.1 Statements. Within 45 days after the end of each of the first three quarters of each fiscal year of the Partnership and within 90 days after the close of each fiscal year of the Partnership, the General Partner shall furnish to each Partner with respect to such a period, a balance sheet, income statement and cash flow statement. The foregoing quarterly financial statements shall be unaudited and the foregoing annual financial statements shall be audited by such certified public accountants as are acceptable to the Partners, and the cost of preparing the statements and such audit shall be borne by the Partnership.
     6.2 Operating Budget. Not less than 45 days prior to the commencement of each fiscal year, the General partner shall cause to be prepared a proposed operating and capital expenditures budget (“Operating Budget”) for the approval of all Partners setting forth the estimated operating and capital expenditures and receipts of the Partnership for the following year.
     6.3 Inspection. All books of account and all other records of the Partnership (including the Certificate, and all amendments thereto, and this Agreement) shall be kept by the General Partner at the Partnership’s principal place of business and may be inspected there at any reasonable time by the Partners.
     6.4 Taxes. The General Partner shall be the “tax matters partner” (as that term is used in the Code) of the Partnership. The General Partner shall cause, at Partnership expense, ad tax returns and notices to be prepared and filed for the Partnership and shall furnish copies thereof to all Partners. The General Partner shall make such elections under the Internal Revenue Code, including the method of depreciation and amortization, as all of the Partners shall direct. The General Partner shall furnish to the Partners a copy of the Partnership’s Schedule K-l (or successor form) with the annual financial statements under Section 6.1. above.

 

 

Section 7. ADDITIONAL PARTNERS; TRANSFERS; WITHDRAWAL
     7.1 Additional Partners. Additional limited partners may be admitted to the Partnership only upon the written consent of the General Partner and only on the terms and conditions set forth in the instrument evidencing any such consent.
     7.2 Transfers.
          7.2.1. No Limited Partner shall, without the prior written consent of the General Partner, sell, convey, lease, assign, pledge, hypothecate, transfer or otherwise dispose of or encumber all or any part of its interest in the Partnership, except as otherwise specifically permitted in this Section 7.
          7.2.2. The Partnership interest of any Limited Partner, or any part thereof, may not be transferred or assigned, and no such transferee or assignee may be admitted as a substituted partner of the Partnership, unless; (a) a duly executed and acknowledged instrument of assignment, setting forth the intention of the assignor that the assignee become a substituted limited partner, is delivered to the General Partner; (b) the assignor and assignee execute and acknowledge such other instruments as the General Partner reasonably may deem necessary or desirable to effect such admission, including the written acceptance and adoption by the assignee of the provisions of this Agreement and the assumption of any unperformed obligations of the assignor; (c) an opinion of counsel, satisfactory to the General Partner, that such proposed transfer will not result in (i) violation of any applicable federal or state securities law or regulation, (ii) termination of the Partnership under Section 708 of the Code or otherwise result in the Partnership’s being adversely affected under any federal or state tax law or regulation, or (iii) the status of any facility as a “qualifying facility” under the Public Utility Regulatory Policies Act of 1978, as amended, being lost or adversely affected; and (d) the General Partner, in its sole discretion, consents to the proposed assignment or transfer and the admission of such assignee to the partnership.
          7.2.3. All Partners will, no later than 30 days after the date of compliance with the provisions of this Section, amend the Certificate to reflect the admission of such assignee as a substituted limited partner.
     7.3 Expenses. Expenses of the Partnership or of any Partners occasioned by transfers of interests held by Partners shall be reimbursed to the Partnership or Partners, as the case may be, by the substitute Partner.
     7.4 Bankruptcy. Upon the bankruptcy of a Limited Partner, the Partnership interest of such Limited Partner shall be assigned to the General Partner, which shall purchase such interest for an amount equal to the amount

 

 

credited to such Limited Partner in its Capital Account at the time of such assignment.
     7.5 Withdrawal of Limited Partner. No Limited Partner may voluntarily withdraw or resign from the Partnership without the prior written consent of the General Partner. Upon withdrawal and to the extent permitted by the Act, a Limited Partner shall be entitled to receive the balance, if any, in his Capital Account, within 60 days following the end of the fiscal quarter of the Partnership in which such withdrawal occurs, less any amount which the General Partner deems necessary to reserve therefrom in respect of contingent liabilities or obligations of the Partnership.
     7.6 Withdrawal of General Partner. The General Partner may withdraw or resign from the Partnership upon 30 days prior written notice to all of the Partners.
     7.7 Election to Continue the Business of the Partnership. Upon the insolvency or adjudication of bankruptcy of the General Partner, or upon the General Partner’s withdrawal or resignation from the Partnership (the “Event Date”), the Partnership shall not terminate but the interest of such General Partner shall forthwith be converted into a limited partnership interest with the same interest in Partnership profits, losses, Net Cash Flow, distributions and Capital Balance as before said conversion. The remaining Partners, upon written notice by anyone or more of them to all of the other Partners, may hold a meeting and elect by a majority vote of interests in the Partnership of Limited Partners, an entity to serve as the general partner subject to all the terms, conditions and liabilities to which the former General Partner was subject, and to continue the Partnership for the remainder of the term. In the event that the Partners fail to elect a successor general partner within 6 months of the Event Date, the Partnership shall be dissolved and liquidated as hereinafter set forth. The procedures set forth in this Section 7.7 shall be applicable to the original General Partner and any successor general partner serving hereunder
Section 8, Dissolution
     8.1 Dissolution. The Partnership will be dissolved upon the occurrence of any of the following:
          (a) December 31, 2041; or
          (b) the insolvency or adjudication of bankruptcy of the General Partner or upon the withdrawal or resignation of the General Partner, if the other Partners do not elect to continue the business of the Partnership and select a successor general partner pursuant to Section 7.7 hereof; or

 

 

          (c) the unanimous agreement of all the Partners to dissolve the Partnership; or
          (d) the sale, transfer or other disposition of all or substantially all of the assets of the Partnership.
     8.2 Distributions. Upon the dissolution of the Partnership, the General Partner shall wind up the Partnership, liquidate its property and terminate the Partnership. Upon the winding up of the Partnership, the assets of the Partnership shall be distributed in the following order of priority: (a) first, to the expenses of liquidation; (b) second, to the creditors of the Partnership (other than creditors who are Partners); (c) third, to the setting up of such reserves as may be reasonably necessary for any contingent or unforeseen liabilities or obligations of the Partnership arising out of or in connection with the Partnership business; provided that any such reserve will be held for the purpose of disbursing such reserves in payment of such contingencies and, at the expiration of such period as appears reasonable, the balance remaining, if any, shall be distributed in the manner hereinafter provided; (d) fourth, to the repayment of Partner Loans (in the order set forth in Section 4.1 (a) above); and (e) fifth, to all of the Partners in repayment of their then positive outstanding Capital Accounts, all in proportion to the respective amounts of each Partner’s Capital Accounts. For purposes of determining the Partner’s Capital Accounts under this Section 8.2, the Capital Accounts will first be adjusted by the Partners’ shares of income, gains and losses realized on the liquidation of the assets of the Partnership. If any of the assets are to be distributed in kind, the fair market value of such assets shall be determined as of the time of distribution. There shall be allocated among the Partners, in accordance with Section 4.2, the amount of gain or loss, if any, which would have been realized by the Partnership if such assets had been sold by the Partnership for prices equal to their respective fair market values as so determined.
     8.3 Actions of the General Partner: Statements of Account. During the period of liquidation (which will be such reasonable time as may be required for the orderly completion of liquidation and distribution as set forth above), the General Partner, as liquidating trustee for the benefit of all Partners as tenants in common, will take any and all action necessary or appropriate to complete such liquidation and distribution as provided in this Section 8, having for such purpose all of the powers numerated in Section 5 appropriate to accomplish the same. The General partner promptly will prepare a final statement of the accounts of the Partnership as of the date of termination (such statement to set forth the actual or contemplated application and distribution of the assets of the Partnership), and will furnish a copy thereof to each Partner. Upon completion of the distribution as required hereby, a further statement for the period of liquidation will be so prepared by the General Partner and furnished to each Partner.

 

 

     8.4 Property. No Partner may demand or receive property other than cash in return for his contributions, loans or advances at any time or upon dissolution as provided herein, except upon the prior written approval of the General Partner.
     8.5 Cancellation. Upon the dissolution of the Partnership, its Certificate shall be canceled as required by the Act.
Section 9. GENERAL
     9.1 Filings. The Partners agree that: (a) a signed and acknowledged Certificate shall be filed as required by the Act; and (b) they shall sign, acknowledge and file from time to time all writings to amend the Certificate as are required by the Act.
     9.2 Power of Attorney. The Limited Partners, by their execution of this Agreement, hereby irrevocably constitute and appoint the General Partner as their true and lawful attorney to make, execute, sign, acknowledge and file and record in their name, place and stead: (a) the Certificate, as well as amendments thereto and a statement of cancellation thereof under the laws of any state or jurisdiction, as necessary; and (b) any other instrument or document which may be required to be filed by the Partnership under the laws of the United States or any state, or by any governmental agency, or which the General Partner deems advisable to file.
     9.3 Bank Accounts. All funds of the Partnership will be deposited in such Partnership bank account or accounts as designated from time to time by the General Partner. Withdrawals from any such bank account or accounts will be made upon such signature or signatures as the General Partner may from time to time designate.
     9.4 Partial Invalidity. The invalidity or unenforceability of a portion of this Agreement will not affect the validity or enforceability of the remainder hereof.
     9.5 Governing Law; Binding Effect. This Agreement will be governed by the laws of the State of Delaware and will bind and inure to the benefit of the successors and assigns of the Partners.
     9.6 Amendment. This Agreement may be amended only by the written consent of all of the Partners.
     9.7 Captions. All article, section or paragraph titles or captions contained in this Agreement are for convenience only and are not deemed part of the context hereof.

 

 

     9.8 Pronouns. All pronouns and any variations thereof are deemed to refer to the masculine, feminine, neuter, singular or plural as the identity of the person or persons may require.
     9.9 . Notices. To be effective hereunder, notices shall be in writing and shall be deemed to have been duly given when personally delivered or, if mailed, when mailed by U.S. certified or registered mail, postage prepaid, to the other parties at the addresses set forth on Exhibit I hereto (or at such other address as shall be given in writing by a party to the other parties).
     9.1 0 Limitation on Rights of Others. No person other than a Partner shall have any legal or equitable right, remedy, or claim under or in respect to this Agreement.
     9.11 Entire Agreement. This Agreement and the Exhibits hereto contain the entire understanding among the Partners, and supersedes any prior understandings and agreements among them respecting the subject matter hereof.
     IN WITNESS WHEREOF, the parties have executed this Agreement as of this _ day of _____, 1996.
                 
Limited Partner       General Partner
 
                
Westmoreland Energy, Inc.       WEI — Roanoke Valley, Inc.
 
                
By:
          By:    
 
 
 
Title: 		         
 
Title:

 

 

EXHIBIT 1
                 
Name & Address   Initial        
Of   Capital     Participation  
Limited Partner   Contribution     Percentage  
Westmoreland Energy, Inc.
Citizens Commonwealth Building
300 Preston Avenue, 5th Floor
Charlottesville, Virginia 22902
   $ 900       90 %
 
                
Name & Address
of the
General Partner
                
WEI-Roanoke Valley, Inc.
c/o Westmoreland Energy, Inc.
Citizens Commonwealth Building
300 Preston Avenue, 5th Floor
Charlottesville, Virginia 22902
   $ 100       10 %
 
            
 
                
AGGREGATE CAPITAL
CONTRIBUTIONS
OF ALL PARTNERS
   $ 1,000       100 %
Specified Office
of the Partnership
c/o Westmoreland Energy, Inc.
Citizens Commonwealth Building
300 Preston Avenue, 5th Floor
Charlottesville, Virginia 22902
Registered Agent
of the Partnership
The Corporation Trust Company
1209 Orange Street
Wilmington
New Castle County
Delaware

 

EX-3.19 20 d82642exv3w19.htm EX-3.19 exv3w19
Exhibit 3.19
CERTIFICATE OF INCORPORATION
OF
WESTMORELAND RESOURCES, INC.
ARTICLE I
Name
          The name of the corporation is WESTMORELAND RESOURCES, INC.
ARTICLE II
Registered Office
          The address of the registered office of the corporation in the State of Delaware is 100 West Tenth Street, in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company.
ARTICLE III
Purpose
          The nature of the business of or purposes to be conducted or promoted by the corporation are to acquire, hold, explore, develop and operate coal properties and interests therein and to produce, process, transport and sell and otherwise deal in the resulting products.
ARTICLE IV
Capital Stock
          4.1 Authorized Capital. The total number of shares which the corporation shall have authority to issue is forty thousand (40,000) shares of common stock, each with a par value of one dollar ($1.00), divided into four

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classes of ten thousand (10,000) shares each, which are denominated Class I, Class II, Class III and Class IV, respectively.
          4.2 Rights of Classes of Stock. The shares of each class of stock shall be identical in all respects except that the holders of a majority of the stock of each class, voting as a class, shall have the right to elect one director.
          4.3 Stock Dividends. Dividends or other distributions payable in stock of the corporation in respect of the outstanding stock of the corporation shall be paid to each stockholder only in stock of the class held by such stockholder immediately prior to the payment of such dividend or distribution.
ARTICLE V
Incorporator
          The name of the incorporator is Minturn T. Wright, III and his mailing address is 3400 Centre Square West, 1500 Market Street, Philadelphia, Pennsylvania 19102.
ARTICLE VI
Term
          The corporation shall have perpetual existence.
ARTICLE VII
Stockholder Approval of Certain Actions
          7.1 Unanimous Approval. None of the following actions shall be deemed the authorized act of the corporation unless the board of directors shall have approved or declared advisable the proposed action and such proposed action shall have been approved by the holders of all of the outstanding stock of the corporation:
               7.1.1 amendment of the certificate of incorporation;
               7.1.2 amendment or repeal of the bylaws;

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               7.1.3 sale of all or substantially all of the property and assets of the corporation;
               7.1.4 merger or consolidation of the corporation into or with any other corporation or the merger of any other corporation into this corporation; and
               7.1.5 the voluntary dissolution of the corporation.
ARTICLE VIII
Consent of Stockholders in Lieu of Meeting
          Any action that may be taken at any annual or special meeting of the stockholders may be taken without a meeting, without prior notice, and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of all of the outstanding stock of the Company entitled to vote thereon.
          IN WITNESS WHEREOF, the undersigned, being the sole incorporator herein named, for the purposes of forming a corporation pursuant to the Delaware General Corporation Law, does make this certificate, hereby declaring and certifying that this is my act and deed and the facts herein stated are true, and accordingly have hereunto set my hand this 21st day of September, 1976.
         
     
  /s/ Minturn T. Wright    
  Minturn T. Wright, III   
     

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EX-3.20 21 d82642exv3w20.htm EX-3.20 exv3w20
         
Exhibit 3.20
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
WESTMORELAND RESOURCES, INC.
     WESTMORELAND RESOURCES, INC., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the “Company”), does hereby certify that:
     1. The Board of Directors of the Company by the unanimous written consent of its members, filed with the minutes of the Board, adopted a resolution approving and declaring advisable the following amendment to the Certificate of Incorporation of said corporation:
          RESOLVED, that it is hereby approved and declared to the Stockholders to be advisable to amend Article IV, section 4.2 of the Certificate of Incorporation of the company to read in full as follows:
               4.2. Rights of Classes of Stock. The shares of each class of stock shall be identical in all respects except that (a) the holders of a majority of the stock of each class, voting as a class, shall have the right to elect one director and (b) the holder, if any , of all of the outstanding stock of two or more classes, being in the aggregate the majority of shares of stock then outstanding, shall be entitled to elect one additional director.
     2. In lieu of a meeting and vote of stockholders of the company, the stockholders have given unanimous written consent to said amendment in accordance with the provisions of Section 228 of the General Corporation Law of the State of Delaware.

 

 

     3. The aforesaid amendment was duly adopted in accordance with the applicable provisions of Section 242 and 228 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, Westmoreland Resources, Inc. has caused this Certificate to be signed by C. Joseph Presley, its President, and attested by Richard G. Danzer, its Secretary, this 12th day of November, 1979.
                 
 
        WESTMORELAND RESOURCES, INC.    
 
                
Attest:
           
 
                
By:
  /s/ Richard G. Danzer
 
Richard G. Danzer 		    By:  /s/ C. Joseph Presley
 
C. Joseph Presley, 		   
 
  Secretary       President    

 

EX-3.21 22 d82642exv3w21.htm EX-3.21 exv3w21
Exhibit 3.21
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
WESTMORELAND RESOURCES, INC.
     WESTMORELAND RESOURCES, INC., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the “Company”), does hereby certify that:
     l. The Board of Directors of the Company by the unanimous written consent of its members, filed with the minutes of the Board, adopted a resolution approving and declaring advisable the following amendment, to the Certificate of Incorporation of said corporation:
RESOLVED, that it is hereby approved and declared to the Stockholders to be advisable to amend Article VII, section 7.1 of the Certificate of Incorporation of the Company to read in full as follows:
7.1 Unanimous Approval. None of the following actions shall be deemed the authorized act of the corporation unless the board of directors shall have approved or declared advisable the proposed action and such proposed action shall have been approved by the holders of all of the outstanding stock of the corporation:
               7.1.1 amendment of this section 7.l of the certificate of incorporation; and
               7.1.2 the voluntary liquidation, dissolution or winding up of the corporation.”
2. In lieu of a meeting and vote of stockholders of the Company, the stockholders have given unanimous written consent to said amendment in

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accordance with the provisions of Section 228 of the General Corporation Law of the State of Delaware.
3. The aforesaid amendment was duly adopted in accordance with the applicable provisions of Section 242 and 228 of the General Corporation Law of the State of Delaware.
     IN WITNESS WHEREOF. Westmoreland Resources, Inc. has caused this Certificate to be signed by D. W. Simpson. its President, and attested by Larry Mikkola, its Vice President — Finance and Secretary, this 1st day of October 1996.
                 
 
      WESTMORELAND RESOURCES, INC.    
 
                
Attest:
           
 
                
By:
  /s/ Larry Mikkola
 
Larry Mikkola 		  By:   /s/ David W. Simpson
 
David W. Simpson 		   
 
  Vice President — Finance       President    
 
  And Secretary            

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EX-3.22 23 d82642exv3w22.htm EX-3.22 exv3w22
Exhibit 3.22
BYLAWS OF
WESTMORELAND RESOURCES, INC.
ARTICLE I
STOCKHOLDERS
     1.1 Meetings.
          1.1.1 Place. Meetings of the stockholders shall be held at such place as may be designated by the board of directors.
     1.1.2 Annual Meeting. An annual meeting of the stockholders for the election of directors and for other business shall be held at such time as may be fixed by the board of directors on the first Thursday of April in each year (or if such is a legal holiday, on the next following business day), or on such other day as may be fixed by the board of directors.
     1.1.3 Special Meetings. Special meetings of the stockholders may be called at any time by the president, or the board of directors, or the holders of a majority of the outstanding shares of any class of stock of the Company entitled to vote at the meeting.
     1.1.4 Quorum. The presence, in person or by proxy, of the holders of a majority of the outstanding shares of stock of the Company entitled to vote in the election of directors or any other particular matter shall constitute a quorum for the purpose of such election or considering such other matter.
     1.2 Audit Reports. The Company’s books and records shall be audited by a certified independent public accountant selected by the board of directors, and each stockholder shall receive a copy of the audit report.
ARTICLE II
DIRECTORS
     2.1 Number And Term. Before any shares of common stock shall be issued, the board of directors shall consist of four persons. After shares of common stock shall be issued, the board of directors shall consist of as many

 

 

persons as there are classes of common stock of the Company outstanding, provided, that in the event that all of the outstanding stock of two or more classes, being in the aggregate the majority of shares of common stock then outstanding, shall be held by one stockholder, the number of directors shall be increased by one director and the additional director shall be elected by such stockholder. Each director shall hold office from his election until the next annual meeting of the stockholders and until his successor shall be elected and shall have qualified, unless he sooner resigns or is removed or disqualified.
     2.2 Removal of Directors and Filling of Vacancies. The holders of a majority of the shares of each class of common stock, voting separately and as a class, shall have the right at any time to remove, with or without cause, any director elected by the holders of such class of stock and to fill any vacancy created by the removal of such director. The retirement, purchase or cancellation by the Company of all the outstanding shares of a class of common stock shall automatically effect the removal of any director elected by the holders of such class of stock.
     2.3 Meetings.
     2.3.1 Place. Meetings of the board of directors shall be held at such place as may be designated by the board or in the notice of the meeting.
     2.3.2 Regular Meetings. Regular meetings of the board of directors shall be held at such times as the board may designate by resolution. Notice of regular meetings need not be given.
     2.3.3 Special Meetings. Special meetings of the board may be called by direction of the president or any two members of the board on three days’ notice to each director, which need not be written.
     2.3.4 Quorum and Voting Requirements. A majority of all of the directors in office shall constitute a quorum for the transaction of business at any meeting. Action of the board of directors shall be taken only by the affirmative vote of at least a majority of all of the directors in office.

 

 

ARTICLE III
OFFICERS
     3.1 Election. At its first meeting after each annual meeting of the stockholders, the board of directors shall elect a president, treasurer, secretary and such other officers as it deems advisable.
     3.2 Authority, Duties and Compensation. The officers shall have such authority, perform such duties and serve for such compensation as may be determined by resolution of the board of directors. Except as otherwise provided by board resolution (i) the president shall be the chief executive officer of the Company, shall have general supervision over the business and operations of the Company, may perform any act and execute any instrument for the conduct of such business and operations and shall preside at all meetings of the board and stockholders, (ii) the other officers shall have the duties usually related to their offices, and (iii) the vice president, or vice presidents in the order determined by the board, shall in the absence of the president have the authority and perform the duties of the president.
ARTICLE IV
INDEMNIFICATION
     4.1 Right to Indemnification. The Company shall indemnify any person who was or is a party or threatened to be made a party to any threatened, pending or completed action, suit or proceeding, either civil, criminal, administrative or investigative, by reason of the fact that he is or was a director, officer or employee of the Company or any corporation of which all of the outstanding shares of voting capital stock are owned by the Company (“Subsidiary”) or is or was serving at the request of the Company or any Subsidiary as a director, officer or employee of another enterprise, or is or was a director, officer or employee of the Company or any Subsidiary serving at the Company’s request as an administrator, trustee or other fiduciary of one or more of the employee benefit plans of the Company or another enterprise, against expenses (including attorneys’ fees), judgments, fines, excise taxes and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding to the extent that such person is not insured or otherwise indemnified and the power to do so has been or may be granted by statute. For this purpose the board of directors may, and on request of any such person shall be required to, determine

 

 

in each case whether or not the applicable standards in any such statute have been met, or such determination shall be made by independent legal counsel if the board so directs or if the board is not empowered by statute to make such determination.
     4.2 Indemnification Not Exclusive. The foregoing indemnification shall not be deemed exclusive of any other right to which one indemnified may be entitled, both as to action in his official capacity and as to action in another capacity while holding such office, and shall inure to the benefit of the heirs, executors and administrators of any such person.
     4.3. Insurance and Other Indemnification. The board of directors shall have the power to (i) purchase and maintain, at the Company’s expense, insurance on behalf of the Company and on behalf of others to the extent that power to do so has been or may be granted by statute, and (ii) give other indemnification to the extent not prohibited by law.
ARTICLE V
TRANSFER OF SHARE CERTIFICATES: RESTRICTIONS
     5.1 Transfers. Transfers of share certificates and the shares represented thereby shall be made on the books of the Company only by the registered holder or by duly authorized attorney. Transfers shall be made only on surrender of the share certificate or certificates.
     5.2 Restrictions. Any restriction on the transfer of the stock of the Company imposed by the Certificate of Incorporation, the bylaws or by an agreement in writing among all the holders of or subscribers to stock of the Company and the Company shall be binding upon the Company and shall be appropriately noted conspicuously upon all certificates of shares of its stock, and no stock shall be transferred on the books of the Company except in accordance with the terms and provisions of such certificate of incorporation, bylaws or agreement.

 

 

ARTICLE VI
AMENDMENTS
     These bylaws may be amended or repealed at any regular or special meeting of the stockholders upon the affirmative vote of the holders of all of the outstanding stock of the Company entitled to vote.

 

EX-3.23 24 d82642exv3w23.htm EX-3.23 exv3w23
Exhibit 3.23
CERTIFICATE OF INCORPORATION
OF
WRI PARTNERS, INC.
(a Delaware corporation)
•   First: The name of the Corporation is WRI Partners, Inc.
 
•   Second: Its registered office in the State of Delaware is to be located at 1209 Orange Street, County of New Castle, City of Wilmington, Delaware 19801. The registered agent in charge thereof is The Corporation Trust Company.
 
•   Third: The purpose of the corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware.
 
•   Fourth: The amount of the total stock this corporation is authorized to issue is 100 shares of Common Stock with a par value of $.01 per share.
 
•   Fifth: The name and mailing address of the incorporator are as follows:
Larry Nemirow, Esq.
Davis Graham & Stubbs LLP
1550 17th Street, Suite 500
Denver, Colorado 80202
•   I, The Undersigned, for the purpose of forming a corporation under the laws of the State of Delaware, do make, file and record this Certificate, and do certify that the facts herein stated are true, and I have accordingly set my hand this 28th day of May, 2008.
         
  By:   /s/ Larry Nemirow  
    (Incorporator)  
 
    NAME:   Larry Nemirow, Esq.  

EX-3.24 25 d82642exv3w24.htm EX-3.24 exv3w24
Exhibit 3.24
BYLAWS
OF
WRI PARTNERS, INC.
Adopted May 28, 2008
ARTICLE I
OFFICES
     1.1 Offices.
          The registered office of WRI Partners, Inc. (the “Corporation”) in the State of Delaware will be as provided for in the Certificate of Incorporation as amended from time to time. The Corporation will have offices at such other places as the board of directors may from time to time determine.
ARTICLE II
STOCKHOLDERS
     2.1 Annual Meetings.
          The annual meeting of stockholders for the election of directors and for the transaction of such other business as may properly come before the meeting will be held on the date and at the time fixed, from time to time, by resolution of the board of directors. Each such annual meeting will be held at such place, within or without the State of Delaware, as will be determined by the board of directors. The day, time, and place of each annual meeting will be specified in the notice of such annual meeting. Any annual meeting of stockholders may be adjourned from day to day, time to time, and place to place until its business is completed.
     2.2 Special Meetings.
          Except as otherwise required by law or by the Certificate of Incorporation of the Company (the “Certificate of Incorporation”), special meetings of stockholders may be called by the chairman of the board, the chief executive officer, or the board of directors pursuant to a resolution approved by a majority of the entire board of directors or a sole remaining director, or the written request of stockholders owning a majority in amount of the entire capital stock of the Corporation issued and outstanding and entitled to vote. The term “entire board of directors,” as used in these bylaws, means the total number of directors which the Corporation would have if there were no vacancies.
     2.3 Stockholder Action.
          Any action required or permitted to be taken by the stockholders of the Corporation will be effected at a duly called annual or special meeting of such stockholders or without a meeting, without prior notice, and without a vote, if the requisite stockholders entitled to vote execute a consent in writing, setting forth the action so taken.

 

 

     2.4 Notice of Meeting.
          Written notice stating the place, date and hour of the meeting and, in case of a special meeting, the purpose or purposes for which the meeting is called, will be given not less than ten (10) nor more than sixty (60) days before the date of the meeting, except as otherwise required by statute or the Certificate of Incorporation, either personally or by mail, prepaid telegram, telex, facsimile transmission, electronic mail (confirmed receipt), or overnight courier, to each stockholder of record entitled to vote at such meeting. If mailed, such notice will be deemed to be given when deposited in the United States mail, postage prepaid, addressed to the stockholder at the stockholder’s address as it appears on the stock records of the Corporation. If given personally or otherwise than by mail, such notice will be deemed to be given when either handed to the stockholder or delivered to the stockholder’s address as it appears on the stock records of the Corporation.
     2.5 Waiver.
          Attendance of a stockholder of the Corporation, either in person or by proxy, at any meeting, whether annual or special, will constitute a waiver of notice of such meeting, except where a stockholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. A written waiver of notice of any such meeting signed by a stockholder or stockholders entitled to such notice, whether before, at or after the time for notice or the time of the meeting, will be equivalent to notice. Neither the business to be transacted at, nor the purposes of, any meeting need be specified in any written waiver of notice.
     2.6 Voting List.
          The secretary will prepare and make available, at the earlier of ten (10) days before every meeting of stockholders, or two (2) business days after the notice is given, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order and showing the address and the number of shares registered in the name of each stockholder. Such list will be open to the examination of any stockholder for any purpose germane to the meeting, during ordinary business hours either at a place within the city where the meeting is to be held, which place will be specified in the notice of the meeting or, if not so specified, at the place where the meeting is to be held. The list will be produced and kept at the place of the meeting during the whole time of the meeting and may be inspected by any stockholder who is present.
     2.7 Quorum.
          Except as otherwise required by law, the Certificate of Incorporation or these bylaws, the holders of not less than a majority of the shares entitled to vote at any meeting of the stockholders, present in person or by proxy, will constitute a quorum, and the act of the majority of such quorum will be deemed the act of the stockholders. If a quorum fails to attend any meeting, the chairman of the meeting may adjourn the meeting from time to time, without notice if the time and place are announced at the meeting, until a quorum is present. At such adjourned meeting at which a quorum is present, any business may be transacted which might have been

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transacted at the original meeting. If the adjournment is for more than thirty (30) days or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting will be given to each stockholder of record entitled to vote at the meeting.
          If a notice of any adjourned special meeting of stockholders is sent to all stockholders entitled to vote thereat, stating that it will be held with those present constituting a quorum, then, notwithstanding the prior paragraph and except as otherwise required by law, those present at such adjourned meeting will constitute a quorum, and all matters will be determined by a majority of votes cast at such meeting.
     2.8 Record Date.
          In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting, or at any adjournment of a meeting of stockholders; or entitled to receive payment of any dividend or other distribution or allotment of any rights; or entitled to exercise any rights in respect of any change, conversion or exchange of stock; or for the purpose of any other lawful action; the board of directors may fix, in advance, a record date, which record date will not precede the date upon which the resolution fixing the record date is adopted by the board of directors. The record date for determining the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournments thereof will not be more than sixty (60) nor less than ten (10) days before the date of such meeting. The record date for any other action will not be more than sixty (60) days prior to such action. If no record date is fixed: (i) the record date for determining stockholders entitled to notice of or to vote at any meeting will be the close of business on the day immediately preceding the day on which notice is given or, if notice is waived by all stockholders, at the close of business on the day immediately preceding the day on which the meeting is held; and (ii) the record date for determining stockholders for any other purpose will be at the close of business on the day on which the board of directors adopts the resolution relating to such other purpose. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders will apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for the adjourned meeting.
     2.9 Voting and Proxies.
          At every meeting of the stockholders, each stockholder will be entitled to one vote, in person or by proxy, for each share of the capital stock having voting power held by such stockholder, but no proxy will be voted on after three years from its date unless the proxy provides for a longer period. When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy will decide any question brought before such meeting, unless the question is one upon which, by express provision of the statutes or of the Certificate of Incorporation, a different vote is required, in which case such express provision will govern.
     2.10 Procedure.
          The order of business and all other matters of procedure at every meeting of the stockholders may be determined by the presiding officer.

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ARTICLE III
DIRECTORS
     3.1 Number.
          Except as otherwise fixed pursuant to the provisions of the Certificate of Incorporation, the number of directors will be fixed from time to time exclusively by resolutions adopted by the board of directors; provided, however, that the number of directors will at no time be less than one (1); and provided, further, that no decrease in the number of directors constituting the board of directors will shorten the term of any incumbent director; and provided, further, that a newly created directorship established by the election of an additional member of the board by the board of directors will be deemed to automatically increase the size of the board by one (1).
     3.2 Chairman of the Board.
          The chairman, if present, will preside at all meetings of stockholders and of the board and will perform all duties incident to the office of chairman of the board and all such other duties as may from time to time be assigned to him by the board or by these bylaws.
     3.3 Election and Terms.
          A director will hold office until the annual meeting for the year in which his term expires and until his successor will be elected and qualified, subject, however, to such director’s prior death, resignation, retirement, disqualification or removal from office.
     3.4 Newly Created Directorships and Vacancies.
          Except as otherwise fixed pursuant to the provisions of the Certificate of Incorporation, newly created directorships resulting from any increase in the number of directors and any vacancies on the board of directors resulting from death, resignation, disqualification, removal or other cause will be filled by the affirmative vote of a majority of the remaining directors then in office or a sole remaining director, even though less than a quorum of the board of directors, or, if there are no remaining directors, by the stockholders. Any director elected in accordance with the preceding sentence will hold office for the remainder of the full term of the new directorship which was created or in which the vacancy occurred and until such director’s successor will have been elected and qualified.
     3.5 Regular Meetings.
          The first meeting of each newly elected board of directors elected at the annual meeting of stockholders will be held immediately after and at the same place as, the annual meeting of the stockholders, provided a quorum is present, and no notice of such meeting will be necessary in order to legally constitute the meeting. Regular meetings of the board of directors will be held at such times and places as the board of directors may from time to time determine.

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     3.6 Special Meetings.
          Special meetings of the board of directors may be called at any time, at any place and for any purpose by the chairman of the board, the chief executive officer, or by a majority of the entire board of directors.
     3.7 Notice of Meetings.
          Notice of regular meetings of the board of directors need not be given. Notice of every special meeting of the board of directors will be given to each director at his usual place of business or at such other address as will have been furnished by him for such purpose. Such notice will be properly and timely given if it is: (a) deposited in the United States mail not later than the third calendar day preceding the date of the meeting or (b) personally delivered, telegraphed, sent by facsimile transmission or communicated by telephone at least twenty-four hours before the time of the meeting. Such notice need not include a statement of the business to be transacted at, or the purpose of, any such meeting.
     3.8 Waiver.
          Attendance of a director at a meeting of the board of directors will constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. A written waiver of notice signed by a director or directors entitled to such notice, whether before, at, or after the time for notice or the time of the meeting, will be equivalent to the giving of such notice.
     3.9 Quorum.
          Except as may be otherwise provided by law, in the Certificate of Incorporation, or in these bylaws, the presence of a majority of the directors then in office will be necessary and sufficient to constitute a quorum for the transaction of business at any meeting of the board of directors, and the act of a majority of the directors present at a meeting at which a quorum is present will be deemed the act of the board of directors. Less than a quorum may adjourn any meeting of the board of directors from time to time without notice.
     3.10 Participation in Meetings by Telephone.
          Members of the board of directors, or of any committee thereof, may participate in a meeting of such board or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other and such participation will constitute presence in person at such meeting.
     3.11 Powers.
          The business, property and affairs of the Corporation will be managed by or under the direction of its board of directors, which will have and may exercise all the powers of the Corporation to do all such lawful acts and things as are not by law, by the Certificate of

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Incorporation or by these bylaws, directed or required to be exercised or done by the stockholders.
     3.12 Compensation of Directors.
          Directors will receive such compensation for their services as will be determined by a majority of the entire board of directors, provided that directors who are serving the Corporation as officers or employees and who receive compensation for their services as such officers or employees will not receive any salary or other compensation for their services as directors.
     3.13 Action Without a Meeting.
          Unless otherwise restricted by the Certificate of Incorporation or these bylaws, any action required or permitted to be taken at any meeting of the board of directors or any committee thereof may be taken without a meeting if written consent thereto is signed by all members of the board of directors or of such committee, as the case may be, and such written consent is filed with the minutes of proceedings of the board or committee. Any such consent may be in counterparts and will be effective on the date of the last signature thereon unless otherwise provided therein.
ARTICLE IV
COMMITTEES
     4.1 Designation of Committees.
          The board of directors may establish committees for the performance of delegated or designated functions to the extent permitted by law, each committee to consist of one or more directors of the Corporation. In the absence or disqualification of a member of a committee, the member or members present at any meeting and not disqualified from voting, whether or not such members constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting in the place of such absent or disqualified member.
     4.2 Committee Powers and Authority.
          The board of directors may provide, by resolution or by amendment to these bylaws, that a committee may exercise all the power and authority of the board of directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; provided, however, that a committee may not exercise the power or authority of the board of directors in reference to amending the Certificate of Incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation’s property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution, or amending these bylaws; and, unless the resolution expressly so provides, no such committee will have the power or authority to declare a dividend or to authorize the issuance of stock.

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     4.3 Committee Procedures.
          To the extent the board of directors or the committee does not establish other procedures for the committee, each committee will be governed by the procedures established in Section 3.3 (except as they relate to an annual meeting of the board of directors) and Sections 3.4, 3.5, 3.6, 3.7, 3.9, 3.10, 3.12, and 3.13 of these bylaws, as if the committee were the board of directors.
ARTICLE V
OFFICERS
     5.1 Number.
          The officers of the Corporation will be appointed or elected by the board of directors. The officers will be a president, one or more vice presidents, a secretary, and a treasurer. Any person may hold two (2) or more offices at the same time.
     5.2 Additional Officers.
          The board of directors may appoint such other officers as it deems appropriate.
     5.3 Term of Office, Resignation.
          All officers, agents and employees of the Corporation will hold their respective offices or positions at the pleasure of the board of directors and may be removed at any time by the board of directors with or without cause. Any officer may resign at any time by giving written notice of his resignation to the president or the secretary, and acceptance of such resignation will not be necessary to make it effective unless the notice so provides. Any vacancy occurring in any office will be filled by the board of directors, or, for officers other than the president, may also be filled by the president.
     5.4 Duties.
          The officers of the Corporation will perform the duties and exercise the powers as may be assigned to them from time to time by the board of directors or the president and chief executive officer. In the absence of such assignment, the officers will have the duties and powers set forth herein.
     5.5 President.
          The president will be chief executive officer of the Corporation and, subject to the direction and control of the board of directors, will manage the business of the Corporation. The president will preside at meetings of the board of directors and may execute contracts, deeds and other instruments on behalf of the Corporation. The president will have full authority on behalf of the Corporation to attend any meeting, give any waiver, cast any vote, grant any discretionary or directed proxy to any person, and exercise any other rights of ownership with respect to any shares of capital stock or other securities held by the Corporation and issued by any other corporation or with respect to any partnership, trust or similar interest held by the Corporation.

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     5.6 Vice President.
          Each vice president, if any, will perform such functions as may be prescribed by the board of directors or the president. Each vice president may execute contracts, deeds and other instruments on behalf of the Corporation. The vice president will have full authority on behalf of the Corporation to attend any meeting, give any waiver, cast any vote, grant any discretionary or directed proxy to any person, and exercise any other rights of ownership with respect to any shares of capital stock or other securities held by the Corporation and issued by any other corporation or with respect to any partnership, trust or similar interest held by the Corporation. Each vice president will perform such other duties as the board or the president may from time to time prescribe or delegate to him.
     5.7 Secretary.
          The secretary will give, or cause to be given, notice of all meetings of the stockholders and, upon the request of a person entitled to call a special meeting of the board of directors, he will give notice of any such special meeting. The secretary will keep the minutes of all meetings of the stockholders, the board of directors or any committee established by the board of directors. The secretary will be responsible for the maintenance of all records of the Corporation and may attest documents on behalf of the Corporation. The secretary will perform such other duties as the board or the president may from time to time prescribe or delegate to him.
     5.8 Treasurer.
          The treasurer, if any, will be responsible for the control of the funds of the Corporation and the custody of all securities owned by the Corporation. The treasurer will perform such other duties as the board, the president or any vice president may from time to time prescribe or delegate to him.
     5.9 Compensation.
          Officers will receive such compensation, if any, for their services as may be authorized or ratified by the board of directors. Election or appointment as an officer will not of itself create a right to compensation for services performed as such officer.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES
     6.1 Directors and Officers.
          Subject to the Certificate of Incorporation and the other sections of this Article, the Corporation will indemnify, to the fullest extent permitted by, and in the manner permissible under, the laws of the State of Delaware in effect on the date of these bylaws and as amended from time to time, any person who was or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that he is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of

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another corporation, partnership, joint venture, trust, association or other enterprise, against expenses (including attorneys’ fees), judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding, including any action, suit or proceeding by or in the right of the Corporation (a “Proceeding”). The Corporation will advance all reasonable expenses incurred by or on behalf of any such person in connection with any Proceeding within ten days after the receipt by the Corporation of a statement or statements from such person requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements will reasonably evidence the expenses incurred by such person and, if such person is an officer or director of the Corporation, will include or be preceded or accompanied by an undertaking by or on behalf of such person to repay any expenses advanced if it will ultimately be determined that such person is not entitled to be indemnified against such expenses. Costs, charges or expenses of investigating or defending Proceedings for which indemnity will be sought hereunder may be incurred without the Corporation’s consent provided that no settlement of any such Proceeding may be made without the Corporation’s consent, which consent will not be unreasonably withheld.
     6.2 Determination of Right to Indemnification.
          6.2.1 Any indemnification requested by any person under Section 6.1 will be made no later than forty-five (45) days after receipt of the written request of such person unless a determination is made within said forty-five (45) day period: (i) by a majority vote of directors who are not parties to such Proceedings, or (ii) in the event a quorum of non-involved directors is not obtainable, at the election of the Corporation, by independent legal counsel in a written opinion, that such person is not entitled to indemnification hereunder.
          6.2.2 Notwithstanding a determination under Section 6.2.1 above that any person is not entitled to indemnification with respect to a Proceeding, such person will have the right to apply to any court of competent jurisdiction for the purpose of enforcing such person’s right to indemnification pursuant to these bylaws. Neither the failure of the Corporation (including its board of directors or independent legal counsel) to have made a determination prior to the commencement of such action that such person is entitled to indemnification hereunder, nor an actual determination by the Corporation (including its board of directors or independent legal counsel) that such person is not entitled to indemnification hereunder, will be a defense to the action or create any presumption that such person is not entitled to indemnification hereunder.
          6.2.3 The Corporation will indemnify any person against all expenses incurred in connection with any hearing or Proceeding under this Section 6.2 if such person prevails on the merits or otherwise in such Proceeding.
     6.3 Subrogation.
          In the event of payment under these bylaws, the indemnifying party or parties will be subrogated to the extent of such payment to all of the rights of recovery of the indemnified person therefor and such indemnified person will execute all papers required and will do everything that may be necessary to secure such rights, including the execution of such

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documents necessary to enable the indemnifying party or parties to effectively bring suit to enforce such rights.
     6.4 Presumptions and Effect of Certain Proceedings.
          6.4.1 In making a determination with respect to entitlement to indemnification hereunder, the person or persons or entity making such determination will presume that such person is entitled to indemnification under this Article VI, and the Corporation will have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption.
          6.4.2 The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, will not (except as otherwise expressly provided in these bylaws) of itself adversely affect the right of any person to indemnification or create a presumption that such person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation or, with respect to any criminal Proceeding, that such person had reasonable cause to believe that his conduct was unlawful.
     6.5 Exception to Right of Indemnification or Advancement of Expenses.
          Notwithstanding any other provision of these bylaws, no person will be entitled to indemnification or advancement of expenses under these bylaws with respect to any Proceeding brought by such person, unless the bringing of such Proceeding or making of such claim has been approved by the board of directors.
     6.6 Contract.
          The foregoing provisions of this Article VI will be deemed to be a contract between the Corporation and each director and officer who serves in such capacity at any time while this bylaw is in effect, and any repeal or modification thereof will not affect any rights or obligations then existing with respect to any state of facts then or theretofore existing or any Proceeding theretofore or thereafter brought based in whole or in part upon any such state of facts.
          The foregoing rights of indemnification will not be deemed exclusive of any other rights to which any director or officer may be entitled apart from the provisions of this Article VI.
     6.7 Surviving Corporation.
          The board of directors may provide by resolution that references to “the Corporation” in this Article will include, in addition to this Corporation, all constituent corporations absorbed in a merger with this Corporation so that any person who was a director or officer of such a constituent corporation or is or was serving at the request of such constituent corporation as a director, employee or agent of another corporation, partnership, joint venture, trust, association or other entity will stand in the same position under the provisions of this Article with respect to this Corporation as he would if he had served this Corporation in the same

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capacity or is or was so serving such other entity at the request of this Corporation, as the case may be.
     6.8 Inurement.
          The indemnification and advancement of expenses provided by, or granted pursuant to, this Article will continue as to a person who has ceased to be a director or officer and will inure to the benefit of the heirs, executors, and administrators of such person.
     6.9 Employees and Agents.
          To the same extent as it may do for a director or officer, the Corporation may indemnify and advance expenses to a person who is not and was not a director or officer of the Corporation but who is or was an employee or agent of the Corporation.
ARTICLE VII
CAPITAL STOCK
     7.1 Certificates.
          Shares of stock of the Corporation shall be represented by certificates which shall be in a form approved by the board of directors. Each certificate shall be signed by the president or the vice president and the secretary or an assistant secretary.
     7.2 Facsimile Signatures.
          In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate will have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he, she or it was such officer, transfer agent, or registrar at the date of issue.
     7.3 Registered Stockholders.
          The Corporation will be entitled to treat the holder of record of any share or shares of stock of the Corporation as the holder in fact thereof and, accordingly, will not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it has actual or other notice thereof, except as provided by law.
     7.4 Cancellation of Certificates.
          All certificates surrendered to the Corporation will be canceled and, except in the case of lost, stolen or destroyed certificates, no new certificates will be issued until the former certificate or certificates for the same number of shares of the same class of stock have been surrendered and canceled.

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     7.5 Lost, Stolen, or Destroyed Certificates.
          The board of directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost, stolen, or destroyed upon the making of an affidavit of that fact by the person claiming the certificate or certificates to be lost, stolen, or destroyed. In its discretion, and as a condition precedent to the issuance of any such new certificate or certificates, the board of directors may require that the owner of such lost, stolen or destroyed certificate or certificates, or such person’s legal representative, give the Corporation and its transfer agent or agents, registrar or registrars a bond in such form and amount as the board of directors may direct as indemnity against any claim that may be made against the Corporation and its transfer agent or agents, registrar or registrars on account of the alleged loss, theft, or destruction of any such certificate or the issuance of such new certificate.
     7.6 Transfer of Shares.
          Certificated shares of the Corporation will only be transferred on its books upon the surrender to the Corporation of the share certificates duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer. The surrendered certificates shall be canceled, new certificates issued to the person entitled to them and the transaction recorded on the books of the Corporation.
     7.7 Transfer Agents and Registrars.
          The Corporation may have one or more transfer agents and one or more registrars of its stock, whose respective duties the board of directors may, from time to time, define. No certificated certificate of stock will be valid until countersigned by a transfer agent, if the Corporation will have a transfer agent, or until registered by the registrar, if the Corporation will have a registrar. The duties of transfer agent and registrar may be combined. The Corporation may act as its own transfer agent and registrar.
ARTICLE VIII
SEAL
     8.1 Seal.
          The board of directors may adopt and provide a seal which will be circular in form and will bear the name of the Corporation and the words “Seal” and “Delaware,” and which, if adopted, will constitute the corporate seal of the Corporation.
ARTICLE IX
FISCAL YEAR
     9.1 Fiscal Year.
          The fiscal year for the Corporation will close on the 31st of December of each year.

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ARTICLE X
AMENDMENTS
     10.1 Amendments.
          Subject to the provisions of the Certificate of Incorporation, these bylaws may be altered, amended, or repealed at any regular meeting of the stockholders (or at any special meeting thereof duly called for that purpose) by a majority vote of the shares represented and entitled to vote at such meeting, provided that in the notice of such special meeting, notice of such purpose will be given. Subject to the laws of the State of Delaware, the Certificate of Incorporation and these bylaws, the board of directors may, by majority vote of those present at any meeting at which a quorum is present, amend these bylaws or enact such other bylaws as in their judgment may be advisable for the regulation of the conduct of the affairs of the Corporation.

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EX-3.25 26 d82642exv3w25.htm EX-3.25 exv3w25
Exhibit 3.25
CERTIFICATE OF INCORPORATION OF
WESTMORELAND MINING SERVICES, INC.
(a Delaware Corporation)
First: The name of the corporation is Westmoreland Mining Services, Inc.
Second: Its registered office in the State of Delaware is to be located at 1209 Orange Street, County of New Castle, city of Wilmington, Delaware 19801. The registered agent in charge thereof is The Corporation Trust Company.
Third: The purpose of the corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware.
Fourth: The amount of the total stock this corporation is authorized to issue is 100 shares of common stock with a par value of $01. per share.
Fifth: The name and mailing address of the incorporator are as follows:
Jennifer Grafton, Esq.
2 North Cascade Avenue, 2nd Floor
Colorado Springs, CO 80903
I, the undersigned, for the purpose of forming a corporation under the laws of the state of Delaware, do make, file and record this Certificate, and do certify that the facts herein stated are true, and I have accordingly set my hand this 11th day of March, 2010.
         
     
  BY:   /s/ Jennifer S. Grafton    
    NAME: Jennifer S. Grafton   
       
 

 

EX-3.26 27 d82642exv3w26.htm EX-3.26 exv3w26
Exhibit 3.26
BYLAWS
OF
WESTMORELAND MINING SERVICE, INC.
Adopted March 31, 2010
ARTICLE I
OFFICES
     1.1 Offices.
The registered office of Westmoreland Mining Services, Inc. (the “Corporation”) in the State of Delaware will be as provided for in the Certificate of Incorporation of the Corporation (the “Certificate of Incorporation”) as amended from time-to-time. The Corporation will have offices at such other places as the board of directors may from time-to-time determine.
ARTICLE II
STOCKHOLDERS
     2.1 Annual Meetings.
The annual meeting of stockholders for the election of directors and for the transaction of such other business as may properly come before the meeting will be held on the date and at the time fixed, from time-to-time, by resolution of the board of directors. Each such annual meeting will be held at such place, within or without the State of Delaware, as will be determined by the board of directors. The day, time, and place of each annual meeting will be specified in the notice of such annual meeting. Any annual meeting of stockholders may be adjourned from day to day, time to time, and place to place until its business is completed.
     2.2 Special Meetings.
Except as otherwise required by law or by the Certificate of Incorporation, special meetings of stockholders may be called by the chairman of the board, the chief executive officer, or the board of directors pursuant to a resolution approved by a majority of the entire board of directors or a sole remaining director, or the written request of stockholders owning a majority in amount of the entire capital stock of the Corporation issued and outstanding and entitled to vote. The term “entire board of directors,” as used in these bylaws, means the total number of directors which the Corporation would have if there were no vacancies.
     2.3 Stockholder Action.
Any action required or permitted to be taken by the stockholders of the Corporation will be effected at a duly called annual or special meeting of such stockholders or without a meeting, without prior notice, and without a vote, if the requisite stockholders entitled to vote execute a consent in writing, setting forth the action so taken.
     2.4 Notice of Meeting.
Written notice stating the place, date and hour of the meeting and, in case of a special meeting, the purpose or purposes for which the meeting is called, will be given not less than ten (10) nor more than sixty (60) days before the date of the meeting, except as otherwise required by statute

 

 

or the Certificate of Incorporation, either personally or by mail, prepaid telegram, telex, facsimile transmission, electronic mail (confirmed receipt), or overnight courier, to each stockholder of record entitled to vote at such meeting. If mailed, such notice will be deemed to be given when deposited in the United States mail, postage prepaid, addressed to the stockholder at the stockholder’s address as it appears on the stock records of the Corporation. If given personally or otherwise than by mail, such notice will be deemed to be given when either handed to the stockholder or delivered to the stockholder’s address as it appears on the stock records of the Corporation.
     2.5 Waiver.
Attendance of a stockholder of the Corporation, either in person or by proxy, at any meeting, whether annual or special, will constitute a waiver of notice of such meeting, except where a stockholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. A written waiver of notice of any such meeting signed by a stockholder or stockholders entitled to such notice, whether before, at or after the time for notice or the time of the meeting, will be equivalent to notice. Neither the business to be transacted at, nor the purposes of, any meeting need be specified in any written waiver of notice.
     2.6 Voting List.
The secretary will prepare and make available, at the earlier of ten (10) days before every meeting of stockholders, or two (2) business days after the notice is given, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order and showing the address and the number of shares registered in the name of each stockholder. Such list will be open to the examination of any stockholder for any purpose germane to the meeting, during ordinary business hours either at a place within the city where the meeting is to be held, which place will be specified in the notice of the meeting or, if not so specified, at the place where the meeting is to be held. The list will be produced and kept at the place of the meeting during the whole time of the meeting and may be inspected by any stockholder who is present.
     2.7 Quorum.
Except as otherwise required by law, the Certificate of Incorporation or these bylaws, the holders of not less than a majority of the shares entitled to vote at any meeting of the stockholders, present in person or by proxy, will constitute a quorum, and the act of the majority of such quorum will be deemed the act of the stockholders. If a quorum fails to attend any meeting, the chairman of the meeting may adjourn the meeting from time to time, without notice if the time and place are announced at the meeting, until a quorum is present. At such adjourned meeting at which a quorum is present, any business may be transacted which might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting will be given to each stockholder of record entitled to vote at the meeting.
If a notice of any adjourned special meeting of stockholders is sent to all stockholders entitled to vote thereat, stating that it will be held with those present constituting a quorum, then, notwithstanding the prior paragraph and except as otherwise required by law, those present at such adjourned meeting will constitute a quorum, and all matters will be determined by a majority of votes cast at such meeting.

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     2.8 Record Date.
In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting, or at any adjournment of a meeting of stockholders; or entitled to receive payment of any dividend or other distribution or allotment of any rights; or entitled to exercise any rights in respect of any change, conversion or exchange of stock; or for the purpose of any other lawful action; the board of directors may fix, in advance, a record date, which record date will not precede the date upon which the resolution fixing the record date is adopted by the board of directors. The record date for determining the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournments thereof will not be more than sixty (60) nor less than ten (10) days before the date of such meeting. The record date for any other action will not be more than sixty (60) days prior to such action. If no record date is fixed: (i) the record date for determining stockholders entitled to notice of or to vote at any meeting will be the close of business on the day immediately preceding the day on which notice is given or, if notice is waived by all stockholders, at the close of business on the day immediately preceding the day on which the meeting is held; and (ii) the record date for determining stockholders for any other purpose will be at the close of business on the day on which the board of directors adopts the resolution relating to such other purpose. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders will apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for the adjourned meeting.
     2.9 Voting and Proxies.
At every meeting of the stockholders, each stockholder will be entitled to one vote, in person or by proxy, for each share of the capital stock having voting power held by such stockholder, but no proxy will be voted on after three years from its date unless the proxy provides for a longer period. When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy will decide any question brought before such meeting, unless the question is one upon which, by express provision of the statutes or of the Certificate of Incorporation, a different vote is required, in which case such express provision will govern.
     2.10 Procedure.
The order of business and all other matters of procedure at every meeting of the stockholders may be determined by the presiding officer.
ARTICLE III
DIRECTORS
     3.1 Number.
Except as otherwise fixed pursuant to the provisions of the Certificate of Incorporation, the number of directors will be fixed from time-to-time exclusively by resolutions adopted by the board of directors; provided, however, that the number of directors will at no time be less than one (1); and provided, further, that no decrease in the number of directors constituting the board of directors will shorten the term of any incumbent director; and provided, further, that a newly created directorship established by the election of an additional member of the board by the board of directors will be deemed to automatically increase the size of the board by one (1).

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     3.2 Chairman of the Board.
The chairman, if present, will preside at all meetings of stockholders and of the board and will perform all duties incident to the office of chairman of the board and all such other duties as may from time to time be assigned to him by the board or by these bylaws.
     3.3 Election and Terms.
A director will hold office until the annual meeting for the year in which his term expires and until his successor will be elected and qualified, subject, however, to such director’s prior death, resignation, retirement, disqualification or removal from office.
     3.4 Newly Created Directorships and Vacancies.
Except as otherwise fixed pursuant to the provisions of the Certificate of Incorporation, newly created directorships resulting from any increase in the number of directors and any vacancies on the board of directors resulting from death, resignation, disqualification, removal or other cause will be filled by the affirmative vote of a majority of the remaining directors then in office or a sole remaining director, even though less than a quorum of the board of directors, or, if there are no remaining directors, by the stockholders. Any director elected in accordance with the preceding sentence will hold office for the remainder of the full term of the new directorship which was created or in which the vacancy occurred and until such director’s successor will have been elected and qualified.
     3.5 Regular Meetings.
The first meeting of each newly elected board of directors elected at the annual meeting of stockholders will be held immediately after and at the same place as, the annual meeting of the stockholders, provided a quorum is present, and no notice of such meeting will be necessary in order to legally constitute the meeting. Regular meetings of the board of directors will be held at such times and places as the board of directors may from time to time determine.
     3.6 Special Meetings.
Special meetings of the board of directors may be called at any time, at any place and for any purpose by the chairman of the board, the chief executive officer, or by a majority of the entire board of directors.
     3.7 Notice of Meetings.
Notice of regular meetings of the board of directors need not be given. Notice of every special meeting of the board of directors will be given to each director at his usual place of business or at such other address as will have been furnished by him for such purpose. Such notice will be properly and timely given if it is: (a) deposited in the United States mail not later than the third calendar day preceding the date of the meeting or (b) personally delivered, telegraphed, sent by facsimile transmission or communicated by telephone at least twenty-four hours before the time of the meeting. Such notice need not include a statement of the business to be transacted at, or the purpose of, any such meeting.

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     3.8 Waiver.
Attendance of a director at a meeting of the board of directors will constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. A written waiver of notice signed by a director or directors entitled to such notice, whether before, at, or after the time for notice or the time of the meeting, will be equivalent to the giving of such notice.
     3.9 Quorum.
Except as may be otherwise provided by law, in the Certificate of Incorporation, or in these bylaws, the presence of a majority of the directors then in office will be necessary and sufficient to constitute a quorum for the transaction of business at any meeting of the board of directors, and the act of a majority of the directors present at a meeting at which a quorum is present will be deemed the act of the board of directors. Less than a quorum may adjourn any meeting of the board of directors from time to time without notice.
     3.10 Participation in Meetings by Telephone.
Members of the board of directors, or of any committee thereof, may participate in a meeting of such board or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other and such participation will constitute presence in person at such meeting.
     3.11 Powers.
The business, property and affairs of the Corporation will be managed by or under the direction of its board of directors, which will have and may exercise all the powers of the Corporation to do all such lawful acts and things as are not by law, by the Certificate of Incorporation or by these bylaws, directed or required to be exercised or done by the stockholders.
     3.12 Compensation of Directors.
Directors will receive such compensation for their services as will be determined by a majority of the entire board of directors, provided that directors who are serving the Corporation as officers or employees and who receive compensation for their services as such officers or employees will not receive any salary or other compensation for their services as directors.
     3.13 Action Without a Meeting.
Unless otherwise restricted by the Certificate of Incorporation or these bylaws, any action required or permitted to be taken at any meeting of the board of directors or any committee thereof may be taken without a meeting if written consent thereto is signed by all members of the board of directors or of such committee, as the case may be, and such written consent is filed with the minutes of proceedings of the board or committee. Any such consent may be in counterparts and will be effective on the date of the last signature thereon unless otherwise provided therein.

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ARTICLE IV
COMMITTEES
     4.1 Designation of Committees.
The board of directors may establish committees for the performance of delegated or designated functions to the extent permitted by law, each committee to consist of one or more directors of the Corporation. In the absence or disqualification of a member of a committee, the member or members present at any meeting and not disqualified from voting, whether or not such members constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting in the place of such absent or disqualified member.
     4.2 Committee Powers and Authority.
The board of directors may provide, by resolution or by amendment to these bylaws, that a committee may exercise all the power and authority of the board of directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; provided, however, that a committee may not exercise the power or authority of the board of directors in reference to amending the Certificate of Incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation’s property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution, or amending these bylaws; and, unless the resolution expressly so provides, no such committee will have the power or authority to declare a dividend or to authorize the issuance of stock.
     4.3 Committee Procedures.
To the extent the board of directors or the committee does not establish other procedures for the committee, each committee will be governed by the procedures established in Section 3.3 (except as they relate to an annual meeting of the board of directors) and Sections 3.4, 3.5, 3.6, 3.7, 3.9, 3.10, 3.12, and 3.13 of these bylaws, as if the committee were the board of directors.
ARTICLE V
OFFICERS
     5.1 Number.
The officers of the Corporation will be appointed or elected by the board of directors. The officers will be a president, one or more vice presidents, a secretary, and a treasurer. Any person may hold two (2) or more offices at the same time.
     5.2 Additional Officers.
The board of directors may appoint such other officers as it deems appropriate.
     5.3 Term of Office, Resignation.
All officers, agents and employees of the Corporation will hold their respective offices or positions at the pleasure of the board of directors and may be removed at any time by the board of directors with or without cause. Any officer may resign at any time by giving written notice

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of his resignation to the president or the secretary, and acceptance of such resignation will not be necessary to make it effective unless the notice so provides. Any vacancy occurring in any office will be filled by the board of directors, or, for officers other than the president, may also be filled by the president.
     5.4 Duties.
The officers of the Corporation will perform the duties and exercise the powers as may be assigned to them from time to time by the board of directors or the president and chief executive officer. In the absence of such assignment, the officers will have the duties and powers set forth herein.
     5.5 President.
The president will be chief executive officer of the Corporation and, subject to the direction and control of the board of directors, will manage the business of the Corporation. The president will preside at meetings of the board of directors and may execute contracts, deeds and other instruments on behalf of the Corporation. The president will have full authority on behalf of the Corporation to attend any meeting, give any waiver, cast any vote, grant any discretionary or directed proxy to any person, and exercise any other rights of ownership with respect to any shares of capital stock or other securities held by the Corporation and issued by any other corporation or with respect to any partnership, trust or similar interest held by the Corporation.
     5.6 Vice President.
Each vice president, if any, will perform such functions as may be prescribed by the board of directors or the president. Each vice president may execute contracts, deeds and other instruments on behalf of the Corporation. The vice president will have full authority on behalf of the Corporation to attend any meeting, give any waiver, cast any vote, grant any discretionary or directed proxy to any person, and exercise any other rights of ownership with respect to any shares of capital stock or other securities held by the Corporation and issued by any other corporation or with respect to any partnership, trust or similar interest held by the Corporation. Each vice president will perform such other duties as the board or the president may from time to time prescribe or delegate to him.
     5.7 Secretary.
The secretary will give, or cause to be given, notice of all meetings of the stockholders and, upon the request of a person entitled to call a special meeting of the board of directors, he will give notice of any such special meeting. The secretary will keep the minutes of all meetings of the stockholders, the board of directors or any committee established by the board of directors. The secretary will be responsible for the maintenance of all records of the Corporation and may attest documents on behalf of the Corporation. The secretary will perform such other duties as the board or the president may from time to time prescribe or delegate to him.
     5.8 Treasurer.
The treasurer, if any, will be responsible for the control of the funds of the Corporation and the custody of all securities owned by the Corporation. The treasurer will perform such other duties

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as the board, the president or any vice president may from time to time prescribe or delegate to him.
     5.9 Compensation.
Officers will receive such compensation, if any, for their services as may be authorized or ratified by the board of directors. Election or appointment as an officer will not of itself create a right to compensation for services performed as such officer.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES
     6.1 Directors and Officers.
Subject to the Certificate of Incorporation and the other sections of this Article, the Corporation will indemnify, to the fullest extent permitted by, and in the manner permissible under, the laws of the State of Delaware in effect on the date of these bylaws and as amended from time to time, any person who was or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that he is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, association or other enterprise, against expenses (including attorneys’ fees), judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding, including any action, suit or proceeding by or in the right of the Corporation (a “Proceeding”). The Corporation will advance all reasonable expenses incurred by or on behalf of any such person in connection with any Proceeding within ten days after the receipt by the Corporation of a statement or statements from such person requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements will reasonably evidence the expenses incurred by such person and, if such person is an officer or director of the Corporation, will include or be preceded or accompanied by an undertaking by or on behalf of such person to repay any expenses advanced if it will ultimately be determined that such person is not entitled to be indemnified against such expenses. Costs, charges or expenses of investigating or defending Proceedings for which indemnity will be sought hereunder may be incurred without the Corporation’s consent provided that no settlement of any such Proceeding may be made without the Corporation’s consent, which consent will not be unreasonably withheld.
     6.2 Determination of Right to Indemnification.
          6.2.1 Any indemnification requested by any person under Section 6.1 will be made no later than forty-five (45) days after receipt of the written request of such person unless a determination is made within said forty-five (45) day period: (i) by a majority vote of directors who are not parties to such Proceedings, or (ii) in the event a quorum of non-involved directors is not obtainable, at the election of the Corporation, by independent legal counsel in a written opinion, that such person is not entitled to indemnification hereunder.
          6.2.2 Notwithstanding a determination under Section 6.2.1 above that any person is not entitled to indemnification with respect to a Proceeding, such person will have the right to apply to any court of competent jurisdiction for the purpose of enforcing such person’s

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right to indemnification pursuant to these bylaws. Neither the failure of the Corporation (including its board of directors or independent legal counsel) to have made a determination prior to the commencement of such action that such person is entitled to indemnification hereunder, nor an actual determination by the Corporation (including its board of directors or independent legal counsel) that such person is not entitled to indemnification hereunder, will be a defense to the action or create any presumption that such person is not entitled to indemnification hereunder.
          6.2.3 The Corporation will indemnify any person against all expenses incurred in connection with any hearing or Proceeding under this Section 6.2 if such person prevails on the merits or otherwise in such Proceeding.
     6.3 Subrogation.
In the event of payment under these bylaws, the indemnifying party or parties will be subrogated to the extent of such payment to all of the rights of recovery of the indemnified person therefor and such indemnified person will execute all papers required and will do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the indemnifying party or parties to effectively bring suit to enforce such rights.
     6.4 Presumptions and Effect of Certain Proceedings.
          6.4.1 In making a determination with respect to entitlement to indemnification hereunder, the person or persons or entity making such determination will presume that such person is entitled to indemnification under this Article VI, and the Corporation will have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption.
          6.4.2 The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, will not (except as otherwise expressly provided in these bylaws) of itself adversely affect the right of any person to indemnification or create a presumption that such person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation or, with respect to any criminal Proceeding, that such person had reasonable cause to believe that his conduct was unlawful.
     6.5 Exception to Right of Indemnification or Advancement of Expenses.
Notwithstanding any other provision of these bylaws, no person will be entitled to indemnification or advancement of expenses under these bylaws with respect to any Proceeding brought by such person, unless the bringing of such Proceeding or making of such claim has been approved by the board of directors.
     6.6 Contract.
The foregoing provisions of this Article VI will be deemed to be a contract between the Corporation and each director and officer who serves in such capacity at any time while this bylaw is in effect, and any repeal or modification thereof will not affect any rights or obligations then existing with respect to any state of facts then or theretofore existing or any Proceeding theretofore or thereafter brought based in whole or in part upon any such state of facts.

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The foregoing rights of indemnification will not be deemed exclusive of any other rights to which any director or officer may be entitled apart from the provisions of this Article VI.
     6.7 Surviving Corporation.
The board of directors may provide by resolution that references to “the Corporation” in this Article will include, in addition to this Corporation, all constituent corporations absorbed in a merger with this Corporation so that any person who was a director or officer of such a constituent corporation or is or was serving at the request of such constituent corporation as a director, employee or agent of another corporation, partnership, joint venture, trust, association or other entity will stand in the same position under the provisions of this Article with respect to this Corporation as he would if he had served this Corporation in the same capacity or is or was so serving such other entity at the request of this Corporation, as the case may be.
     6.8 Inurement.
The indemnification and advancement of expenses provided by, or granted pursuant to, this Article will continue as to a person who has ceased to be a director or officer and will inure to the benefit of the heirs, executors, and administrators of such person.
     6.9 Employees and Agents.
To the same extent as it may do for a director or officer, the Corporation may indemnify and advance expenses to a person who is not and was not a director or officer of the Corporation but who is or was an employee or agent of the Corporation.
ARTICLE VII
CAPITAL STOCK
     7.1 Certificates.
Shares of stock of the Corporation shall be represented by certificates which shall be in a form approved by the board of directors. Each certificate shall be signed by the president or the vice president and the secretary or an assistant secretary.
     7.2 Facsimile Signatures.
In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate will have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he, she or it was such officer, transfer agent, or registrar at the date of issue.
     7.3 Registered Stockholders.
The Corporation will be entitled to treat the holder of record of any share or shares of stock of the Corporation as the holder in fact thereof and, accordingly, will not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it has actual or other notice thereof, except as provided by law.

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     7.4 Cancellation of Certificates.
All certificates surrendered to the Corporation will be canceled and, except in the case of lost, stolen or destroyed certificates, no new certificates will be issued until the former certificate or certificates for the same number of shares of the same class of stock have been surrendered and canceled.
     7.5 Lost, Stolen, or Destroyed Certificates.
The board of directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost, stolen, or destroyed upon the making of an affidavit of that fact by the person claiming the certificate or certificates to be lost, stolen, or destroyed. In its discretion, and as a condition precedent to the issuance of any such new certificate or certificates, the board of directors may require that the owner of such lost, stolen or destroyed certificate or certificates, or such person’s legal representative, give the Corporation and its transfer agent or agents, registrar or registrars a bond in such form and amount as the board of directors may direct as indemnity against any claim that may be made against the Corporation and its transfer agent or agents, registrar or registrars on account of the alleged loss, theft, or destruction of any such certificate or the issuance of such new certificate.
     7.6 Transfer of Shares.
Certificated shares of the Corporation will only be transferred on its books upon the surrender to the Corporation of the share certificates duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer. The surrendered certificates shall be canceled, new certificates issued to the person entitled to them and the transaction recorded on the books of the Corporation.
     7.7 Transfer Agents and Registrars.
The Corporation may have one or more transfer agents and one or more registrars of its stock, whose respective duties the board of directors may, from time to time, define. No certificated certificate of stock will be valid until countersigned by a transfer agent, if the Corporation will have a transfer agent, or until registered by the registrar, if the Corporation will have a registrar. The duties of transfer agent and registrar may be combined. The Corporation may act as its own transfer agent and registrar.
ARTICLE VIII
SEAL
     8.1 Seal.
The board of directors may adopt and provide a seal which will be circular in form and will bear the name of the Corporation and the words “Seal” and “Delaware,” and which, if adopted, will constitute the corporate seal of the Corporation.

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ARTICLE IX
FISCAL YEAR
     9.1 Fiscal Year.
The fiscal year for the Corporation will close on the 31st of December of each year.
ARTICLE X
AMENDMENTS
     10.1 Amendments.
Subject to the provisions of the Certificate of Incorporation, these bylaws may be altered, amended, or repealed at any regular meeting of the stockholders (or at any special meeting thereof duly called for that purpose) by a majority vote of the shares represented and entitled to vote at such meeting, provided that in the notice of such special meeting, notice of such purpose will be given. Subject to the laws of the State of Delaware, the Certificate of Incorporation and these bylaws, the board of directors may, by majority vote of those present at any meeting at which a quorum is present, amend these bylaws or enact such other bylaws as in their judgment may be advisable for the regulation of the conduct of the affairs of the Corporation.

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EX-3.27 28 d82642exv3w27.htm EX-3.27 exv3w27
Exhibit 3.27
CERTIFICATE OF INCORPORATION
     FIRST: the name of this Corporation is
GENERAL COAL COMPANY
     SECOND: Its principal office in the State of Delaware is located at 100 West Tenth Street in the City of Wilmington, County of New Castle, State of Delaware.
               The name and address of it s Resident Agent is The Corporation Trust Company, 100 west Tenth Street, Wilmington, Delaware.
     THIRD: The nature of the business, or objects or purposes proposed to be transacted, promoted or carried on are:
               To buy, and sell, deal or traffic in, carry and transport, export or import, coal, coke and wood and oil or other fuel, and also, patent fuel, water and ice and iron, steel and minerals and any and all by-products thereof and other materials, and to act as the agent of any individual or individuals; natural or artificial, in buying, selling or dealing for them in such materials and by-products, and to engage in the business of handling, buying, selling and dealing in and with coal or the other articles mentioned, for them or otherwise, or for other account or otherwise and for the purpose of such business to own or rent or otherwise use or occupy store houses and yards, docks, wharves, piers, boats, vessels of all descriptions and barges and any real estate necessary to the carrying on of the said business.
               To purchase, take hold, sell, convey, lease, mortgage, explore, develop, improve or otherwise deal in coal or ore lands, mining rights, wood lands, fuel bearing lands, or other land or any interest therein and to conduct mining operations of all kinds.
               To own, use and operate ships, boats and other vessels, steam, motor and sail for the purpose of the business of the corporation.
               To purchase, own, sell, build, construct, lease, mortgage or otherwise acquire and dispose of or encumber houses, storage ware houses and yards, stores, buildings, depots, hotels, docks, wharves and piers and to maintain and conduct the same in connection with any of the objects herein set forth.
               To manufacture, purchase or otherwise acquire, own, mortgage, pledge, sell, assign and transfer, or otherwise dispose of, to invest, trade, deal in and deal with, goods, wares and merchandise and real and personal property of every class and description.
               To acquire, and pay for in cash, stock or bonds of this corporation or otherwise, the good will, rights, assets and property, and to undertake or assume the whole or any part of the Obligations or liabilities of any person, firm, association or corporation.
               To acquire, hold, use, sell, assign, lease, grant licenses in respect of, mortgage, or otherwise dispose of letters patent of the United states or any foreign country,

 

 

patent rights, licenses and privileges, inventions, improvements and processes, copyrights, trade-marks, and trade names, relating to or useful in connection with any business of this corporation.
               To guarantee, purchase, hold, sell, assign, transfer, mortgage, pledge or otherwise dispose of shares of the capital stock of, or any bonds, securities or evidence of indebtedness created by any other corporation or corporations organized under the laws of this state or any other state, country, nation or government, and while the owner thereof to exercise all the rights, powers and privileges of ownership.
               To issue bonds, debentures or obligations of this Corporation from time to time, for any of the objects or purposes of the corporation, and to secure the same by mortgage, pledge, deed of trust or otherwise.
               To purchase, hold, sell and transfer the shares of its own capital stock; provided, it shall not use its funds or property for the purchase of its own shares of capital stock when such use would cause any impairment of its capital; and provided further that shares of its own capital stock belonging to it shall not be voted upon directly or indirectly.
               To have one or more offices, to carryon all or any of its operations and business and without restriction or limit as to amount to purchase or otherwise acquire, hold, own, mortgage, sell, convey, or otherwise dispose of real and personal property of every class and description in any of the States, Districts, Territories or Colonies of the United States, and in any and all foreign countries, subject to the laws of such State, District, Territory, Colony or Country.
               In general, to carryon any other business in connection with the foregoing, whether manufacturing or otherwise, and to have and exercise all the powers conferred by the laws of Delaware upon corporations formed under the act hereinafter referred to, and to do all of the things hereinbefore set forth to the same extent as natural persons might or could do.
               The foregoing clauses shall be construed both as objects and powers; and it is hereby expressly provided that the foregoing, enumeration of specific powers shall not be held to limit or restrict in any manner the powers of this corporation.
     FOURTH: The total number of shares of stock which the Corporation shall have authority to issue is 25,000 shares, and the par value of each share is $40.00, amounting in the aggregate to $1,000,000.
     Amended at special meeting of stockholders held June 18, 1952
     FIFTH: The number of shares with which this corporation will commence business is ten (10).
     SIXTH: The names and places of residence of the subscribers to the capital stock and the number of shares subscribed for by each are as follows:

 

 

             
NAME   RESIDENCE   NUMBER OF SHARES
C.L. Rimlinger
  Wilmington, Delaware     8  
M. M. Clancy
  Wilmington, Delaware     1  
P. B. Drew
  Wilmington, Delaware     1  
     SEVENTH: This corporation is to have perpetual existence.
     EIGHTH: The private property of the stockholders shall not be subject to the payment of corporate debts to any extent whatever.
     NINTH: In furtherance, and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized:
               To make and alter the By-laws of this corporation, to fix the amount to be reserved as working capital over and above its capital stock paid in, to authorize and cause to be executed mortgages and liens upon the real and personal property of this corporation.
               From time to time to determine whether and to what extent, and at what times and places, and under what conditions and regulations, the accounts and books of this corporation, (other than the stock ledger), or any of them, shall be open to inspection of stockholders; and no stockholder shall have any right of inspecting any account, book or document of this corporation except as conferred by statute, unless authorized by a resolution of the stockholders or directors;
               If the By-laws so provide, to designate two or more of its number to constitute an executive committee, which committee shall for the time being, as provided in said resolution or in the By-laws of this corporation, have and exercise any or all of the powers of the Board of
Directors in the management of the business and affairs of this corporation, and have power to authorize the seal of this corporation to be affixed to all papers which may require it.
               Pursuant to the affirmative vote of the holders of at least a majority of the stock issued and outstanding, having voting power, given at a stockholders’, meeting duty called for that purpose, or when authorized by the written consent of at least a majority of the holders of the voting stock issued and outstanding, the Board of Directors shall have power and authority at any meeting to sell, lease or exchange all of the property and assets of” this corporation, including its good will and its corporate franchises, upon such terms and conditions as its Board of Directors deem expedient and for the best interests of the corporation.
               This corporation may in its By-laws confer powers upon its directors in addition to the foregoing, and in addition to the powers and authorities expressly conferred upon them by the statute.
               Both stockholders and directors shall have power, if the bylaws so provide, to hold their meetings, and to have one or more offices within or without the State of Delaware, and to keep the books of this corporation (subject to the provisions of the statutes),

 

 

outside of the State of Delaware at such places as may be from time to time designated by the Board of Directors.
     TENTH: This corporation reserves the right to amend, alter, change, repeal any provision contained in the certificate of incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation.
     We, THE UNDERSIGNED, being each of the original subscribers to the capital stock hereinbefore named for the purpose of forming a corporation to do business both within and without the State of Delaware and in pursuance of the General Corporation Law of the State of Delaware, being Chapter 65 of the Revised Code of Delaware, and the acts amendatory thereof and supplemental thereto, do make and file this certificate, hereby declaring and certifying that the facts herein stated are true and do respectively agree to take the number of shares of stock hereinbefore set forth, and accordingly have hereunto set our hands and seals this 20th day of November, A. D. 1918.
In Presence of:
         
 
  Lawrence J. Broman   C. L. Rimlinger (seal)
 
        
 
      M. M. Clancy (seal)
 
        
 
      P. B. Drew (seal)

 

EX-3.28 29 d82642exv3w28.htm EX-3.28 exv3w28
Exhibit 3.28
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
     General Coal Company, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY:
     FIRST: That the Board of Directors of said corporation, at a meeting duly held, adopted a resolution proposing and declaring advisable the following amendment to the Certificate of Incorporation of said corporation:
RESOLVED, that the Certificate of Incorporation of General Coal Company be amended by changing Article I thereof so that, as amended, said Article shall be and read as follows:
“The name of the corporation is WESTMORELAND COAL SALES COMPANY, INC.”
     SECOND: That in lieu of a meeting and vote of stockholders, the sole stockholder has given written consent to said amendment in accordance with the provisions of Section 228 of the General Corporation Law of the State of Delaware.
     THIRD: That the aforesaid amendment was duly adopted in accordance with the applicable provisions of Sections 242 and 228 of the General Corporation law of the State of Delaware.
     IN WITNESS WHEREOF, said General Coal Company has caused this certificate to be signed by M.J. McDonnell, its Vice President, and attested by W.E. Bradshaw, its Secretary, this 20th day of February, 1985.
         
     
  By   /s/ M. J. McDonnell    
    Vice President   
         
  ATTEST:
 		  
  By   /s/ William E. Bradshaw    
    Secretary   
       

 

EX-3.29 30 d82642exv3w29.htm EX-3.29 exv3w29
         
Exhibit 3.29
4/1/82
BY-LAWS OF
GENERAL COAL COMPANY
ARTICLE I
SHAREHOLDERS
1.1 Meetings:
     (a) Place. Meetings of the stockholders shall be held at such place as may be designated by the Board of Directors.
     (b) Annual Meeting. An annual meeting of the stockholders for the election of directors and for other business shall be held at such time as may be fixed by the Board of Directors, on the third Friday of April in each year (or if such is a legal holiday, on the next following business day), or on such other day as may be fixed by the Board of Directors.
     (c) Special Meetings. Special meetings of the shareholders may be called at any time by the President, or the Board of Directors, or the holders of a majority of the outstanding shares of stock of the Company entitled to vote at the meeting.
     (d) Quorum and Required Vote. The presence, in person or by proxy, of the holders of a majority of the outstanding shares of stock of the Company entitled to vote on a particular matter shall constitute a quorum for the purpose of considering such matter. Except as may otherwise be provided in these Bylaws, in the Certificate of Incorporation or by law, the acts of the holders of a majority of the shares present in person or by proxy at any meeting at which a quorum is present shall be the acts of the shareholders.
ARTICLE II
DIRECTORS
2.1 Number and Term. The Board of Directors shall have the authority to (i) determine the number of directors to constitute the Board, and (ii) fix the terms of office of the directors.
2.2 Meetings.
     (a) Place. Meetings of the Board of Directors shall be held at such places as may be designated by the Board or in the notice of the meeting.
     (b) Regular Meetings. Regular meetings of the Board of Directors shall be held at such times as the Board may designate by resolution. Notice of regular meetings need not be given.

 

 

     (c) Special Meetings. Special meetings of the Board may be called by direction of the President or any two members of the Board on three days’ notice to each Director, either personally, or by mail or by telegram.
     (d) Quorum. A majority of all the directors in office shall constitute a quorum for the transaction of business at any meeting.
2.3 Committees. The Board of Directors may by resolution adopted by a majority of the whole Board, designate one or more committees, each committee to consist of one or more directors and such alternate members (also directors) as may be designated by the Board. In the absence or disqualification of any member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another director to act at the meeting in the place of any such absent or disqualified member.
ARTICLE III
OFFICERS
3.1 Election. At its first meeting after each annual meeting of shareholders, the Board of Directors shall elect a President, a Treasurer, a Secretary and such other officers as it deems advisable.
3.2 Authority, Duties and Compensation. The officers shall have such authority to perform such duties and serve for such compensation as may be determined by resolution of the Board of Directors. Except as otherwise provided by Board resolution (i) the President shall be the chief executive officer of the Company, shall have general supervision over the business and operations of the Company, may perform any act and execute any instrument for the conduct of such business and operations and shall preside at all meetings of the Board and shareholders; (ii) the other officers shall have the duties usually related to their offices; (iii) the Vice presidents, in the order determined by the Board, shall in the absence of the President have the authority and perform the duties of the President; and (iv) any Vice President may execute any instruments having a term of three (3) years or less for the conduct of the Company’s business and operations provided such instrument shall not have an aggregate value in excess of $5 million dollars.
ARTICLE IV
INDEMNIFICATION
4.1 Right to Indemnification. The Company shall indemnify any person who was or is a party or threatened to be made a party to any threatened, pending or completed action, suit or proceeding, either civil, criminal, administrative or investigative, by reason of the fact that he is or was a director, officer or employee of the Company or a constituent corporation absorbed in a consolidation or

 

 

merger, or is or was serving at the request of the Company or a constituent corporate absorbed in a consolidation or merger, as a director, officer or employee of another enterprise, against expenses (including attorney’s fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding to the extent that such person is not otherwise indemnified and the power to do so has been or may be granted by statute. For this purpose the Board of Directors may, and on request of any such person, shall be required to, determine in each case whether or not the applicable standards in any such statute have been met, or such determination shall be made by independent legal counsel if the Board so directs or if the Board is not empowered by statute to make such determination.
4.2 Indemnification Not Exclusive. The foregoing indemnification shall not be deemed exclusive of any other right to which one indemnified may be entitled, both as to action in his official capacity and as to action in another capacity while holding such office, and shall inure to the benefit of the heirs, executors and administrators of any such person.
4.3 Insurance and Other Indemnification. The Board of Directors shall have the power to (i) purchase and maintain, at the Company’s expense, insurance on behalf of the Company and on behalf of the others to the extent that power to do so has been or may be granted by statute, and (ii) give other indemnification to the extent permitted by law.
ARTICLE V
TRANSFER OF SHARE CERTIFICATES
Transfers of share certificates and the shares represented thereby shall be made on the books of the Company only by-the registered -holder or by duly authorized attorney. Transfers shall be made only on surrender of the share certificate or certificates.
ARTICLE VI
AMENDMENTS
These by-laws may be altered, amended or repealed at any regular or special meeting of the Board of Directors by the vote of the majority of all the directors in office or any annual or special meeting of stockholders by the vote of the holders of the majority of the outstanding stock entitled to vote. Notice of any such annual or special meeting of stockholders shall set forth the proposed change or a summary thereof.

 

EX-3.30 31 d82642exv3w30.htm EX-3.30 exv3w30
Exhibit 3.30
CERTIFICATE OF INCORPORATION OF
WCC LAND HOLDING COMPANY, INC.
(a Delaware Corporation)
First: The name of the corporation is WCC Land Holding Company, Inc.
Second: Its registered office in the State of Delaware is to be located at 1209 Orange Street, County of New Castle, city of Wilmington, Delaware 19801. The registered agent in charge thereof is The Corporation Trust Company.
Third: The purpose of the corporation is to purchase, receive, take by grant, gift, devise, bequest or otherwise, lease, or otherwise acquire, own, hold, improve, employ, use and otherwise deal in and with real or personal property, or any interest therein, wherever situated, and to sell, convey, lease, exchange, transfer or otherwise dispose of, or mortgage or pledge, all or any of the corporation’s property and assets, or any interest therein, wherever situated.
Fourth: The amount of the total stock this corporation is authorized to issue is 100 shares of common stock with a par value of $.01 per share.
Fifth: The name and mailing address of the incorporator are as follows:
Jennifer S. Grafton, Esq.
2 North Cascade Avenue, 2nd Floor
Colorado Springs, CO 80903
I, the undersigned, for the purpose of forming a corporation under the laws of the state of Delaware, do make, file and record this Certificate, and do certify that the facts herein stated are true, and I have accordingly set my hand this 16th day of November, 2010.
         
     
  BY:   /s/Jennifer S. Grafton    
    NAME: Jennifer S. Grafton   
       
 

 

EX-3.31 32 d82642exv3w31.htm EX-3.31 exv3w31
Exhibit 3.31
BYLAWS
OF
WCC LAND HOLDING COMPANY, INC.
Adopted November 16, 2010
ARTICLE I
OFFICES
     1.1 Offices.
The registered office of WCC Land Holding Company, Inc. (the “Corporation”) in the State of Delaware will be as provided for in the Certificate of Incorporation of the Corporation (the “Certificate of Incorporation”) as amended from time-to-time. The Corporation will have offices at such other places as the board of directors may from time-to-time determine.
ARTICLE II
STOCKHOLDERS
     2.1 Annual Meetings.
The annual meeting of stockholders for the election of directors and for the transaction of such other business as may properly come before the meeting will be held on the date and at the time fixed, from time-to-time, by resolution of the board of directors. Each such annual meeting will be held at such place, within or without the State of Delaware, as will be determined by the board of directors. The day, time, and place of each annual meeting will be specified in the notice of such annual meeting. Any annual meeting of stockholders may be adjourned from day to day, time to time, and place to place until its business is completed.
     2.2 Special Meetings.
Except as otherwise required by law or by the Certificate of Incorporation, special meetings of stockholders may be called by the chairman of the board, the chief executive officer, or the board of directors pursuant to a resolution approved by a majority of the entire board of directors or a sole remaining director, or the written request of stockholders owning a majority in amount of the entire capital stock of the Corporation issued and outstanding and entitled to vote. The term “entire board of directors,” as used in these bylaws, means the total number of directors which the Corporation would have if there were no vacancies.
     2.3 Stockholder Action.
Any action required or permitted to be taken by the stockholders of the Corporation will be effected at a duly called annual or special meeting of such stockholders or without a meeting, without prior notice, and without a vote, if the requisite stockholders entitled to vote execute a consent in writing, setting forth the action so taken.

 

 

     2.4 Notice of Meeting.
Written notice stating the place, date and hour of the meeting and, in case of a special meeting, the purpose or purposes for which the meeting is called, will be given not less than ten (10) nor more than sixty (60) days before the date of the meeting, except as otherwise required by statute or the Certificate of Incorporation, either personally or by mail, prepaid telegram, telex, facsimile transmission, electronic mail (confirmed receipt), or overnight courier, to each stockholder of record entitled to vote at such meeting. If mailed, such notice will be deemed to be given when deposited in the United States mail, postage prepaid, addressed to the stockholder at the stockholder’s address as it appears on the stock records of the Corporation. If given personally or otherwise than by mail, such notice will be deemed to be given when either handed to the stockholder or delivered to the stockholder’s address as it appears on the stock records of the Corporation.
     2.5 Waiver.
Attendance of a stockholder of the Corporation, either in person or by proxy, at any meeting, whether annual or special, will constitute a waiver of notice of such meeting, except where a stockholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. A written waiver of notice of any such meeting signed by a stockholder or stockholders entitled to such notice, whether before, at or after the time for notice or the time of the meeting, will be equivalent to notice. Neither the business to be transacted at, nor the purposes of, any meeting need be specified in any written waiver of notice.
     2.6 Voting List.
The secretary will prepare and make available, at the earlier of ten (10) days before every meeting of stockholders, or two (2) business days after the notice is given, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order and showing the address and the number of shares registered in the name of each stockholder. Such list will be open to the examination of any stockholder for any purpose germane to the meeting, during ordinary business hours either at a place within the city where the meeting is to be held, which place will be specified in the notice of the meeting or, if not so specified, at the place where the meeting is to be held. The list will be produced and kept at the place of the meeting during the whole time of the meeting and may be inspected by any stockholder who is present.
     2.7 Quorum.
Except as otherwise required by law, the Certificate of Incorporation or these bylaws, the holders of not less than a majority of the shares entitled to vote at any meeting of the stockholders, present in person or by proxy, will constitute a quorum, and the act of the majority of such quorum will be deemed the act of the stockholders. If a quorum fails to attend any meeting, the chairman of the meeting may adjourn the meeting from time to time, without notice if the time and place are announced at the meeting, until a quorum is present. At such adjourned meeting at which a quorum is present, any business may be transacted which might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days or if after the

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adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting will be given to each stockholder of record entitled to vote at the meeting.
If a notice of any adjourned special meeting of stockholders is sent to all stockholders entitled to vote thereat, stating that it will be held with those present constituting a quorum, then, notwithstanding the prior paragraph and except as otherwise required by law, those present at such adjourned meeting will constitute a quorum, and all matters will be determined by a majority of votes cast at such meeting.
     2.8 Record Date.
In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting, or at any adjournment of a meeting of stockholders; or entitled to receive payment of any dividend or other distribution or allotment of any rights; or entitled to exercise any rights in respect of any change, conversion or exchange of stock; or for the purpose of any other lawful action; the board of directors may fix, in advance, a record date, which record date will not precede the date upon which the resolution fixing the record date is adopted by the board of directors. The record date for determining the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournments thereof will not be more than sixty (60) nor less than ten (10) days before the date of such meeting. The record date for any other action will not be more than sixty (60) days prior to such action. If no record date is fixed: (i) the record date for determining stockholders entitled to notice of or to vote at any meeting will be the close of business on the day immediately preceding the day on which notice is given or, if notice is waived by all stockholders, at the close of business on the day immediately preceding the day on which the meeting is held; and (ii) the record date for determining stockholders for any other purpose will be at the close of business on the day on which the board of directors adopts the resolution relating to such other purpose. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders will apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for the adjourned meeting.
     2.9 Voting and Proxies.
At every meeting of the stockholders, each stockholder will be entitled to one vote, in person or by proxy, for each share of the capital stock having voting power held by such stockholder, but no proxy will be voted on after three years from its date unless the proxy provides for a longer period. When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy will decide any question brought before such meeting, unless the question is one upon which, by express provision of the statutes or of the Certificate of Incorporation, a different vote is required, in which case such express provision will govern.
     2.10 Procedure.
The order of business and all other matters of procedure at every meeting of the stockholders may be determined by the presiding officer.

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ARTICLE III
DIRECTORS
     3.1 Number.
Except as otherwise fixed pursuant to the provisions of the Certificate of Incorporation, the number of directors will be fixed from time-to-time exclusively by resolutions adopted by the board of directors; provided, however, that the number of directors will at no time be less than one (1); and provided, further, that no decrease in the number of directors constituting the board of directors will shorten the term of any incumbent director; and provided, further, that a newly created directorship established by the election of an additional member of the board by the board of directors will be deemed to automatically increase the size of the board by one (1).
     3.2 Chairman of the Board.
The chairman, if present, will preside at all meetings of stockholders and of the board and will perform all duties incident to the office of chairman of the board and all such other duties as may from time to time be assigned to him by the board or by these bylaws.
     3.3 Election and Terms.
A director will hold office until the annual meeting for the year in which his term expires and until his successor will be elected and qualified, subject, however, to such director’s prior death, resignation, retirement, disqualification or removal from office.
     3.4 Newly Created Directorships and Vacancies.
Except as otherwise fixed pursuant to the provisions of the Certificate of Incorporation, newly created directorships resulting from any increase in the number of directors and any vacancies on the board of directors resulting from death, resignation, disqualification, removal or other cause will be filled by the affirmative vote of a majority of the remaining directors then in office or a sole remaining director, even though less than a quorum of the board of directors, or, if there are no remaining directors, by the stockholders. Any director elected in accordance with the preceding sentence will hold office for the remainder of the full term of the new directorship which was created or in which the vacancy occurred and until such director’s successor will have been elected and qualified.
     3.5 Regular Meetings.
The first meeting of each newly elected board of directors elected at the annual meeting of stockholders will be held immediately after and at the same place as, the annual meeting of the stockholders, provided a quorum is present, and no notice of such meeting will be necessary in order to legally constitute the meeting. Regular meetings of the board of directors will be held at such times and places as the board of directors may from time to time determine.

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     3.6 Special Meetings.
Special meetings of the board of directors may be called at any time, at any place and for any purpose by the chairman of the board, the chief executive officer, or by a majority of the entire board of directors.
     3.7 Notice of Meetings.
Notice of regular meetings of the board of directors need not be given. Notice of every special meeting of the board of directors will be given to each director at his usual place of business or at such other address as will have been furnished by him for such purpose. Such notice will be properly and timely given if it is: (a) deposited in the United States mail not later than the third calendar day preceding the date of the meeting or (b) personally delivered, telegraphed, sent by facsimile transmission or communicated by telephone at least twenty-four hours before the time of the meeting. Such notice need not include a statement of the business to be transacted at, or the purpose of, any such meeting.
     3.8 Waiver.
Attendance of a director at a meeting of the board of directors will constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. A written waiver of notice signed by a director or directors entitled to such notice, whether before, at, or after the time for notice or the time of the meeting, will be equivalent to the giving of such notice.
     3.9 Quorum.
Except as may be otherwise provided by law, in the Certificate of Incorporation, or in these bylaws, the presence of a majority of the directors then in office will be necessary and sufficient to constitute a quorum for the transaction of business at any meeting of the board of directors, and the act of a majority of the directors present at a meeting at which a quorum is present will be deemed the act of the board of directors. Less than a quorum may adjourn any meeting of the board of directors from time to time without notice.
     3.10 Participation in Meetings by Telephone.
Members of the board of directors, or of any committee thereof, may participate in a meeting of such board or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other and such participation will constitute presence in person at such meeting.
     3.11 Powers.
The business, property and affairs of the Corporation will be managed by or under the direction of its board of directors, which will have and may exercise all the powers of the Corporation to do all such lawful acts and things as are not by law, by the Certificate of Incorporation or by these bylaws, directed or required to be exercised or done by the stockholders.

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     3.12 Compensation of Directors.
Directors will receive such compensation for their services as will be determined by a majority of the entire board of directors, provided that directors who are serving the Corporation as officers or employees and who receive compensation for their services as such officers or employees will not receive any salary or other compensation for their services as directors.
     3.13 Action Without a Meeting.
Unless otherwise restricted by the Certificate of Incorporation or these bylaws, any action required or permitted to be taken at any meeting of the board of directors or any committee thereof may be taken without a meeting if written consent thereto is signed by all members of the board of directors or of such committee, as the case may be, and such written consent is filed with the minutes of proceedings of the board or committee. Any such consent may be in counterparts and will be effective on the date of the last signature thereon unless otherwise provided therein.
ARTICLE IV
COMMITTEES
     4.1 Designation of Committees.
The board of directors may establish committees for the performance of delegated or designated functions to the extent permitted by law, each committee to consist of one or more directors of the Corporation. In the absence or disqualification of a member of a committee, the member or members present at any meeting and not disqualified from voting, whether or not such members constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting in the place of such absent or disqualified member.
     4.2 Committee Powers and Authority.
The board of directors may provide, by resolution or by amendment to these bylaws, that a committee may exercise all the power and authority of the board of directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; provided, however, that a committee may not exercise the power or authority of the board of directors in reference to amending the Certificate of Incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation’s property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution, or amending these bylaws; and, unless the resolution expressly so provides, no such committee will have the power or authority to declare a dividend or to authorize the issuance of stock.
     4.3 Committee Procedures.
To the extent the board of directors or the committee does not establish other procedures for the committee, each committee will be governed by the procedures established in Section 3.3

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(except as they relate to an annual meeting of the board of directors) and Sections 3.4, 3.5, 3.6, 3.7, 3.9, 3.10, 3.12, and 3.13 of these bylaws, as if the committee were the board of directors.
ARTICLE V
OFFICERS
     5.1 Number.
The officers of the Corporation will be appointed or elected by the board of directors. The officers will be a president, one or more vice presidents, a secretary, and a treasurer. Any person may hold two (2) or more offices at the same time.
     5.2 Additional Officers.
The board of directors may appoint such other officers as it deems appropriate.
     5.3 Term of Office, Resignation.
All officers, agents and employees of the Corporation will hold their respective offices or positions at the pleasure of the board of directors and may be removed at any time by the board of directors with or without cause. Any officer may resign at any time by giving written notice of his resignation to the president or the secretary, and acceptance of such resignation will not be necessary to make it effective unless the notice so provides. Any vacancy occurring in any office will be filled by the board of directors, or, for officers other than the president, may also be filled by the president.
     5.4 Duties.
The officers of the Corporation will perform the duties and exercise the powers as may be assigned to them from time to time by the board of directors or the president and chief executive officer. In the absence of such assignment, the officers will have the duties and powers set forth herein.
     5.5 President.
The president will be chief executive officer of the Corporation and, subject to the direction and control of the board of directors, will manage the business of the Corporation. The president will preside at meetings of the board of directors and may execute contracts, deeds and other instruments on behalf of the Corporation. The president will have full authority on behalf of the Corporation to attend any meeting, give any waiver, cast any vote, grant any discretionary or directed proxy to any person, and exercise any other rights of ownership with respect to any shares of capital stock or other securities held by the Corporation and issued by any other corporation or with respect to any partnership, trust or similar interest held by the Corporation.
     5.6 Vice President.
Each vice president, if any, will perform such functions as may be prescribed by the board of directors or the president. Each vice president may execute contracts, deeds and other

-7-

 

instruments on behalf of the Corporation. The vice president will have full authority on behalf of the Corporation to attend any meeting, give any waiver, cast any vote, grant any discretionary or directed proxy to any person, and exercise any other rights of ownership with respect to any shares of capital stock or other securities held by the Corporation and issued by any other corporation or with respect to any partnership, trust or similar interest held by the Corporation. Each vice president will perform such other duties as the board or the president may from time to time prescribe or delegate to him.
     5.7 Secretary.
The secretary will give, or cause to be given, notice of all meetings of the stockholders and, upon the request of a person entitled to call a special meeting of the board of directors, he will give notice of any such special meeting. The secretary will keep the minutes of all meetings of the stockholders, the board of directors or any committee established by the board of directors. The secretary will be responsible for the maintenance of all records of the Corporation and may attest documents on behalf of the Corporation. The secretary will perform such other duties as the board or the president may from time to time prescribe or delegate to him.
     5.8 Treasurer.
The treasurer, if any, will be responsible for the control of the funds of the Corporation and the custody of all securities owned by the Corporation. The treasurer will perform such other duties as the board, the president or any vice president may from time to time prescribe or delegate to him.
     5.9 Compensation.
Officers will receive such compensation, if any, for their services as may be authorized or ratified by the board of directors. Election or appointment as an officer will not of itself create a right to compensation for services performed as such officer.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES
     6.1 Directors and Officers.
Subject to the Certificate of Incorporation and the other sections of this Article, the Corporation will indemnify, to the fullest extent permitted by, and in the manner permissible under, the laws of the State of Delaware in effect on the date of these bylaws and as amended from time to time, any person who was or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that he is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, association or other enterprise, against expenses (including attorneys’ fees), judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding, including any action, suit or proceeding by or in the right of the Corporation (a “Proceeding”). The Corporation will advance all reasonable expenses incurred by or on behalf

-8-

 

of any such person in connection with any Proceeding within ten days after the receipt by the Corporation of a statement or statements from such person requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements will reasonably evidence the expenses incurred by such person and, if such person is an officer or director of the Corporation, will include or be preceded or accompanied by an undertaking by or on behalf of such person to repay any expenses advanced if it will ultimately be determined that such person is not entitled to be indemnified against such expenses. Costs, charges or expenses of investigating or defending Proceedings for which indemnity will be sought hereunder may be incurred without the Corporation’s consent provided that no settlement of any such Proceeding may be made without the Corporation’s consent, which consent will not be unreasonably withheld.
     6.2 Determination of Right to Indemnification.
          6.2.1 Any indemnification requested by any person under Section 6.1 will be made no later than forty-five (45) days after receipt of the written request of such person unless a determination is made within said forty-five (45) day period: (i) by a majority vote of directors who are not parties to such Proceedings, or (ii) in the event a quorum of non-involved directors is not obtainable, at the election of the Corporation, by independent legal counsel in a written opinion, that such person is not entitled to indemnification hereunder.
          6.2.2 Notwithstanding a determination under Section 6.2.1 above that any person is not entitled to indemnification with respect to a Proceeding, such person will have the right to apply to any court of competent jurisdiction for the purpose of enforcing such person’s right to indemnification pursuant to these bylaws. Neither the failure of the Corporation (including its board of directors or independent legal counsel) to have made a determination prior to the commencement of such action that such person is entitled to indemnification hereunder, nor an actual determination by the Corporation (including its board of directors or independent legal counsel) that such person is not entitled to indemnification hereunder, will be a defense to the action or create any presumption that such person is not entitled to indemnification hereunder.
          6.2.3 The Corporation will indemnify any person against all expenses incurred in connection with any hearing or Proceeding under this Section 6.2 if such person prevails on the merits or otherwise in such Proceeding.
     6.3 Subrogation.
In the event of payment under these bylaws, the indemnifying party or parties will be subrogated to the extent of such payment to all of the rights of recovery of the indemnified person therefor and such indemnified person will execute all papers required and will do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the indemnifying party or parties to effectively bring suit to enforce such rights.
     6.4 Presumptions and Effect of Certain Proceedings.
          6.4.1 In making a determination with respect to entitlement to indemnification hereunder, the person or persons or entity making such determination will presume that such

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person is entitled to indemnification under this Article VI, and the Corporation will have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption.
          6.4.2 The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, will not (except as otherwise expressly provided in these bylaws) of itself adversely affect the right of any person to indemnification or create a presumption that such person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation or, with respect to any criminal Proceeding, that such person had reasonable cause to believe that his conduct was unlawful.
     6.5 Exception to Right of Indemnification or Advancement of Expenses.
Notwithstanding any other provision of these bylaws, no person will be entitled to indemnification or advancement of expenses under these bylaws with respect to any Proceeding brought by such person, unless the bringing of such Proceeding or making of such claim has been approved by the board of directors.
     6.6 Contract.
The foregoing provisions of this Article VI will be deemed to be a contract between the Corporation and each director and officer who serves in such capacity at any time while this bylaw is in effect, and any repeal or modification thereof will not affect any rights or obligations then existing with respect to any state of facts then or theretofore existing or any Proceeding theretofore or thereafter brought based in whole or in part upon any such state of facts.
The foregoing rights of indemnification will not be deemed exclusive of any other rights to which any director or officer may be entitled apart from the provisions of this Article VI.
     6.7 Surviving Corporation.
The board of directors may provide by resolution that references to “the Corporation” in this Article will include, in addition to this Corporation, all constituent corporations absorbed in a merger with this Corporation so that any person who was a director or officer of such a constituent corporation or is or was serving at the request of such constituent corporation as a director, employee or agent of another corporation, partnership, joint venture, trust, association or other entity will stand in the same position under the provisions of this Article with respect to this Corporation as he would if he had served this Corporation in the same capacity or is or was so serving such other entity at the request of this Corporation, as the case may be.
     6.8 Inurement.
The indemnification and advancement of expenses provided by, or granted pursuant to, this Article will continue as to a person who has ceased to be a director or officer and will inure to the benefit of the heirs, executors, and administrators of such person.

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     6.9 Employees and Agents.
To the same extent as it may do for a director or officer, the Corporation may indemnify and advance expenses to a person who is not and was not a director or officer of the Corporation but who is or was an employee or agent of the Corporation.
ARTICLE VII
CAPITAL STOCK
     7.1 Certificates.
Shares of stock of the Corporation shall be uncertificated.
     7.2 Registered Stockholders.
The Corporation will be entitled to treat the holder of record of any share or shares of stock of the Corporation as the holder in fact thereof and, accordingly, will not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it has actual or other notice thereof, except as provided by law.
     7.3 Transfer of Shares.
Shares of the Corporation will only be transferred on its books upon proper evidence of succession, assignment or authority to transfer. The transaction transferring the shares shall be recorded on the books of the Corporation.
     7.4 Transfer Agents and Registrars.
The Corporation may have one or more transfer agents and one or more registrars of its stock, whose respective duties the board of directors may, from time to time, define. The duties of transfer agent and registrar may be combined. The Corporation may act as its own transfer agent and registrar.
ARTICLE VIII
SEAL
     8.1 Seal.
The board of directors may adopt and provide a seal which will be circular in form and will bear the name of the Corporation and the words “Seal” and “Delaware,” and which, if adopted, will constitute the corporate seal of the Corporation.
ARTICLE IX
FISCAL YEAR
     9.1 Fiscal Year.
The fiscal year for the Corporation will close on the 31st of December of each year.

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ARTICLE X
AMENDMENTS
     10.1 Amendments.
Subject to the provisions of the Certificate of Incorporation, these bylaws may be altered, amended, or repealed at any regular meeting of the stockholders (or at any special meeting thereof duly called for that purpose) by a majority vote of the shares represented and entitled to vote at such meeting, provided that in the notice of such special meeting, notice of such purpose will be given. Subject to the laws of the State of Delaware, the Certificate of Incorporation and these bylaws, the board of directors may, by majority vote of those present at any meeting at which a quorum is present, amend these bylaws or enact such other bylaws as in their judgment may be advisable for the regulation of the conduct of the affairs of the Corporation.

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EX-3.32 33 d82642exv3w32.htm EX-3.32 exv3w32
Exhibit 3.32
CERTIFICATE OF INCORPORATION
OF
WESTMORELAND POWER, INC.
     FIRST The name of the Corporation is: Westmoreland Power, Inc. (the Corporation”).
     SECOND The address of its registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of its registered agent at such address is the Corporation Trust Company.
     THIRD The nature of the business or purposes to be conducted or promoted by the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Law of Delaware.
     FOURTH The total number of shares of stock which the Corporation shall have authority to issue is 3,000 shares of Common Stock, $0.01 pal’ value per share.
     The number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the stock of the Corporation entitled to vote, irrespective of the provisions of Section 242(b )(2) of the General Corporation Law of Delaware.
     FIFTH The name and mailing address of the sole incorporator are as follows:
     
NAME   MAILING ADDRESS
Paul W. Durham
  2 North Cascade Avenue, 14th Floor
 
  Colorado Springs, CO 80903
     SIXTH The name and mailing address of each person who is to serve as a director of the Corporation until the first annual meeting of stockholders or until a successor is elected and qualified are as follows:
     
NAME   MAILING ADDRESS
Robert J. Jaeger
  2 North Cascade Avenue, 14th Floor
 
  Colorado Springs, CO 80903
 
    
W. Michael Lepchitz
  2 North Cascade Avenue, 14th Floor
 
  Colorado Springs, CO 80903
 
    
Christopher K. Seglem
  2 North Cascade Avenue, 14th Floor
 
  Colorado Springs, CO 80903
 
    
Richard C. Stone
  2 North Cascade Avenue, 14th Floor
 
  Colorado Springs, CO 80903
 
    
Gregory S. Woods
  2302 Hunters Way
 
  Charlottesville, VA 22911

 

 

     SEVENTH In furtherance of and not in limitation of powers conferred by statute, it is further provided:
  1.   Election of directors need not be by written ballot.
  2.   The Board of Directors is expressly authorized to adopt, amend or repeal the By-Laws of the Corporation.
     EIGHTH Except to the extent that the General Corporation Law of Delaware prohibits the elimination or limitation of liability of directors for breaches of fiduciary duty, no director or the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for any breach of fiduciary duty as a director, notwithstanding any provision of law imposing such liability. No amendment to or repeal of this provision shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to such amendment.
     NINTH The Corporation shall, to the fullest extent permitted by Section 145 of the General Corporation Law of Delaware, as amended from time to time, indemnify each person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was, or has agreed to become, a director or officer of the Corporation, or is or was serving, or has agreed to serve, at the request of the Corporation, as a director, officer or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise (including any employee benefit plan)(all such persons being referred to hereafter as an “Indemnitee”), or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by or on behalf of an Indemnitee in connection with such action, suite or proceeding and any appeal therefrom.
     As a condition precedent to his right to be indemnified, the Indemnitee must notify the Corporation in writing as soon as practicable of any action, suit, proceeding or investigation involving him for which indemnity will or could be sought. With respect to any action, suit proceeding or investigation of which the Corporation is so notified, the Corporation will be entitled to participate therein at its own expense and/or to assume the defense thereof at its own expense, with legal counsel reasonably acceptable to the Indemnitee.
     In the event that the Corporation does not assume the defense of any action, suit, proceeding or investigation of which the Corporation receives notice under this Article, the Corporation shall pay in advance of the final disposition of such matter any expenses (including attorneys’ fees) incurred by an Indemnitee in defending a civil or criminal action, suit, proceeding or investigation or any appeal herefrom; provided, however, that the payment of such expenses incurred by an Indemnitee in advance of the final disposition of such matter shall be made only upon receipt of an undertaking by or on behalf of the Indemnitee to repay all amounts so advanced in the event that it shall ultimately be determined that the Indemnitee is not entitled to be indemnified by the Corporation as authorized in this Article, which undertaking shall be accepted without reference to the financial ability of the Indemnitee to make such repayment; and further provided that no such advancement of expenses shall be made if it is determined that (i) the Indemnitee did not act in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Corporation, or (ii) with respect to any criminal action or proceeding, the Indemnitee had reasonable causes to believe his conduct was unlawful.

 

 

     The Corporation shall not indemnify an Indemnitee seeking indemnification in connection with a proceeding (or part thereof) initiated by such Indemnitee unless the initiation thereof was approved by the Board of Directors of the Corporation. In addition, the Corporation shall not indemnify an Indemnitee to the extent such Indemnitee is reimbursed from the proceeds of insurance, and in the event the Corporation makes any indemnification payments to an Indemnitee and such Indemnitee shall promptly refund such indemnification payments to the Corporation to the extend of such insurance reimbursement.
     All determinations hereunder as to the entitlement of an Indemnitee to indemnification or advancement of expenses shall be made in each instance by (a) a majority vote of the directors of the Corporation consisting of persons who are not at that time patties to the action, suit or proceeding in question (“disinterested directors”), whether or not a quorum, (b) a majority vote of a quorum of the outstanding shares of stock of all classes entitled to vote for directors, voting as a single class, which quorum shall consist of stockholders who are not at that time parties to the action, suite or proceeding in question, (c) independent legal counsel (who may, to the extend permitted by law, be regular legal counsel to the Corporation), or (d) a court of competent jurisdiction.
     The indemnification rights provided in this Article (i) shall not be deemed exclusive of any other rights to which an Indemnitee may be entitled under any law, agreement or vote of stockholders or disinterested directors or otherwise, and (ii) shall insure to the benefit of the heirs, executors and administrators of the Indemnitees. The Corporation may, to the extend authorized from time to time by its Board of Directors, grant indemnification rights to other employees or agents of the Corporation or other persons serving the Corporation and such rights may be equivalent to, or greater or less than, those set forth in this Article.
     TENTH The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute and this Certificate of Incorporation, and all rights conferred upon stockholders herein are granted subject to this reservation.
EXECUTED this 27th day of February, 2001.
         
  /s/ Paul W. Durham    
  Paul W. Durham   
  Incorporator   

 

EX-3.33 34 d82642exv3w33.htm EX-3.33 exv3w33
         
Exhibit 3.33
STATE OF DELAWARE
CERTIFICATE OF AMENDMENT
OF CERTIFICATE OF INCORPORATION
The corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware does hereby certify:
FIRST: That at a meeting of the Board of Directors of Westmoreland Power, Inc.
resolutions were duly adopted setting forth a proposed amendment of the Certificate of Incorporation of said corporation, declaring said amendment to be advisable and calling a meeting of the stockholders of said corporation for consideration thereof. The resolution setting forth the proposed amendment is as follows:
RESOLVED, that the Certificate of Incorporation of this corporation be amended by changing the Article thereof numbered “First ”so that, as amended, said Article shall be and read as follows:
The name of the Corporation is: Westmoreland Land Holding Company, Inc.
SECOND: That thereafter, pursuant to resolution of its Board of Directors, a special meeting of the stockholders of said corporation was duly called and held upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware at which meeting the necessary number of shares as required by statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, said corporation has caused this certificate to be signed this 21st day of January, 2009.
         
  BY:   /s/ Delbert L. Lobb, Jr.    
    Authorized Officer   
    Title: President   
    Name: Delbert L. Lobb, Jr.
Print or Type 		  

 

EX-3.34 35 d82642exv3w34.htm EX-3.34 exv3w34
         
Exhibit 3.34
STATE OF DELAWARE
CERTIFICATE OF AMENDMENT
OF CERTIFICATE OF INCORPORATION
The corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware does hereby certify:
FIRST: That at a meeting of the Board of Directors of Westmoreland Land Holding Company, Inc.
resolutions were duly adopted setting forth a proposed amendment of the Certificate of Incorporation of said corporation, declaring said amendment to be advisable and calling a meeting of the stockholders of said corporation for consideration thereof. The resolution setting forth the proposed amendment is as follows:
RESOLVED, that the Certificate of Incorporation of this corporation be amended by changing the Article thereof numbered “First “so that, as amended, said Article shall be and read as follows:
The name of the corporation is: Westmoreland Power, Inc.
SECOND: That thereafter, pursuant to resolution of Its Board of Directors, a special meeting of the stockholders of said corporation was duly called and held upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware at which meeting the necessary number of shares as required by statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance will the provisions of Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, said corporation has caused this certificate to be signed this 10th day of November, 2010.
         
  BY:   /s/ Jennifer Grafton    
    Authorized Officer   
    Title: Secretary   
    Name: Jennifer S. Grafton
Print or Type 		  
 

 

EX-3.35 36 d82642exv3w35.htm EX-3.35 exv3w35
Exhibit 3.35
BY-LAWS
OF
WESTMORELAND POWER, INC.

 

 

BY-LAWS
TABLE OF CONTENTS
         
ARTICLE I STOCKHOLDERS
     1  
1.1 Place of Meetings
     1  
1.2 Annual Meeting
     1  
1.3 Special Meetings
     1  
1.4 Notice of Meetings
     1  
1.5 Voting List
     2  
1.6 Quorum
     2  
1.7 Adjournments
     2  
1.8 Voting and Proxies
     2  
1.9 Action at Meeting
     3  
1.10 Conduct of Meetings
     3  
1.11 Action without Meeting
     4  
 
        
ARTICLE II DIRECTORS
     5  
2.1 General Powers
     5  
2.2 Number; Election and Qualification
     5  
2.3 Enlargement of the Board
     5  
2.4 Tenure
     5  
2.5 Vacancies
     5  
2.6 Resignation
     5  
2.7 Regular Meetings
     5  
2.8 Special Meetings
     6  
2.9 Notice of Special Meetings
     6  
2.10 Meetings by Conference Communications Equipment
     6  
2.11 Quorum
     6  
2.12 Action at Meeting
     6  
2.13 Action by Consent
     6  
2.14 Removal
     6  
2.15 Committees
     7  
2.16 Compensation of Directors
     7  
 
        
ARTICLE III OFFICERS
     7  
3.1 Titles
     7  
3.2 Election
     7  
3.3 Qualification
     8  
3.4 Tenure
     8  
3.5 Resignation and Removal
     8  
3.6 Vacancies
     8  
3.7 Chairman of the Board
     8  

- i -

 

         
3.8 President; Chief Executive Officer
     8  
3.9 Vice Presidents
     9  
3.10 Secretary and Assistant Secretaries
     9  
3.11 Treasurer and Assistant Treasurers
     9  
3.12 Salaries
     10  
 
        
ARTICLE IV CAPITAL STOCK
     10  
4.1 Issuance of Stock
     10  
4.2 Certificates of Stock
     10  
4.3 Transfers
     11  
4.4 Lost, Stolen or Destroyed Certificates
     11  
4.5 Record Date
     11  
 
        
ARTICLE V GENERAL PROVISIONS
     12  
5.1 Fiscal Year
     12  
5.2 Corporate Seal
     12  
5.3 Waiver of Notice
     12  
5.4 Voting of Securities
     12  
5.5 Evidence of Authority
     12  
5.6 Certificate of Incorporation
     12  
5.7 Transactions with Interested Parties
     12  
5.8 Severability
     13  
5.9 Pronouns
     13  
 
        
ARTICLE VI AMENDMENTS
     13  
6.1 By the Board of Directors
     13  
6.2 By the Stockholders
     13  

- ii -

 

BY-LAWS
OF
WESTMORELAND POWER, INC.
ARTICLE I
STOCKHOLDERS
     1.1 Place of Meetings. All meetings of stockholders shall be held at such place as may be designated from time to time by the Board of Directors, the Chairman of the Board or the President or, if not so designated, at the principal office of the corporation.
     1.2 Annual Meeting. Unless directors are elected by consent in lieu of an annual meeting, the annual meeting of stockholders for the election of directors and for the transaction of such other business as may properly be brought before the meeting shall be held on a date and at a time designated by the Board of Directors, the Chairman of the Board or the President (which date shall not be a legal holiday in the place where the meeting is to be held). If no annual meeting is held in accordance with the foregoing provisions, a special meeting may be held in lieu of the annual meeting, and any action taken at that special meeting shall have the same effect as if it had been taken at the annual meeting, and in such case all references in these By-laws to the annual meeting of the stockholders shall be deemed to refer to such special meeting.
     1.3 Special Meetings. Special meetings of stockholders for any purpose or purposes may be called at any time by the Board of Directors, the Chairman of the Board or the President, but such special meetings may not be called by any other person or persons. Business transacted at any special meeting of stockholders shall be limited to matters relating to the purpose or purposes stated in the notice of meeting.
     1.4 Notice of Meetings. Except as otherwise provided by law, written notice of each meeting of stockholders, whether annual or special, shall be given not less than 10 nor more than 60 days before the date of the meeting to each stockholder entitled to vote at such meeting. Without limiting the manner by which notice otherwise may be given to stockholders, any notice shall be effective if given by a form of electronic transmission consented to (in a manner consistent with the Delaware General Corporation Law) by the stockholder to whom the notice is given. The notices of all meetings shall state the place, date and time of the meeting and the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such meeting. The notice of a special meeting shall state, in addition, the purpose or purposes for which the meeting is called. If notice is given by mail, such notice shall be deemed given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder’s address as it appears on the records of the corporation. If notice is given by electronic transmission, such notice shall be deemed given at the time specified in Section 232 of the Delaware General Corporation Law.

 

 

     1.5 Voting List. The Secretary shall prepare, at least 10 days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting for a period of at least 10 days prior to the meeting: (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (ii) during ordinary business hours, at the principal place of business of the corporation. The list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.
     1.6 Quorum. Except as otherwise provided by law, the Certificate of Incorporation or these By-laws, the holders of a majority of the shares of the capital stock of the corporation issued and outstanding and entitled to vote at the meeting, present in person, present by means of remote communication in a manner, if any, authorized by the Board of Directors in its sole discretion or represented by proxy, shall constitute a quorum for the transaction of business. A quorum, once established at a meeting, shall not be broken by the withdrawal of enough votes to leave less than a quorum.
     1.7 Adjournments. Any meeting of stockholders may be adjourned from time to time to any other time and to any other place at which a meeting of stockholders may be held under these By-laws by the stockholders present or represented at the meeting and entitled to vote, although less than a quorum, or, if no stockholder is present, by any officer entitled to preside at or to act as secretary of such meeting. It shall not be necessary to notify any stockholder of any adjournment of less than 30 days if the time and place of the adjourned meeting, and the means of remote communication, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such adjourned meeting, are announced at the meeting at which adjournment is taken, unless after the adjournment a new record date is fixed for the adjourned meeting. At the adjourned meeting, the corporation may transact any business which might have been transacted at the original meeting.
     1.8 Voting and Proxies. Each stockholder shall have one vote for each share of stock entitled to vote held of record by such stockholder and a proportionate vote for each fractional share so held, unless otherwise provided by law or the Certificate of Incorporation. Each stockholder of record entitled to vote at a meeting of stockholders, or to express consent or dissent to corporate action without a meeting, may vote or express such consent or dissent in person or may authorize another person or persons to vote or act for such stockholder by a proxy executed or transmitted in a manner permitted by the General Corporation Law of Delaware by the stockholder or such stockholder’s authorized agent and delivered (including by electronic transmission) to the Secretary of the corporation. No such proxy shall be voted or acted upon after three years from the date of its execution, unless the proxy expressly provides for a longer period.
     1.9 Action at Meeting. When a quorum is present at any meeting, any matter other than the election of directors to be voted upon by the stockholders at such meeting shall be decided by the vote of the holders of shares of stock having a majority of the votes cast by the

 

 

holders of all of the shares of stock present or represented and voting on such matter (or if there are two or more classes of stock entitled to vote as separate classes, then in the case of each such class, the holders of a majority of the stock of that class present or represented and voting on such matter), except when a different vote is required by law, the Certificate of Incorporation or these By-Laws. When a quorum is present at any meeting, any election by stockholders of directors shall be determined by a plurality of the votes cast on the election.
     1.10 Conduct of Meetings.
          (a) Chairman of Meeting. Meetings of stockholders shall be presided over by the Chairman of the Board, if any, or in the Chairman’s absence by the Vice Chairman of the Board, if any, or in the Vice Chairman’s absence by the President, or in the President’s absence by a Vice President, or in the absence of all of the foregoing persons by a chairman designated by the Board of Directors, or in the absence of such designation by a chairman chosen by vote of the stockholders at the meeting. The Secretary shall act as secretary of the meeting, but in the Secretary’s absence the chairman of the meeting may appoint any person to act as secretary of the meeting.
          (b) Rules, Regulations and Procedures. The Board of Directors of the corporation may adopt by resolution such rules, regulations and procedures for the conduct of any meeting of stockholders of the corporation as it shall deem appropriate including, without limitation, such guidelines and procedures as it may deem appropriate regarding the participation by means of remote communication of stockholders and proxyholders not physically present at a meeting. Except to the extent inconsistent with such rules, regulations and procedures as adopted by the Board of Directors, the chairman of any meeting of stockholders shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board of Directors or prescribed by the chairman of the meeting, may include, without limitation, the following: (i) the establishment of an agenda or order of business for the meeting; (ii) rules and procedures for maintaining order at the meeting and the safety of those present; (iii) limitations on attendance at or participation in the meeting to stockholders of record of the corporation, their duly authorized and constituted proxies or such other persons as shall be determined; (iv) restrictions on entry to the meeting after the time fixed for the commencement thereof; and (v) limitations on the time allotted to questions or comments by participants. Unless and to the extent determined by the Board of Directors or the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.
     1.11 Action without Meeting.
          (a) Taking of Action by Consent. Any action required or permitted to be taken at any annual or special meeting of stockholders of the corporation may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, is signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a

 

 

meeting at which all shares entitled to vote on such action were present and voted. Except as otherwise provided by the Certificate of Incorporation, stockholders may act by written consent to elect directors; provided, however, that, if such consent is less than unanimous, such action by written consent may be in lieu of holding an annual meeting only if all of the directorships to which directors could be elected at an annual meeting held at the effective time of such action are vacant and are filled by such action.
          (b) Electronic Transmission of Consents. A telegram, cablegram or other electronic transmission consenting to an action to be taken and transmitted by a stockholder or proxyholder, or by a person or persons authorized to act for a stockholder or proxyholder, shall be deemed to be written, signed and dated for the purposes of this section, provided that any such telegram, cablegram or other electronic transmission sets forth or is delivered with information from which the corporation can determine (A) that the telegram, cablegram or other electronic transmission was transmitted by the stockholder or proxyholder or by a person or persons authorized to act for the stockholder or proxyholder and (B) the date on which such stockholder or proxyholder or authorized person or persons transmitted such telegram, cablegram or electronic transmission. The date on which such telegram, cablegram or electronic transmission is transmitted shall be deemed to be the date on which such consent was signed. No consent given by telegram, cablegram or other electronic transmission shall be deemed to have been delivered until such consent is reproduced in paper form and until such paper form shall be delivered to the corporation by delivery to its registered office in the State of Delaware, its principal place of business or an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to a corporation’s registered office shall be made by hand or by certified or registered mail, return receipt requested. Notwithstanding the foregoing limitations on delivery, consents given by telegram, cablegram or other electronic transmission may be otherwise delivered to the principal place of business of the corporation or to an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded if, to the extent and in the manner provided by resolution of the Board of Directors. Any copy, facsimile or other reliable reproduction of a consent in writing may be substituted or used in lieu of the original writing for any and all purposes for which the original writing could be used, provided that such copy, facsimile or other reproduction shall be a complete reproduction of the entire original writing.
          (c) Notice of Taking of Corporate Action. Prompt notice of the taking of corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing and who, if the action had been taken at a meeting, would have been entitled to notice of the meeting if the record date for such meeting had been the date that written consents signed by a sufficient number of holders to take the action were delivered to the corporation.

 

 

ARTICLE II
DIRECTORS
     2.1 General Powers. The business and affairs of the corporation shall be managed by or under the direction of a Board of Directors, who may exercise all of the powers of the corporation except as otherwise provided by law, the Certificate of Incorporation or these Bylaws. In the event of a vacancy in the Board of Directors, the remaining directors, except as otherwise provided by law, may exercise the powers of the full Board until the vacancy is filled.
     2.2 Number: Election and Qualification. The number of directors which shall constitute the whole Board of Directors shall be determined from time to time by resolution of the stockholders or the Board of Directors, but in no event shall be less than one. The number of directors may be decreased at any time and from time to time either by the stockholders or by a majority of the directors then in office, but only to eliminate vacancies existing by reason of the death, resignation, removal or expiration of the term of one or more directors. The directors shall be elected at the annual meeting of stockholders by such stockholders as have the right to vote on such election. Directors need not be stockholders of the corporation.
     2.3 Enlargement of the Board. The number of directors may be increased at any time and from time to time by the stockholders or by a majority of the directors then in office.
     2.4 Tenure. Each director shall hold office until the next annual meeting and until a successor is elected and qualified, or until such director’s earlier death, resignation or removal.
     2.5 Vacancies. Unless and until filled by the stockholders, any vacancy in the Board of Directors, however occurring, including a vacancy resulting from an enlargement of the Board, may be filled by vote of a majority of the directors then in office, although less than a quorum, or by a sole remaining director. A director elected to fill a vacancy shall be elected for the unexpired term of such director’s predecessor in office, and a director chosen to fill a position resulting from an increase in the number of directors shall hold office until the next annual meeting of stockholders and until a successor is elected and qualified, or until such director’s earlier death, resignation or removal.
     2.6 Resignation. Any director may resign by delivering a resignation in writing or by electronic transmission to the corporation at its principal office or to the Chairman of the Board, the President or the Secretary. Such resignation shall be effective upon receipt unless it is specified to be effective at some later time or upon the happening of some later event.
     2.7 Regular Meetings. Regular meetings of the Board of Directors may be held without notice at such time and place as shall be determined from time to time by the Board of Directors; provided that any director who is absent when such a determination is made shall be given notice of the determination. A regular meeting of the Board of Directors may be held without notice immediately after and at the same place as the annual meeting of stockholders.

 

 

     2.8 Special Meetings. Special meetings of the Board of Directors may be held at any time and place designated in a call by the Chairman of the Board, the President, two or more directors, or by one director in the event that there is only a single director in office.
     2.9 Notice of Special Meetings. Notice of any special meeting of directors shall be given to each director by the Secretary or by the officer or one of the directors calling the meeting. Notice shall be duly given to each director (i) by giving notice to such director in person or by telephone at least 24 hours in advance of the meeting, (ii) by sending a telegram, telecopy or electronic mail, or delivering written notice by hand, to such director’s last known business, home or electronic mail address at least 48 hours in advance of the meeting, or (iii) by sending written notice, via first-class mail or reputable overnight courier, to such director’s last known business or home address at least 72 hours in advance of the meeting. A notice or waiver of notice of a meeting of the Board of Directors need not specify the purposes of the meeting.
     2.10 Meetings by Conference Communications Equipment. Directors may participate in meetings of the Board of Directors or any committee thereof by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation by such means shall constitute presence in person at such meeting.
     2.11 Quorum. A majority of the total number of the whole Board of Directors shall constitute a quorum at all meetings of the Board of Directors. In the event one or more of the directors shall be disqualified to vote at any meeting, then the required quorum shall be reduced by one for each such director so disqualified; provided, however, that in no case shall less than one-third (1/3) of the number so fixed constitute a quorum. In the absence of a quorum at any such meeting, a majority of the directors present may adjourn the meeting from time to time without further notice other than announcement at the meeting, until a quorum shall be present.
     2.12 Action at Meeting. At any meeting of the Board of Directors at which a quorum is present, the vote of a majority of those present shall be sufficient to take any action, unless a different vote is specified by law, the Certificate of Incorporation or these By-Laws 2.13 Action by Consent. Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the Board or committee, as the case may be, consent to the action in writing or by electronic transmission, and the written consents and electronic transmissions are filed with the minutes of proceedings of the Board or committee.
     2.14 Removal. Except as otherwise provided by the General Corporation Law of Delaware, anyone or more or all of the directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors, except that the directors elected by the holders of a particular class or series of stock may be removed without cause only by vote of the holders of a majority of the outstanding shares of such class or series.

 

 

     2.15 Committees. The Board of Directors may designate one or more committees, each committee to consist of one or more of the directors of the corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members of the committee present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors and subject to the provisions of law, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation and may authorize the seal of the corporation to be affixed to all papers which may require it. Each such committee shall keep minutes and make such reports as the Board of Directors may from time to time request. Except as the Board of Directors may otherwise determine, any committee may make rules for the conduct of its business, but unless otherwise provided by the directors or in such rules, its business shall be conducted as nearly as possible in the same manner as is provided in these By-laws for the Board of Directors.
     2.16 Compensation of Directors. Directors may be paid such compensation for their services and such reimbursement for expenses of attendance at meetings as the Board of Directors may from time to time determine. No such payment shall preclude any director from serving the corporation or any of its parent or subsidiary corporations in any other capacity and receiving compensation for such service.
ARTICLE III
OFFICERS
     3.1 Titles. The officers of the corporation shall consist of a President, a Secretary, a Treasurer and such other officers with such other titles as the Board of Directors may determine, including a Chairman of the Board, a Vice Chairman of the Board, and one or more Vice Presidents, Assistant Treasurers, and Assistant Secretaries. The Board of Directors may appoint such other officers as it may deem appropriate.
     3.2 Election.The President, Treasurer and Secretary shall be elected annually by the Board of Directors at its first meeting following the annual meeting of stockholders. Other officers may be appointed by the Board of Directors at such meeting or at any other meeting.
     3.3 Qualification. No officer need be a stockholder. Any two or more offices may be held by the same person.
     3.4 Tenure. Except as otherwise provided by law, by the Certificate of Incorporation or by these By-laws, each officer shall hold office until such officer’s successor is elected and qualified, unless a different term is specified in the resolution electing or appointing such officer, or until such officer’s earlier death, resignation or removal.

 

 

     3.5 Resignation and Removal. Any officer may resign by delivering a written resignation to the corporation at its principal office or to the Chief Executive Officer or the Secretary. Such resignation shall be effective upon receipt unless it is specified to be effective at some later time or upon the happening of some later event.
          Any officer may be removed at any time, with or without cause, by vote of a majority of the entire number of directors then in office.
          Except as the Board of Directors may otherwise determine, no officer who resigns or is removed shall have any right to any compensation as an officer for any period following such officer’s resignation or removal, or any right to damages on account of such removal, whether such officer’s compensation be by the month or by the year or otherwise, unless such compensation is expressly provided in a duly authorized written agreement with the corporation.
     3.6 Vacancies. The Board of Directors may fill any vacancy occurring in any office for any reason and may, in its discretion, leave unfilled for such period as it may determine any offices other than those of President, Treasurer and Secretary. Each such successor shall hold office for the unexpired term of such officer’s predecessor and until a successor is elected and qualified, or until such officer’s earlier death, resignation or removal.
     3.7 Chairman of the Board. The Board of Directors may appoint from its members a Chairman of the Board. If the Board of Directors appoints a Chairman of the Board, such Chairman shall perform such duties and possess such powers as are assigned by the Board of Directors and, if the Chairman of the Board is also designated as the corporation’s Chief Executive Officer, shall have the powers and duties of the Chief Executive Officer prescribed in Section 3.8 of these By-laws. Unless otherwise provided by the Board of Directors, the Chairman of the Board shall preside at all meetings of the Board of Directors and stockholders.
     3.8 President; Chief Executive Officer. Unless the Board of Directors has designated the Chairman of the Board or another person as the corporation’s Chief Executive Officer, the President shall be the Chief Executive Officer of the corporation. The Chief Executive Officer shall have general charge and supervision of the business of the Corporation subject to the direction of the Board of Directors. The President shall perform such other duties and shall have such other powers as the Board of Directors and the Chief Executive Officer (if the Chairman of the Board or another person is serving in such position) may from time to time prescribe.
     3.9 Vice Presidents. Any Vice President shall perform such duties and possess such powers as the Board of Directors or the Chief Executive Officer may from time to time prescribe. In the event of the absence, inability or refusal to act of the Chief Executive Officer, the President (if the President is not the Chief Executive Officer), and then the Vice President (or if there shall be more than one, the Vice Presidents in the order determined by the Board of Directors), shall perform the duties of the Chief Executive Officer and when so performing shall have all the powers of and be subject to all the restrictions upon the Chief Executive

 

 

Officer. The Board of Directors may assign to any Vice President the title of Executive Vice President, Senior Vice President or any other title selected by the Board of Directors.
     3.10 Secretary and Assistant Secretaries. The Secretary shall perform such duties and shall have such powers as the Board of Directors or the Chief Executive Officer may from time to time prescribe. In addition, the Secretary shall perform such duties and have such powers as are incident to the office of the secretary, including without limitation the duty and power to give notices of all meetings of stockholders and special meetings of the Board of Directors, to attend all meetings of stockholders and the Board of Directors and keep a record of the proceedings, to maintain a stock ledger and prepare lists of stockholders and their addresses as required, to be custodian of corporate records and the corporate seal and to affix and attest to the same on documents.
          Any Assistant Secretary shall perform such duties and possess such powers as the Board of Directors, the Chief Executive Officer or the Secretary may from time to time prescribe. In the event of the absence, inability or refusal to act of the Secretary, the Assistant Secretary, (or if there shall be more than one, the Assistant Secretaries in the order determined by the Board of Directors) shall perform the duties and exercise the powers of the Secretary.
          In the absence of the Secretary or any Assistant Secretary at any meeting of stockholders or directors, the chairman of the meeting shall designate a temporary secretary to keep a record of the meeting.
     3.11 Treasurer and Assistant Treasurers. The Treasurer shall perform such duties and shall have such powers as may from time to time be assigned by the Board of Directors or the Chief Executive Officer. In addition, the Treasurer shall perform such duties and have such powers as are incident to the office of treasurer, including without limitation the duty and power to keep and be responsible for all funds and securities of the corporation, to deposit funds of the corporation in depositories selected in accordance with these By-laws, to disburse such funds as ordered by the Board of Directors, to make proper accounts of such funds, and to render as required by the Board of Directors statements of all such transactions and of the financial condition of the corporation.
          The Assistant Treasurers shall perform such duties and possess such powers as the Board of Directors, the Chief Executive Officer or the Treasurer may from time to time prescribe. In the event of the absence, inability or refusal to act of the Treasurer, the Assistant Treasurer, (or if there shall be more than one, the Assistant Treasurers in the order determined by the Board of Directors) shall perform the duties and exercise the powers of the Treasurer.
     3.12 Salaries. Officers of the corporation shall be entitled to such salaries, compensation or reimbursement as shall be fixed or allowed from time to time by the Board of Directors.

 

 

ARTICLE IV
CAPITAL STOCK
     4.1 Issuance of Stock. Unless otherwise voted by the stockholders and subject to the provisions of the Certificate of Incorporation, the whole or any part of any unissued balance of the authorized capital stock of the corporation or the whole or any part of any unissued balance of the authorized capital stock of the corporation held in its treasury may be issued, sold, transferred or otherwise disposed of by vote of the Board of Directors in such manner, for such consideration and on such terms as the Board of Directors may determine.
     4.2 Certificates of Stock. Every holder of stock of the corporation shall be entitled to have a certificate, in such form as may be prescribed by law and by the Board of Directors, certifying the number and class of shares owned by such holder in the corporation. Each such certificate shall be signed by, or in the name of the corporation by, the Chairman or Vice Chairman, if any, of the Board of Directors, or the President or a Vice President, and the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the corporation. Any or all of the signatures on the certificate may be a facsimile.
          Each certificate for shares of stock which are subject to any restriction on transfer pursuant to the Certificate of Incorporation, these By-laws, applicable securities laws or any agreement among any number of stockholders or among such holders and the corporation shall have conspicuously noted on the face or back of the certificate either the full text of the restriction or a statement of the existence of such restriction.
          If the corporation shall be authorized to issue more than one class of stock or more than one series of any class, the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of each certificate representing shares of such class or series of stock, provided that in lieu of the foregoing requirements there may be set forth on the face or back of each certificate representing shares of such class or series of stock a statement that the corporation will furnish without charge to each stockholder who so requests a copy of the full text of the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and or rights.
     4.3 Transfers. Except as otherwise established by rules and regulations adopted by the Board of Directors, and subject to applicable law, shares of stock may be transferred on the books of the corporation by the sun-ender to the corporation or its transfer agent of the certificate representing such shares properly endorsed or accompanied by a written assignment or power of attorney properly executed, and with such proof of authority or the authenticity of signature as the corporation or its transfer agent may reasonably require. Except as may be otherwise required by law, by the Certificate of Incorporation or by these By-laws, the corporation shall be entitled to treat the record holder of stock as shown on its books as the owner of such stock for all purposes, including the payment of dividends and the

 

 

right to vote with respect to such stock, regardless of any transfer, pledge or other disposition of such stock until the shares have been transferred on the books of the corporation in accordance with the requirements of these By-laws.
     4.4 Lost. Stolen or Destroyed Certificates. The corporation may issue a new certificate of stock in place of any previously issued certificate alleged to have been lost, stolen, or destroyed, upon such terms and conditions as the Board of Directors may prescribe, including the presentation of reasonable evidence of such loss, theft or destruction and the giving of such indemnity as the Board of Directors may require for the protection of the corporation or any transfer agent or registrar.
     4.5 Record Date. The Board of Directors may fix in advance a date as a record date for the determination of the stockholders entitled to notice of or to vote at any meeting of stockholders or to express consent (or dissent) to corporate action without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action. Such record date shall not be more than 60 nor less than 10 days before the date of such meeting, nor more than 10 days after the date of adoption of a record date for a consent without a meeting, nor more than 60 days prior to any other action to which such record date relates.
          If no record date is fixed, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day before the day on which notice is given, or, if notice is waived, at the close of business on the day before the day on which the meeting is held. If no record date is fixed, the record date for determining stockholders entitled to express consent to corporate action without a meeting, when no prior action by the Board of Directors is necessary, shall be the day on which the first consent is properly delivered to the corporation. If no record date is fixed, the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating to such purpose.
          A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.
ARTICLE V
GENERAL PROVISIONS
     5.1 Fiscal Year. Except as from time to time otherwise designated by the Board of Directors, the fiscal year of the corporation shall begin on the first day of January of each year and end on the last day of December in each year.
     5.2 Corporate Seal. The corporate seal shall be in such form as shall be approved by the Board of Directors.

 

 

     5.3 Waiver of Notice. Whenever notice is required to be given by law, by the Certificate of Incorporation or by these By-laws, a written waiver, signed by the person entitled to notice or a waiver by electronic transmission by the person entitled to notice, whether before, at or after the time stated in such waiver, or the attendance of such person at such meeting, shall be deemed equivalent to such notice.
     5.4 Voting of Securities. Except as the Board of Directors may otherwise designate, the President or the Treasurer may waive notice of, and act as, or appoint any person or persons to act as, proxy or attorney-in-fact for this corporation (with or without power of substitution) at, any meeting of stockholders or shareholders of any other corporation or organization, the securities of which may be held by this corporation.
     5.5 Evidence of Authority. A certificate by the Secretary, or an Assistant secretary, or a temporary Secretary, as to any action taken by the stockholders, directors, a committee or any officer or representative of the corporation shall as to all persons who rely on the certificate in good faith be conclusive evidence of such action.
     5.6 Certificate of Incorporation. All references in these By-laws to the Certificate of Incorporation shall be deemed to refer to the Certificate of Incorporation of the corporation, as amended and in effect from time to time.
     5.7 Transactions with Interested Parties. No contract or transaction between the corporation and one or more of the directors or officers, or between the corporation and any other corporation, partnership, association, or other organization in which one or more of the directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or a committee of the Board of Directors at which the contract or transaction is authorized or solely because any such director’s or officer’s votes are counted for such purpose, if:
          (a) The material facts as to the director’s or officer’s relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum;
          (b) The material facts as to the director’s or officer’s relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or
          (c) The contract or transaction is fair as to the corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee of the Board of Directors, or the stockholders.

 

 

          Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction.
     5.8 Severability. Any determination that any provision of these By-laws is for any reason inapplicable, illegal or ineffective shall not affect or invalidate any other provision of these By-laws.
     5.9 Pronouns. All pronouns used in these By-laws shall be deemed to refer to the masculine, feminine or neuter, singular or plural, as the identity of the person or persons may require.
ARTICLE VI
AMENDMENTS
     6.1 By the Board of Directors. These By-laws may be altered, amended or repealed or new by-laws may be adopted by the affirmative vote of a majority of the directors present at any regular or special meeting of the Board of Directors at which a quorum is present.
     6.2 By the Stockholders. These By-laws may be altered, amended or repealed or new by-laws may be adopted by the affirmative vote of the holders of a majority of the shares of the capital stock of the corporation issued and outstanding and entitled to vote at any regular meeting of stockholders, or at any special meeting of stockholders, provided notice of such alteration, amendment, repeal or adoption of new by-laws shall have been stated in the notice of such special meeting.

 

EX-4.1 37 d82642exv4w1.htm EX-4.1 exv4w1
Exhibit 4.1
EXECUTION COPY
WESTMORELAND COAL COMPANY
and
WESTMORELAND PARTNERS
as Issuers,
the GUARANTORS named herein,
as Guarantors,
and
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Trustee
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Note Collateral Agent
INDENTURE
Dated as of February 4, 2011
10.75% Senior Secured Notes due 2018

 

 

 

CROSS-REFERENCE TABLE
     
Trust Indenture Act   Indenture
Section   Section
310 (a)(1)
  7.10
(a)(2)
  7.10
(a)(3)
  N.A.
(a)(4)
  N.A.
(a)(5)
  7.08; 7.10
(b)
   7.08; 7.10; 12.02
(c)
   N.A.
311 (a)
   7.11
(b)
   7.11
(c)
   N.A.
312 (a)
   2.05
(b)
   12.03
(c)
   12.03
313 (a)(1)
  7.06
(a)(2)
  7.06
(a)(3)
  7.06
(a)(4)
  7.06
(a)(8)
  7.06
(b)(2)
  7.06
(c)
   7.06; 12.02
(d)
   7.06
314 (a)
  4.09; 4.21; 4.22; 12.02
(c)(1)
  7.02; 12.04; 12.05
(c)(2)
  7.02; 12.04; 12.05
(c)(3)
  N.A.
(e)
   12.05
(f)
   N.A.
315 (a)
   7.01(b)
(b)
   7.05
(c)
   7.01
(d)
   6.05; 7.01(c)
(e)
   6.11
316 (a)(last sentence)
  2.09
(a)(1)(A)
  6.02
(a)(1)(B)
  6.04
(a)(2)
  9.02
(c)
   9.04
317 (a)(1)
  6.08
(a)(2)
  6.09
(b)
   2.04
318 (a)
   12.01
(c)
   12.01
 
     
N.A.   means Not Applicable
 
Note:   This Cross-Reference Table shall not, for any purpose, be deemed to be a part of the Indenture.

 

 

 

TABLE OF CONTENTS
         
    Page  
 
ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE
     1  
 
        
Section 1.01 Definitions
     1  
Section 1.02 Incorporation by Reference of Trust Indenture Act
     46  
Section 1.03 Rules of Construction
     46  
 
        
ARTICLE TWO THE NOTES
     47  
 
        
Section 2.01 Form and Dating
     47  
Section 2.02 Execution, Authentication and Denomination; Additional Notes
     50  
Section 2.03 Registrar and Paying Agent
     51  
Section 2.04 Paying Agent To Hold Assets in Trust
     51  
Section 2.05 Holder Lists
     52  
Section 2.06 Transfer and Exchange
     52  
Section 2.07 Replacement Notes
     52  
Section 2.08 Outstanding Notes
     53  
Section 2.09 Treasury Notes
     53  
Section 2.10 Temporary Notes
     53  
Section 2.11 Cancellation
     54  
Section 2.12 Defaulted Interest
     54  
Section 2.13 CUSIP Numbers, ISINs, etc.
     54  
Section 2.14 Deposit of Moneys
     55  
Section 2.15 Certificated Notes
     55  
Section 2.16 Special Transfer Provisions
     56  
 
        
ARTICLE THREE REDEMPTION
     60  
 
        
Section 3.01 Notices to Trustee
     60  
Section 3.02 Selection of Notes To Be Redeemed
     61  
Section 3.03 Notice of Redemption
     61  
Section 3.04 Effect of Notice of Redemption
     62  
Section 3.05 Deposit of Redemption Price
     62  
Section 3.06 Notes Redeemed in Part
     62  
 
        
ARTICLE FOUR COVENANTS
     63  
 
        
Section 4.01 Payment of Notes
     63  
Section 4.02 Maintenance of Office or Agency
     63  
Section 4.03 Corporate Existence
     63  
Section 4.04 Payment of Taxes and Other Claims
     64  
Section 4.05 Maintenance of Properties and Insurance
     64  
Section 4.06 Compliance Certificate; Notice of Default
     66  
Section 4.07 Compliance with Laws
     66  
Section 4.08 Waiver of Stay, Extension or Usury Laws
     67  

 

i

 

         
    Page  
 
Section 4.09 Change of Control
     67  
Section 4.10 Limitations on Additional Indebtedness and Preferred Stock
     70  
Section 4.11 Limitations on Restricted Payments
     74  
Section 4.12 Limitations on Liens
     78  
Section 4.13 Limitations on Asset Sales
     78  
Section 4.14 Excess Cash Flow
     83  
Section 4.15 Limitations on Transactions with Affiliates
     85  
Section 4.16 Limitations on Dividend and Other Restrictions Affecting Restricted Subsidiaries
     87  
Section 4.17 Limitations on Sale and Leaseback Transactions
     89  
Section 4.18 Limitations on the Issuance or Sale of Equity Interests of Restricted Subsidiaries
     90  
Section 4.19 Additional Note Guarantees
     90  
Section 4.20 Further Assurances; Delivery of Mortgages
     91  
Section 4.21 Reports to Holders
     93  
Section 4.22 Limitations on Designation of Unrestricted Subsidiaries
     95  
Section 4.23 Post-Closing Covenant
     96  
Section 4.24 Conduct of Business
     97  
Section 4.25 Limitation on Activities of Certain Subsidiaries
     97  
Section 4.26 Payments for Consent
     98  
Section 4.27 Events of Loss
     98  
Section 4.28 Rights Offering
     99  
 
        
ARTICLE FIVE SUCCESSOR CORPORATION
     100  
 
        
Section 5.01 Mergers, Consolidations, Etc.
     100  
 
ARTICLE SIX DEFAULT AND REMEDIES
     103  
 
        
Section 6.01 Events of Default
     103  
Section 6.02 Acceleration
     105  
Section 6.03 Other Remedies
     106  
Section 6.04 Waiver of Past Defaults
     106  
Section 6.05 Control by Majority
     107  
Section 6.06 Limitation on Suits
     107  
Section 6.07 Rights of Holders To Receive Payment
     107  
Section 6.08 Collection Suit by Trustee
     108  
Section 6.09 Trustee May File Proofs of Claim
     108  
Section 6.10 Priorities
     108  
Section 6.11 Undertaking for Costs
     109  
 
        
ARTICLE SEVEN TRUSTEE
     109  
 
        
Section 7.01 Duties of Trustee
     109  
Section 7.02 Rights of Trustee
     110  
Section 7.03 Individual Rights of Trustee
     113  
Section 7.04 Trustee’s Disclaimer
     113  
Section 7.05 Notice of Default
     113  

 

ii

 

         
    Page  
 
Section 7.06 Reports by Trustee to Holders
     113  
Section 7.07 Compensation and Indemnity
     114  
Section 7.08 Replacement of Trustee
     116  
Section 7.09 Successor Trustee by Merger, Etc.
     116  
Section 7.10 Eligibility; Disqualification
     117  
Section 7.11 Preferential Collection of Claims Against the Issuers
     117  
 
        
ARTICLE EIGHT DISCHARGE OF INDENTURE; DEFEASANCE
     117  
 
        
Section 8.01 Termination of the Issuers’ Obligations
     117  
Section 8.02 Legal Defeasance and Covenant Defeasance
     118  
Section 8.03 Conditions to Legal Defeasance or Covenant Defeasance
     120  
Section 8.04 Application of Trust Money
     121  
Section 8.05 Repayment to the Issuers
     122  
Section 8.06 Reinstatement
     122  
 
        
ARTICLE NINE AMENDMENTS, SUPPLEMENTS, WAIVERS AND ENTRY INTO INTERCREDITOR AGREEMENT
     122  
 
        
Section 9.01 Without Consent of Holders
     122  
Section 9.02 With Consent of Holders
     124  
Section 9.03 Compliance with the Trust Indenture Act
     125  
Section 9.04 Revocation and Effect of Consents
     125  
Section 9.05 Notation on or Exchange of Notes
     126  
Section 9.06 Trustee and the Note Collateral Agent To Sign Amendments, Etc.
     126  
Section 9.07 Terms of Intercreditor Agreement
     127  
 
        
ARTICLE TEN COLLATERAL
     131  
 
        
Section 10.01 Collateral and Security Documents
     131  
Section 10.02 Recordings and Opinions
     132  
Section 10.03 Release of Collateral
     133  
Section 10.04 Suits to Protect the Collateral
     134  
Section 10.05 Authorization of Receipt of Funds by the Trustee Under the Security Documents
     135  
Section 10.06 Powers Exercisable by Receiver or Trustee
     135  
Section 10.07 Note Collateral Agent
     135  
Section 10.08 Compensation and Indemnity
     140  
Section 10.09 Intercreditor Agreement and Other Security Documents
     140  
 
        
ARTICLE ELEVEN NOTE GUARANTEE
     141  
 
        
Section 11.01 Unconditional Guarantee
     141  
Section 11.02 Limitation on Guarantor Liability
     142  
Section 11.03 Execution and Delivery of Note Guarantee
     143  
Section 11.04 Release of a Guarantor
     143  
Section 11.05 Waiver of Subrogation
     144  

 

iii

 

         
    Page  
 
Section 11.06 Immediate Payment
     145  
Section 11.07 No Setoff
     145  
Section 11.08 Note Guarantee Obligations Absolute
     145  
Section 11.09 Note Guarantee Obligations Continuing
     146  
Section 11.10 Note Guarantee Obligations Not Reduced
     146  
Section 11.11 Note Guarantee Obligations Reinstated
     146  
Section 11.12 Note Guarantee Obligations Not Affected
     146  
Section 11.13 Waiver
     148  
Section 11.14 No Obligation To Take Action Against the Issuers
     148  
Section 11.15 Dealing with the Issuers and Others
     148  
Section 11.16 Default and Enforcement
     149  
Section 11.17 Amendment, Etc.
     149  
Section 11.18 Acknowledgment
     149  
Section 11.19 Costs and Expenses
     149  
Section 11.20 No Merger or Waiver; Cumulative Remedies
     149  
Section 11.21 Survival of Note Guarantee Obligations
     150  
Section 11.22 Note Guarantee in Addition to Other Guarantee Obligations
     150  
Section 11.23 Severability
     150  
Section 11.24 Successors and Assigns
     150  
 
        
ARTICLE TWELVE MISCELLANEOUS
     151  
 
        
Section 12.01 Trust Indenture Act Controls
     151  
Section 12.02 Notices
     151  
Section 12.03 Communications by Holders with Other Holders
     152  
Section 12.04 Certificate and Opinion as to Conditions Precedent
     152  
Section 12.05 Statements Required in Certificate or Opinion
     152  
Section 12.06 Rules by Trustee, Paying Agent, Registrar
     153  
Section 12.07 Legal Holidays
     153  
Section 12.08 Governing Law
     153  
Section 12.09 No Adverse Interpretation of Other Agreements
     153  
Section 12.10 No Recourse Against Others
     153  
Section 12.11 Successors
     154  
Section 12.12 Duplicate Originals
     154  
Section 12.13 Severability
     154  
         
Schedule 4.05
  —   Insurance
Schedule 4.19
  —   Real Property
 
        
Exhibit A
  —   Form of Notes and Exchange Notes
Exhibit B
  —   Form of Legends
Exhibit C
  —   Form of Notation of Guarantee and Exchange Guarantee
Exhibit D
  —   Form of Regulation S Certificate
Exhibit E
  —   Form of Rule 144A Certificate
Exhibit F
  —   Form of Institutional Accredited Investor Certificate
Exhibit G
  —   Form of Certificate of Beneficial Ownership

 

iv

 

INDENTURE dated as of February 4, 2011 among WESTMORELAND COAL COMPANY, a Delaware corporation, and its successors, but not any of its subsidiaries (the “Issuer”), WESTMORELAND PARTNERS, a Virginia partnership and an indirect Wholly Owned Subsidiary of the Issuer (the “Co-Issuer” and, together with the Issuer, the “Issuers”), and each of the Guarantors named herein and WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association organized under the laws of the United States of America, as trustee (in such capacity, the “Trustee”) and as the collateral agent (in such capacity, the “Note Collateral Agent”). The terms of the Notes include those set forth in this Indenture and those made part of this Indenture by reference to the Trust Indenture Act.
The Issuers have duly authorized the creation of the Initial Notes on the Issue Date and, thereafter, Additional Notes (which such Additional Notes may have a different issue date, issue price and first interest payment date than the Initial Notes), and to provide therefor, the Issuers have duly authorized the execution and delivery of this Indenture. All things necessary to make the Notes, when duly issued and executed by the Issuers and authenticated and delivered hereunder, the valid and binding obligations of the Issuers and to make this Indenture a valid and binding agreement of the Issuers have been done.
Each party hereto agrees as follows for the benefit of each other party and for the equal and ratable benefit of the Holders of the Notes:
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01 Definitions.
Set forth below are certain defined terms used in this Indenture.
“Absaloka” means Absaloka Coal LLC.
“Absaloka Collateral” means any assets owned by Absaloka.
“acceleration declaration” has the meaning assigned to that term in Section 6.02.
“Acquired Indebtedness” means (1) with respect to any Person that becomes a Restricted Subsidiary after the Issue Date, Indebtedness of such Person and its Subsidiaries existing at the time such Person becomes a Restricted Subsidiary and (2) with respect to the Issuer, the Co-Issuer or any Restricted Subsidiary, any Indebtedness of a Person (other than the Issuer, the Co-Issuer or a Restricted Subsidiary) existing at the time such Person is merged with or into the Issuer, the Co-Issuer or a Restricted Subsidiary, or Indebtedness expressly assumed by the Issuer, the Co-Issuer or any Restricted Subsidiary in connection with the acquisition of an asset or assets from another Person.

 

1

 

“Additional Interest” has the meaning set forth in the Registration Rights Agreement or as set forth in Section 4.28 with respect to any Rights Offering; the Issuer shall promptly notify the Trustee of such Additional Interest as set forth in the Registration Rights Agreement or Section 4.28, as applicable, and any other registration rights agreement.
“Additional Notes” means additional Notes issued under this Indenture having identical terms and conditions to the Notes issued on the Issue Date, except for issue date, issue price and first interest payment date, in an unlimited aggregate principal amount, subject to compliance with Section 4.10 and Section 4.12; provided, that the Co-Issuer shall not be permitted to issue Additional Notes independently of the Issuer.
“Administrative Agent” has the meaning assigned to that term in Section 9.07.
“Affiliate” of any Person means any other Person which directly or indirectly controls or is controlled by, or is under direct or indirect common control with, the referenced Person. For purposes of Section 4.15, Affiliates shall be deemed to include, with respect to any Person, any other Person (1) which beneficially owns or holds, directly or indirectly, 10% or more of any class of the Voting Stock of the referenced Person, (2) of which 10% or more of the Voting Stock is beneficially owned or held, directly or indirectly, by the referenced Person or (3) with respect to an individual, any immediate family member of such Person. For purposes of this definition, “control” of a Person shall mean the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise.
“Affiliate Transaction” has the meaning assigned to that term in Section 4.15(a).
“Agent Members” has the meaning assigned to that term in Section 2.01(d)(ii).
“Agents” means, collectively, the Note Collateral Agent and (if any) the Revolving Collateral Agent.
“Alternate Offer” has the meaning assigned to that term in Section 4.09.
“amend” means to amend, supplement, restate, amend and restate or otherwise modify, including successively, and “amendment” shall have a correlative meaning.
“Amended and Restated WML Credit Agreement” means the Amended and Restated Credit Agreement by and among Westmoreland Mining LLC, the guarantors party thereto, the banks party thereto and PNC Bank, National Association, as agent, dated as of June 26, 2008.

 

2

 

“Applicable Procedures” means, with respect to any transfer or transaction involving a Temporary Regulation S Global Note or beneficial interest therein, the rules and procedures of the Depository for such Temporary Regulation S Global Note, to the extent applicable to such transaction and as in effect from time to time.
“asset” means any asset or property.
“Asset Acquisition” means
(1) an Investment by the Issuer, the Co-Issuer or any Restricted Subsidiary of the Issuer in any other Person if, as a result of such Investment, such Person shall become a Restricted Subsidiary of the Issuer, or shall be merged with or into the Issuer, the Co-Issuer or any Restricted Subsidiary of the Issuer, or
(2) the acquisition by the Issuer, the Co-Issuer or any Restricted Subsidiary of the Issuer of all or substantially all of the assets of any other Person or any division or line of business of any other Person.
“Asset Sale” means any sale, issuance, conveyance, transfer, lease, assignment or other disposition by the Issuer, the Co-Issuer or any Restricted Subsidiary to any Person (including by means of a Sale and Leaseback Transaction or a merger or consolidation or similar transaction and including any sale or issuance of the Equity Interest of any Restricted Subsidiary) (collectively, for purposes of this definition, a “transfer”), in one transaction or a series of related transactions, of any assets of the Issuer, the Co-Issuer or any of the Restricted Subsidiaries of the Issuer; provided, that for purposes of this definition, the term “Asset Sale” shall not include:
(1) transfers of cash or Cash Equivalents;
(2) transfers of assets (including Equity Interests) that are governed by, and made in accordance with, Section 4.09 and Section 5.01;
(3) Permitted Investments and Restricted Payments permitted under Section 4.11;
(4) the creation of or realization on any Permitted Lien;
(5) any transfer or series of related transfers that, but for this clause, would be Asset Sales, if after giving effect to such transfers, the aggregate Fair Market Value of the assets transferred in such transaction or any such series of related transactions does not exceed $2.5 million;
(6) a transfer of assets between or among any of the Issuer, the Co-Issuer and any of the Guarantors, a transfer of assets between any Restricted Subsidiaries that are not Guarantors and a transfer of assets by a Restricted Subsidiary that is not a guarantor to the Issuer, the Co-Issuer or any Guarantor;

 

3

 

(7) an issuance or sale of Equity Interests by a Guarantor to the Issuer, the Co-Issuer or to another Guarantor or an issuance or sale of Equity Interests by a Restricted Subsidiary that is not a Guarantor to the Issuer, the Co-Issuer or any Restricted Subsidiary;
(8) a disposition of inventory in the ordinary course of business;
(9) a disposition of obsolete or worn out equipment or equipment that is no longer useful in the conduct of the business of the Issuer, the Co-Issuer and the Restricted Subsidiaries of the Issuer and that is disposed of in each case in the ordinary course of business;
(10) dispositions of past due accounts and notes receivable arising in the ordinary course of business, but only in connection with the compromise or collection thereof;
(11) the licensing or sublicensing of intellectual property or other general intangibles and licenses, leases or subleases of other property in the ordinary course of business and which do not materially interfere with the business of the Issuer, the Co-Issuer and its Restricted Subsidiaries;
(12) a surrender or waiver of contract rights or the settlement, release or surrender of contract, tort or other claims of any kind; and
(13) trades of coal properties of equivalent value in the ordinary course of business.
“Attributable Indebtedness,” when used with respect to any Sale and Leaseback Transaction, means, as at the time of determination, the present value (discounted at a rate equivalent to the Issuer’s then-current weighted average cost of funds for borrowed money as at the time of determination, compounded on a semi-annual basis) of the total obligations of the lessee for rental payments during the remaining term of the lease included in any such Sale and Leaseback Transaction.
“Authentication Order” has the meaning assigned to that term in Section 2.02.
“Bankruptcy Code” means Title 11 of the United States Code, as amended.
“bankruptcy law” means the Bankruptcy Code or any similar federal, foreign or state law for the relief of debtors.
“Board of Directors” means, with respect to any Person, (i) in the case of any corporation, the board of directors of such Person, (ii) in the case of any limited liability company, the board of managers of such Person, (iii) in the case of any partnership, the Board of Directors of the general partner of such Person and (iv) in any other case, the functional equivalent of the foregoing.

 

4

 

“Business Day” means a day other than a Saturday, Sunday or other day on which banking institutions in New York are authorized or required by law to close.
“Capital Lease” means, with respect to any Person, a lease required to be capitalized for financial reporting purposes on the balance sheet of such Person in conformity with GAAP.
“Capital Lease Obligations” of any Person means the obligations of such Person to pay rent or other amounts under a Capital Lease, and the amount of such obligation shall be the capitalized amount thereof determined in accordance with GAAP.
“Cash Equivalents” means:
(1) obligations issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided, that the full faith and credit of the United States of America is pledged in support thereof) or obligations of state or local governments rated not lower than AAA/Aaa by S&P or Moody’s maturing no later than twelve months from the date of acquisition;
(2) time deposits and certificates of deposit or acceptances with a maturity of 360 days or less of any financial institution having combined capital and surplus and undivided profits of not less than $500.0 million whose obligations are rated A- or the equivalent or better by S&P or A3 or better by Moody’s on the date of acquisition;
(3) commercial paper maturing no more than 180 days (or 270 days in the case of WML or its Subsidiaries) from the date of creation thereof issued by a corporation that is not the Issuer or an Affiliate of the Issuer, and is organized under the laws of any State of the United States of America or the District of Columbia and rated at least A-1 by S&P or at least P-1 by Moody’s;
(4) repurchase obligations for underlying securities of the types described in clause (1) above entered into with any financial institution meeting the specifications of clause (2) above; provided, that for any Person other than WML and its Subsidiaries, such obligations may not have a term of more than seven days;
(5) demand deposit accounts maintained in the ordinary course of business; and
(6) investments in money market or other mutual funds 95% of whose assets comprise securities of the types described in clauses (1) through (5) above.

 

5

 

“Cash Management Obligations” means, with respect to any Person, the obligations of such Person in connection with (a) credit cards or stored value cards or (b) treasury, depository or cash management or related services, including (i) the automated clearinghouse transfer of funds or overdrafts or (ii) controlled disbursement services.
“Certificated Note” has the meaning assigned to that term in Section 2.01(c).
“Change of Control” means:
(1) the merger or consolidation of the Issuer with or into another Person or the merger of another Person with or into the Issuer or the merger of any Person with or into a Subsidiary of the Issuer if Equity Interests of the Issuer are issued in connection therewith, or the sale of all or substantially all the assets of the Issuer and Guarantors, taken as a whole, to another Person, unless holders of a majority of the aggregate voting power of the Voting Stock of the Issuer, immediately prior to such transaction, hold securities of the surviving or transferee Person that represent, immediately after such transaction, at least a majority of the aggregate voting power of the Voting Stock of the surviving Person;
(2) any person or group of persons (within the meaning of Sections 13(d) or 14(d)(2) of the Exchange Act) shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the SEC) of capital stock or other securities of the Issuer which are entitled to cast more than 40% of the total votes which may be cast in an election of directors of the Issuer;
(3) a majority of the board of directors of the Issuer shall be comprised of persons other than individuals who were directors of the Issuer one year prior to such time together with any individuals who were nominated for election as directors of the Issuer by individuals who were directors of the Issuer who, at the time of such individuals’ nominations, had been directors of the Issuer for at least one year;
(4) there is any change in the persons (as such term is used in Section 13(d) and Section 14(d)(2) of the Exchange Act) who are direct owners of an equity interest in WML or certain of its Subsidiaries identified in the WML Credit Agreements;
(5) the execution by the Issuer, Co-Issuer or any of its Subsidiaries or Affiliates, or WML or any of its Subsidiaries or Affiliates, of any agreement with respect to any proposed transaction or event or series of transactions or events which, individually or in the aggregate, may reasonably be expected to result in an event described in clauses (2), (3) or (4) above; or the execution of any written agreement which, when fully performed by the parties thereto, would result in an event described in such clauses; or
(6) the adoption of a plan relating to the liquidation or dissolution of the Issuer.

 

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“Change of Control Offer” has the meaning assigned to that term in Section 4.09.
“Change of Control Payment Date” has the meaning assigned to that term in Section 4.09.
“Change of Control Purchase Price” has the meaning assigned to that term in Section 4.09.
“Code” means the Internal Revenue Code of 1986, as amended.
“Collateral” means collectively Note Collateral and (if any) Revolving Facility First-Priority Collateral.
“Consolidated Adjusted Working Capital” means at any date the excess of (i) Consolidated Current Assets (excluding (A) cash and Cash Equivalents classified as such in accordance with GAAP and (B) deferred taxes calculated in accordance with GAAP) over (ii) Consolidated Current Liabilities (excluding deferred taxes calculated in accordance with GAAP).
“Consolidated Amortization Expense” for any period means the amortization expense of the Issuer, the Co-Issuer and the Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP.
“Consolidated Asset Reclamation Accretion Expense” for any period means the accretion expense associated with asset reclamation obligations of the Issuer, the Co-Issuer and the Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP.
“Consolidated Capital Expenditures” means for any period the aggregate amount of all expenditures (whether paid in cash or other consideration or accrued as a liability) that would, in accordance with GAAP, be included as additions to property, plant and equipment and other capital expenditures of the Issuer and its consolidated Subsidiaries for such period, as the same are or would be set forth in a consolidated statement of cash flows of the Issuer and its consolidated Subsidiaries for such period (including the amount of assets leased under any capital lease and any mine reserve acquisitions), but excluding (to the extent that they would otherwise be included) (i) any such expenditures made for the replacement or restoration of assets in amounts not exceeding the aggregate amount of insurance proceeds or casualty or condemnation proceeds with respect to the asset or assets being replaced or restored, (ii) any such expenditures financed with the proceeds of Indebtedness, equity issuances or other proceeds that would not be included in Consolidated EBITDA and (iii) capitalized interest.
“Consolidated Current Assets” means at any date the consolidated current assets of the Issuer and its consolidated Subsidiaries determined as of such date in accordance with GAAP, including accounts receivable, inventory and for purposes of this definition whether or not treated as a current asset in accordance with GAAP, restricted investments and bond collateral, reclamation deposits and advanced coal royalties.

 

7

 

“Consolidated Current Liabilities” means at any date the consolidated current liabilities of the Issuer and its consolidated Subsidiaries determined as of such date in accordance with GAAP, including the amount of any accounts payable, accrued expenses and any Investments made during such period to purchase performance and surety bonds for permitting purposes or reclamation.
“Consolidated Depreciation and Depletion Expense” for any period means the depreciation and depletion expense of the Issuer, the Co-Issuer and the Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP.
“Consolidated EBITDA” for any period means, without duplication, the sum of the amounts for such period of
(1) Consolidated Net Income, plus
(2) in each case only to the extent (and in the same proportion) deducted in determining Consolidated Net Income and with respect to the portion of Consolidated Net Income attributable to the Co-Issuer or any Restricted Subsidiary only if a corresponding amount would be permitted at the date of determination to be distributed to the Issuer by the Co-Issuer or such Restricted Subsidiary without prior approval (that has not been obtained), pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to the Co-Issuer or such Restricted Subsidiary or its stockholders,
(a) Consolidated Income Tax Expense (other than income taxes or income tax adjustments (whether positive or negative) attributable to Asset Sales or extraordinary gains or losses and, without duplication, permitted tax distributions,
(b) Consolidated Amortization Expense (but only to the extent not included in Consolidated Interest Expense),
(c) Consolidated Asset Reclamation Accretion Expense,
(d) Consolidated Depreciation and Depletion Expense (but only to the extent not included in Consolidated Interest Expense),
(e) Consolidated Interest Expense,
(f) all other non-cash items reducing Consolidated Net Income (including without limitation non-cash write-offs of goodwill, intangibles and long-lived assets, but excluding any non-cash charge that results in an accrual of a reserve for cash charges in any future period) for such period, and

 

8

 

(g) costs and expenses incurred in connection with the Transactions,
in each case determined on a consolidated basis in accordance with GAAP, minus
(3) the aggregate amount of all non-cash items, determined on a consolidated basis in accordance with GAAP, to the extent such items increased Consolidated Net Income (other than the accrual of revenue, recording of receivables or the reversal of reserves in the ordinary course of business) for such period.
“Consolidated Income Tax Expense” for any period means the provision for taxes of the Issuer, the Co-Issuer and the Restricted Subsidiaries, determined on a consolidated basis in accordance with GAAP.
“Consolidated Interest Expense” for any period means the sum, without duplication, of the total interest expense of the Issuer, the Co-Issuer and the Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP and including, without duplication,
(1) imputed interest on Capital Lease Obligations and Attributable Indebtedness,
(2) commissions, discounts and other fees and charges owed with respect to letters of credit securing financial obligations, bankers’ acceptance financing and receivables financings,
(3) amortization of debt issuance costs, debt discount or premium and other financing fees and expenses but excluding amortization of deferred financing charges incurred in respect of the Notes,
(4) the interest portion of any deferred payment obligations,
(5) all other non-cash interest expense,
(6) consolidated capitalized interest,
(7) the product of (a) all cash and non-cash dividends paid, declared, accrued or accumulated on any series of Disqualified Equity Interests or any Preferred Stock of the Issuer, the Co-Issuer or any Restricted Subsidiary (other than any such Disqualified Equity Interests or any Preferred Stock held by the Issuer, the Co-Issuer or a Wholly Owned Restricted Subsidiary or to the extent paid in Qualified Equity Interests), multiplied by (b) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, state and local statutory income tax rate of the Issuer, the Co-Issuer and the Restricted Subsidiaries, expressed as a decimal,
(8) all interest payable with respect to discontinued operations, and

 

9

 

(9) all interest on any Indebtedness of any other Person guaranteed by the Issuer, the Co-Issuer or any Restricted Subsidiary; provided, that to the extent directly related to the issuance of the Notes, amortization of debt issuance costs, debt discount or premium and other financing fees and expenses shall be excluded. Consolidated Interest Expense shall be calculated after giving effect to Hedging Obligations (including associated costs) described in clause (1) of the definition of “Hedging Obligations,” but excluding unrealized gains and losses with respect to Hedging Obligations.
“Consolidated Net Income” for any period means the net income (or loss) of the Issuer, the Co-Issuer and the Restricted Subsidiaries for such period determined on a consolidated basis in accordance with GAAP; provided, that there shall be excluded from the calculation of Consolidated Net Income (to the extent otherwise included therein), without duplication:
(1) the net income (or loss) of any Person (other than a Restricted Subsidiary) in which any Person other than the Issuer, the Co-Issuer and the Restricted Subsidiaries has an ownership interest, except to the extent that cash in an amount equal to any such income has actually been received by the Issuer, the Co-Issuer or any of its Restricted Subsidiaries during such period;
(2) except to the extent includible in the consolidated net income of the Issuer pursuant to the foregoing clause (1), the net income (or loss) of any Person that accrued prior to the date that (a) such Person becomes a Restricted Subsidiary or is merged into or consolidated with the Issuer, the Co-Issuer or any Restricted Subsidiary or (b) the assets of such Person are acquired by the Issuer, the Co-Issuer or any Restricted Subsidiary;
(3) the net income of any Restricted Subsidiary and Co-Issuer during such period to the extent that the declaration or payment of dividends or similar distributions by such Restricted Subsidiary and Co-Issuer of that income is not permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary during such period, except that the Issuer’s equity in a net loss of any such Restricted Subsidiary for such period shall be included in determining Consolidated Net Income; provided, that the net income of WML and its Subsidiaries shall not be excluded pursuant to this clause (3) to the extent that the declaration or payment of dividends or similar distributions or payments is not permitted pursuant to provisions in the WML Credit Agreements that limit dividends, distributions or fee payments from WML to the Issuer (it being understood that this proviso shall apply only to such provisions of the WML Credit Agreements and not to any other limitations or restrictions otherwise applicable);
(4) for the purposes of calculating the Restricted Payments Basket only, in the case of a successor to the Issuer by consolidation, merger or transfer of its assets, any income (or loss) of the successor prior to such merger, consolidation or transfer of assets;

 

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(5) any gain (or loss), together with any related provisions for taxes on any such gain (or the tax effect of any such loss), realized during such period by the Issuer, the Co-Issuer or any Restricted Subsidiary upon (a) the acquisition of any securities, or the extinguishment of any Indebtedness, or the sale or disposition of any Equity Interests of the Issuer, the Co-Issuer or any Restricted Subsidiary or (b) any Asset Sale (without regard to the $2.50 million limitation set forth in clause (5) of the definition thereof) by the Issuer, the Co-Issuer or any Restricted Subsidiary;
(6) gains and losses due solely to fluctuations in currency values and the related tax effects according to GAAP;
(7) unrealized gains and losses with respect to Hedging Obligations;
(8) any extraordinary or nonrecurring gain (or extraordinary or nonrecurring loss), together with any related provision for taxes on any such gain (or the tax effect of any such loss), realized by the Issuer, the Co-Issuer or any Restricted Subsidiary during such period;
(9) any impairment charge or asset write-off or write-down, including impairment charges or asset write-offs or write-downs related to goodwill, intangible assets, deferred financing costs, inventory, long-lived assets, investments in debt and equity securities in connection with any past or future acquisition, merger, consolidation or similar transaction (excluding any non-cash items to the extent that it represents an accrual of or reserve for cash expenditures in any future period except to the extent such item is subsequently reserved or as a result of a change in law or regulation, in each case, pursuant to GAAP, and the amortization of intangibles arising pursuant to GAAP;
(10) effects of adjustments (including the effects of such adjustments pushed down to the Issuer, the Co-Issuer and Restricted Subsidiaries) in Issuer’s consolidated financial statements pursuant to GAAP (including in the inventory, property and equipment, software, goodwill, intangible assets, in-process research and development, deferred revenue and debt line items thereof) resulting from the application of purchase accounting, as the case may be, in relation to any consummated transaction or the amortization or write-off of any amounts thereof, net of taxes; provided, that this clause (10) shall not include the recognition of ROVA deferred revenue for any period subsequent to the Issue Date; and
(11) cumulative effect of a change in accounting principle(s) during such period.
For purposes of this definition of “Consolidated Net Income,” “nonrecurring” means any gain or loss as of any date that is not reasonably likely to recur within the two years following such date; provided, that if there was a gain or loss similar to such gain or loss within the two years preceding such date, such gain or loss shall not be deemed nonrecurring.

 

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Notwithstanding the foregoing, for the purposes of Section 4.11 only, there shall be excluded from Consolidated Net Income any repurchases, repayments or redemptions of Investments, proceeds realized on the sale of Investments or return of capital to the Issuer, the Co-Issuer or a Restricted Subsidiary to the extent such repurchases, repayments, redemptions, proceeds or returns increase the amount of Restricted Payments permitted under Section 4.11(a)(3)(D) or decrease the amount of Investments outstanding pursuant to the paragraph following clause (18) of the definition of “Permitted Investments.”
“Consolidated Total Indebtedness” means, at any date of determination, an amount equal to the sum, without duplication, of the aggregate amount of all outstanding Indebtedness of the Issuer, the Co-Issuer and its Restricted Subsidiaries.
“Controlling Secured Parties” means at least a majority in aggregate principal amount of the Holders of the Notes then outstanding.
“Corporate Trust Office” means the corporate trust office of the Trustee located at 201 Main Street, Suite 301, Fort Worth, TX, 76102, Attention: Corporate Trust Administration, or such other office, designated by the Trustee by written notice to the Issuers, at which at any particular time its corporate trust business shall be administered.
“Covenant Defeasance” has the meaning assigned to that term in Section 8.02(c).
“Coverage Ratio Exception” has the meaning assigned to that term in Section 4.10(a).
“Co-Issuer” has the meaning assigned to that term in the Preamble.
“Custodian” means any receiver, trustee, assignee, liquidator or similar official under any applicable bankruptcy law.
“Default” means (1) any Event of Default or (2) any event, act or condition that, after notice or the passage of time or both, would be an Event of Default.
“Denominated Currency” has the meaning assigned to that term in Section 11.07.
“Depository” means The Depository Trust Company, New York, New York, or a successor thereto registered under the Exchange Act or other applicable statute or regulation.
“Designated Preferred Stock” means Preferred Stock of the Issuer (other than in the form of Disqualified Equity Interests) that is issued for cash (other than to the Co-Issuer or a Restricted Subsidiary) and is so designated as Designated Preferred Stock pursuant to an Officer’s Certificate on the issuance date thereof.

 

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“Designation” has the meaning assigned to that term in Section 4.22(a).
“Designation Amount” has the meaning assigned to that term in Section 4.22(a)(2).
“DIP Financing” has the meaning assigned to that term in Section 9.07.
“Disqualified Equity Interests” of any Person means any class of Equity Interests of such Person that, by its terms, or by the terms of any related agreement or of any security into which it is convertible, puttable or exchangeable, is, or upon the happening of any event or the passage of time would be, required to be redeemed by such Person, whether or not at the option of the holder thereof, or matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, in whole or in part, on or prior to the date which is 91 days after the final maturity date of the Notes; provided, however, that any class of Equity Interests of such Person that, by its terms, authorizes such Person to satisfy in full its obligations with respect to the payment of dividends or upon maturity, redemption (pursuant to a sinking fund or otherwise) or repurchase thereof or otherwise by the delivery of Equity Interests that are not Disqualified Equity Interests, and that is not convertible, puttable or exchangeable for Disqualified Equity Interests or Indebtedness, will not be deemed to be Disqualified Equity Interests so long as such Person satisfies its obligations with respect thereto solely by the delivery of Equity Interests that are not Disqualified Equity Interests; provided, further, that any Equity Interests that would not constitute Disqualified Equity Interests but for provisions thereof giving holders thereof (or the holders of any security into or for which such Equity Interests are convertible, exchangeable or exercisable) the right to require the Issuer to redeem such Equity Interests upon the occurrence of a change in control or asset sale occurring prior to the final maturity date of the Notes shall not constitute Disqualified Equity Interests if the change in control or asset sale provisions applicable to such Equity Interests are no more favorable to such holders than the provisions described under Section 4.09 and Section 4.13, respectively, and such Equity Interests specifically provide that the Issuer will not redeem any such Equity Interests pursuant to such provisions prior to the Issuer’s purchase of the Notes as required pursuant to the provisions described under Section 4.09 and Section 4.13, respectively.
“Distribution Compliance Period” means, with respect to any Notes, the period of 40 consecutive days beginning on and including the later of (i) the day on which such Notes are first offered to Persons other than distributors (as defined in Regulation S under the Securities Act) in reliance on Regulation S and (ii) the Issue Date with respect to such Notes.
“Environment” means ambient air, indoor air, surface water and groundwater (including potable water, navigable water and wetlands), the land surface or subsurface strata, natural resources, or as otherwise defined in any Environmental Law.
“Environmental Claim” has the meaning assigned to that term in Section 7.07.

 

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“Environmental Law” means any and all present and future treaties, laws, statutes, ordinances, regulations, rules, decrees, orders, judgments, consent orders, consent decrees, code or other binding requirements, and the common law, relating to protection of public health or the Environment, the Release or threatened Release of Hazardous Material, natural resources or natural resource damages, and any and all Environmental Permits.
“Environmental Permit” means any permit, license, approval, registration, notification, exemption, consent or other authorization required by or from a Governmental Authority under Environmental Law.
“Equity Interests” of any Person means (1) any and all shares or other equity interests (including common stock, preferred stock, limited liability company interests and partnership interests) in such Person and (2) all rights to purchase, warrants or options (whether or not currently exercisable), participations or other equivalents of or interests in (however designated) such shares or other interests in such Person (but excluding any debt security that is convertible into, or exchangeable for, common stock).
“Event of Default” has the meaning assigned to that term in Section 6.01.
“Event of Loss” means, with respect to any Collateral, whether in respect of a single event or a series of related events, any (1) loss, destruction or damage of such Collateral, (2) condemnation, seizure or taking by exercise of the power of eminent domain or otherwise of such Collateral, or confiscation of such Collateral or the requisition of the use of such Collateral or (3) settlement in lieu of clause (2) above.
“Excess Cash Flow” means for any period an amount equal to the excess of:
(1) the sum, without duplication, of:
(a) Consolidated EBITDA for such period plus
(b) the decrease, if any, in Consolidated Adjusted Working Capital from the first day to the last day of such period, plus
(c) the increase, if any, in deferred revenue liabilities (including both the current and non-current portion of such liabilities) from the first day to the last day of such period, plus
(d) the increase, if any, in amounts drawn by the Issuer or any of its consolidated Subsidiaries under any revolving credit facility from the first day to the last day of such period, over
(2) (the sum, without duplication, of:
(a) Consolidated Interest Expense for such period paid in cash,

 

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(b) Consolidated Income Tax Expense actually paid by the Issuer on a consolidated basis during such period in respect of any period ending on or after the Issue Date,
(c) the increase, if any, in Consolidated Adjusted Working Capital from the first day to the last day of such period,
(d) the decrease, if any, in deferred revenue liabilities (including both the current and non-current portion of such liabilities) from the first day to the last day of such period,
(e) the aggregate amount of any permitted optional redemptions of Notes during such period under Section 5 and Section 6 of the Notes,
(f) cash payments made during such period in respect of Consolidated Capital Expenditures,
(g) consolidated cash payments (or repayments) in respect of outstanding Indebtedness (excluding any Indebtedness outstanding under any revolving credit facility) of the Issuer or any of its consolidated Subsidiaries, including principal payments in respect of capital leases and payments of any make-whole amounts, actually paid by the Issuer or any of its consolidated Subsidiaries during such period,
(h) consolidated cash payments or repayments (whether or not resulting in a permanent commitment reduction) made in respect of outstanding Indebtedness of the Issuer or any of its consolidated Subsidiaries under any revolving credit facility, actually paid by the Issuer or any of its consolidated Subsidiaries during such period,
(i) consolidated cash payments made by the Issuer or any of its consolidated Subsidiaries during such period related to post-retirement medical and heritage costs, in excess of amounts included in Consolidated EBITDA,
(j) consolidated cash payments made by the Issuer or any of its consolidated Subsidiaries during such period related to pension plans, in excess of amounts included in Consolidated EBITDA,
(k) consolidated cash payments made by the Issuer or any of its consolidated Subsidiaries during such period related to asset reclamation,
(l) cash amounts contributed by the Issuer or any of its consolidated Subsidiaries to fund the WML debt service reserve account during such period; provided, that such amounts shall not exceed the minimum amounts required to fund such reserve account, and
(m) cash payments made by the Issuer or any of its consolidated Subsidiaries to fund the WML working capital reserve account during such period; provided, that such amounts shall not exceed the minimum amounts required to fund such reserve account.

 

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“Excess Cash Flow Amount” means, as of the date of determination, an aggregate amount equal to 75% of the Excess Cash Flow for such prior fiscal year. For example, if the date of determination is April 30, 2012, Excess Cash Flow shall be calculated for the fiscal year ended December 31, 2011.
“Excess Cash Flow Offer” has the meaning assigned to that term in Section 4.14.
“Excess Cash Flow Offer Deficiency” has the meaning assigned to that term in Section 4.14.
“Excess Cash Flow Offered Price” has the meaning assigned to that term in Section 4.14.
“Excess Cash Flow Payment Amount” has the meaning assigned to that term in Section 4.14.
“Excess Cash Flow Payment Date” has the meaning assigned to that term in Section 4.14.
“Excess Loss Proceeds” has the meaning assigned to that term in Section 4.27(c).
“Excess Proceeds” has the meaning assigned to that term in Section 4.13(d).
“Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended and the rules and regulations of the SEC promulgated thereunder.
“Exchange Global Notes” has the meaning assigned to that term in Section 2.01(c)(i).
“Exchange Notes” means any notes issued pursuant to the Registration Rights Agreement in exchange for the Notes issued on the Issue Date or in exchange for any Additional Notes.
“Exchange Offer” has the meaning set forth in the Registration Rights Agreement.

 

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“Excluded Property” means (A) shares of any first-tier Subsidiary of the Issuer that is a “controlled foreign corporation” (as defined in Section 957(a) of the Code) in excess of 66% of all of the issued and outstanding Equity Interests in such Subsidiary entitled to vote (within the meaning of Treasury Regulation Section 1.956-2(c)(2)) and (B) any right, title or interest in any permit, lease, capital lease, license, contract, agreement, account receivable, inventory or equipment held by the Issuer, the Co-Issuer or any Subsidiary Guarantor or to which any of the Issuer, the Co-Issuer or any Subsidiary Guarantor is a party or any of its right, title or interest thereunder to the extent, but only to the extent, that the creation of a security interest would, under the terms of such permit, lease, capital lease, license, contract, agreement, account receivable, inventory or equipment, or as a matter of law, result in a breach of the terms of, or constitute a default under, any permit, lease, capital lease, license, contract, agreement, account receivable, inventory or equipment held by the Issuer, the Co-Issuer or any Subsidiary Guarantor or to which any of the Issuer, the Co-Issuer or any Subsidiary Guarantor is a party or render void the security interest therein (other than to the extent that any such term would be rendered ineffective pursuant to Section 9-406, 9-407, 9-408 or 9-409 of the UCC (or any successor provision or provisions); provided, that immediately upon (x) any such Subsidiary described in (A) not being a “controlled foreign corporation” or (y) the ineffectiveness, lapse or termination of any such provision or upon obtaining a required consent to cure any potential breach, such right, title or interest in such permit, lease, capital lease, license, contract, agreement, account receivable, inventory or equipment shall cease to be an “Excluded Property.” For the avoidance of doubt, “Excluded Property” shall not include any right to receive any payment of money or the proceeds, substitutions or replacements of any Excluded Property (unless such proceeds, substitutions or replacements would constitute an Excluded Property).
“Fair Market Value” means, with respect to any asset, the price (after taking into account any liabilities relating to such assets) that would be negotiated in an arm’s-length transaction for cash between a willing seller and a willing and able buyer, neither of which is under any compulsion to complete the transaction, as such price is determined in good faith by the Board of Directors of the Issuer or a duly authorized committee thereof, as evidenced by a resolution of such Board or committee.
“First Lien Collateral” means substantially all of the tangible and intangible assets of the Issuer, the Co-Issuer and the Subsidiary Guarantors (whether now owned or hereinafter arising or acquired) pursuant to one or more First Lien Security Documents and, with respect to assets consisting of Real Property and fixtures (whether now owned or hereinafter arising or acquired) pursuant to mortgages, deeds of trust, or deeds to secure debt.
“First Lien Security Documents” means any security document among the Issuer, the Co-Issuer, the Subsidiary Guarantors, Absaloka and the Note Collateral Agent granting or evidencing a first-priority security interest in or Liens on any assets of such Person to secure the Obligations under this Indenture, the Notes and the Note Guarantees, as each may be amended, restated, supplemented or otherwise modified from time to time.

 

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“Fixed Charge Coverage Ratio” means the ratio of Consolidated EBITDA during the Four-Quarter Period ending on or prior to the date of the transaction giving rise to the need to calculate the Fixed Charge Coverage Ratio (the “Transaction Date”) to Consolidated Interest Expense for the Four-Quarter Period. For purposes of this definition, Consolidated EBITDA and Consolidated Interest Expense shall be calculated after giving effect on a pro forma basis for the period of such calculation to:
(1) the incurrence of any Indebtedness or the issuance of any Preferred Stock or Disqualified Equity Interests of the Issuer, the Co-Issuer or any Restricted Subsidiary (and the application of the proceeds thereof) and any repayment of other Indebtedness or redemption of other Preferred Stock or Disqualified Equity Interests (and the application of the proceeds therefrom) (other than the incurrence or repayment of Indebtedness in the ordinary course of business for working capital purposes pursuant to any revolving credit arrangement) occurring during the Four-Quarter Period or at any time subsequent to the last day of the Four-Quarter Period and on or prior to the Transaction Date, as if such incurrence, repayment, issuance or redemption, as the case may be (and the application of the proceeds thereof), occurred on the first day of the Four-Quarter Period; and
(2) any Asset Sale or Asset Acquisition (including, without limitation, any Asset Acquisition giving rise to the need to make such calculation as a result of the Issuer, the Co-Issuer or any Restricted Subsidiary (including any Person who becomes a Restricted Subsidiary as a result of such Asset Acquisition) incurring Acquired Indebtedness and also including any Consolidated EBITDA associated with any such Asset Acquisition) occurring during the Four-Quarter Period or at any time subsequent to the last day of the Four-Quarter Period and on or prior to the Transaction Date, as if such Asset Sale or Asset Acquisition (including the incurrence of, or assumption of liability for, any such Indebtedness or Acquired Indebtedness) occurred on the first day of the Four-Quarter Period; provided, that with respect to any Asset Sale, in the case of Consolidated Interest Expense, only to the extent that the obligations giving rise to such Consolidated Interest Expense will not be obligations of the Issuer, the Co-Issuer or any Restricted Subsidiary following the Transaction Date.
If the Issuer, the Co-Issuer or any Restricted Subsidiary directly or indirectly guarantees Indebtedness of a third Person, the preceding sentence shall give effect to the incurrence of such guaranteed Indebtedness as if the Issuer, the Co-Issuer or such Restricted Subsidiary had directly incurred or otherwise assumed such guaranteed Indebtedness.
In calculating Consolidated Interest Expense for purposes of determining the denominator (but not the numerator) of this Fixed Charge Coverage Ratio:
(1) interest on outstanding Indebtedness determined on a fluctuating basis as of the Transaction Date and which will continue to be so determined thereafter shall be deemed to have accrued at a fixed rate per annum equal to the rate of interest on such Indebtedness in effect on the Transaction Date;
(2) if interest on any Indebtedness actually incurred on the Transaction Date may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a eurocurrency interbank offered rate, or other rates, then the interest rate in effect on the Transaction Date will be deemed to have been in effect during the Four-Quarter Period; and

 

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(3) notwithstanding clause (1) or (2) above, interest on Indebtedness determined on a fluctuating basis, to the extent such interest is covered by agreements relating to Hedging Obligations, shall be deemed to accrue at the rate per annum resulting after giving effect to the operation of these agreements.
For purposes of this definition, whenever pro forma effect is to be given to any pro forma event, the pro forma calculations will be made on a basis that is consistent with Article 11 of Regulation S-X under the Securities Act and shall include, for the avoidance of doubt, synergies, operating expense reductions and other cost savings to the extent allowable, calculated in accordance with Article 11 of Regulation S-X under the Securities Act.
“Foreign Subsidiary” means, with respect to any Person, any Restricted Subsidiary of such Person that is not organized or existing under the laws of the United States of America, any state thereof, the District of Columbia, or any territory thereof.
“Four-Quarter Period” with respect to any Person means the most recent four consecutive full fiscal quarters for which internal financial statements are available at such Person.
“Funding Guarantor” has the meaning assigned to that term in Section 10.02.
“GAAP” means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession of the United States, as in effect on the Issue Date (without giving effect to Accounting Standards Codification Topic 825-10-25, “The Fair Value Option”).
“Global Notes” has the meaning assigned to that term in Section 2.01(c)(iv).
“Governmental Authority” means the government of the United States or any other nation, or of any political subdivision thereof, whether state, provincial, tribal or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union, the European Central Bank or the Organization for Economic Cooperation and Development).

 

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“guarantee” means a direct or indirect guarantee by any Person of any Indebtedness of any other Person and includes any obligation, direct or indirect, contingent or otherwise, of such Person (1) to purchase or pay (or advance or supply funds for the purchase or payment of) Indebtedness of such other Person (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services (unless such purchase arrangements are on arm’s-length terms and are entered into in the ordinary course of business), to take-or-pay, or to maintain financial statement conditions or otherwise); or (2) entered into for purposes of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); “guarantee,” when used as a verb, and “guaranteed” have correlative meanings.
“Guarantee Obligations” has the meaning assigned to that term in Section 11.01.
“Guarantors” means the Subsidiary Guarantors, and each other Person that is required to, or at the election of the Issuer does, become a Guarantor by the terms of this Indenture after the Issue Date, in each case, until such Person is released from its Note Guarantee in accordance with the terms of this Indenture.
“Hazardous Materials” has the meaning assigned to that term in Section 7.07.
“Hedging Obligations” of any Person means the obligations of such Person pursuant to (1) any interest rate swap agreement, interest rate collar agreement or other similar agreement or arrangement, (2) agreements or arrangements relating to, or designed to protect such Person against, fluctuations in foreign currency exchange rates, or (3) any forward contract, commodity swap agreement, commodity option agreement or other similar agreement or arrangement.
“Holder” means any registered holder, from time to time, of the Notes.
“Holder Buy-out Right” has the meaning assigned to that term in Section 9.07.
“incur” means, with respect to any Indebtedness or Obligation, incur, create, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to such Indebtedness or Obligation; provided, that (1) the Indebtedness of a Person existing at the time such Person became a Restricted Subsidiary shall be deemed to have been incurred by such Restricted Subsidiary and (2) neither the accrual of interest nor the accretion of original issue discount shall be deemed to be an incurrence of Indebtedness.
“Indebtedness” means, with respect to any specified Person:
(1) all liabilities, contingent or otherwise, of such Person for borrowed money (whether or not the recourse of the lender is to the whole of the assets of such Person or only to a portion thereof);

 

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(2) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments other than obligations in respect of asset reclamation obligations;
(3) all letters of credit or reimbursement obligations of such Person in respect of letters of credit, letters of guaranty, bankers’ acceptances and similar credit transactions;
(4) all obligations of such Person to pay the deferred and unpaid purchase price of property or services, except trade payables, pension and other retirement related benefits and accrued expenses incurred by such Person in the ordinary course of business in connection with obtaining goods, materials or services;
(5) the maximum fixed redemption or repurchase price of all Disqualified Equity Interests of such Person;
(6) all Capital Lease Obligations of such Person;
(7) all Indebtedness of others secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person;
(8) all Indebtedness of others guaranteed by such Person to the extent of such guarantee; provided, that Indebtedness of the Issuer, the Co-Issuer or its Subsidiaries that is guaranteed by the Issuer, the Co-Issuer or the Issuer’s Subsidiaries shall only be counted once in the calculation of the amount of Indebtedness of the Issuer, the Co-Issuer and its Subsidiaries on a consolidated basis;
(9) all Attributable Indebtedness;
(10) all Preferred Stock of such Person;
(11) to the extent not otherwise included in this definition, Hedging Obligations of such Person; and
(12) all obligations of such Person under conditional sale or other title retention agreements relating to assets purchased by such Person;
if and to the extent any of the preceding items (other than letters of credit, Attributable Indebtedness and Hedging Obligations) would appear as a liability on a balance sheet of the specified Person prepared in accordance with GAAP.

 

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The amount of any Indebtedness which is incurred at a discount to the principal amount at maturity thereof as of any date shall be deemed to have been incurred at the accreted value thereof as of such date. The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above, the maximum liability of such Person for any such contingent obligations at such date and, in the case of clause (7), the lesser of (a) the Fair Market Value of any asset subject to a Lien securing the Indebtedness of others on the date that the Lien attaches and (b) the amount of the Indebtedness secured. For purposes of clause (5), the “maximum fixed redemption or repurchase price” of any Disqualified Equity Interests that do not have a fixed redemption or repurchase price shall be calculated in accordance with the terms of such Disqualified Equity Interests as if such Disqualified Equity Interests were redeemed or repurchased on any date on which an amount of Indebtedness outstanding shall be required to be determined pursuant to this Indenture.
“Indenture” means this Indenture, as amended or supplemented from time to time in accordance with the terms hereof.
“Independent Financial Advisor” means an accounting, appraisal or investment banking firm of nationally recognized standing that is, in the reasonable judgment of the Issuer’s Board of Directors, qualified to perform the task for which it has been engaged and disinterested and independent with respect to the Issuer and its Affiliates.
“Initial Notes” means an issue of 10.75% Senior Secured Notes due 2018 issued on the Issue Date.
“Initial Purchaser” means Gleacher & Company Securities, Inc. and such other initial purchasers party to the purchase agreement entered into in connection with the offer and sale of the Notes issued on the Issue Date.
“Institutional Accredited Investor” means an institution that is an “accredited investor” as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act, who are not also QIBs.
“Institutional Accredited Investor Certificate” means the form of Institutional Accredited Investor Certificate set forth in Exhibit F.
“Insurance Policies” means the insurance policies and coverages required to be maintained by each Issuer and Guarantor which is an owner of Mortgaged Property with respect to the applicable Mortgaged Property pursuant to Section 4.05 and all renewals and extensions thereof.
“Insurance Requirements” means, collectively, all provisions of the Insurance Policies, all requirements of the issuer of any of the Insurance Policies and all orders, rules, regulations and any other requirements of the National Board of Fire Underwriters (or any other body exercising similar functions) binding upon each Issuer and Guarantor which is an owner of Mortgaged Property and applicable to the Mortgaged Property or any use or condition thereof.
“Intercreditor Agreement” has the meaning assigned to that term in Section 9.07.

 

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“interest” means, with respect to the Notes, interest on the Notes, and shall include, if applicable, Additional Interest payable upon the occurrence of a Registration Default under the Registration Rights Agreement or as provided in Section 4.28 with respect to any Rights Offering.
“Interest Payment Date” means the Stated Maturity of an installment of interest on the Notes.
“Investments” of any Person means:
(1) all direct or indirect investments by such Person in any other Person in the form of joint ventures, loans, advances or capital contributions or other credit extensions constituting Indebtedness of such other Person, and any guarantee of Indebtedness of any other Person;
(2) all purchases (or other acquisitions for consideration) by such Person of Indebtedness, Equity Interests or other securities of any other Person (other than any such purchase that constitutes a Restricted Payment of the type described in clause (2) of the definition thereof);
(3) all other items that would be classified as investments (including purchases of assets outside the ordinary course of business) on a balance sheet of such Person prepared in accordance with GAAP; and
(4) the Designation of any Subsidiary as an Unrestricted Subsidiary.
Except as otherwise expressly specified in this definition, the amount of any Investment (other than an Investment made in cash) shall be the Fair Market Value thereof on the date such Investment is made. The amount of Investment pursuant to clause (4) shall be the Designation Amount determined in accordance with Section 4.22. If the Issuer, the Co-Issuer or any Subsidiary sells or otherwise disposes of any Equity Interests of any direct or indirect Subsidiary such that, after giving effect to any such sale or disposition, such Person is no longer a Subsidiary, the Issuer shall be deemed to have made an Investment on the date of any such sale or other disposition equal to the Fair Market Value of the Equity Interests of and all other Investments in such Subsidiary not sold or disposed of, which amount shall be determined in good faith by the Board of Directors. The acquisition by the Issuer, the Co-Issuer or any Restricted Subsidiary of a Person that holds an Investment in a third Person shall be deemed to be an Investment by the Issuer, the Co-Issuer or such Restricted Subsidiary in the third Person in an amount equal to the Fair Market Value of the Investment held by the acquired Person in the third Person.
“Issue Date” means the date on which the Notes are originally issued.
“Issuer” has the meaning assigned to that term in the Preamble.
“Issuers” has the meaning assigned to that term in the Preamble.

 

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“Legal Defeasance” has the meaning assigned to that term in Section 8.02(b).
“Lien” means, with respect to any asset, any mortgage, deed of trust, lien (statutory or other), pledge, lease, easement, restriction, covenant, charge, security interest or other encumbrance of any kind or nature in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, and any lease in the nature thereof, any option or other agreement to sell, and any filing of, or agreement to give, any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction (other than cautionary filings in respect of operating leases).
“Liquidated Damages” has the meaning set forth in the Registration Rights Agreement.
“Loss Proceeds Offer” has the meaning assigned to that term in Section 4.27(c).
“Material Adverse Effect” means any event or condition that would, individually or in the aggregate, have a material adverse effect on the business, financial condition or results of operations of the Issuer and its Restricted Subsidiaries taken as a whole.
“Maturity Date” means February 1, 2018.
“Mineral Consents” means the written consent of each of (i) the Crow Tribe of Indians of the Crow Reservation and (ii) the United States Department of the Interior, to permit a Lien on any interest in mineral rights related to WRI’s and/or Absaloka’s mining operations in Big Horn County, Montana in favor of the Note Collateral Agent for the benefit of the Trustee and the Holders of the Notes.
“Moody’s” means Moody’s Investors Service, Inc., and its successors.
“Mortgage” means any mortgage or deed of trust to secure debt with respect to Real Property owned in fee simple by the Issuer, Co-Issuer, any Guarantor or Absaloka (or Real Property which is the subject of the Mineral Consents) in form and substance reasonably satisfactory to the Note Collateral Agent, including any assignment of leases and rents, security agreement and fixture filing relating thereto, entered into by the Issuer, the Co-Issuer or any Subsidiary Guarantor or Absaloka in favor of the Note Collateral Agent for its benefit and the benefit of the Trustee and the Holders of Notes.
“Mortgage Policies” has the meaning assigned to that term in Section 4.20(c)(1)(A).
“Mortgaged Property” means any fee interest in Real Property which is owned on the Issue Date by the Issuer, the Co-Issuer or a Subsidiary Guarantor and identified in Schedule 4.20 or any fee interest in Real Property acquired after the Issue Date by the Issuer, the Co-Issuer, any Subsidiary Guarantor or Absaloka (or Real Property which is the subject of the Mineral Consents) or that otherwise secures the Notes and Note Guarantees, but shall not, in each case, include Excluded Property.

 

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“Net Assets” of a Guarantor at any date means the amount by which the fair value of the properties and assets of such Guarantor exceeds the total amount of liabilities, including, without limitation, contingent liabilities (after giving effect to all other fixed and contingent liabilities incurred or assumed on such date), but excluding liabilities under its Note Guarantee, of such Guarantor at such date.
“Net Available Proceeds” means, with respect to any Asset Sale, the proceeds of such Asset Sale in the form of cash or Cash Equivalents, net of:
(1) brokerage commissions and other fees and expenses (including fees and expenses of legal counsel, accountants and investment banks) of such Asset Sale;
(2) provisions for taxes payable as a result of such Asset Sale (after taking into account any available tax credits or deductions and any tax sharing arrangements);
(3) amounts required to be paid to any Person (other than the Issuer, the Co-Issuer or any Restricted Subsidiary) owning a beneficial interest in the assets subject to the Asset Sale or to repay Indebtedness outstanding at the time of the Asset Sale that is secured by a Lien on the property or assets sold; and
(4) appropriate amounts to be provided by the Issuer, the Co-Issuer or any Restricted Subsidiary, as the case may be, as a reserve required in accordance with GAAP against any adjustment in the sale price of such asset or assets or liabilities associated with such Asset Sale and retained by the Issuer, the Co-Issuer or any Restricted Subsidiary, as the case may be, after such Asset Sale, including pensions and other post employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale, all as reflected in an Officers’ Certificate delivered to the Trustee; provided, however, that any amounts remaining after adjustments, revaluations or liquidations of such reserves shall constitute Net Available Proceeds.
“Net Loss Proceeds” means, with respect to any Event of Loss, the aggregate proceeds in the form of cash or Cash Equivalents including, without limitation, insurance proceeds from condemnation awards or damages awarded by any judgment, in each case received by the Issuer, the Co-Issuer or any of its Restricted Subsidiaries from such Event of Loss, net of:
(1) reasonable out-of-pocket expenses and fees relating to such Event of Loss (including without limitation legal, accounting, appraisal or insurance adjuster fees);

 

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(2) taxes paid or payable after taking into account any reduction in consolidated tax liability due to available tax credits or deductions and any tax sharing arrangements;
(3) any repayment of Indebtedness that is secured by, or directly related to, the property or assets that are the subject of such Event of Loss;
(4) amounts required to be paid to any Person (other than the Issuer, the Co-Issuer or any Restricted Subsidiary) owning a beneficial interest in the assets subject to the Event of Loss; and
(5) appropriate amounts to be provided by the Issuer, the Co-Issuer or any Restricted Subsidiary, as the case may be, as a reserve, in accordance with GAAP, against any liabilities associated with such Event of Loss and retained by the Issuer, the Co-Issuer or any Restricted Subsidiary, as the case may be, after such Event of Loss, including, without limitation, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Event of Loss.
“Net Proceeds Deficiency” has the meaning assigned to that term in Section 4.13(f).
“Net Proceeds Offer” has the meaning assigned to that term in Section 4.13(e)(1).
“Net Proceeds Payment Date” has the meaning assigned to that term in Section 4.13(h)(2).
“Non-Recourse Debt” means Indebtedness of an Unrestricted Subsidiary:
(1) as to which none of the Issuer, the Co-Issuer or any Restricted Subsidiary (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (b) is directly or indirectly liable as a guarantor or otherwise, or (c) constitutes the lender;
(2) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit upon notice, lapse of time or both any holder of any other Indebtedness of the Issuer, the Co-Issuer or any Restricted Subsidiary to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity; and
(3) as to which the lenders have been notified in writing that they will not have any recourse to the Equity Interests or assets of the Issuer, the Co-Issuer or any Restricted Subsidiary.
“Non-U.S. Person” means any Person other than a U.S. Person as defined in Regulation S.

 

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“Note Collateral” means, collectively, the Absaloka Collateral, the First Lien Collateral, the Note Second Lien Collateral (but only in the event that a Revolving Credit Facility is entered into), the WML Payments Collateral, the WRM Collateral and, upon the WML Repayment Date, the WML Collateral, in each case subject to Permitted Liens and the exclusion of Excluded Property.
“Note Collateral Agent” has the meaning assigned to that term in the Preamble.
“Note First-Priority Liens” means the Liens on the Note Collateral created in favor of the Note Collateral Agent for its benefit and the benefit of the Trustee and the Holders of the Notes, subject solely to Permitted Liens; provided that, in the event the Issuer, the Co-Issuer, the Subsidiary Guarantors and Absaloka enter into a Revolving Credit Facility secured by Revolving Credit Facility First-Priority Liens, the Note First-Priority Liens will, pursuant to the terms of an Intercreditor Agreement, become a Note Second-Priority Lien on such Revolving Facility First-Priority Collateral. For the avoidance of doubt, on the WML Repayment Date, the WML Lien (if any) shall be deemed to be a “Note First-Priority Lien.”
“Note Guarantees” has the meaning assigned to that term in Section 11.01.
“Note Liens” means, collectively, the Note First-Priority Liens and (if a Revolving Credit Facility is entered into) the Note Second-Priority Liens.
“Note Second Lien Collateral” means the Revolving Facility First-Priority Collateral that is subject to a Note Second-Priority Lien.
“Note Second-Priority Liens” means the Liens on the Revolving Facility First-Priority Collateral created in favor of the Note Collateral Agent for its benefit and the benefit of the Trustee and the Holders of the Notes, subject solely to Permitted Liens and Revolving Facility First-Priority Liens.
“Notes” means, collectively, the Initial Notes and Additional Notes treated as a single class of securities under this Indenture, as amended or supplemented from time to time in accordance with the terms of this Indenture; provided any such Additional Notes may have a different issue date, issue price and first interest payment date than the Notes issued on the Issue Date and shall be subject to compliance with Section 4.10 and Section 4.12.
“Notes Custodian” means the custodian with respect to a Global Note (as appointed by the Depository), or any successor Person thereto and shall initially be the Trustee.
“Obligations” means any principal, premium, interest, penalties, fees, indemnification, reimbursements, costs, expenses, damages and other liabilities payable under the documentation governing any Indebtedness.

 

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“Offered Price” has the meaning assigned to that term in Section 4.13(e)(2).
“Offering Memorandum” means the offering memorandum of the Issuers dated February 1, 2011 relating to the Notes.
“Officer” means any of the following of the Issuer: the Chairman of the Board of Directors, the Chief Executive Officer, the Chief Financial Officer, the President, any Vice President, the Treasurer or the Secretary.
“Officers’ Certificate” means a certificate signed in the name of the Issuer (i) by the chairman of the Board of Directors, the president or chief executive officer or a vice president and (ii) by the chief financial officer, the treasurer or any assistant treasurer or the secretary or any assistant secretary.
“Opinion of Counsel” means a written opinion from legal counsel who is reasonably acceptable to the Trustee. The counsel may be an employee of or counsel to the Issuers, a Guarantor or the Trustee.
“Other Currency” has the meaning assigned to that term in Section 11.07.
“Pari Passu Indebtedness” means any Indebtedness of the Issuer, the Co-Issuer or any Guarantor that ranks pari passu in right of payment with the Notes or the Note Guarantees, as applicable, and is secured by a Lien on the Note Collateral that has the same priority as the Lien securing the Notes and the Note Guarantees.
“Pari Passu Indebtedness Price” has the meaning assigned to that term in Section 4.13(e)(2).
“Participant” means, with respect to the Depositary, a Person who has an account with the Depositary.
“Paying Agent” has the meaning assigned to that term in Section 2.03.
“Payment Amount” has the meaning assigned to that term in Section 4.13(e)(1).
“PCBs” has the meaning assigned to that term in Section 7.07.
“Permanent Regulation S Global Note” has the meaning assigned to that term in Section 2.01(c).
“Permitted Business” means the businesses engaged in by the Issuer, the Co-Issuer and its Subsidiaries on the Issue Date as described in the Offering Memorandum and businesses that are reasonably related thereto or reasonable extensions thereof.

 

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“Permitted Collateral Liens” shall mean (a) in the case of Collateral other than Mortgaged Property and any pledged securities, Permitted Liens, (b) in the case of Mortgaged Property, “Permitted Collateral Liens” shall mean the Liens described in clauses (1), (2), (3), (5), (6), (10), (13), (14), (16), (18), (19), (20), (21) (insofar as it relates to Liens to secure Obligations in respect of Refinancing Indebtedness of Indebtedness secured by Liens referred to in clause (12), (15), (18), (19), (20), (27), (30) or (33) of the definition of “Permitted Liens”) and (22), (27), (29), (30), (32) and (33) of the definition of “Permitted Liens” and (c) in the case of Collateral consisting of pledged securities, shall mean the Liens described in clause (1), (3), (5), (8), (16), (17), (20), (21), (30), (32) and (33) of the definition of “Permitted Liens.”
“Permitted Indebtedness” has the meaning assigned to that term in Section 4.10(b).
“Permitted Investment” means:
(1) (a) Investments by the Issuer, the Co-Issuer or any Restricted Subsidiary in (i) the Issuer, any Guarantor or the Co-Issuer or (ii) in any Person that is or will become immediately after such Investment a Restricted Subsidiary and a Guarantor or that will merge or consolidate into the Issuer, the Co-Issuer or a Guarantor, including any Investment of such Person not made in contemplation of such transaction and (b) Investments by any Restricted Subsidiary that is not a Guarantor in (i) any Restricted Subsidiary or (ii) any Person that is or will become immediately after such Investment a Restricted Subsidiary or that will merge or consolidate into the Issuer, the Co-Issuer or a Restricted Subsidiary, including any Investment of such Person not made in contemplation of such transaction;
(2) Investments in the Issuer by any Restricted Subsidiary or the Co-Issuer;
(3) Hedging Obligations incurred pursuant to Section 4.10(b)(4);
(4) cash and Cash Equivalents;
(5) receivables owing to the Issuer, the Co-Issuer or any Restricted Subsidiary if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; provided, however, that such trade terms may include such concessionary trade terms as the Issuer, the Co-Issuer or any such Restricted Subsidiary deems reasonable under the circumstances;
(6) ordinary course trade credit, advances to customers, commissions, tranche and other similar advances to officers, directors and employees made in each case in the ordinary course of business;
(7) Investments in securities of trade creditors or customers received pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of such trade creditors or customers;

 

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(8) Investments made by the Issuer, the Co-Issuer or any Restricted Subsidiary as a result of consideration received in connection with an Asset Sale made (to the extent applicable) in compliance with Section 4.13(d);
(9) prepaid expenses, surety, reclamation and performance bonds and lease, tax, utilities, workers’ compensation, performance and similar deposits made in the ordinary course of business;
(10) stock, obligations or securities received in settlement of debts created in the ordinary course of business and owing to the Issuer, the Co-Issuer or any Restricted Subsidiary or in satisfaction of judgments;
(11) Investments, to the extent Qualified Equity Interests are used to make the Investment;
(12) Investments existing on the Issue Date and any modification, replacement, renewal or extension thereof; provided, that the amount of any such Investment may be increased (x) (i) as required by the terms of such Investment as in existence on the Issue Date or (ii) as otherwise permitted under this Indenture, or (y) with respect to Absaloka, as required to meet the requirements of the Internal Revenue Code;
(13) Investments represented by guarantees otherwise permitted to be made by this Indenture;
(14) Investments not to exceed the greater of (a) $1.0 million per any calendar year at WRM and (b) contributions required to maintain statutorily-defined minimum capitalization at WRM; provided, that such Investments are in the ordinary course of business, consistent with past practice and made on an arm’s length basis;
(15) Investments from the Issuer up to $1.0 million per any calendar year to Basin Resources Inc. and Westmoreland Power Inc. and Investments from the Issuer in an aggregate amount not to exceed $5,000 to Westmoreland Terminal Company, Eastern Coal & Coke Company, and Criterion Coal Company, in each case in connection with their respective dissolution;
(16) Investments made after the date hereof in Restricted Subsidiaries that are not Guarantors in an aggregate amount not to exceed $10.0 million at any one time outstanding (with each Investment being valued as of the date made and without regard to subsequent changes in value);
(17) any Investment by Issuer, the Co-Issuer or a Restricted Subsidiary in a Permitted Business having an aggregative fair market value, taken together with all other Investments made pursuant to this clause (17) that are at that time outstanding (without giving effect to the sale of an Unrestricted Subsidiary to the extent the proceeds of such sale do not consist of cash and/or marketable securities), not to exceed $5.0 million;

 

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(18) other Investments in an aggregate amount not to exceed $10.0 million at any one time outstanding (with each Investment being valued as of the date made and without regard to subsequent changes in value); provided, that no Investment made in reliance on clauses (17) and (18) shall be made in any Person that is the direct or indirect holder of a majority of the outstanding Equity Interests of the Issuer; and
(19) An Investment made by the Issuers in WML and its Subsidiaries with the proceeds of the issuance and sale of Additional Notes as permitted to be incurred under Section 4.10 and the other terms of the Indenture for the purpose of the concurrent refinancing of the WML Notes.
The amount of Investments outstanding at any time pursuant to clauses (16), (17) and (18) above shall be deemed to be reduced:
(a) upon the disposition or repayment of or return on any Investment made pursuant to clauses (16), (17) and (18) above, by an amount equal to the return of capital with respect to such Investment to the Issuer, the Co-Issuer or any Restricted Subsidiary (to the extent not included in the computation of Consolidated Net Income), less the cost of the disposition of such Investment and net of taxes); and
(b) upon a Redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary, by an amount equal to the lesser of (x) the Fair Market Value of the Issuer’s proportionate interest in such Subsidiary immediately following such Redesignation, and (y) the aggregate amount of Investments in such Subsidiary that increased (and did not previously decrease) the amount of Investments outstanding pursuant to clauses (16), (17) and (18) above.
“Permitted Liens” means the following types of Liens:
(1) Liens for taxes, assessments or governmental charges or claims, Liens otherwise existing under applicable law, or Liens or encumbrances upon, and defects of title to, real or personal property other than the Collateral or the WML Collateral, including any attachment of personal or real property or other legal process prior to adjudication of a dispute on the merits, in each case, that are either (a) not delinquent or (b) contested in good faith by appropriate proceedings and as to which the Issuer, Co-Issuer or the Restricted Subsidiaries shall have set aside on its books such reserves as may be required pursuant to GAAP and such proceedings have the effect of preventing forfeiture or sale of the property or assets subject to any such Lien;
(2) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens imposed by law incurred in the ordinary course of business for sums not yet delinquent or being contested in good faith by appropriate proceedings, if adequate reserves or other appropriate provision, if any, as shall be required by GAAP shall have been made in respect thereof and such proceedings have the effect of preventing forfeiture or sale of the property or assets subject to any such Lien;

 

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(3) pledges incurred, deposits made or bonds given in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, reclamation, surety and appeal bonds, bids, leases, government contracts, performance and return-of-money bonds and other ordinary course obligations (exclusive of obligations for the payment of borrowed money);
(4) Liens upon specific items of inventory or other goods and proceeds of any Person securing such Person’s obligations in respect of bankers’ acceptances issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods;
(5) judgment Liens not giving rise to a Default so long as such Liens are adequately bonded and any appropriate legal proceedings which may have been duly initiated for the review of such judgment have not been finally terminated or the period within which the proceedings may be initiated has not expired;
(6) survey exceptions, easements, rights-of-way, zoning restrictions and other similar charges, restrictions or encumbrances in respect of real property or immaterial imperfections of title that were not incurred in connection with Indebtedness and which do not, in the aggregate, impair in any material respect the ordinary conduct of the business of the Issuer, the Co-Issuer and the Restricted Subsidiaries taken as a whole, including without limitation, encumbrances and exceptions to title expressly set forth as an exception to the policies of title insurance obtained to insure the lien of each Mortgage granted in connection with the Notes or the Revolving Credit Facility or the mortgages granted in connection with the WML Credit Agreements;
(7) Liens securing reimbursement obligations with respect to commercial letters of credit which encumber documents and other assets relating to such letters of credit and products and proceeds thereof;
(8) Liens encumbering deposits made to secure obligations arising from statutory, regulatory, contractual or warranty requirements of the Issuer, the Co-Issuer or any Restricted Subsidiary, including rights of offset and setoff;
(9) bankers’ Liens, rights of setoff and other similar Liens existing solely with respect to cash and Cash Equivalents on deposit in one or more of accounts maintained by the Issuer, the Co-Issuer or any Restricted Subsidiary, in each case granted in the ordinary course of business in favor of the bank or banks with which such accounts are maintained, securing amounts owing to such bank with respect to cash management and operating account arrangements, including those involving pooled accounts and netting arrangements; provided, that in no case shall any such Liens secure (either directly or indirectly) the repayment of any Indebtedness;
(10) Liens on leases or subleases arising from the provisions of such lease and subleases and granted to others in the ordinary course of business that do not materially interfere with the ordinary course of business of the Issuer, Co-Issuer or any Restricted Subsidiary, and Liens on property leased under operating leases existing under the WML Credit Agreements;

 

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(11) Liens arising from filing Uniform Commercial Code (or equivalent statutes) financing statements regarding operating leases entered into in the ordinary course of business;
(12) (a) Liens securing the Notes (other than any Additional Notes, except as otherwise provided in this clause (12)) and any Note Guarantee and (b) Liens securing Additional Notes to the extent such Liens secure Refinancing Indebtedness represented by Additional Notes and Note Guarantees of Indebtedness incurred under Section 4.10(b)1(b) and, with respect to WML Notes only, Section 4.10(b)(3);
(13) Liens in respect of royalty, production payment and other obligations under coal leases and similar agreements entered into in the ordinary course of business and to the extent such Liens do not secure any obligation for borrowed money;
(14) Liens in respect of supply, sales, surface use and other operational agreements entered into consistent with normal practices in the mining industry, in each case to the extent such agreements are entered into in the ordinary course of business and such Liens do not secure any obligation for borrowed money;
(15) (a) Liens existing on the Issue Date securing Indebtedness outstanding on the Issue Date and (b) Liens with respect to the assets and common stock, and the products and proceeds thereof, of WML’s Subsidiary Texas Westmoreland Coal Co. in favor of NRG Texas Power LLC as contemplated by the WML Credit Agreements;
(16) Liens in favor of the Issuer, the Co-Issuer or a Guarantor;
(17) Liens securing Obligations in respect of Indebtedness under the Revolving Credit Facility, but only to the extent such Indebtedness is incurred in reliance on and outstanding under Section 4.10(b)(1)(a) and only for so long as the Liens securing such Obligations are subject to the Intercreditor Agreement;
(18) Liens securing Obligations in respect of Indebtedness under the Amended and Restated WML Credit Agreement, but only to the extent such Indebtedness is incurred in reliance on and outstanding under Section 4.10(b)(1)(b);
(19) Liens securing Purchase Money Indebtedness;
(20) Liens on assets or shares of stock of a Person existing at the time such Person becomes a Restricted Subsidiary of the Issuer or at the time the Issuer, the Co-Issuer or the Restricted Subsidiary acquires the asset or shares including by merger or consolidation or otherwise; provided, that such Liens were in existence prior to the contemplation of such Person becoming a Restricted Subsidiary of the Issuer or such acquisition and do not extend to any assets other than those of the Person that becomes a Restricted Subsidiary of the Issuer, or is merged with or into or consolidated with the Issuer, the Co-Issuer or any Restricted Subsidiary of the Issuer or otherwise acquired;

 

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(21) Liens to secure Obligations in respect of Refinancing Indebtedness of Indebtedness secured by Liens referred to in the foregoing clauses (12) (with respect to Notes and Additional Notes), (15) (other than with respect to the WML Notes), (17), (18), (20), (30) and (33) (but only to the extent any such Indebtedness secured by such Lien is permitted to be refinanced pursuant to Section 4.10); provided, that in each case:
(A) such Liens do not extend to any additional assets (other than improvements thereon and replacements thereof); and
(B) the Indebtedness secured by such Lien is not increased to any amount greater than the sum of (x) the outstanding principal amount plus accrued and unpaid interest, or, if greater, the committed amount, of the Indebtedness renewed, refunded, refinanced, replaced, defeased or discharged with such Refinancing Indebtedness and (y) an amount necessary to pay any fees and expenses, including premiums, related to such renewal, refunding, refinancing, replacement, defeasance or discharge;
(22) Liens to secure Attributable Indebtedness incurred pursuant to Section 4.17; provided, that any such Lien shall not extend to or cover any assets of the Issuer, the Co-Issuer or any Restricted Subsidiary other than the assets which are the subject of the Sale and Leaseback Transaction in which the Attributable Indebtedness is incurred;
(23) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods in the ordinary course of business;
(24) Liens incurred in the ordinary course of business of the Issuer, the Co-Issuer or any Restricted Subsidiary with respect to obligations (other than Indebtedness) that do not in the aggregate exceed $5.0 million at any one time outstanding; provided, that such Lien shall in no event extend to any Mortgaged Property;
(25) Liens securing Hedging Obligations permitted to be incurred by Section 4.10(b)(4) so long as to the extent such Liens relate to Collateral they are subject to the Intercreditor Agreement;
(26) Liens to secure Obligations in respect of Cash Management Obligations permitted to be incurred by Section 4.10(b)(16) so long as to the extent such Liens relate to Collateral, they are subject to the Intercreditor Agreement;
(27) Liens on cash, Cash Equivalents or other property arising in connection with the defeasance, discharge or redemption of Indebtedness or other Obligations in compliance with this Indenture;

 

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(28) licenses of intellectual property granted by the Issuer, the Co-Issuer or any Restricted Subsidiary in the ordinary course of business and not interfering in any material respect with the ordinary conduct of business of the Issuer, the Co-Issuer or the Restricted Subsidiaries;
(29) encumbrances or exceptions expressly permitted pursuant to the Mortgages;
(30) Liens securing Indebtedness permitted to be incurred by Section 4.10(b)(18);
(31) Liens on cash advances in favor of the seller of any property to be acquired in an Investment permitted pursuant to Permitted Investments to be applied against the purchase price for such Investment, solely to the extent such Investment would have been permitted on the date of the creation of such Lien;
(32) Liens arising by operation of law or contract on insurance policies and the proceeds thereof to secure premiums thereunder; and
(33) Liens on Collateral in favor of an Agent for the benefit of the Holders or the Revolving Lenders relating to such Agent’s administrative expenses with respect to the Collateral; provided, however, that no consensual Liens shall be permitted to exist, directly or indirectly, on any Collateral, other than Permitted Collateral Liens and Liens granted pursuant to the Security Documents (including Mortgages), any First Lien Security Document or any Second Lien Security Document.
“Person” means any individual, corporation, partnership, limited liability company, joint venture, incorporated or unincorporated association, joint-stock company, trust, unincorporated organization or government or other agency or political subdivision thereof or other entity of any kind.
“Plan of Liquidation” with respect to any Person, means a plan that provides for, contemplates or the effectuation of which is preceded or accompanied by (whether or not substantially contemporaneously, in phases or otherwise): (1) the sale, lease, conveyance or other disposition of all or substantially all of the assets of such Person; and (2) the distribution of all or substantially all of the proceeds of such sale, lease, conveyance or other disposition of all or substantially all of the remaining assets of such Person to holders of Equity Interests of such Person.
“Preferred Stock” means, with respect to any Person, any and all preferred or preference stock or other equity interests (however designated) of such Person whether now outstanding or issued after the Issue Date.
“principal” means, with respect to the Notes, the principal of, and premium, if any, on the Notes.

 

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“Purchase Money Indebtedness” means Indebtedness, including Capital Lease Obligations, of the Issuer, the Co-Issuer or any Restricted Subsidiary incurred for the purpose of financing all or any part of the purchase price of property, plant or equipment used in the business of the Issuer, the Co-Issuer or any Restricted Subsidiary or the cost of installation, construction or improvement thereof; provided, however, that (1) the amount of such Indebtedness shall not exceed such purchase price or cost, (2) such Indebtedness shall not be secured by any asset other than the specified asset being financed or assets securing any letter of credit supporting the Issuer, the Co-Issuer or Restricted Subsidiary’s ability to pay such purchase price or, in the case of real property or fixtures, including additions and improvements, the real property (other than any Mortgaged Property) to which such asset is attached and (3) such Indebtedness shall be incurred within 180 days after such acquisition of such asset by the Issuer, the Co-Issuer or such Restricted Subsidiary or such installation, construction or improvement.
“Qualified Equity Interests” of any Person means Equity Interests of such Person other than Disqualified Equity Interests; provided, that such Equity Interests shall not be deemed Qualified Equity Interests to the extent sold or owed to a Subsidiary of such Person or financed, directly or indirectly, using funds (1) borrowed from such Person or any Subsidiary of such Person until and to the extent such borrowing is repaid or (2) contributed, extended, guaranteed or advanced by such Person or any Subsidiary of such Person (including, without limitation, in respect of any employee stock ownership or benefit plan). Unless otherwise specified, Qualified Equity Interests refer to Qualified Equity Interests of the Issuer.
“Qualified Equity Offering” means the issuance and sale of Qualified Equity Interests of the Issuer to Persons other than any Person who is, prior to such issuance and sale, an Affiliate of the Issuer; provided, however, that cash proceeds therefrom equal to not less than 100% of the aggregate principal amount of any Notes to be redeemed are received by the Issuer as a capital contribution immediately prior to such redemption.
“Qualified Institutional Buyer” or “QIB” shall have the meaning specified in Rule 144A under the Securities Act.
“Real Property” means, collectively, all right, title and interest (including any leasehold, mineral or other estate) in and to any and all parcels of or interests in real property owned, leased or operated by any Person, whether by lease, license or other means, together with, in each case, all easements, hereditaments and appurtenances relating thereto, all improvements and appurtenant fixtures and rights incidental to the ownership, lease or operation thereof.
“Record Date” means the applicable Record Date specified in the Notes; provided that if any such date is not a Business Day, the Record Date shall be the first day immediately preceding such specified day that is a Business Day.

 

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“redeem” means to redeem, repurchase, purchase, defease, retire, discharge or otherwise acquire or retire for value; and “redemption” shall have a correlative meaning; provided, that this definition shall not apply for purposes of Section 5 or 6 of the Notes or Article Three of this Indenture.
“Redemption Date” means, when used with respect to any Note to be redeemed, the date fixed for such redemption pursuant to this Indenture and the Notes.
“Redemption Price” means, when used with respect to any Note to be redeemed, the price fixed for such redemption, payable in immediately available funds, pursuant to this Indenture and the Notes.
“Redesignation” has the meaning given to such term in Section 4.22(d).
“refinance” means to refinance, repay, prepay, replace, renew or refund.
“Refinancing Indebtedness” means Indebtedness of the Issuer, the Co-Issuer or a Restricted Subsidiary issued in exchange for, or the proceeds from the issuance and sale or disbursement of which are used substantially concurrently to redeem, extend, refinance, renew, replace, defease or refund in whole or in part, or constituting an amendment of, any Indebtedness of the Issuer, the Co-Issuer or any Restricted Subsidiary (the “Refinanced Indebtedness”) in a principal amount not in excess of the principal amount (plus premium, if any) of the Refinanced Indebtedness so repaid or amended (or, if such Refinancing Indebtedness refinances Indebtedness under a revolving credit facility or other agreement providing a commitment for subsequent borrowings, with a maximum commitment plus costs and fees not to exceed the maximum commitment under such revolving credit facility or other agreement, less the amount of any permanent repayment and/or commitment reduction that was required thereunder at any time); provided, that:
(1) the Refinancing Indebtedness is the obligation of the same Person as that of the Refinanced Indebtedness;
(2) if the Refinanced Indebtedness was subordinated to or pari passu with the Notes or the Note Guarantees, as the case may be, then such Refinancing Indebtedness, by its terms, is expressly pari passu with (in the case of Refinanced Indebtedness that was pari passu with) or subordinate in right of payment to (in the case of Refinanced Indebtedness that was subordinated to) the Notes or the Note Guarantees, as the case may be, at least to the same extent as the Refinanced Indebtedness;
(3) the Refinancing Indebtedness is scheduled to mature either (a) no earlier than the Refinanced Indebtedness being repaid or amended or (b) at least 91 days after the maturity date of the Notes;
(4) the portion, if any, of the Refinancing Indebtedness that is scheduled to mature on or prior to the maturity date of the Notes has a Weighted Average Life to Maturity at the time such Refinancing Indebtedness is incurred that is equal to or greater than the Weighted Average Life to Maturity of the portion of the Refinanced Indebtedness being repaid that is scheduled to mature on or prior to the maturity date of the Notes; and

 

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(5) the Refinancing Indebtedness is secured only to the extent, if at all, and by the assets, that the Refinanced Indebtedness being repaid or amended is secured, and such security interest encumbering such assets is of the same priority as, or a lower priority than, the security interest that secured the Refinanced Indebtedness being repaid or amended.
“Registrar” has the meaning assigned to that term in Section 2.03.
“Registration Default” has the meaning set forth in the Registration Rights Agreement.
“Registration Rights Agreement” means the Registration Rights Agreement related to the Notes, to be executed on the Issue Date, among the Issuer, the Co-Issuer, the Guarantors and the Initial Purchaser set forth therein.
“Regulation S” means Regulation S under the Securities Act.
“Regulation S Certificate” means the form of Regulation S Certificate set forth in Exhibit D.
“Regulation S Global Note” has the meaning assigned to that term in Section 2.01(c).
“Regulation S Notes” has the meaning assigned to that term in Section 2.01(b).
“Release” means any spilling, leaking, seepage, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing, depositing, dispersing, emanating or migrating of any Hazardous Material in, into, onto or through the Environment.
“Required Filing Date” has the meaning assigned to that term in Section 4.21.
“Requirements of Law” means, collectively, any and all applicable requirements of any Governmental Authority including any and all laws, judgments, orders, executive orders, decrees, ordinances, rules, regulations, statutes or case law.
“Responsible Officer” means, when used with respect to the Trustee, any officer in the Corporate Trust Office of the Trustee to whom any corporate trust matter is referred because of such officer’s knowledge of and familiarity with the particular subject and shall also mean any officer who shall have direct responsibility for the administration of this Indenture.

 

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“Restricted Global Note” means a Global Note bearing the Restricted Notes Legend for all Restricted Notes in Exhibit B.
“Restricted Payment” means any of the following:
(1) the declaration or payment of any dividend or any other distribution on Equity Interests of the Issuer, the Co-Issuer or any Restricted Subsidiary or any payment made to the direct or indirect holders (in their capacities as such) of Equity Interests of the Issuer, the Co-Issuer or any Restricted Subsidiary, including, without limitation, any payment of any dividend or other distribution in connection with any merger or consolidation involving the Issuer (but not included in or part of merger consideration) but excluding (a) dividends or distributions payable solely in Qualified Equity Interests, (b) in the case of the Co-Issuer and Restricted Subsidiaries, dividends or distributions payable to the Issuer, the Co-Issuer or to a Guarantor, (c) in the case of Restricted Subsidiaries that are not Guarantors, dividends or distributions payable to the Issuer or to a Restricted Subsidiary that is not a Guarantor and (d) in the case of any dividend or distribution payable on or in respect of any class of series of securities issued by a Restricted Subsidiary other than a Wholly Owned Subsidiary, pro rata dividends or distributions to minority stockholders of such Restricted Subsidiary (or owners of an equivalent interest in the case of a Subsidiary that is an entity other than a corporation in accordance with the organizational documents of such entities); provided, that the Issuer, the Co-Issuer or a Restricted Subsidiary receives at least its pro rata share of such dividend or distribution in accordance with its Equity Interests in such class or series of securities or in accordance with the organizational documents of such entities;
(2) the purchase, redemption or other acquisition or retirement of any Equity Interests of the Issuer, the Co-Issuer, any Restricted Subsidiary or any equity holder of the Issuer, including, without limitation, any purchase, redemption or other acquisition or retirement in connection with any merger or consolidation involving the Issuer (other than an exchange of stock as part of merger consideration in connection with a merger or consolidation) but excluding any such Equity Interests held by the Issuer, the Co-Issuer or any Restricted Subsidiary;
(3) any Investment other than a Permitted Investment; or
(4) any payment or redemption, repurchase, defeasance or other acquisition or retirement in each case prior to the scheduled maturity or prior to any scheduled repayment of principal or sinking fund payment, as the case may be, on or in respect of Subordinated Indebtedness.
“Restricted Payments Basket” has the meaning assigned to that term in Section 4.11(a)(3).
“Restricted Security” means a Note that constitutes a “Restricted Security” within the meaning of Rule 144(a)(3) under the Securities Act; provided, however, that the Trustee shall be entitled to request and conclusively rely on an Opinion of Counsel with respect to whether any Note constitutes a Restricted Security.

 

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“Restricted Subsidiary” means any current or future Subsidiary of the Issuer other than an Unrestricted Subsidiary, including Absaloka. For the avoidance of doubt, on the date of this Indenture, WELLC and each Subsidiary of WELLC, WRI and each Subsidiary of WRI, Westmoreland Mining Services, Inc., WML and each Subsidiary of WML, WRM, Westmoreland Coal Sales Co., WCC Land Holding Company, Inc. and Westmoreland Power Inc. will be Restricted Subsidiaries unless and until designated as Unrestricted Subsidiaries.
“Revolving Buy-out Price” has the meaning assigned to that term in Section 9.07.
“Revolving Collateral Agent” has the meaning assigned to that term in Section 9.07.
“Revolving Credit Facility” means a revolving credit facility that may be entered into after the date of this Indenture and under which the Issuer, the Co-Issuer, the Subsidiary Guarantors and Absaloka, would be a borrower or guarantor, including any notes, guarantees, collateral and security documents, instruments and agreements executed in connection therewith, and in each case as amended, amended and restated, supplemented, modified, refinanced, replaced or otherwise restructured, in whole or in part, from time to time. References herein to the “Revolving Credit Facility” shall only be deemed to mean such Revolving Credit Facility as fully executed.
“Revolving Credit Facility Obligations” means the indebtedness outstanding under the Revolving Credit Facility that is secured by a Permitted Lien described in clause (17) of the definition thereof, and all other obligations of the Issuer, the Co-Issuer, any Guarantor or Absaloka under the Revolving Credit Facility, all Cash Management Obligations permitted by this Indenture and secured by the collateral securing any Obligations under the Revolving Credit Facility, and all Hedging Obligations permitted by this Indenture and secured by the collateral securing any Obligations under the Revolving Credit Facility.
“Revolving Facility First-Priority Collateral” means substantially all of the accounts and inventory of the Issuer, the Co-Issuer, the Subsidiary Guarantors (whether now owned or hereinafter arising or acquired) and Absaloka (if it is a guarantor under the Revolving Credit Facility) and the proceeds and products thereof.
“Revolving Facility First-Priority Liens” means Liens on the Revolving Facility First-Priority Collateral securing any Revolving Credit Facility Obligations on a first-priority basis.
“Revolving Lender” has the meaning assigned to that term in Section 9.07.
“Rights Offering” has the meaning assigned to that term in Section 4.28.
“Rights Offering Deadline” has the meaning assigned to that term in Section 4.28.

 

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“Rights Offering Registration Statement” has the meaning assigned to that term in Section 4.28.
“Rights Plan” means that certain amended and restated rights agreement entered into by the Issuer on February 7, 2003, as subsequently amended, and any successor plan.
“Rule 144” means Rule 144 promulgated under the Securities Act.
“Rule 144A” means Rule 144A under the Securities Act.
“Rule 144A Certificate” means the form of Rule 144A Certificate set forth in Exhibit E.
“Rule 144A Global Notes” has the meaning assigned to that term in Section 2.01(c).
“Rule 144A Notes” has the meaning assigned to that term in Section 2.01(b).
“S&P” means Standard & Poor’s Ratings Services, a division of the McGraw-Hill Companies, Inc., and its successors.
“Sale and Leaseback Transactions” means with respect to any Person an arrangement with any bank, insurance company or other lender or investor or to which such lender or investor is a party, providing for the leasing by such Person of any asset of such Person which has been or is being sold or transferred by such Person to such lender or investor or to any Person to whom funds have been or are to be advanced by such lender or investor on the security of such asset.
“SEC” means the U.S. Securities and Exchange Commission.
“Second Lien Security Document” means any security document by and among the Issuer, the Co-Issuer, the Subsidiary Guarantors, the Note Collateral Agent and the Revolving Collateral Agent granting or evidencing a second-priority security interest in or Liens on any assets of such Person to secure the Obligations under this Indenture, the Notes and the Note Guarantees, as each may be amended, restated, supplemented or otherwise modified from time to time.
“Secretary’s Certificate” means a certificate signed by the Secretary of the Issuer.
“Securities Act” means the U.S. Securities Act of 1933, as amended.
“Security Documents” means collectively, the First Lien Security Documents and, if the Revolving Credit Facility is entered into, the Second Lien Security Documents.

 

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“Senior Indebtedness” means
(1) all Indebtedness of the Issuer, the Co-Issuer or any of the Restricted Subsidiaries outstanding under the Revolving Credit Facility and all Hedging Obligations with respect thereto;
(2) any other Indebtedness of the Issuer, the Co-Issuer or any of the Restricted Subsidiaries permitted to be incurred under the terms of this Indenture, unless the instrument under which such Indebtedness is incurred expressly provides that it is subordinated in right of payment to the Notes or any Note Guarantee; and
(3) all Obligations with respect to the items listed in the preceding clauses (1) and (2).
Notwithstanding anything to the contrary in the preceding sentence, Senior Indebtedness will not include:
(a) any intercompany Indebtedness of the Issuer, the Co-Issuer or any of the Restricted Subsidiaries to the Issuer or any of its Restricted Subsidiaries; or
(b) any Indebtedness that is incurred in violation of this Indenture.
For the avoidance of doubt, “Senior Indebtedness” will not include any trade payables or taxes owed or owing by the Issuer, the Co-Issuer or any Restricted Subsidiary.
“Series A Preferred Stock” means the Series A Convertible Exchangeable Preferred Stock, par value $1.00 per share, of the Issuer.
“Significant Subsidiary” means (1) any Restricted Subsidiary that would be a “significant subsidiary” as defined in Rule 1-02(w)(1) or (2) of Regulation S-X promulgated pursuant to the Securities Act as such Regulation is in effect on the Issue Date and (2) any Restricted Subsidiary that, when aggregated with all other Restricted Subsidiaries that are not otherwise Significant Subsidiaries and as to which any event described in Section 6.01(8) or Section 6.01(9) has occurred and is continuing, would constitute a Significant Subsidiary under clause (1) of this definition.
“Standstill Period” has the meaning assigned to that term in Section 9.07.
“Stated Maturity” means, with respect to any installment of interest or principal on any Indebtedness, the date on which such payment of interest or principal is scheduled to be paid in the documentation governing such Indebtedness, and shall not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof.

 

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“Subordinated Indebtedness” means (a) with respect to the Issuer or the Co-Issuer, any Indebtedness of the Issuer or the Co-Issuer that is by its terms subordinated in right of payment to the Notes pursuant to a written agreement and (b) with respect to any Guarantor, any Indebtedness of such Guarantor that is by its terms subordinated in right of payment to the Note Guarantee of such Guarantor pursuant to a written agreement. For the purposes of the foregoing, for the avoidance of doubt, no Indebtedness shall be deemed to be subordinated in right of payment to any other Indebtedness solely by virtue of being unsecured or secured by a lower priority Lien or by virtue of the fact that the holders of such Indebtedness have entered into intercreditor agreements or other arrangements giving one or more of such holders priority over the other holders in the collateral held by them.
“Subsidiary” means, with respect to any Person:
(1) any corporation, limited liability company, association or other business entity of which more than 50% of the total voting power of the Equity Interests entitled (without regard to the occurrence of any contingency) to vote in the election of the Board of Directors thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of such Person (or a combination thereof); and
(2) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are such Person or one or more Subsidiaries of such Person (or any combination thereof);
provided, that Absaloka shall be considered a Subsidiary of the Issuer. Unless otherwise specified, “Subsidiary” refers to a Subsidiary of the Issuer.
“Subsidiary Guarantors” means (i) WELLC, Westmoreland North Carolina Power LLC, WEI-Roanoke Valley, Inc., Westmoreland-Roanoke Valley, LP, WRI, WRI Partners, Westmoreland Mining Services, Inc., Westmoreland Coal Sales Co., WCC Land Holding Company, Inc. and Westmoreland Power Inc., (ii) each other domestic Subsidiary of WELLC and WRI as may be formed after the Issue Date and (iii) each other domestic Subsidiary of the Issuer, the Co-Issuer or a Guarantor that becomes a Restricted Subsidiary after the Issue Date.
“Successor” has the meaning assigned to that term in Section 5.01(a)(1)(B).
“Total Assets” means the total amount of all assets of the Issuer, the Co-Issuer and the Restricted Subsidiaries, determined on a consolidated basis in accordance with GAAP as shown on the most recent internal balance sheet of the Issuer.
“Temporary Regulation S Global Notes” has the meaning assigned to that term in Section 2.01(c).

 

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“Total Leverage Ratio” means the ratio, as of any date of determination, of (i) Consolidated Total Indebtedness of the Issuer, the Co-Issuer and the Restricted Subsidiaries as of such date to (ii) Consolidated EBITDA for the most recently ended four full fiscal quarters for which internal consolidated financial statements are available immediately preceding such date.
“Transactions” means (a) the entering into and initial borrowing, if any, under the Revolving Credit Facility, (b) the issuance of the Notes offered by the Offering Memorandum (including the grant of the security interests and Liens pursuant to the Security Documents) and issuance of Exchange Notes, (c) the repayment of the Issuer’s existing PIK senior secured convertible notes, (d) the repayment of WRI’s existing revolving credit facility and term loan, (e) the repayment of WELLC’s existing term loan, (f) redemption or repayment of the outstanding accrued dividends on the Issuer’s Series A Preferred Stock and (f) all transactions (including the payment of fees and expenses) related to any of the foregoing.
“Transfer Restricted Notes” means Notes that bear or are required to bear the legend set forth in clauses (ii), (iv) or (v) of Exhibit B hereto.
“Trust Indenture Act” or “TIA” means the Trust Indenture Act of 1939, as amended.
“Trustee” has the meaning assigned to that term in the Preamble.
“UCC” means the Uniform Commercial Code as in effect in the State of New York, and any successor statute, as in effect from time to time (except that terms used herein which are defined in the Uniform Commercial Code as in effect in the State of New York on the date hereof shall continue to have the same meaning notwithstanding any replacement or amendment of such statute except as the Note Collateral Agent may otherwise determine).
“Unrestricted Subsidiary” means (1) Basin Resources Inc.; (2) any Subsidiary that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors of the Issuer in accordance with Section 4.22; and (3) any Subsidiary of an Unrestricted Subsidiary.
“U.S. Government Obligations” means direct non-callable obligations of, or obligations guaranteed by, the United States of America for the payment of which guarantee or obligations the full faith and credit of the United States is pledged.
“U.S. Legal Tender” means such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts.
“U.S. Person” means a U.S. Person as defined in Rule 902(k) promulgated under the Securities Act.

 

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“Voting Stock” with respect to any Person, means securities of any class of Equity Interests of such Person (in the case of a partnership, the sole general partner or managing general partner of such Person) entitling the holders thereof (whether at all times or only so long as no senior class of stock or other relevant equity interest has voting power by reason of any contingency) to vote in the election of members of the Board of Directors of such Person.
“Weighted Average Life to Maturity” when applied to any Indebtedness at any date, means the number of years obtained by dividing (1) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payment of principal, including payment at final maturity, in respect thereof by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment by (2) the then outstanding principal amount of such Indebtedness.
“WELLC” means Westmoreland Energy LLC.
“Wholly Owned” means, with respect to any Restricted Subsidiary, a Restricted Subsidiary of which 100% of the Equity Interests (except for directors’ qualifying shares) are owned directly by the Issuer or through one or more Wholly Owned Restricted Subsidiaries (or a combination thereof).
“WML” means Westmoreland Mining LLC.
“WML Collateral” means all assets that secure Indebtedness under the WML Credit Agreements.
“WML Credit Agreements” means (A) the Amended and Restated WML Credit Agreement and (B) the WML Notes.
“WML Lien” means the Lien created in accordance with Section 4.19 hereof in favor of the Note Collateral Agent for its benefit and the benefit of the Trustee and the Holders of the Notes on the WML Collateral that exists on the WML Repayment Date, subject to Permitted Liens and to the extent the WML Collateral does not constitute Excluded Property.
“WML Notes” means the Note Purchase Agreement regarding $125,000,000 8.02% Senior Guaranteed Secured Notes due March 31, 2018 among Westmoreland Mining LLC and each of the purchasers named in Schedule A thereto, dated as of June 26, 2008.
“WML Payments Collateral” means 100% of all management fees, dividends, and distributions paid by WML to the Issuer, subject to the prior Lien under the WML Credit Agreements and related WML Security Agreements, but only to the extent that such Lien affects such management fees, dividends, and distributions.

 

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“WML Repayment Date” means the date on which all of the outstanding obligations under the WML Notes shall have been repaid in full or otherwise refinanced.
“WML Security Agreements” means that certain Security Agreement dated as of June 26, 2008, entered into between WML and certain of its Subsidiaries and U.S. Bank National Association, the Amended and Restated Security Agreement dated June 26, 2008 among WML and certain of its Subsidiaries and US Bank National Association, the Pledge Agreement dated June 26, 2008 among the Issuer, WML and US Bank National Association, and the Amended and Restated Pledge Agreement dated June 26, 2008 among Issuer, WML and US Bank National Association.
“WRI” means Westmoreland Resources Inc.
“WRM” means Westmoreland Risk Management Ltd.
“WRM Collateral” means all of the common shares of WRM held by the Issuer.
Section 1.02 Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the Trust Indenture Act, such provision is incorporated by reference in, and made a part of, this Indenture. The following Trust Indenture Act terms used in this Indenture have the following meanings:
“indenture securities” means the Notes.
“indenture security holder” means a Holder.
“indenture to be qualified” means this Indenture.
“indenture trustee” or “institutional trustee” means the Trustee.
“obligor” on the indenture securities means the Issuer, the Co-Issuer, any Guarantor or any other obligor on the Notes.
All other Trust Indenture Act terms used in this Indenture that are defined by the Trust Indenture Act, defined by Trust Indenture Act reference to another statute or defined by SEC rule and not otherwise defined herein have the meanings assigned to them therein.
Section 1.03 Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP;

 

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(3) “or” is not exclusive;
(4) words in the singular include the plural, and words in the plural include the singular;
(5) provisions apply to successive events and transactions;
(6) “herein,” “hereof” and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision; and
(7) the words “including,” “includes” and similar words shall be deemed to be followed by “without limitation.”
ARTICLE TWO
THE NOTES
Section 2.01 Form and Dating.
(a) The Notes and the Trustee’s certificate of authentication with respect thereto shall be substantially in the form set forth in Exhibit A. The Notes may have notations, legends or endorsements required by law, rule or usage to which the Issuers are subject. Each Note shall be dated the date of its authentication.
(b) The Notes are initially being offered and sold to QIBs in reliance on Rule 144A under the Securities Act (“Rule 144A Notes”). The Notes are also being offered and sold to Persons other than U.S. Persons (as defined in Regulation S) in reliance on Regulation S under the Securities Act (“Regulation S Notes”). Except as set forth herein, the Notes will be issuable only in registered, global form in denominations of $2,000 or an integral multiple of $1,000 in excess thereof.
(c) (i) Rule 144A Notes initially will be issued in the form of one or more global Notes in registered form without interest coupons (collectively, “Rule 144A Global Notes”); and Regulation S Notes will be issued initially in the form of one or more global securities in registered form without interest coupons (collectively, the “Temporary Regulation S Global Notes”), in each case with the applicable restricted securities legend set forth in Exhibit B hereto. Exchange Notes will initially be issued in the form of one or more Global Notes in registered form without coupons (collectively, the “Exchange Global Notes”). Except as set forth in this Section 2.01(c), beneficial ownership interests in a Temporary Regulation S Global Note will be exchangeable for interests in a Rule 144A Global Note or a permanent Regulation S global note (the “Permanent Regulation S Global Note” and together with the Temporary Regulation S Global Note, the “Regulation S Global Note”) or a definitive note in

 

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registered certificated form (a “Certificated Note”) only after the expiration of the Distribution Compliance Period and then only (i) upon certification in form reasonably satisfactory to the Trustee that beneficial ownership interests in such Temporary Regulation S Global Note are owned either by non-U.S. persons or U.S. persons who purchased such interests in a transaction that did not require registration under the Securities Act and (ii) in the case of an exchange for a Certificated Note, in compliance with the requirements described in Section 2.15. The Global Notes (as defined below) will be deposited upon issuance with the Trustee as custodian for the Depository, in New York, New York, and registered in the name of the Depository or its nominee, in each case for credit to an account of a direct or indirect participant in the Depository as described below. Beneficial interests in the Rule 144A Global Notes may not be exchanged for beneficial interests in the Regulation S Global Notes at any time except in the limited circumstances described below.
(ii) Beneficial interests in the Temporary Regulation S Global Note may be exchanged for beneficial interests in the Permanent Regulation S Global Note or the Rule 144A Global Note only after the expiration of the Distribution Compliance Period and then only if the transferor first delivers to the Trustee a written certificate (in form reasonably satisfactory to the Trustee) to the effect that such beneficial ownership interests in such Temporary Regulation S Note are owned by or being transferred to either non-U.S. Persons or U.S. Persons who purchased such interests in a transaction that did not require registration under the Securities Act.
(iii) Beneficial interests in a Rule 144A Global Note may be transferred to a Person who takes delivery in the form of an interest in a Regulation S Global Note, whether before or after the expiration of the Distribution Compliance Period, only if the transferor first delivers to the Trustee a written certificate (in form reasonably satisfactory to the Trustee) to the effect that such transfer is being made in accordance with Rule 903 or 904 of Regulation S or Rule 144 (if applicable).
(iv) The Rule 144A Global Note, the Temporary Regulation S Global Note, the Permanent Regulation S Global Note and the Exchange Global Note are collectively referred to herein as “Global Notes.” The aggregate principal amount of the Global Notes may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depository or its nominee as hereinafter provided. Each Global Note will bear the DTC Form of Legend in clause (i) on Exhibit B.
(d) Book-Entry Provisions. This Section 2.01(d) shall apply only to a Global Note deposited with or on behalf of the Depository.
(i) The Issuers shall execute and the Trustee shall, in accordance with this Section 2.01(d), authenticate and deliver initially one or more Global Notes that (A) shall be registered in the name of the Depository for such Global Note or Global Notes or the nominee of such Depository and (B) shall be delivered by the Trustee to such Depository or pursuant to such Depository’s instructions or held by the Trustee as custodian for the Depository.

 

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(ii) Members of, or participants in, the Depository (“Agent Members”) shall have no rights under this Indenture with respect to any Global Note held on their behalf by the Depository or by the Trustee as the custodian of the Depository or under such Global Note, and the Issuers, the Trustee and any agent of the Issuers or the Trustee shall be entitled to treat the Depository as the absolute owner of such Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Issuers, the Trustee or any agent of the Issuers or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depository or impair, as between the Depository and its Agent Members, the operation of customary practices of such Depository governing the exercise of the rights of a holder of a beneficial interest in any Global Note.
(e) Certificated Notes. Except as provided in this Section 2.01 or Section 2.15 or Section 2.16, owners of beneficial interests in Restricted Global Notes shall not be entitled to receive physical delivery of Certificated Notes.
(f) (i) If the Issuers determine (upon the advice of counsel and such other certifications and evidence as the Issuers may reasonably require) that a Note is eligible for resale pursuant to Rule 144 under the Securities Act (or a successor provision) without the need for current public information and that the restricted securities legend is no longer necessary or appropriate in order to ensure that subsequent transfers of the Note (or a beneficial interest therein) are effected in compliance with the Securities Act, or
(ii) after a Restricted Global Note or a Restricted Certificated Notes is (x) sold pursuant to an effective registration statement under the Securities Act, pursuant to the Registration Rights Agreement or otherwise, or (y) is validly tendered for exchange into an Exchange Note pursuant to an Exchange Offer
the Issuers shall instruct the Trustee to cancel the Restricted Global Note and issue to the Holder thereof (or to its transferee) a new Note of like tenor and amount, registered in the name of the Holder thereof (or its transferee), that does not bear the restricted securities legend, and the Trustee will comply with such instruction.
(g) By its acceptance of any Note bearing the restricted securities legend (or any beneficial interest in such a Note), each Holder thereof and each owner of a beneficial interest therein acknowledges the restrictions on transfer of such Note (and any such beneficial interest) set forth in this Indenture and in the restricted securities legend and agrees that it will transfer such Note (and any such beneficial interest) only in accordance with this Indenture and such legend.

 

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(h) The terms and provisions contained in the Notes shall constitute, and are expressly made, a part of this Indenture and, to the extent applicable, the Issuers, the Guarantors and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and agree to be bound thereby. However, to the extent any provision of any Note conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling.
(i) The Notes may be presented for registration of transfer and exchange at the offices of the Registrar.
Section 2.02 Execution, Authentication and Denomination; Additional Notes.
One Officer of each Issuer (who shall have been duly authorized by all requisite corporate actions) shall sign the Notes for such Issuer by manual or facsimile signature. One Officer of each Guarantor (who shall have been duly authorized by all requisite corporate actions) shall sign the Note Guarantee in the form of Exhibit C for such Guarantor by manual or facsimile signature.
If an Officer whose signature is on a Note or Note Guarantee, as the case may be, was an Officer at the time of such execution but no longer holds that office at the time the Trustee authenticates the Note, the Note shall nevertheless be valid.
A Note shall not be valid until an authorized signatory of the Trustee manually signs the certificate of authentication on the Note. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture.
The Trustee shall authenticate the Initial Notes on the Issue Date in the aggregate principal amount of $150,000,000 upon a written order of the Issuer in the form of a certificate of any Officer of the Issuer (an “Authentication Order”). In addition, the Trustee shall authenticate Exchange Notes and Additional Notes upon a written order of the Issuer in the form of an Authentication Order. Each such Authentication Order shall specify (i) the amount of Notes to be authenticated (ii) the date on which the Notes are to be authenticated (which, in the case of Exchange Notes, shall be a like principal amount of Initial Notes or Additional Notes), (iii) whether the Notes are to be issued as Certificated Notes or Global Notes, (iv) whether the Notes are to be Rule 144A Notes, Regulation S Notes or Exchange Notes, (v) in the case of Exchange Notes, acknowledgment of an effective Registration Statement and (vi) such other information as the Trustee may reasonably request. In addition, such Authentication Order from the Issuer shall be accompanied by an Opinion of Counsel of the Issuer in a form reasonably satisfactory to the Trustee.
The Trustee may appoint an authenticating agent reasonably acceptable to the Issuers to authenticate Notes. Unless otherwise provided in the appointment, an authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with the Issuers and Affiliates of the Issuers.

 

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Section 2.03 Registrar and Paying Agent.
The Issuers shall maintain or cause to be maintained an office or agency in the Borough of Manhattan, New York, where (a) Notes may be presented or surrendered for registration of transfer or for exchange (“Registrar”), (b) Notes may, subject to Section 2 of the Notes, be presented or surrendered for payment (“Paying Agent”) and (c) notices and demands to or upon the Issuers in respect of the Notes and this Indenture may be served. The Issuers may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Issuers of their obligation to maintain or cause to be maintained an office or agency in the Borough of Manhattan, The City of New York, for such purposes. The Issuers may act as Registrar or Paying Agent, except that for the purposes of Articles Three and Eight and Sections 4.09 and 4.13, neither the Issuers nor any Affiliate of the Issuers shall act as Paying Agent. The Registrar shall keep a register of the Notes and of their transfer and exchange. The Issuers, upon notice to the Trustee, may have one or more co-registrars and one or more additional paying agents reasonably acceptable to the Trustee. The term “Registrar” includes any co-registrar and the term “Paying Agent” includes any additional paying agent. The Issuers initially appoint the Trustee as Registrar and Paying Agent until such time as the Trustee has resigned or a successor has been appointed.
The Issuers shall enter into an appropriate agency agreement with any Agent not a party to this Indenture, which agreement shall implement the provisions of this Indenture that relate to such Agent. The Issuers shall notify the Trustee, in advance, of the name and address of any such Agent. If the Issuers fail to maintain a Registrar or Paying Agent, the Trustee shall act as such.
Section 2.04 Paying Agent To Hold Assets in Trust.
The Issuers shall require each Paying Agent other than the Trustee to agree in writing that each Paying Agent shall hold in trust for the benefit of Holders or the Trustee all assets held by the Paying Agent for the payment of principal of, or interest on, the Notes (whether such assets have been distributed to it by the Issuers or any other obligor on the Notes), and shall notify the Trustee of any Default by the Issuers (or any other obligor on the Notes) in making any such payment. The Issuers at any time may require a Paying Agent to distribute all assets held by it to the Trustee and account for any assets disbursed and the Trustee may at any time during the continuance of any payment Default, upon written request to a Paying Agent, require such Paying Agent to distribute all assets held by it to the Trustee and to account for any assets distributed. Upon distribution to the Trustee of all assets that shall have been delivered by the Issuers to the Paying Agent, the Paying Agent shall have no further liability for such assets.

 

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Section 2.05 Holder Lists.
The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Holders. If the Trustee is not the Registrar, the Issuers shall furnish to the Trustee at least two (2) Business Days prior to each Interest Payment Date and at such other times as the Trustee may request in writing a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Holders, which list may be conclusively relied upon by the Trustee.
Section 2.06 Transfer and Exchange.
Subject to Section 2.15 and Section 2.16, when Notes are presented to the Registrar with a request to register the transfer of such Notes or to exchange such Notes for an equal principal amount of Notes of other authorized denominations, the Registrar shall register the transfer or make the exchange as requested if its requirements for such transaction are met; provided, however, that the Notes surrendered for transfer or exchange shall be duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Issuers and the Registrar, duly executed by the Holder thereof or his or her attorney duly authorized in writing. To permit registrations of transfers and exchanges, the Issuers shall execute and the Trustee shall authenticate Notes at the Registrar’s request. No service charge shall be made for any registration of transfer or exchange, but the Issuers may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith.
Without the prior written consent of the Issuer, the Registrar shall not be required to register the transfer of or exchange of any Note (i) during a period beginning at the opening of business 15 days before the mailing of a notice of redemption of Notes and ending at the close of business on the day of such mailing, (ii) selected for redemption in whole or in part pursuant to Article Three, except the unredeemed portion of any Note being redeemed in part, and (iii) beginning at the opening of business on any Record Date and ending on the close of business on the related Interest Payment Date.
Any Holder of a beneficial interest in a Global Note shall, by acceptance of such beneficial interest, agree that transfers of beneficial interests in such Global Notes may be effected only through a book-entry system maintained by the Holder of such Global Note (or its agent), and that ownership of a beneficial interest in the Note shall be required to be reflected in a book-entry system.
Section 2.07 Replacement Notes.
If a mutilated Note is surrendered to the Trustee or if the Holder of a Note claims that the Note has been lost, destroyed or wrongfully taken, the Issuers shall issue and the Trustee shall authenticate a replacement Note if the Trustee’s requirements are met. Such Holder must provide an indemnity bond or other indemnity, sufficient in the judgment of both the Issuers and the Trustee, to protect the Issuers, the Trustee or any Agent from any loss which any of them may suffer if a Note is replaced. The Issuers may charge such Holder for their reasonable out-of-pocket expenses in replacing a Note pursuant to this Section 2.07, including reasonable fees and expenses of counsel and of the Trustee.

 

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Every replacement Note is an additional obligation of the Issuers and every replacement Note Guarantee shall constitute an additional obligation of the Guarantor thereof.
Section 2.08 Outstanding Notes.
Notes outstanding at any time are all the Notes that have been authenticated by the Trustee except those cancelled by it, those delivered to it for cancellation and those described in this Section as not outstanding. A Note does not cease to be outstanding because the Issuers, the Guarantors or any of their respective Affiliates hold the Note (subject to the provisions of Section 2.09).
If a Note is replaced pursuant to Section 2.07 (other than a mutilated Note surrendered for replacement), it ceases to be outstanding unless a Responsible Officer of the Trustee receives proof satisfactory to it that the replaced Note is held by a bona fide purchaser. A mutilated Note ceases to be outstanding upon surrender of such Note and replacement thereof pursuant to Section 2.07.
If the principal amount of any Note is considered paid under Section 4.01, it ceases to be outstanding and interest ceases to accrue. If on a Redemption Date or the Maturity Date the Trustee or Paying Agent (other than the Issuers or an Affiliate thereof) holds U.S. Legal Tender or U.S. Government Obligations sufficient to pay all of the principal and interest due on the Notes payable on that date, then on and after that date such Notes cease to be outstanding and interest on them ceases to accrue.
Section 2.09 Treasury Notes.
In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Issuers or any of their Affiliates shall be disregarded, except that, for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes that a Responsible Officer of the Trustee actually knows are so owned shall be disregarded.
Section 2.10 Temporary Notes.
Until definitive Notes are ready for delivery, the Issuers may prepare and the Trustee shall authenticate temporary Notes. Temporary Notes shall be substantially in the form of definitive Notes but may have variations that the Issuers consider appropriate for temporary Notes. Without unreasonable delay, the Issuers shall prepare and the Trustee shall authenticate definitive Notes in exchange for temporary Notes. Until such exchange, temporary Notes shall be entitled to the same rights, benefits and privileges as definitive Notes. Notwithstanding the foregoing, so long as the Notes are represented by a Global Note, such Global Note may be in typewritten form.

 

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Section 2.11 Cancellation.
The Issuers at any time may deliver Notes to the Trustee for cancellation. The Registrar and the Paying Agent shall forward to the Trustee any Notes surrendered to them for transfer, exchange or payment. The Trustee, or at the direction of the Trustee, the Registrar or the Paying Agent (other than the Issuers or a Subsidiary), and no one else, shall cancel and, at the written direction of the Issuers, shall dispose of all Notes surrendered for transfer, exchange, payment or cancellation in accordance with its customary procedures. Subject to Section 2.07, the Issuers may not issue new Notes to replace Notes they have paid or delivered to the Trustee for cancellation. If the Issuers or any Guarantor shall acquire any of the Notes, such acquisition shall not operate as a redemption or satisfaction of the Indebtedness represented by such Notes unless and until the same are surrendered to the Trustee for cancellation pursuant to this Section 2.11.
Section 2.12 Defaulted Interest.
If the Issuers default in a payment of interest on the Notes, they shall, unless the Trustee fixes another record date pursuant to Section 6.10, pay the defaulted interest, plus (to the extent lawful) any interest payable on the defaulted interest, in any lawful manner. The Issuers may pay the defaulted interest to the persons who are Holders on a subsequent special record date, which date shall be the fifteenth day next preceding the date fixed by the Issuers for the payment of defaulted interest or the next succeeding Business Day if such date is not a Business Day. At least 15 days before any such subsequent special record date, the Issuers shall mail to each Holder, with a copy to the Trustee, a notice that states the subsequent special record date, the payment date and the amount of defaulted interest, and interest payable on such defaulted interest, if any, to be paid.
Section 2.13 CUSIP Numbers, ISINs, etc.
The Issuers in issuing the Notes may use “CUSIP” numbers, “ISINs” and “Common Code” numbers (if then generally in use) and, if so, the Trustee shall use CUSIP numbers, ISINs and “Common Code” numbers in notices of redemption or exchange as a convenience to Holders; provided, however, that any such notice may state that no representation is made as to the correctness of such numbers, either as printed on the Notes or as contained in any notice of a redemption, that reliance may be placed only on the other identification numbers printed on the Notes, and that any such redemption shall not be affected by any defect in or omission of such numbers. The Issuer shall promptly advise the Trustee in writing of any change in the CUSIP numbers, ISINs and Common Code numbers.

 

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Section 2.14 Deposit of Moneys.
Subject to Section 2 of the Notes, prior to 10:00 a.m. New York City time on each Interest Payment Date, Maturity Date, Redemption Date, Change of Control Payment Date, Net Proceeds Payment Date and any date as to which a payment is to be made pursuant to Section 4.14 (the “Excess Cash Flow Payment Date”) the Issuers shall have deposited with the Paying Agent in immediately available funds money sufficient to make cash payments, if any, due on such Interest Payment Date, Maturity Date, Redemption Date, Change of Control Payment Date, Net Proceeds Payment Date and Excess Cash Flow Payment Date, as the case may be, in a timely manner which permits the Paying Agent to remit payment to the Holders on such Interest Payment Date, Maturity Date, Redemption Date, Change of Control Payment Date, Net Proceeds Payment Date and Excess Cash Flow Payment Date, as the case may be.
Section 2.15 Certificated Notes.
(a) A Global Note deposited with the Depository or with the Trustee as Notes Custodian for the Depository pursuant to Section 2.02 shall be transferred to the beneficial owners thereof in the form of Certificated Notes in an aggregate principal amount equal to the principal amount of such Global Note, in exchange for such Global Note, only if such transfer complies with Section 2.16 hereof and (i) the Depository notifies the Issuers that it is unwilling or unable to continue as Depository for such Global Note and the Depository fails to appoint a successor depository or if at any time such Depository ceases to be a “clearing agency” registered under the Exchange Act and, in either case, a successor depositary is not appointed by the Issuer within 90 days of such notice, (ii) an Event of Default has occurred and is continuing and the Trustee has received a request from the Depository or (iii) the Issuers, at their option, notify the Trustee in writing that they elect to cause the issuance of Notes in definitive form under this Indenture, then, upon surrender by the relevant Global Note Holder of its Global Note, Notes in such form will be issued to each person that such Global Note Holder and the Depository identifies as being the beneficial owner of the related Notes. In addition, beneficial interests in a Global Note may be exchanged for Certificated Notes upon prior written notice given to the Trustee by or on behalf of the Depository in accordance with this Indenture. In all cases, Certificated Notes delivered in exchange for any Global Note or beneficial interests in Global Notes will be registered in the names, and issued in any approved denominations, requested by or on behalf of the Depository (in accordance with its customary procedures) and will bear the applicable restrictive legend referred to Exhibit B hereof, unless that legend is not required by applicable law.
(b) Any Global Note that is transferable to the beneficial owners thereof pursuant to this Section 2.15 shall be surrendered by the Depository to the Trustee located at its principal corporate trust office in the Borough of Manhattan, The City of New York, to be so transferred, in whole or from time to time in part, without charge, and the Trustee shall authenticate and deliver, upon such transfer of each portion of such Global Note, an equal aggregate principal amount of Certificated Notes of authorized denominations. Any portion of a Global Note transferred pursuant to this Section 2.15 shall be executed, authenticated and delivered only in denominations of $2,000 principal amount or any integral multiple of $1,000 in excess thereof and registered in such names as the Depository shall direct. Any Certificated Note delivered in exchange for an interest in the Transfer Restricted Note shall, except as otherwise provided by Exhibit B hereof, bear the applicable restricted securities legend and definitive note legend set forth in Exhibit B hereto.

 

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(c) Subject to the provisions of this Section 2.15, the registered Holder of a Global Note shall be entitled to grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Notes.
(d) In the event of the occurrence of one of the events specified in Section 2.15(a), the Issuer shall promptly make available to the Trustee a reasonable supply of Certificated Notes in definitive, fully registered form without interest coupons. In the event that the Certificated Notes are not issued to each such beneficial owner promptly after the Registrar has received a request from the Holder of a Global Note to issue such Certificated Note, the Issuer expressly acknowledges, with respect to the right of any Holder to pursue a remedy pursuant to Article Six of this Indenture, the right of any beneficial holder of Notes to pursue such remedy with respect to the portion of the Global Note that represents such beneficial holder’s Notes as if such Certificated Notes had been issued.
(e) By its acceptance of any Note bearing any legend in Exhibit B, each Holder of such Note acknowledges the restrictions on transfer of such Note set forth in this Indenture and in such legend in Exhibit B and agrees that it will transfer such Note only as provided in this Indenture and in such legend.
The Registrar shall retain for a period of two years copies of all letters, notices and other written communications received pursuant to Section 2.02 or this Section 2.15. The Issuer shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time upon the giving of reasonable notice to the Registrar.
Section 2.16 Special Transfer Provisions.
(a) Global Note to Global Note. If a beneficial interest in a Global Note is transferred or exchanged for a beneficial interest in another Global Note, the Trustee will (x) record a decrease in the principal amount of the Global Note being transferred or exchanged equal to the principal amount of such transfer or exchange and (y) record a like increase in the principal amount of the other Global Note. Any beneficial interest in one Global Note that is transferred to a Person who takes delivery in the form of an interest in another Global Note, or exchanged for an interest in another Global Note, will, upon transfer or exchange, cease to be an interest in such Global Note and become an interest in the other Global Note and, accordingly, will thereafter be subject to all transfer and exchange restrictions, if any, and other procedures applicable to beneficial interests in such other Global Note for as long as it remains such an interest.

 

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(b) Global Note to Certificated Note. If a beneficial interest in a Global Note is transferred or exchanged for a Certificated Note, the Trustee will (x) record a decrease in the principal amount of such Global Note equal to the principal amount of such transfer or exchange and (y) deliver one or more new Certificated Notes in authorized denominations having an equal aggregate principal amount to the transferee (in the case of a transfer) or the owner of such beneficial interest (in the case of an exchange), registered in the name of such transferee or owner, as applicable.
(c) Certificated Note to Global Note. If a Certificated Note is transferred or exchanged for a beneficial interest in a Global Note, the Trustee will (x) cancel such Certificated Note, (y) record an increase in the principal amount of such Global Note equal to the principal amount of such transfer or exchange and (z) in the event that such transfer or exchange involves less than the entire principal amount of the canceled Certificated Note, deliver to the Holder thereof one or more new Certificated Notes in authorized denominations having an aggregate principal amount equal to the untransferred or unexchanged portion of the canceled Certificated Note, registered in the name of the Holder thereof.
(d) Certificated Note to Certificated Note. If a Certificated Note is transferred or exchanged for another Certificated Note, the Trustee will (x) cancel the Certificated Note being transferred or exchanged, (y) deliver one or more new Certificated Notes in authorized denominations having an aggregate principal amount equal to the principal amount of such transfer or exchange to the transferee (in the case of a transfer) or the Holder of the canceled Certificated Note (in the case of an exchange), registered in the name of such transferee or Holder, as applicable, and (z) if such transfer or exchange involves less than the entire principal amount of the canceled Certificated Note, deliver to the Holder thereof one or more Certificated Notes in authorized denominations having an aggregate principal amount equal to the untransferred or unexchanged portion of the canceled Certificated Note, registered in the name of the Holder thereof.
(e) Restrictions on Transfer and Exchange.
(i) The transfer or exchange of any Note (or a beneficial interest therein) may only be made in accordance with this Article II and, in the case of a Global Note (or a beneficial interest therein), the applicable rules and procedures of the Depositary. The Trustee shall refuse to register any requested transfer or exchange that does not comply with the preceding sentence.

 

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(ii) Subject to Section 2.16(c), the transfer or exchange of any Note (or a beneficial interest therein) of the type set forth in column A below for a Note (or a beneficial interest therein) of the type set forth opposite in column B below may only be made in compliance with the certification requirements (if any) described in the clause of this paragraph set forth opposite in column C below.
             
A   B   C  
144A Global Note
   144A Global Note     (1 )
144A Global Note
   Regulation S Global Note     (2 )
144A Global Note
   Certificated Note     (3 )
Regulation S Global Note
   144A Global Note     (4 )
Regulation S Global Note
   Regulation S Global Note     (1 )
Regulation S Global Note
   Certificated Note     (5 )
Certificated Note
   144A Global Note     (4 )
Certificated Note
   Regulation S Global Note     (2 )
Certificated Note
   Certificated Note     (3 )
(1) No certification is required.
(2) The Person requesting the transfer or exchange must deliver or cause to be delivered to the Trustee a duly completed Regulation S Certificate; provided that if the requested transfer or exchange is made by the Holder of a Certificated Note that does not bear the restricted securities legend, then no Regulation S Certificate is required.
(3) The Person requesting the transfer or exchange must deliver or cause to be delivered to the Trustee (x) a duly completed Rule 144A Certificate, (y) a duly completed Regulation S Certificate or (z) a duly completed Institutional Accredited Investor Certificate, and/or an Opinion of Counsel and such other certifications and evidence as the Issuers may reasonably require in order to determine that the proposed transfer or exchange is being made in compliance with the Securities Act and any applicable securities laws of any state of the United States; provided that if the requested transfer or exchange is made by the Holder of a Certificated Note that does not bear the restricted securities legend, then no certification is required. In the event that (i) the requested transfer or exchange takes place after the Distribution Compliance Period and a duly completed Regulation S Certificate is delivered to the Trustee or (ii) a Certificated Note that does not bear the restricted securities legend is surrendered for transfer or exchange, upon transfer or exchange the Trustee will deliver a Certificated Note that does not bear the restricted securities legend.
(4) The Person requesting the transfer or exchange must deliver or cause to be delivered to the Trustee a duly completed Rule 144A Certificate.
(5) Notwithstanding anything to the contrary contained herein, no such exchange is permitted if the requested exchange involves a beneficial interest in a Temporary Regulation S Global Note. If the requested transfer involves a beneficial interest in a Temporary Regulation S Global Note, the Person requesting the transfer must deliver or cause to be delivered to the Trustee (x) a duly completed Rule 144A Certificate or (y) a duly completed Institutional Accredited Investor Certificate and/or an Opinion of Counsel and such other certifications and evidence as the Issuers may reasonably require in order to determine that the proposed transfer is being made in compliance with the Securities Act and any applicable securities laws of any state of the United States. If the requested transfer or exchange involves a beneficial interest in a Permanent Regulation S Global Note, no certification is required and the Trustee will deliver a Certificated Note that does not bear the restricted securities legend.

 

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(f) No Certification for Certain Transfer and Exchange. No certification is required in connection with any transfer or exchange of any Note (or a beneficial interest therein):
(1) after such Note is eligible for resale pursuant to Rule 144 under the Securities Act (or a successor provision) without the need for current public information; provided that the Issuers have provided the Trustee with an Officer’s Certificate to that effect, and the Issuers may require from any Person requesting a transfer or exchange in reliance upon this clause (1) an opinion of counsel and any other reasonable certifications and evidence in order to support such certificate; or
(2) (x) sold pursuant to an effective registration statement, pursuant to the Registration Rights Agreement or otherwise or (y) which is validly tendered for exchange into an Exchange Note pursuant to an Exchange Offer.
Any Certificated Note delivered in reliance upon this paragraph will not bear the restricted securities legend.
(g) Trustee’s Records. The Trustee will retain copies of all certificates, opinions and other documents received in connection with the transfer or exchange of a Note (or a beneficial interest therein), and the Issuers will have the right to inspect and make copies thereof at any reasonable time upon written notice to the Trustee.
(h) Cancellation or Adjustment of Global Note. At such time as all beneficial interests in a Global Note have either been exchanged for Certificated Notes, redeemed, purchased or canceled, such Global Note shall be returned to the Depository for cancellation or retained and canceled by the Trustee. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for Certificated Notes, redeemed, purchased or canceled, the principal amount of Notes represented by such Global Note shall be reduced and an adjustment shall be made on the books and records of the Trustee (if it is then the Notes Custodian for such Global Note) with respect to such Global Note, or by the Trustee or the Notes Custodian, to reflect such reduction.

 

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(i) No Obligation of the Trustee.
(1) The Trustee shall have no responsibility or obligation to any beneficial owner of a Global Note, a member of, or a participant in the Depository or other Person with respect to the accuracy of the records of the Depository or its nominee or of any participant or member thereof, with respect to any ownership interest in the Notes or with respect to the delivery to any participant, member, beneficial owner or other Person (other than the Depository) of any notice (including any notice of redemption) or the payment of any amount, under or with respect to such Notes. All notices and communications to be given to the Holders and all payments to be made to Holders under the Notes shall be given or made only to or upon the order of the registered Holders (which shall be the Depository or its nominee in the case of a Global Note). The rights of beneficial owners in any Global Note shall be exercised only through the Depository subject to the applicable rules and procedures of the Depository. The Trustee may rely and shall be fully protected in relying upon information furnished by the Depository with respect to its members, participants and any beneficial owners.
(2) The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Note (including any transfers between or among Depository participants, members or beneficial owners in any Global Note) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by, the terms of this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof.
ARTICLE THREE
REDEMPTION
Section 3.01 Notices to Trustee.
If the Issuer elects to redeem Notes pursuant to Section 5 or Section 6 of the Notes, it shall notify the Trustee in writing of the Redemption Date, the Redemption Price and the principal amount of Notes to be redeemed. The Issuer shall give notice of redemption to the Paying Agent and Trustee at least 35 days but not more than 60 days before the Redemption Date (unless a shorter notice shall be agreed to by the Trustee in writing), together with an Officers’ Certificate stating that such redemption will comply with the conditions contained herein.

 

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Section 3.02 Selection of Notes To Be Redeemed.
In the event that less than all of the Notes are to be redeemed at any time pursuant to Section 5 or 6 of the Notes, selection of the Notes for redemption will be made by the Trustee on a pro rata basis, by lot or by such method that complies with applicable legal and securities exchange requirements, if any, and in accordance with methods generally deemed fair and appropriate by the Trustee; provided, however, that no Notes of a principal amount of $2,000 or less shall be redeemed in part. In addition, if a partial redemption is made pursuant to Section 6 of the Notes, selection of the Notes or portions thereof for redemption shall be made by the Trustee only on a pro rata basis or on as nearly a pro rata basis as is practicable (subject to the procedures of The Depository Trust Company), unless that method is otherwise prohibited.
Section 3.03 Notice of Redemption.
At least 30 days but not more than 60 days before a Redemption Date, the Issuer shall mail a notice of redemption by first class mail, postage prepaid, to each Holder whose Notes are to be redeemed at its registered address (except that a notice issued in connection with a redemption referred to in Section 8.01(2) may be more than 60 days before such Redemption Date). At the Issuer’s request, the Trustee shall forward the notice of redemption in the Issuer’s name and at the Issuer’s expense. Each notice for redemption shall identify the Notes (including the CUSIP number) to be redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price and the amount of accrued interest, if any, to be paid;
(3) the name and address of the Paying Agent;
(4) that Notes called for redemption must be surrendered to the Paying Agent to collect the Redemption Price plus accrued interest, if any;
(5) that, unless the Issuers default in making the redemption payment, interest on Notes called for redemption ceases to accrue on and after the Redemption Date, and the only remaining right of the Holders of such Notes is to receive payment of the Redemption Price and the amount of accrued interest, if any, upon surrender to the Paying Agent of the Notes redeemed;
(6) if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed and that, after the Redemption Date, and upon surrender of such Note, a new Note or Notes in aggregate principal amount equal to the unredeemed portion thereof will be issued;
(7) if fewer than all the Notes are to be redeemed, the identification of the particular Notes (or portion thereof) to be redeemed, as well as the aggregate principal amount of Notes to be redeemed and the aggregate principal amount of Notes to be outstanding after such partial redemption; and
(8) the Section of the Notes pursuant to which the Notes are to be redeemed.

 

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The notice, if mailed in a manner herein provided, shall be conclusively presumed to have been given, whether or not the Holder receives such notice. In any case, failure to give such notice by mail or any defect in the notice to the Holder of any Note designated for redemption in whole or in part shall not affect the validity of the proceedings for the redemption of any other Note. Notices of redemption may not be conditional.
Section 3.04 Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.03, Notes called for redemption become due and payable on the Redemption Date and at the Redemption Price plus accrued interest, if any. Upon surrender to the Trustee or Paying Agent, such Notes called for redemption shall be paid at the Redemption Price (which shall include accrued interest thereon to the Redemption Date), but installments of interest, the maturity of which is on or prior to the Redemption Date, shall be payable to Holders of record at the close of business on the relevant Record Dates. On and after the Redemption Date interest shall cease to accrue on Notes or portions thereof called for redemption unless the Issuers shall have not complied with their obligations pursuant to Section 3.05.
Section 3.05 Deposit of Redemption Price.
On or before 10:00 a.m. New York time on the Redemption Date, the Issuer shall deposit with the Paying Agent U.S. Legal Tender sufficient to pay the Redemption Price plus accrued and unpaid interest, if any, of all Notes to be redeemed on that date.
If the Issuer complies with the preceding paragraph, then, unless the Issuer defaults in the payment of such Redemption Price plus accrued interest, if any, interest on the Notes to be redeemed will cease to accrue on and after the applicable Redemption Date, whether or not such Notes are presented for payment.
Section 3.06 Notes Redeemed in Part.
If any Note is to be redeemed in part only, the notice of redemption that relates to such Note shall state the portion of the principal amount thereof to be redeemed. A new Note or Notes in principal amount equal to the unredeemed portion of the original Note or Notes shall be issued in the name of the Holder thereof upon cancellation of the original Note or Notes.

 

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ARTICLE FOUR
COVENANTS
Section 4.01 Payment of Notes.
The Issuers shall pay the principal of (and premium, if any) and interest on the Notes in the manner provided in the Notes and this Indenture. An installment of principal of or interest on the Notes shall be considered paid on the date it is due if the Trustee or Paying Agent (other than the Issuers or an Affiliate thereof) holds on that date U.S. Legal Tender designated for and sufficient to pay the installment. Interest on the Notes will be computed on the basis of a 360-day year comprised of twelve 30-day months.
The Issuers shall pay interest on overdue principal, and premium, if any, (including, without limitation, post petition interest in a proceeding under any Bankruptcy Law), and, to the extent lawful, on overdue interest and Additional Interest, at a rate of 2% per annum in excess of the rate borne by the Notes, without regard to any applicable grace period.
Section 4.02 Maintenance of Office or Agency.
The Issuer shall maintain in the Borough of Manhattan, The City of New York, the office or agency required under Section 2.03 (which may be an office of the Trustee or an affiliate of the Trustee or Registrar). The Issuer shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Issuer shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the address of the Trustee set forth in Section 12.02.
The Issuer may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations. The Issuer will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency.
The Issuers hereby initially designate Wells Fargo Bank, National Association, located at 45 Broadway, 14th Floor, New York, New York 10016, as such office of the Issuers in accordance with Section 2.03.
Section 4.03 Corporate Existence.
Except as otherwise permitted by Article Five, the Issuer and Co-Issuer shall do or cause to be done all things necessary to preserve and keep in full force and effect its respective corporate and partnership existence and the corporate, partnership or other existence of each Restricted Subsidiary in accordance with the respective organizational documents of each such entity and the rights (charter and statutory) of the Issuer, the Co-Issuer and each Restricted Subsidiary; provided, however, that the Issuer shall not be required to preserve any such right or corporate, partnership or other existence with respect to any Restricted Subsidiary (other than the Co-Issuer) if the failure to maintain such right or existence would not have a Material Adverse Effect.

 

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Section 4.04 Payment of Taxes and Other Claims.
Each of the Issuers and the Guarantors shall, and shall cause each of the Restricted Subsidiaries to, pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (a) all material taxes, assessments and governmental charges levied or imposed upon it or any of the Restricted Subsidiaries or upon the income, profits or property of it or any of the Restricted Subsidiaries and (b) all lawful claims for labor, materials and supplies which, in each case, if unpaid, might by law become a material liability or Lien upon the property of it or any of the Restricted Subsidiaries (subject to liens permitted under subsections (1) and (2) of the definition of “Permitted Liens”); provided, however, that the Issuers and the Guarantors shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount the applicability or validity is being contested in good faith by appropriate actions and for which appropriate provision has been made.
Section 4.05 Maintenance of Properties and Insurance.
(a) The Issuers shall, and shall cause each of the Restricted Subsidiaries to (1) do or cause to be done all things necessary to obtain, preserve, renew, extend and keep in full force and effect the rights, licenses, permits, privileges, franchises, authorizations, patents, copyrights, trademarks and trade names material to the conduct of its business; maintain and operate such business in substantially the manner in which it is presently conducted and operated; comply with all applicable Requirements of Law (including any and all zoning, building, Environmental Law, ordinance, code or approval or any building permits or any restrictions of record or agreements affecting the Real Property) and decrees and orders of any Governmental Authority, whether now in effect or hereafter enacted, except where the failure to comply, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect; pay its material monetary obligations and perform its other material obligations under all material leases; and (2) except where the failure to comply, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, at all times maintain, preserve and protect all property material to the conduct of such business and keep such property in good repair, working order and condition and from time to time make, or cause to be made, all needful and proper repairs, renewals, additions, improvements and replacements thereto necessary in order that the business carried on in connection therewith may be properly conducted at all times; provided that nothing in this Section 4.05 shall prevent (i) sales of property, consolidations or mergers made in accordance with the provision of this Indenture; (ii) the withdrawal by the Issuer or any of its Subsidiaries of its qualification as a foreign corporation in any jurisdiction where such withdrawal, individually or in the aggregate, could not reasonably be expected

 

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to result in a Material Adverse Effect; or (iii) the abandonment by the Issuer or any of its Subsidiaries of any rights, franchises, licenses, trademarks, trade names, copyrights or patents that such person reasonably determines are not useful to its business or no longer commercially desirable; and (3) maintain adequate insurance at all times on all Collateral, as reflected in Schedule 4.05, by companies rated A-, VII or better by A.M. Best; maintain such insurance, to such extent and against such risks as is reflected in Schedule 4.05, including insurance with respect to Mortgaged Properties and other properties material to the business of the Issuers against such casualties and contingencies and of such types and in such amounts with such deductibles as is reflected in Schedule 4.05 and obtaining such other insurance against risks as the Note Collateral Agent may from time to time reasonably require; provided that with respect to physical hazard insurance, neither the Note Collateral Agent nor the Issuer shall agree to the adjustment of any claim thereunder without the consent of the other (such consent not to be unreasonably withheld or delayed); provided, further, that no consent of any Issuer shall be required during an Event of Default.
(b) All such insurance shall (i) provide that no cancellation or non-renewal of coverage thereof shall be effective until at least 30 days after receipt by Note Collateral Agent of written notice thereof, (ii) name Note Collateral Agent as mortgagee (in the case of property insurance) or additional insured on behalf of the Trustee and the Holders (in the case of liability insurance) or loss payee (in the case of property insurance), as applicable, and (iii) be reasonably satisfactory in all other respects to Note Collateral Agent.
(c) The Issuer shall notify the Trustee and the Note Collateral Agent in writing immediately whenever any separate insurance concurrent in form or contributing in the event of loss with that required to be maintained under this Section 4.05 is taken out by any Issuer or Guarantor; and promptly deliver to the Trustee and the Note Collateral Agent a duplicate original copy of such policy or policies.
(d) With respect to each Mortgaged Property, the Issuers or affected Guarantor shall obtain flood insurance in such total amount as shall be commercially reasonable if at any time the area in which any improvements are located on any Mortgaged Property is designated a “flood hazard area” in any Flood Insurance Rate Map published by the Federal Emergency Management Agency (or any successor agency), and otherwise comply with the National Flood Insurance Program as set forth in the Flood Disaster Protection Act of 1973, as amended from time to time.
(e) Deliver to the Trustee and the Note Collateral Agent a report of a reputable insurance broker with respect to such insurance and such supplemental reports with respect thereto as the Trustee or the Note Collateral Agent may from time to time reasonably request; provided, however, that neither the Trustee nor the Note Collateral Agent have an obligation or duty to request such reports, unless requested to do so by the Holders of 25% of the aggregate principal amount of the Notes then outstanding.

 

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(f) No Issuer or Guarantor that is an owner of Mortgaged Property shall take any action that is reasonably likely to be the basis for termination, revocation or denial of any insurance coverage required to be maintained under such Issuer or Guarantor’s respective Mortgage or that could be the basis for a defense to any claim under any Insurance Policy maintained in respect of the Mortgaged Property, and each Issuer and Guarantor shall otherwise comply in all material respects with all Insurance Requirements in respect of the Mortgaged Property; provided, however, that each Issuer or Guarantor may, at its own expense and after written notice to the Trustee, (i) contest the applicability or enforceability of any such Insurance Requirements by appropriate legal proceedings, the prosecution of which does not constitute a basis for cancellation or revocation of any insurance coverage required under this Section 4.05 or (ii) cause the Insurance Policy containing any such Insurance Requirement to be replaced by a new policy complying with the provisions of this Section 4.05.
Section 4.06 Compliance Certificate; Notice of Default.
(a) The Issuer shall deliver to the Trustee, within 90 days after the close of each fiscal year, an Officers’ Certificate stating that a review of the activities of the Issuers and their Subsidiaries has been made under the supervision of the signing Officers with a view to determining whether the Issuers and the Guarantors have kept, observed, performed and fulfilled their obligations under this Indenture and further stating, as to each such Officer signing such certificate, that to the best of such Officer’s knowledge, the Issuers and the Guarantors during such preceding fiscal year has kept, observed, performed and fulfilled each and every such covenant and no Default occurred during such year and at the date of such certificate there is no Default that has occurred and is continuing or, if such signers do know of such Default, the certificate shall describe its status with particularity. The Officers’ Certificate shall also notify the Trustee should the Issuer elect to change the manner in which it fixes its fiscal year end.
(b) The Issuer shall deliver to the Trustee as soon as possible and in any event within five days after the Issuer becomes aware of the occurrence of any Default an Officers’ Certificate specifying the Default and describing its status with particularity and the actions being taken or proposed to be taken with respect thereto.
Section 4.07 Compliance with Laws.
The Issuers shall comply, and shall cause each of their Restricted Subsidiaries to comply, with all applicable statutes, rules, regulations, orders and restrictions of the United States, all states and municipalities thereof and in all cases, of any governmental department, commission, board, regulatory authority, bureau, agency and instrumentality of the foregoing, in respect of the conduct of their respective businesses and the ownership of their respective properties, except, in any such case, to the extent the failure to so comply would not, individually or in the aggregate, have a Material Adverse Effect.

 

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Section 4.08 Waiver of Stay, Extension or Usury Laws.
Each of the Issuers and each Guarantor covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury law or other law that would prohibit or forgive such Issuer or such Guarantor from paying all or any portion of the principal of and/or interest on the Notes or the Note Guarantee of any such Guarantor as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Indenture, and (to the extent that it may lawfully do so) each hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.
Section 4.09 Change of Control.
If a Change of Control occurs, each Holder of Notes will have the right to require the Issuer to repurchase all or any part (equal to $2,000 or an integral multiple of $1,000 in excess thereof) of that Holder’s Notes pursuant to a Change of Control Offer (the “Change of Control Offer”). In the Change of Control Offer, the Issuer will offer to pay an amount in cash (the “Change of Control Purchase Price”) equal to 101% of the aggregate principal amount of Notes purchased, plus accrued and unpaid interest thereon and Additional Interest, if any, to the date of purchase. A Change of Control Offer may be made in advance of a Change of Control or conditional upon the occurrence of a Change of Control, if a definitive agreement is in place for the Change of Control at the time the Change of Control Offer is made.
Within 30 days following any Change of Control, or at an earlier date if the Issuer makes a Change of Control Offer in advance of, or conditioned on the occurrence of, a Change of Control, the Issuer will mail, or cause to be mailed, to the Holders a notice describing the transaction or transactions that constitute the Change of Control and offering to purchase Notes on the date (the “Change of Control Payment Date”) specified in such notice, which date shall be a Business Day no earlier than 30 days and no later than 60 days from the date such notice is mailed, pursuant to the procedures described below. Such notice shall state:
(1) The circumstances and relevant facts regarding such Change of Control;
(2) that the Change of Control Offer is being made pursuant to this Section 4.09 and that all Notes properly tendered and not withdrawn will be accepted for payment;
(3) the Change of Control Purchase Price (including the amount of accrued interest) and the Change of Control Payment Date;

 

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(4) that any Note not tendered will continue to accrue interest;
(5) that, unless the Issuer defaults in making payment therefor, any Note accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest after the Change of Control Payment Date;
(6) that Holders electing to have a Note purchased pursuant to a Change of Control Offer will be required to surrender the Note, with the form entitled “Option of Holder to Elect Purchase” on the reverse of the Note completed, to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day prior to the Change of Control Payment Date;
(7) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the second Business Day prior to the Change of Control Payment Date, an email, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Notes the Holder delivered for purchase and a statement that such Holder is withdrawing such Holder’s election to have such Note purchased; and
(8) that Holders whose Notes are purchased only in part will be issued new Notes in a principal amount equal to the unpurchased portion of the Notes surrendered (equal to $2,000 or an integral multiple of $1,000 in excess thereof).
The provisions described above that require the Issuer to make a Change of Control Offer following a Change of Control will be applicable regardless whether any other provisions of this Indenture are applicable to the transaction giving rise to the Change of Control. Except as described above with respect to a Change of Control, this Indenture does not contain provisions that permit the Holders of the Notes to require that the Issuer purchase or redeem the Notes in the event of a takeover, recapitalization or similar transaction.
On or before the Change of Control Payment Date, the Issuer will, to the extent lawful:
  •   accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer;
  •   deposit with the Paying Agent U.S. Legal Tender sufficient to pay the Change of Control Purchase Price in respect of all Notes or portions thereof so tendered; and
  •   deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers’ Certificate stating the aggregate principal amount of Notes or portions thereof being purchased by the Issuers.

 

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The Paying Agent will promptly mail to each Holder of Notes so tendered the Change of Control Purchase Price for such Notes, and the Trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided that each such new Note will be in a principal amount of $2,000 or an integral multiple of $1,000 in excess thereof.
The Issuer will post on its website the results of the Change of Control Offer on the Change of Control Payment Date.
The obligation of the Issuer to make a Change of Control Offer will be satisfied if a third party makes the Change of Control Offer (an “Alternate Offer”) in the manner, at the times and otherwise in compliance with the requirements set forth in this Indenture applicable to a Change of Control Offer made by the Issuer and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer. The Alternate Offer must comply with all the other provisions applicable to the Change of Control Offer, shall remain, if commenced prior to the Change of Control, open for acceptance until at least the consummation of the Change of Control (and otherwise in accordance with the time specified as set forth above) and must permit Holders to withdraw any tenders of Notes made into the Alternate Offer until the final expiration or consummation thereof. An Alternate Offer may be made in advance of a Change of Control or conditional upon the occurrence of a Change in Control, if a definitive agreement is in place for the Change of Control at the time the Alternate Offer is made.
In addition, the Issuer will not be required to make a Change of Control Offer upon a Change of Control if notice of redemption with respect to all Notes has been given pursuant to this Indenture as described under Article Three.
The Issuer shall cause the Change of Control Offer to remain open for at least 20 Business Days or for such longer period as may be required by law. The Issuer will comply, and will cause any third party making a Change of Control Offer to comply, with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with a Change of Control Offer. To the extent the provisions of any applicable securities laws or regulations conflict with the provisions of this Indenture relating to a Change of Control Offer, the Issuer will not be deemed to have breached its obligations under this Indenture by virtue of complying with such laws or regulations.

 

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Section 4.10 Limitations on Additional Indebtedness and Preferred Stock.
(a) The Issuer and the Co-Issuer will not, and the Issuer will not permit any Restricted Subsidiary to, directly or indirectly, incur any Indebtedness (including Acquired Indebtedness), and the Issuer and the Co-Issuer will not issue any Disqualified Equity Interests or Preferred Stock and the Issuer shall not permit any Restricted Subsidiaries to issue any Disqualified Equity Interests or Preferred Stock (other than Preferred Stock of a Restricted Subsidiary held by the Issuer, the Co-Issuer or any Guarantor, so long as it is so held); provided, that the Issuer, the Co-Issuer or any Guarantor may incur additional Indebtedness or issue Disqualified Equity Interests and the Issuer may issue Designated Preferred Stock if, in each case, after giving effect thereto, the Fixed Charge Coverage Ratio would have been at least 2.00 to 1.00 (the “Coverage Ratio Exception”) provided, further, that the Issuer may issue Preferred Stock under the Issuer’s Rights Plan.
(b) Notwithstanding Section 4.10(a), each of the following shall be permitted (the “Permitted Indebtedness”):
(1) (a) Indebtedness of the Issuer, the Co-Issuer, any Guarantor and Absaloka under the Revolving Credit Facility together with the incurrence by any Restricted Subsidiary of the guarantees thereunder and the issuance and creation of letters of credit and bankers’ acceptances thereunder (with letters of credit and bankers’ acceptances being deemed to have a principal amount equal to the face amount thereof), up to an aggregate principal amount of $20.0 million outstanding at any one time, less, to the extent a permanent repayment and/or commitment reduction is required thereunder as a result of such application, the aggregate amount of Net Available Proceeds applied to repayments under such Revolving Credit Facility in accordance with Section 4.13 and (b) Indebtedness of WML and its Subsidiaries under the Amended and Restated WML Credit Agreement and the incurrence and creation of letters of credit and bankers’ acceptances thereunder (to the extent permitted and with letters of credit and bankers’ acceptances being deemed to have a principal amount equal to the face amount thereof), up to an aggregate principal amount of $25.0 million outstanding at any time, reduced, to the extent a permanent repayment and/or commitment reduction is required thereunder;
(2) (x) the Notes issued on the Issue Date (excluding any Additional Notes) and the Note Guarantees thereof and (y) any Exchange Notes issued in exchange for the Notes (excluding any Additional Notes) and any Note Guarantees thereof pursuant to the Registration Rights Agreement;
(3) Indebtedness of the Issuer, the Co-Issuer and the Restricted Subsidiaries to the extent outstanding on the Issue Date (other than Indebtedness referred to in clauses (1) and (2) above), after giving effect to the intended use of proceeds of the Notes, including the WML Notes;
(4) Indebtedness under Hedging Obligations in the ordinary course of business that are designed to protect against fluctuations in interest rates, foreign currency exchange rates and commodity prices; provided, that if such Hedging Obligations are of the type described in clause (1) of the definition thereof, (a) such Hedging Obligations relate to payment obligations on Indebtedness otherwise permitted to be incurred by this Section 4.10, and (b) the notional principal amount of such Hedging Obligations at the time incurred does not exceed the principal amount of the Indebtedness to which such Hedging Obligations relate;

 

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(5) Indebtedness of the Issuer or the Co-Issuer owed to a Restricted Subsidiary and Indebtedness of any Restricted Subsidiary owed to the Issuer, the Co-Issuer or any other Restricted Subsidiary; provided, however, that (A) if the Issuer, the Co-Issuer or any Guarantor is the obligor with respect to such Indebtedness and the payee is not the Issuer, the Co-Issuer or a Guarantor, such Indebtedness must be subordinated to the prior payment in full in cash of all obligations of the Issuer, the Co-Issuer or such Guarantor with respect to the Notes and (B) upon any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or such Indebtedness being owed to any Person other than the Issuer, the Co-Issuer or a Restricted Subsidiary, the Issuer, the Co-Issuer or such Restricted Subsidiary, as applicable, in each case, shall be deemed to have incurred Indebtedness not permitted by this clause (5);
(6) (x) any guarantee by the Issuer, the Co-Issuer or a Guarantor of Indebtedness of the Issuer, the Co-Issuer or any Guarantor so long as the incurrence of such Indebtedness by the Issuer, the Co-Issuer and such Guarantor is permitted under the terms of this Indenture and (y) any guarantee by a Restricted Subsidiary that is not a Guarantor of Indebtedness of the Issuer, the Co-Issuer or a Restricted Subsidiary so long as the incurrence of such Indebtedness is permitted under the terms of this Indenture;
(7) (a) Indebtedness incurred by the Issuer, the Co-Issuer or any Restricted Subsidiary constituting reimbursement obligations with respect to any letters of credit, bankers’ acceptance warehouse receipt or similar facility issued in the ordinary course of business, including without limitation letters of credit or Indebtedness in respect of workers’ compensation claims, health, disability or other employee benefits or property, casualty or liability insurance or self-insurance or other Indebtedness with respect to reimbursement-type obligations regarding workers’ compensation claims and (b) Obligations in respect of performance, surety, reclamation and similar bonds and performance and completion guarantees provided by the Issuer, the Co-Issuer or any Restricted Subsidiary or Obligations in respect of letters of credit related thereto, in each case incurred in the ordinary course of business or consistent with past practice, and any guarantees or letters of credit functioning as so supporting any of the foregoing bonds or obligations (in the case of clauses (a) and (b), other than for an obligation for money borrowed);
(8) Purchase Money Indebtedness (a) incurred by the Issuer, the Co-Issuer or any Restricted Subsidiary, in an aggregate amount not to exceed at any time outstanding $40.0 million and (b) incurred by WML or any of its Subsidiaries in an aggregate amount not to exceed at any time outstanding $35.0 million;

 

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(9) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently (except in the case of daylight overdrafts) drawn against insufficient funds in the ordinary course of business; provided, however, that such Indebtedness is extinguished within five Business Days of incurrence;
(10) Indebtedness arising in connection with endorsement of instruments for deposit in the ordinary course of business;
(11) Refinancing Indebtedness with respect to Indebtedness incurred or outstanding pursuant to the Coverage Ratio Exception or clause (1)(b), (2), (3), (8), this clause (11), (15) or (18); provided, that for the purposes of clause 1(b) and 3 (for the purpose of clause 3, with respect to the WML Notes only), and without regard to the definition of Refinancing Indebtedness for purposes of this proviso, such Refinancing Indebtedness may be represented by Additional Notes and Note Guarantees;
(12) Indebtedness supported by one or more letters of credit issued under the Revolving Credit Facility and the Amended and Restated WML Credit Agreement in accordance with clause (1)(a) and (1)(b), respectively; provided, that the amount of Indebtedness permitted to be incurred under this clause (12) supported by any such letter(s) of credit shall not exceed the amount of such letter(s) of credit; provided, further, that upon any reduction, cancellation or termination of such letter(s) of credit, there shall be deemed to be an incurrence of Indebtedness under this Indenture that must be otherwise permitted to be incurred under this Indenture equal to the excess of the amount of such Indebtedness outstanding immediately after such reduction, cancellation or termination over the remaining stated amount, if any, of such letter(s) of credit or the stated amount of any letter(s) of credit issued in a contemporaneous replacement of such letter(s) of credit;
(13) Attributable Indebtedness incurred by the Issuer, the Co-Issuer or any Restricted Subsidiary in an aggregate amount not to exceed $10.0 million at any one time outstanding;
(14) Indebtedness incurred by the Issuer, the Co-Issuer or any Guarantor in an aggregate principal amount (or accreted value, as applicable) at any one time outstanding, including all Refinancing Indebtedness incurred to renew, refund, refinance, replace, defease or discharge any Indebtedness incurred pursuant to this clause (14), not to exceed $20.0 million;
(15) Indebtedness of the Issuer, the Co-Issuer or any Restricted Subsidiary of Acquired Indebtedness (except to the extent such Acquired Indebtedness was incurred in connection with or in contemplation of such acquisition); provided, that after giving effect to such incurrence of Indebtedness either (A) the Issuer would be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Coverage Ratio Exception immediately following such transaction or (B) such Fixed Charge Coverage Ratio would have been greater than immediately prior to such acquisition;

 

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(16) Indebtedness of the Issuer, the Co-Issuer or any Restricted Subsidiary under any Cash Management Obligations;
(17) Customary indemnification, adjustment of purchase price or similar obligations, including title insurance, of the Issuer, the Co-Issuer or any Restricted Subsidiary, in each case, incurred in connection with the disposition of any assets of the Issuer, the Co-Issuer or any such Restricted Subsidiary (other than guarantees incurred by any Person acquiring all or any portion of such assets for the purpose of financing such acquisition); and
(18) Indebtedness represented by Additional Notes and Note Guarantees thereof in connection with or in contemplation of, or to provide all or any portion of the funds or credit support utilized to consummate, the acquisition by the Issuer, the Co-Issuer or any Guarantor of assets used or useful in a Permitted Business (whether through the direct purchase of assets or the purchase of capital stock of, or merger or consolidation with, any Person owning such assets); provided, that the Issuer would, on the date of such transaction after giving pro forma effect thereto and any related financing transactions as if the same had occurred at the beginning of the applicable Four-Quarter Period, have had a Total Leverage Ratio for the Four-Quarter Period immediately preceding the date of such transaction, of no more than 4.0 to 1.0.
(c) The Issuer and the Co-Issuer will not incur, and will not permit any Restricted Subsidiary to incur, any Indebtedness (including Permitted Indebtedness) that is contractually subordinated in right of payment to any other Indebtedness of the Issuer, the Co-Issuer or such Restricted Subsidiary unless such Indebtedness is also contractually subordinated in right of payment to the Notes and the applicable Note Guarantees on substantially identical terms; provided, however, that no Indebtedness will be deemed to be contractually subordinated in right of payment to any other Indebtedness of the Issuer or the Co-Issuer solely by virtue of being unsecured or by virtue of being secured on a junior priority basis; and provided, further, that this provision shall not apply to subordinated debt incurred by WML or its Subsidiaries at any time when the WML Notes are outstanding.
(d) For purposes of determining compliance with this Section 4.10, in the event that an item of Indebtedness meets the criteria of more than one of the categories of Permitted Indebtedness described in Section 4.10(b)(1) through Section 4.10(b)(18) above or is entitled to be incurred pursuant to the Coverage Ratio Exception, the Issuer shall classify and may reclassify, in each case in its sole discretion, such item of Indebtedness and may divide, classify and reclassify such Indebtedness in more than one of the types of Indebtedness described, except that Indebtedness incurred under the Revolving Credit Facility after the Issue Date must be incurred under Section 4.10(b)(1). In addition, for purposes of determining any particular amount of Indebtedness under this Section 4.10, guarantees, Liens or letter of credit obligations supporting Indebtedness otherwise included in the determination of such particular amount shall not be included so long as incurred by a Person that could have incurred such Indebtedness. Notwithstanding any other provision of this Section 4.10, the maximum amount of Indebtedness that the Issuer, the Co-Issuer or any Restricted Subsidiary may incur pursuant to this Section 4.10 shall not be deemed to be exceeded solely as a result of fluctuations in exchange rates or currency values.

 

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Section 4.11 Limitations on Restricted Payments.
(a) The Issuer and the Co-Issuer will not, and will not permit any Restricted Subsidiary to, directly or indirectly, make any Restricted Payment unless, at the time of and after giving effect to such Restricted Payment:
(1) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence of such Restricted Payment;
(2) the Issuer would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable Four-Quarter Period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Coverage Ratio Exception; or
(3) such Restricted Payment, when added to the aggregate amount of all other Restricted Payments made by the Issuer, the Co-Issuer and the Restricted Subsidiaries after the Issue Date (other than Restricted Payments made pursuant to clauses Section 4.11(b)(2), Section 4.11(b)(3), Section 4.11(b)(4), Section 4.11(b)(5), Section 4.11(b)(6), Section 4.11(b)(8), or Section 4.11(b)(9)), is less than the sum (the “Restricted Payments Basket”) of (without duplication):
(A) 50% of Consolidated Net Income of the Issuer for the period (taken as one accounting period) commencing on the first day of the first full fiscal quarter commencing after the Issue Date to and including the last day of the fiscal quarter ended immediately prior to the date of such calculation for which consolidated financial statements are available (or, if such Consolidated Net Income shall be a deficit, minus 100% of such aggregate deficit), plus
(B) 100% of the aggregate net cash proceeds and the fair market value, as determined in good faith by the Board of Directors of the Issuer, of property and marketable securities, received by the Issuer either (x) as contributions to the common equity of the Issuer after the Issue Date (other than (i) by a Restricted Subsidiary, (ii) any Disqualified Equity Interests, (iii) Designated Preferred Stock and (iv) cash proceeds applied to Restricted Payments made in accordance with Section 4.11(b)(4)) or (y) from the issuance and sale of Qualified Equity Interests after the Issue Date, in each case, other than any such proceeds which are used (x) to redeem Notes in accordance with Section 6 of the Notes or (y) to make Restricted Payments in reliance on Section 4.11(b)(3) or Section 4.11(b)(4), plus

 

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(C) the aggregate amount by which Indebtedness (other than any Subordinated Indebtedness) of the Issuer, the Co-Issuer or any Restricted Subsidiary is reduced on the Issuer’s balance sheet upon the conversion or exchange subsequent to the Issue Date (other than by a Subsidiary of the Issuer) into Qualified Equity Interests (less the amount of any cash, or the fair value of assets, distributed by the Issuer, the Co-Issuer or any Restricted Subsidiary upon such conversion or exchange), plus
(D) without duplication of any amounts included in Section 4.11(b)(4), (x) in the case of the disposition or repayment of or return on any Investment that was treated as a Restricted Payment made after the Issue Date, an amount (to the extent not included in the computation of Consolidated Net Income) equal to the lesser of (i) the aggregate amount received in cash and the fair market value, as determined by the Board of Directors of the Issuer in good faith, of property and marketable securities received after the Issue Date and representing the return of capital with respect to such Investment and (ii) the amount of such Investment that was treated as a Restricted Payment, in either case, less the cost of the disposition of such Investment and net of taxes or (y) the sale (other than to the Issuer, the Co-Issuer or a Restricted Subsidiary) of the Equity Interests of an Unrestricted Subsidiary, plus
(E) upon a Redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary, the lesser of (i) the Fair Market Value of the Issuer’s proportionate interest in such Subsidiary immediately following such Redesignation, and (ii) the aggregate amount of the Issuer’s Investments in such Subsidiary to the extent such Investments reduced the Restricted Payments Basket and were not previously repaid or otherwise reduced.
(b) The foregoing provisions will not prohibit:
(1) the payment by the Issuer, the Co-Issuer or any Restricted Subsidiary of any dividend or other distribution within 60 days after the date of declaration thereof, if on the date of declaration the payment would have complied with the provisions of this Indenture;
(2) the redemption, repurchase, retirement or other acquisition of any Equity Interests of the Issuer, the Co-Issuer or any Restricted Subsidiary in exchange for, or out of the proceeds of the substantially concurrent issuance and sale of, Qualified Equity Interests;

 

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(3) the redemption, repurchase, retirement or other acquisition of Subordinated Indebtedness of the Issuer, the Co-Issuer or any Restricted Subsidiary (a) in exchange for, or out of the proceeds of the substantially concurrent issuance and sale of, Qualified Equity Interests or (b) in exchange for, or out of the proceeds of the substantially concurrent incurrence of, Refinancing Indebtedness permitted to be incurred under Section 4.10 and the other terms of this Indenture; provided, that the amount of any such net cash proceeds that are utilized for any such Restricted Payment will not be considered to be net proceeds of Qualified Equity Interests for purposes of Section 4.11(a)(3)(B) and will not be considered to be net cash proceeds from a Qualified Equity Offering for purposes of the provisions described under Section 6 of the Notes;
(4) payments to redeem Equity Interests of the Issuer, held by officers, directors or employees or former officers, directors or employees (or their transferees, estates or beneficiaries under their estates) thereof, upon their death, disability, retirement, severance or termination of employment or service pursuant to any employee benefit plan or agreement or awarded to an employee to pay for the taxes payable by such employee upon such grant or award or the vesting thereof; provided, that the aggregate amount of Restricted Payments under this clause (4) shall not exceed (A) $2.0 million during any calendar year plus (B) the amount of any net cash proceeds received by or contributed to the Issuer from the issuance and sale since the Issue Date of Qualified Equity Interests of the Issuer to its officers, directors or employees that have not been applied to the payment of Restricted Payments pursuant to the terms of clause 3(b) of the preceding paragraph or this clause (4), plus (C) the net cash proceeds of any “key-man” life insurance policies that have not been applied to Restricted Payments pursuant to this clause (4), less (D) the amount of any Restricted Payments previously made from cash proceeds received pursuant to clauses (B) and (C) of this clause (4); provided, further, that the cancellation of Indebtedness owing to the Issuer, the Co-Issuer or any Restricted Subsidiary in connection with the repurchase of Qualified Equity Interests will not be deemed to constitute a Restricted Payment;
(5) (a) the declaration and payment of regularly scheduled or accrued dividends to holders of the Series A Preferred Stock to the extent such dividends are included in the definition of Consolidated Interest Expense, (b) the declaration and payment of regularly scheduled or accrued dividends to holders of any class or series of Disqualified Equity Interests of the Issuer, the Co-Issuer or any Restricted Subsidiary outstanding on the Issue Date or issued on or after the Issue Date in accordance with the Coverage Ratio Exception described under Section 4.10 to the extent such dividends are included in the definition of Consolidated Interest Expense and (c) the declaration and payment of accrued and unpaid dividends to holders of the Series A Preferred Stock outstanding as of the Issue Date with the proceeds from the sale of the Initial Notes;

 

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(6) the declaration and payment of dividends or distributions to holders of any class or series of Designated Preferred Stock (other than Disqualified Equity Interests) issued by the Issuer after the Issue Date in accordance with the Coverage Ratio Exception described under Section 4.10 to the extent such dividends are included in the definition of Consolidated Interest Expense; provided, however, that (A) for the most recently ended four full fiscal quarters for which consolidated financial statements are available immediately preceding the date of issuance of such Designated Preferred Stock, after giving effect to such issuance (and the payment of dividends or distributions thereon) on a pro forma basis, the Issuer would have had a Fixed Charge Coverage Ratio of at least 2.0 to 1.0 and (B) the aggregate amount of dividends declared and paid pursuant to this clause (6) does not exceed the net cash proceeds actually received by the Issuer from any such sale of Designated Preferred Stock (other than Disqualified Equity Interests) issued after the Issue Date;
(7) repurchases of Equity Interests deemed to occur upon the exercise or conversion of stock options or other Equity Interests, if such repurchased or converted Equity Interests represent a portion of the exercise price thereof;
(8) the repurchase, redemption or other acquisition or retirement for value of any Subordinated Indebtedness pursuant to the provisions in documentation governing such Subordinated Indebtedness similar to those described under Section 4.09, Section 4.13, Section 4.14 and Section 4.27; provided, that prior to such repurchase, redemption or another acquisition, the Issuer and the Co-Issuer (or a third party to the extent permitted by this Indenture) shall have made any required Change of Control Offer, Net Proceeds Offer or Loss Proceeds Offer, as the case may be, with respect to the Notes and shall have repurchased all Notes validly tendered and not withdrawn in connection with such Change of Control Offer, Net Proceeds Offer or Loss Proceeds Offer; or
(9) additional Restricted Payments of $10.0 million;
provided, that (a) in the case of any Restricted Payment pursuant to clause (3), (4), (5)(b), (6), (8) or (9) of this Section 4.11(b), no Default shall have occurred and be continuing or occur as a consequence thereof and (b) no issuance and sale of Qualified Equity Interests used to make a payment pursuant to clause (2), (3) or (4) of this Section 4.11(b) shall increase the Restricted Payments Basket.
In the event that a Restricted Payment meets the criteria of more than one of the exceptions described in (1) through (9) of this Section 4.11(b) or is entitled to be made pursuant to Section 4.11(a), the Issuer shall, in its sole discretion, classify or reclassify such Restricted Payment into one or more exceptions.

 

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Section 4.12 Limitations on Liens.
The Issuer and the Co-Issuer shall not, and shall not permit any Restricted Subsidiary other than WML or WML’s subsidiaries in accordance with the WML Credit Agreements to, directly or indirectly, create, incur, assume or permit or suffer to exist any Lien of any nature whatsoever against any properties or assets of the Issuer, the Co-Issuer or any Restricted Subsidiary (including Equity Interests of a Restricted Subsidiary), whether owned at the Issue Date or thereafter acquired, or any proceeds therefrom, or assign or otherwise convey any right to receive income or profits therefrom (other than Permitted Liens and Liens on the collateral securing the Revolving Credit Facility Obligations). Notwithstanding anything herein to the contrary, neither the Issuer nor any of its Restricted Subsidiaries shall permit any Refinancing Indebtedness incurred to refinance Indebtedness under the WML Notes to be secured by any Lien other than as permitted under clause (12) in the definition of Permitted Liens.
Section 4.13 Limitations on Asset Sales.
(a) The Issuer and the Co-Issuer will not, and will not permit any Restricted Subsidiary, other than WML or WML’s subsidiaries in accordance with the WML Credit Agreements, to, directly or indirectly, consummate any Asset Sale unless:
(1) the Issuer, the Co-Issuer or such Restricted Subsidiary receives consideration at the time of such Asset Sale at least equal to the Fair Market Value of the assets included in such Asset Sale; and
(2) at least 75% of the total consideration received in such Asset Sale consists of cash or Cash Equivalents.
(b) For purposes of clause (a)(2), the following shall be deemed to be cash:
(1) the amount (without duplication) of any Indebtedness (other than Subordinated Indebtedness) of the Issuer, the Co-Issuer or such Restricted Subsidiary that is expressly assumed by the transferee in such Asset Sale and with respect to which the Issuer, the Co-Issuer or such Restricted Subsidiary, as the case may be, is unconditionally released by the holder of such Indebtedness,
(2) the amount of any securities, notes or other obligations received from such transferee that are within 90 days converted by the Issuer, the Co-Issuer or such Restricted Subsidiary to cash (to the extent of the cash actually so received), and
(3) the Fair Market Value of (i) any assets (other than securities) received by the Issuer, the Co-Issuer or any Restricted Subsidiary to be used by it in a Permitted Business, (ii) Equity Interests in a Person that is a Restricted Subsidiary or in a Person engaged in a Permitted Business that shall become a Restricted Subsidiary immediately upon the acquisition of such Person by the Issuer or the Co-Issuer or (iii) a combination of (i) and (ii).

 

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(c) If at any time any non-cash consideration received by the Issuer, the Co-Issuer or any Restricted Subsidiary, as the case may be, in connection with any Asset Sale is repaid or converted into or sold or otherwise disposed of for cash (other than interest received with respect to any such non-cash consideration), then the date of such repayment, conversion or disposition shall be deemed to constitute the date of an Asset Sale hereunder and the Net Available Proceeds thereof shall be applied in accordance with this Section 4.13.
(d) If the Issuer, the Co-Issuer or any Restricted Subsidiary engages in an Asset Sale, the Issuer, the Co-Issuer or such Restricted Subsidiary shall, no later than 365 days following the consummation thereof, apply amounts equal to all or any of the Net Available Proceeds therefrom to:
(1) If such Net Available Proceeds are proceeds of an Asset Sale of any asset, prepay permanently or repay permanently any Indebtedness which was secured by the Collateral sold in such Asset Sale; provided, that if such Net Available Proceeds are proceeds of an Asset Sale of the Revolving Facility First-Priority Collateral, such Net Available Proceeds shall be applied as required under the Revolving Credit Facility;
(2) If such Net Available Proceeds are proceeds of an Asset Sale of any assets or properties of WML or any of its Subsidiaries, apply such Net Available Proceeds as and to the extent required under the WML Credit Agreements or in connection with any consent, waiver or amendment thereto provided by the WML lenders thereunder; provided, that Net Available Proceeds that are proceeds of an Asset Sale of any properties or assets of WML or any of its Subsidiaries shall constitute “Excess Proceeds” (as defined below) only if and to the extent permitted to be distributed to the Issuer by WML or any of its Subsidiaries under the WML Credit Agreements and the WML Security Agreements;
(3) If such Net Available Proceeds are proceeds of any Asset Sale (other than an Asset Sale of any asset that constitutes WML Collateral), to permanently reduce any Pari Passu Indebtedness; provided, however, that if any Pari Passu Indebtedness is so reduced, the Issuer and the Co-Issuer will equally and ratably reduce Indebtedness under the Notes by making an offer to all Holders of the Notes to purchase at a purchase price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, the pro rata principal amount of the Notes; or

 

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(4) invest all or any part of the Net Available Proceeds thereof in (A) the purchase of assets (other than securities) to be used by the Issuer, the Co-Issuer or any Restricted Subsidiary in a Permitted Business, (B) capital expenditures to be used by the Issuer, the Co-Issuer or any Restricted Subsidiary in a Permitted Business, (C) acquisition of Qualified Equity Interests in a Person that is a Restricted Subsidiary or in a Person engaged in a Permitted Business that shall become a Restricted Subsidiary immediately upon the consummation of such acquisition or (D) a combination of (A), (B) and (C).
The amount of Net Available Proceeds not applied or invested as provided in this Section 4.13(d) will constitute “Excess Proceeds.”
(e) When the aggregate amount of Excess Proceeds equals or exceeds $10.0 million, the Issuer will be required to make an offer to purchase from all Holders and, if applicable, redeem (or make an offer to do so) any Pari Passu Indebtedness of the Issuer the provisions of which require the Issuer to redeem such Indebtedness with the proceeds from any Asset Sales (or offer to do so), in an aggregate principal amount of Notes and such Pari Passu Indebtedness equal to the amount of such Excess Proceeds as follows:
(1) the Issuer will (a) make an offer to purchase (a “Net Proceeds Offer”) to all Holders in accordance with the procedures set forth in this Indenture, and (b) redeem (or make an offer to do so) any such other Pari Passu Indebtedness, pro rata in proportion to the respective principal amounts of the Notes and such other Indebtedness required to be redeemed, the maximum principal amount of Notes and Pari Passu Indebtedness that may be redeemed out of the amount (the “Payment Amount”) of such Excess Proceeds;
(2) the offer price for the Notes will be payable in cash in an amount equal to 100% of the principal amount of the Notes tendered pursuant to a Net Proceeds Offer, plus accrued and unpaid interest thereon, if any, to the date such Net Proceeds Offer is consummated (the “Offered Price”), in accordance with the procedures set forth in this Indenture and the redemption price for such Pari Passu Indebtedness (the “Pari Passu Indebtedness Price”) shall be as set forth in the related documentation governing such Indebtedness;
(3) if the aggregate Offered Price of Notes validly tendered and not withdrawn by Holders thereof exceeds the pro rata portion of the Payment Amount allocable to the Notes, Notes to be purchased will be selected on a pro rata basis or as nearly a pro rata basis as is practicable (subject to the procedures of the Depository Trust Company); and
(4) upon completion of such Net Proceeds Offer in accordance with the foregoing provisions, the amount of Excess Proceeds with respect to which such Net Proceeds Offer was made shall be deemed to be zero.
(f) To the extent that the sum of the aggregate Offered Price of Notes tendered pursuant to a Net Proceeds Offer and the aggregate Pari Passu Indebtedness Price paid to the holders of such Pari Passu Indebtedness is less than the Payment Amount relating thereto (such shortfall constituting a “Net Proceeds Deficiency”), the Issuer may use the Net Proceeds Deficiency, or a portion thereof, for general corporate purposes, subject to the provisions of this Indenture.

 

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(g) In the event of the transfer of substantially all (but not all) of the assets of the Issuer, the Co-Issuer and the Restricted Subsidiaries as an entirety to a Person in a transaction covered by and effected in accordance with Section 5.01, the successor Person shall be deemed to have sold for cash at Fair Market Value the assets of the Issuer, the Co-Issuer and the Restricted Subsidiaries not so transferred for purposes of this Section 4.13, and the successor Person shall comply with the provisions of this Section 4.13 with respect to such deemed sale as if it were an Asset Sale (with such Fair Market Value being deemed to be Net Available Proceeds for such purpose).
(h) Upon the commencement of a Net Proceeds Offer, the Issuer shall send, by first class mail, a notice to the Trustee and to each Holder at its registered address. The notice shall contain all instructions and materials necessary to enable such Holder to tender Notes pursuant to the Net Proceeds Offer. Any Net Proceeds Offer shall be made to all Holders. The notice, which shall govern the terms of the Net Proceeds Offer, shall state:
(1) that the Net Proceeds Offer is being made pursuant to this Section 4.13;
(2) the Payment Amount, the Offered Price, and the date on which Notes tendered and accepted for payment shall be purchased, which date shall be at least 30 days and not later than 60 days from the date such notice is mailed (the “Net Proceeds Payment Date”);
(3) that any Notes not tendered or accepted for payment shall continue to accrue interest;
(4) that, unless the Issuer defaults in making such payment, any Notes accepted for payment pursuant to the Net Proceeds Offer shall cease to accrue interest after the Net Proceeds Payment Date;
(5) that Holders electing to have a Note purchased pursuant to any Net Proceeds Offer shall be required to surrender the Note, with the form entitled “Option of Holder to Elect Purchase” on the reverse of the Note completed, or transfer by book-entry transfer, to the Issuer, a depository, if appointed by the Issuer, or the Paying Agent at the address specified in the notice at least three Business Days before the Net Proceeds Payment Date;
(6) that Holders shall be entitled to withdraw their election if the Issuer, the Depository or the Paying Agent, as the case may be, receives, not later than two Business Days prior to the Net Proceeds Payment Date, a notice setting forth the name of the Holder, the principal amount of the Note the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Note purchased;

 

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(7) that if the aggregate principal amount of Notes surrendered by Holders exceeds the Payment Amount, the Issuer shall select the Notes to be purchased on a pro rata basis (with such adjustments as may be deemed appropriate by the Issuer so that only Notes in denominations of $2,000, or integral multiples of $1,000 in excess thereof, shall be purchased); and
(8) that Holders whose Notes were purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered (or transferred by book-entry).
(i) On the Net Proceeds Payment Date, the Issuer shall, to the extent lawful: (1) accept for payment all Notes or portions thereof properly tendered pursuant to the Net Proceeds Offer; (2) deposit with the Paying Agent U.S. Legal Tender sufficient to pay the Offered Price in respect of all Notes or portions thereof so tendered; and (3) deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers’ Certificate stating the aggregate principal amount of Notes or portions thereof being repurchased by the Issuer. The Issuer shall publicly announce the results of the Net Proceeds Offer on the Net Proceeds Payment Date.
(j) The Paying Agent shall promptly mail to each Holder of Notes so tendered the Offered Price for such Notes, and the Trustee shall promptly authenticate pursuant to an Authentication Order and mail (or cause to be transferred by book-entry) to each Holder a new Note equal in principal amount to any unrepurchased portion of the Notes surrendered, if any; provided that each such new Note shall be in principal amount of $2,000 or an integral multiple of $1,000 in excess thereof. However, if the Net Proceeds Payment Date is on or after an interest record date and on or before the related interest payment date, any accrued and unpaid interest shall be paid to the Person in whose name a Note is registered at the close of business on such record date, and no additional interest shall be payable to Holders who tender Notes pursuant to the Net Proceeds Offer.
(k) The Issuer will comply with applicable tender offer rules, including the requirements of Rule 14e-1 under the Exchange Act and any other applicable laws and regulations in connection with the purchase of Notes pursuant to a Net Proceeds Offer. To the extent that the provisions of any securities laws or regulations conflict this Section 4.13, the Issuer shall comply with the applicable securities laws and regulations and will not be deemed to have breached their obligations under this Section 4.13 by virtue of this compliance.

 

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Section 4.14 Excess Cash Flow.
(a) Within 120 days after the end of each fiscal year of the Issuer (commencing with the fiscal year ending December 31, 2011), when the aggregate Excess Cash Flow Amount equals or exceeds $1.0 million, the Issuer will be required to make an offer to purchase from all Holders Notes issued under this Indenture (including the principal amount of any Additional Notes issued under this Indenture but without duplication with respect to Exchange Notes) in an aggregate principal amount equal to the Excess Cash Flow Amount as follows:
(1) the Issuer will make an offer to purchase (an “Excess Cash Flow Offer”) to all Holders in accordance with the procedures set forth in this Indenture, pro rata in proportion to the respective principal amounts of the Notes to be purchased, the maximum principal amount that may be purchased out of the Excess Cash Flow Amount (the “Excess Cash Flow Payment Amount”);
(2) the offer price for the Notes will be payable in cash in an amount equal to 100% of the principal amount of the Notes tendered pursuant to an Excess Cash Flow Offer, plus accrued and unpaid interest thereon, if any, to the date such Excess Cash Flow Offer is consummated (the “Excess Cash Flow Offered Price”), in accordance with the procedures set forth in this Indenture;
(3) if the aggregate Excess Cash Flow Offered Price of Notes validly tendered and not withdrawn by Holders thereof exceeds the pro rata portion of the Excess Cash Flow Payment Amount allocable to the Notes, Notes to be purchased will be selected on a pro rata basis or as nearly on a pro rata basis as is practicable (subject to the procedures of the Depository Trust Company); and
(4) upon completion of such Excess Cash Flow Offer in accordance with the foregoing provisions, the Excess Cash Flow Amount with respect to which such Excess Cash Flow Offer was made shall be deemed to be zero.
(b) To the extent that the sum of the aggregate Excess Cash Flow Offered Price of Notes tendered pursuant to an Excess Cash Flow Offer is less than the Excess Cash Flow Payment Amount relating thereto (such shortfall constituting an “Excess Cash Flow Offer Deficiency”), the Issuer may use the Excess Cash Flow Offer Deficiency, or a portion thereof, for general corporate purposes, subject to the provisions of this Indenture.

 

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(c) Upon the commencement of an Excess Cash Flow Offer, the Issuer shall send, by first class mail, a notice to the Trustee and to each Holder at his registered address. The notice shall contain all instructions and materials necessary to enable such Holder to tender Notes pursuant to the Excess Cash Flow Offer. Any Excess Cash Flow Offer shall be made to all Holders. The notice, which shall govern the terms of the Excess Cash Flow Offer, shall state:
(1) that the Excess Cash Flow Offer is being made pursuant to this Section 4.14;
(2) the Excess Cash Flow Payment Amount, the Excess Cash Flow Offered Price, and the date on which Notes tendered and accepted for payment shall be purchased, which date shall be at least 30 days and not later than 60 days from the date such notice is mailed (the “Excess Cash Flow Payment Date”);
(3) that any Notes not tendered or accepted for payment shall continue to accrue interest;
(4) that, unless the Issuer defaults in making such payment, any Notes accepted for payment pursuant to the Excess Cash Flow Offer shall cease to accrue interest after the Excess Cash Flow Payment Date;
(5) that Holders electing to have a Note purchased pursuant to any Excess Cash Flow Offer shall be required to surrender the Note, with the form entitled “Option of Holder to Elect Purchase” on the reverse of the Note completed, or transfer by book-entry transfer, to the Issuer, a depository, if appointed by the Issuer, or the Paying Agent at the address specified in the notice at least three Business Days before the Excess Cash Flow Payment Date;
(6) that Holders shall be entitled to withdraw their election if the Issuer, the Depository or the Paying Agent, as the case may be, receives, not later than two Business Days prior to the Excess Cash Flow Payment Date, a notice setting forth the name of the Holder, the principal amount of the Note the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Note purchased;
(7) that if the aggregate principal amount of Notes surrendered by Holders exceeds the Excess Cash Flow Payment Amount, the Issuer shall select the Notes to be purchased on a pro rata basis (with such adjustments as may be deemed appropriate by the Issuer so that only Notes in denominations of $2,000, or integral multiples of $1,000 in excess thereof, shall be purchased); and
(8) that Holders whose Notes were purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered (or transferred by book-entry).
(d) On the Excess Cash Flow Payment Date, the Issuer shall, to the extent lawful: (1) accept for payment all Notes or portions thereof properly tendered pursuant to the Excess Cash Flow Offer; (2) deposit with the Paying Agent U.S. Legal Tender sufficient to pay the Excess Cash Flow Offered Price in respect of all Notes or portions thereof so tendered; and (3) deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers’ Certificate stating the aggregate principal amount of Notes or portions thereof being repurchased by the Issuer. The Issuer will post on its website the results of the Excess Cash Flow Offer on the Excess Cash Flow Payment Date.

 

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(e) The Paying Agent shall promptly mail to each Holder of Notes so tendered the Excess Cash Flow Offered Price for the Notes being purchased, and the Trustee shall promptly authenticate pursuant to an Authentication Order and mail (or cause to be transferred by book-entry) to each Holder a new Note equal in principal amount to any unrepurchased portion of the Notes surrendered, if any; provided that each such new Note shall be in principal amount of $2,000 or an integral multiple of $1,000 in excess thereof. However, if the Excess Cash Flow Payment Date is on or after an interest record date and on or before the related interest payment date, any accrued and unpaid interest shall be paid to the Person in whose name a Note is registered at the close of business on such record date, and no additional interest shall be payable to Holders who tender Notes pursuant to the Excess Cash Flow Offer.
(f) The Issuer will comply with applicable tender offer rules, including the requirements of Rule 14e-1 under the Exchange Act and any other applicable laws and regulations in connection with the purchase of Notes pursuant to an Excess Cash Flow Offer.
Section 4.15 Limitations on Transactions with Affiliates.
(a) The Issuer and the Co-Issuer will not, and will not permit any Restricted Subsidiary to, directly or indirectly, in one transaction or a series of related transactions, sell, lease, transfer or otherwise dispose of any of its assets to, or purchase any assets from, or enter into any contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate (an “Affiliate Transaction”), unless:
(1) such Affiliate Transaction is on terms that are no less favorable to the Issuer, the Co-Issuer or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction at such time on an arm’s-length basis by the Issuer, the Co-Issuer or that Restricted Subsidiary from a Person that is not an Affiliate of the Issuer, the Co-Issuer or that Restricted Subsidiary; and
(2) the Issuer delivers to the Trustee:
(A) with respect to any Affiliate Transaction involving aggregate value in excess of $10.0 million, an Officers’ Certificate certifying that such Affiliate Transaction complies with clause (1) above and a Secretary’s Certificate which sets forth and authenticates a resolution that has been adopted by a majority of the disinterested members of the Board of Directors of the Issuer approving such Affiliate Transaction and affirming the determination set forth in clause (1) above; and
(B) with respect to any Affiliate Transaction involving aggregate value of $20.0 million or more, the certificates described in the preceding clause (a) and a written opinion as to the fairness of such Affiliate Transaction to the Issuer, the Co-Issuer or such Restricted Subsidiary from a financial point of view issued by an Independent Financial Advisor to the Board of Directors of the Issuer.

 

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(b) The foregoing restrictions shall not apply to:
(1) transactions exclusively between or among (a) the Issuer, the Co-Issuer and one or more Guarantors, (b) Guarantors or (c) Restricted Subsidiaries that are not Guarantors;
(2) the payment of reasonable and customary director, officer, employee and consultant compensation (including bonuses), reimbursement of expenses and other benefits (including retirement, health, stock option and other benefit plans) and indemnification arrangements;
(3) the issuance of Equity Interests (other than Disqualified Equity Interests) of the Issuer to any director, officer, employee or consultant of the Issuer, the Co-Issuer or its Subsidiaries in the ordinary course of business;
(4) Restricted Payments which are made in accordance with Section 4.11;
(5) transactions with customers, clients, suppliers, joint venture partners or purchasers or sellers of goods and services, in each case in the ordinary course of business and otherwise not prohibited by this Indenture that are fair to the Issuer, the Co-Issuer or its Restricted Subsidiaries, in the reasonable determination of the members of the Board of Directors of the Issuer or the senior management of the Issuer, or are on terms at least as favorable as would reasonably have been entered into at such time with an unaffiliated party;
(6) (x) any agreement in effect on the Issue Date and disclosed in the Offering Memorandum, as in effect on the Issue Date or as thereafter amended or replaced in any manner, that, taken as a whole, is not more disadvantageous to the Holders or the Issuer in any material respect than such agreement as it was in effect on the Issue Date or (y) any transaction pursuant to any agreement referred to in the immediately preceding clause (x);
(7) the existence of, and the performance by the Issuer, the Co-Issuer or any Restricted Subsidiary of its obligations under the terms of, any limited liability company, limited partnership or other organizational document or securityholders agreement (including any registration rights agreement or purchase agreement related thereto) to which it is a party on the Issue Date and which is described in the Offering Memorandum, as in effect on the Issue Date, and similar agreements that it may enter into thereafter; provided, however, that the existence of, or the performance by the Issuer, the Co-Issuer or any of its Restricted Subsidiaries of obligations under, any amendment to any such existing agreement or any such similar agreement entered into after the date of this Indenture shall only be permitted by this clause (7) to the extent not more disadvantageous to the Holders in any material respect, when taken as a whole, than any of such documents and agreements as in effect on the Issue Date;

 

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(8) the Transactions and the payment of all transaction, underwriting commitment and other fees and expenses incurred in connection with the Transactions;
(9) sales of Qualified Equity Interests to Affiliates of the Issuer not otherwise prohibited by this Indenture and the granting of registration and other customary rights in connection therewith;
(10) loans or advances to employees in the ordinary course of business consistent with past practice;
(11) any transaction between or among WML or any of its Subsidiaries, on the one hand, and the Issuer or any of its Subsidiaries other than WML and its Subsidiaries, on the other hand, that qualifies as a “Permitted Affiliate Transaction” under the WML Credit Agreements; provided, that, except with respect to the services to be provided and fees payable under the management agreement between WML and the Issuer, no such affiliate transaction shall constitute a “Permitted Affiliate Transaction” unless it is consummated on terms and conditions that are at fair market value and generally similar to the terms and conditions that would apply in a comparable arm’s length transaction with an unrelated third party and the Issuer delivers to the Trustee the certificates referred to in Section 4.15(a)(2)(A), to the extent required by such provision; or
(12) Permitted Investments made in accordance with clause (19) of the definition thereof.
Section 4.16 Limitations on Dividend and Other Restrictions Affecting Restricted Subsidiaries.
The Issuer and the Co-Issuer will not, and will not permit any Restricted Subsidiary to, directly or indirectly, create or otherwise cause or permit to exist or become effective any consensual encumbrance or consensual restriction on the ability of any Restricted Subsidiary to:
(a) pay dividends or make any other distributions on or in respect of its Equity Interests to the Issuer, the Co-Issuer or any Restricted Subsidiary, or with respect to any other interest or participation in, or measured by, its profits, or pay any Indebtedness owed to the Issuer, the Co-Issuer or any Restricted Subsidiary;
(b) make loans or advances or pay any Indebtedness or other obligation owed to the Issuer, the Co-Issuer or any other Restricted Subsidiary; or

 

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(c) sell, lease or transfer any of its assets to the Issuer, the Co-Issuer or any other Restricted Subsidiary;
(d) except for:
(1) encumbrances or restrictions existing under or by reason of applicable law or any applicable rule, regulation or order;
(2) encumbrances or restrictions existing under this Indenture, the Notes and the Note Guarantees (including any Exchange Notes and guarantees thereof), the Intercreditor Agreement and the Security Documents;
(3) customary non-assignment provisions of any contract or any lease or license entered into in the ordinary course of business;
(4) encumbrances or restrictions existing under agreements existing on the date of this Indenture (including, without limitation, the WML Credit Agreements and agreements relating to Absaloka) as in effect on that date;
(5) restrictions on transfers of assets subject to any Lien permitted under this Indenture imposed by the holder of such Lien;
(6) restrictions on transfers of assets imposed under any agreement to sell such assets permitted under this Indenture to any Person pending the closing of such sale;
(7) any instrument governing Acquired Indebtedness, which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person or the properties or assets of the Person so acquired, so long as such Acquired Indebtedness or encumbrance or restriction was not incurred in connection with, or in contemplation of, such acquisition;
(8) any other agreement governing Indebtedness entered into after the Issue Date that contains encumbrances and restrictions that are not materially more restrictive with respect to any Restricted Subsidiary than those in effect on the Issue Date with respect to that Restricted Subsidiary pursuant to agreements in effect on the Issue Date;
(9) customary provisions in partnership agreements, limited liability company organizational governance documents, joint venture agreements and other similar agreements entered into in the ordinary course of business that restrict the transfer of ownership interests in such partnership, limited liability company, joint venture or similar Person;

 

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(10) Purchase Money Indebtedness and Attributable Indebtedness incurred in compliance with Section 4.10 that impose restrictions of the nature described in Section 4.16(c) on the assets acquired;
(11) restrictions on cash or other deposits or net worth imposed by suppliers or landlords under contracts and bonding requirements entered into in the ordinary course of business;
(12) any encumbrances or restrictions pursuant to waivers or consents provided by lenders under the WML Credit Agreements to permit sales of assets of WML or its Subsidiaries that would be otherwise prohibited by the terms of those agreements, provided, that such encumbrances or restrictions may exist only until all Indebtedness outstanding under the WML Credit Agreements is repaid and the agreements are terminated, or until such earlier date as specified in any such waivers or consents; and
(13) any encumbrances or restrictions imposed by any amendments or refinancings of the contracts, instruments or obligations referred to in Section 4.16(d) (1) through (12) above; provided, that such amendments or refinancings are, in the good faith judgment of the Issuer’s Board of Directors, no more materially restrictive with respect to such encumbrances and restrictions than those prior to such amendment or refinancing.
Section 4.17 Limitations on Sale and Leaseback Transactions.
The Issuer and the Co-Issuer will not, and will not permit any Restricted Subsidiary to, directly or indirectly, enter into any Sale and Leaseback Transaction; provided, that the Issuer, the Co-Issuer or any Restricted Subsidiary may enter into a Sale and Leaseback Transaction if:
(1) the Issuer, the Co-Issuer or such Restricted Subsidiary could have (a) incurred the Indebtedness in an amount equal to the Attributable Indebtedness attributable to such Sale and Leaseback Transaction pursuant to Section 4.10 and (b) incurred a Lien to secure such Attributable Indebtedness pursuant to Section 4.12;
(2) the gross cash proceeds of such Sale and Leaseback Transaction are at least equal to the Fair Market Value of the asset that is the subject of such Sale and Leaseback Transaction; and
(3) the transfer of assets in such Sale and Leaseback Transaction is permitted by, and the Issuer, the Co-Issuer or the applicable Restricted Subsidiary applies the proceeds of such transaction in accordance with, Section 4.13.

 

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Section 4.18 Limitations on the Issuance or Sale of Equity Interests of Restricted Subsidiaries.
The Issuer and the Co-Issuer will not, and will not permit any Restricted Subsidiary to, directly or indirectly, sell or issue any shares of Equity Interests of any Restricted Subsidiary except (1) to the Issuer, the Co-Issuer, a Restricted Subsidiary or the minority stockholders of any Restricted Subsidiary, on a pro rata basis or (2) to the extent such shares represent directors’ qualifying shares or shares required by applicable law to be held by a Person other than the Issuer, the Co-Issuer or a Wholly Owned Restricted Subsidiary or (3) pursuant to the Absaloka operating agreement or membership interest purchase agreement relating to the Indian coal tax credit transaction. The sale of all the Equity Interests of any Restricted Subsidiary is permitted by this Section 4.18 but is subject to Section 4.13.
Section 4.19 Additional Note Guarantees.
If, after the Issue Date, (a) the Issuer, the Co-Issuer or any Restricted Subsidiary (other than WML and its Subsidiaries) shall acquire or create another Subsidiary (other than in any case a Subsidiary that has been designated an Unrestricted Subsidiary), (b) any Unrestricted Subsidiary is redesignated a Restricted Subsidiary or (c) the Issuer otherwise elects or is required to have any Restricted Subsidiary become a Guarantor, including on the WML Repayment Date, at which time the Issuer shall cause WML and its Subsidiaries to become Guarantors, then, in each such case, the Issuer shall, unless the Restricted Subsidiary is prohibited from becoming a Guarantor, or from pledging its assets, by reason of any regulatory or contractual prohibition existing at the time of acquisition or creation (but not created in anticipation of acquisition) cause such Restricted Subsidiary to:
(1) execute and deliver to the Trustee (a) a supplemental indenture in form and substance satisfactory to the Trustee pursuant to which such Restricted Subsidiary shall unconditionally guarantee all of the Issuer’s and the Co-Issuer’s obligations under the Notes, this Indenture, the Security Documents, the Registration Rights Agreement and, if the Revolving Credit Facility is then outstanding, the Intercreditor Agreement, (b) a notation of guarantee in respect of its Note Guarantee in the form of Exhibit C, and (c) a joinder to the Security Documents or new Security Documents;
(2) deliver to the Trustee one or more Opinions of Counsel that such supplemental indenture (a) has been duly authorized, executed and delivered by such Restricted Subsidiary and (b) constitutes a valid and legally binding obligation of such Restricted Subsidiary, enforceable against such Restricted Subsidiary in accordance with its terms; and
(3) take such actions as may be reasonably necessary to cause the property and assets of such Restricted Subsidiary, to the extent that they are property or assets of the types which would constitute Collateral under the Security Documents, to be treated as after-acquired property and to be made subject to the Liens of the Security Documents in the manner and to the extent provided in this Indenture and in the Security Documents, in a manner reasonably satisfactory to the Trustee.

 

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Thereafter, such Restricted Subsidiary shall be a Guarantor for all purposes of this Indenture.
Notwithstanding the foregoing, any Note Guarantee will be automatically and unconditionally released and discharged under the circumstances set forth in Section 11.04. The form of the Note Guarantee is attached hereto as Exhibit C.
Section 4.20 Further Assurances; Delivery of Mortgages.
(a) Subject to the Security Documents, the Issuers and each Subsidiary Guarantor and Absaloka shall, at their expense, promptly duly execute and deliver, or cause to be duly executed and delivered to the Note Collateral Agent, as the Note Collateral Agent reasonably requests, such further agreements, documents, statements, instruments and schedules further identifying and describing the Collateral owned by it and such other reports and information in connection with its Collateral as the Note Collateral Agent may reasonably request, all in such detail as the Note Collateral Agent may specify, consistent with the obligations in the Security Document, and do or cause to be done such further acts as may be reasonably necessary or proper to evidence, perfect, maintain and enforce the security interests and the priority thereof in the Collateral for the benefit of the Holders of Notes and the Trustee and, if the Revolving Credit Facility has been entered into, the holders of the Revolving Credit Facility Obligations (with respect to the Revolving Facility First-Priority Collateral), and to otherwise effectuate the provisions or purposes of this Indenture and the Security Documents (it being understood that, in the event that the Issuer, the Co-Issuer, any Guarantor and Absaloka enter into the Revolving Credit Facility, the determination of the Revolving Collateral Agent regarding what further acts are reasonably necessary with respect to the Revolving Facility First-Priority Collateral shall be deemed to be binding on the Note Collateral Agent). The Issuers, each Subsidiary Guarantor and Absaloka also agree to take any and all actions necessary to defend title to the Collateral against all persons and to defend the security interest of the Note Collateral Agent in its Collateral and the priority thereof against any Lien not expressly permitted hereunder.
(b) If (i) the Issuer, the Co-Issuer, a Subsidiary Guarantor or Absaloka acquires property that is not automatically subject to a perfected security interest or Lien under the Security Documents and such property would be of the type that would constitute Collateral or (ii) a Subsidiary becomes a Guarantor, then, in each case, the Issuer, the Co-Issuer, such Guarantor or Absaloka will provide security interests in and Liens on such property (or, in the case of a new Guarantor, all of its assets constituting Collateral) in favor of the Note Collateral Agent for its benefit and the benefit of the Trustee and the Holders of the Notes and deliver certain joinder agreements and certificates in respect thereof as required by this Indenture and the Security Documents.

 

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(c) The Issuers and each Guarantor shall execute and deliver Mortgages, in form and substance reasonably satisfactory to the Note Collateral Agent, which Mortgages shall cover (i) subject to Section 4.23(c) hereof, any fee interest in Real Property owned by the Issuer, the Co-Issuer or a Subsidiary Guarantor on the Issue Date and identified on Schedule 4.20 hereto, (ii) any fee interest in Real Property acquired by the Issuer, the Co-Issuer or a Subsidiary Guarantor after the Issue Date, and (iii) subject to Section 4.23(b) hereof, any interest in mineral rights related to WRI’s and/or Absaloka’s mining operations in Big Horn County, Montana, together with evidence that such Mortgages have been delivered to the title insurance company insuring the Lien of such Mortgage for recording.
(1) Within forty-five (45) days following the recordation of any Mortgage on any Mortgaged Property, the Note Collateral Agent shall have received each of the following documents, which shall be reasonably satisfactory in form and substance to the Note Collateral Agent, the Trustee and each of their respective counsel with respect to each Mortgaged Property, as appropriate:
(A) Title Insurance. With respect to each Mortgage encumbering any Mortgaged Property, a policy of title insurance (or commitment to issue such a policy having the effect of a policy of title insurance insuring (or committing to insure) the lien of such Mortgage as a valid and enforceable mortgage or deed of trust lien on the Mortgaged Property described therein, having a policy limit not to exceed 110% of the then fair market value of such Mortgaged Property (such policies collectively, the “Mortgage Policies”) issued by a title insurance company, which reasonably assures the Note Collateral Agent that the Mortgages on such Mortgaged Properties are valid and enforceable mortgage liens on the respective Mortgaged Properties, free and clear of all Liens, defects and encumbrances (other than Permitted Liens) and such Mortgage Policies shall include such title endorsements to the extent available at commercially reasonably rates;
(B) Survey. The Issuers and the appropriate Guarantors shall deliver to the Note Collateral Agent and the title insurance company insuring the Lien of each Mortgage any and all surveys, opinions of special counsel, or opinions or reports from architects, engineers or zoning report companies as may be reasonably necessary to cause such title insurance company to issue the Mortgage Policies required pursuant to clause (A) above;

 

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(C) Fixture filings. Proper fixture filings under the Uniform Commercial Code on Form UCC-1 for filing under the Uniform Commercial Code in the appropriate jurisdiction in which the Mortgaged Properties are located, desirable to perfect the security interests in fixtures purported to be created by the Mortgages in favor of the Note Collateral Agent for its benefit and the benefit of the Trustee and the Holders of the Notes.
(D) Consents. With respect to the Mortgaged Property, such consents, approvals, amendments, supplements, estoppels, tenant subordination agreements or other instruments as necessary to consummate the transactions in order for the owner or holder of the fee interest constituting such Mortgaged Property to grant the lien contemplated by the Mortgage with respect to such Mortgaged Property, including, without limitation, the Mineral Consents (subject to Section 4.23(b) hereof);
(E) Mortgaged Property Indemnification. With respect to each Mortgaged Property, such affidavits, certificates, instruments of indemnification and other items (including a so-called “gap” indemnification) as shall be reasonably required to induce the title insurance company insuring the Lien of each Mortgage to issue the Mortgage Policies and endorsements contemplated above;
(F) Collateral Fees and Expenses. Evidence of payment by the Issuers of all Mortgage Policy premiums, search and examination charges, mortgage recording taxes, fees, charges, costs and expenses required for the recording of the Mortgages, fixture filings and issuance of the Mortgage Policies referred to above; and
(G) If necessary, amendments to the Mortgages duly authorized, executed and acknowledged, in recordable form and otherwise in form reasonably acceptable to the Trustee and Note Collateral Agent with respect to each Mortgaged Property sufficient for the owner of such Mortgaged Property to (x) grant to the Note Collateral Agent and/or confirm the Note Collateral Agent’s Mortgage lien on and security interests in such Mortgaged Property, (y) confirm such owner’s right and indefeasible title thereto and (z) confirm the Mortgaged Property to be encumbered thereby.
Section 4.21 Reports to Holders.
(a) Whether or not the Issuer is subject to Section 13(a) or 15(d) of the Exchange Act, the Issuer, the Co-Issuer and any Guarantor will, to the extent permitted under the Exchange Act, file with the SEC the annual reports, quarterly reports and other documents which the Issuer, the Co-Issuer and such Guarantor would have been required to file with the SEC pursuant to Sections 13(a) or 15(d) of the Exchange Act if the Issuer, the Co-Issuer or such Guarantor were subject to such Sections of the Exchange Act, such documents to be filed with the SEC on or prior to the date (the “Required Filing Date”) by which the Issuer, the Co-Issuer and such Guarantor would have been required so to file such documents if the Issuer, the Co-Issuer and such Guarantor were subject to the Exchange Act.

 

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If at any time the Notes are guaranteed by a direct or indirect parent of the Issuer and such company has complied with the reporting requirements of Section 13 or 15(d) of the Exchange Act, if applicable, and has furnished the Holders or filed electronically with the SEC’s Next-Generation EDGAR System (or any successor system), the reports described herein with respect to such company, as applicable (including any financial information required by Regulation S-X under the Securities Act relating to the Issuer, the Co-Issuer and the Guarantors), the Issuer, the Co-Issuer and the Guarantors shall be deemed to be in compliance with the provisions of this covenant.
The Issuer, the Co-Issuer and any Guarantor will also in any event (1) within 15 days after each Required Filing Date file with the Trustee copies of the annual reports, quarterly reports and other documents which the Issuer, the Co-Issuer and such Guarantor would have been required to file with the SEC pursuant to Section 13(a) or Section 15(d) of the Exchange Act if the Issuer, the Co-Issuer and such Guarantor were subject to either of such Sections of the Exchange Act and (2) if filing such documents by the Issuer, the Co-Issuer and such Guarantor with the SEC is not permitted under the Exchange Act or prior to the Exchange Offer or the effectiveness of a shelf registration statement contemplated by the Registration Rights Agreement, promptly upon written request and payment of the reasonable cost of duplication and delivery, supply copies of such documents to any prospective holder at the Issuer’s cost. The Issuer, the Co-Issuer and each Guarantor shall be deemed to have satisfied the foregoing requirements if the relevant documents have been filed with the SEC.
If the Co-Issuer’s, any Guarantor’s or secured party’s financial statements would be required to be included in the financial statements filed or delivered pursuant to this Indenture if the Issuer were subject to Section 13(a) or 15(d) of the Exchange Act, the Issuer shall include such financial statements in any filing or delivery pursuant to this Indenture.
So long as any of the Notes remain outstanding, the Issuer will make available to any prospective purchaser of Notes or beneficial owner of Notes in connection with any sale thereof the information required by Rule 144A(d)(4) under the Securities Act, until the earlier of (x) such time as the Issuer has exchanged the Notes for the Exchange Notes and (y) such time as the holders thereof have disposed of such Notes pursuant to an effective registration statement under the Securities Act.
(b) The Issuer will hold quarterly conference calls for the Holders of the Notes to discuss financial information for the previous quarter. The conference call will be held following the last day of each fiscal quarter of the Issuer and not later than ten Business Days after the time that the Issuer distributes the financial information as required pursuant to Section 4.21(a). No fewer than two days prior to the conference call, the Issuer shall issue a press release announcing the time and date of such conference call and providing instructions for Holders, securities analysts and prospective investors to obtain access to such call. For the avoidance of doubt, the Issuer may satisfy the requirements of this Section 4.21(b) by holding the conference calls required within the time period required as part of any earnings calls of the Issuer in accordance with customary past practice.

 

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(c) Delivery of such reports, information and documents to the Trustee is for informational purposes only, and the Trustee’s receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, include the Issuers’ compliance with any of the covenants hereunder (as to which the Trustee is entitled to rely exclusively on officers’ certificates).
Section 4.22 Limitations on Designation of Unrestricted Subsidiaries.
(a) The Issuer may designate any Subsidiary (including any newly formed or newly acquired Subsidiary) of the Issuer (other than the Co-Issuer) as an “Unrestricted Subsidiary” under this Indenture (a “Designation”) only if:
(1) no Default shall have occurred and be continuing at the time of or after giving effect to such Designation; and
(2) the Issuer would be permitted to make, at the time of such Designation, (a) a Permitted Investment or (b) an Investment pursuant to Section 4.11(a), in either case, in an amount (the “Designation Amount”) equal to the Fair Market Value of the Issuer’s proportionate interest in such Subsidiary on such date.
(b) No Subsidiary shall be Designated as an “Unrestricted Subsidiary” unless such Subsidiary:
(1) has no Indebtedness other than Non-Recourse Debt;
(2) is not party to any agreement, contract, arrangement or understanding with the Issuer, the Co-Issuer or any Restricted Subsidiary unless the terms of the agreement, contract, arrangement or understanding are no less favorable to the Issuer, the Co-Issuer or the Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates;
(3) is a Person with respect to which none of the Issuer, the Co-Issuer or any Restricted Subsidiary has any direct or indirect obligation (a) to subscribe for additional Equity Interests or (b) to maintain or preserve the Person’s financial condition or to cause the Person to achieve any specified levels of operating results; and

 

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(4) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Issuer, the Co-Issuer or any Restricted Subsidiary, except for any guarantee given solely to support the pledge by the Issuer, the Co-Issuer or any Restricted Subsidiary of the Equity Interests of such Unrestricted Subsidiary, which guarantee is not recourse to the Issuer, the Co-Issuer or any Restricted Subsidiary, and except to the extent the amount thereof constitutes a Restricted Payment permitted pursuant to Section 4.11; provided, further, that an Unrestricted Subsidiary may have previously been a Guarantor and have provided a Note Guarantee of the Notes.
(c) If, at any time, any Unrestricted Subsidiary fails to meet the requirements of Section 4.22(a) and (b) as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of this Indenture and any Indebtedness of the Subsidiary and any Liens on assets of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary as of the date and, if the Indebtedness is not permitted to be incurred under Section 4.10 or the Lien is not permitted under Section 4.12, the Issuer shall be in default of the applicable covenant. The Issuer may not designate the Co-Issuer as an Unrestricted Subsidiary.
(d) The Issuer may redesignate an Unrestricted Subsidiary as a Restricted Subsidiary (a “Redesignation”) only if:
(1) no Default shall have occurred and be continuing at the time of and after giving effect to such Redesignation; and
(2) all Liens, Indebtedness and Investments of such Unrestricted Subsidiary outstanding immediately following such Redesignation would, if incurred or made at such time, be permitted to be incurred or made for all purposes of this Indenture.
(e) All Designations and Redesignations must be evidenced by resolutions of the Board of Directors of the Issuer, delivered to the Trustee certifying compliance with the foregoing provisions.
Section 4.23 Post-Closing Covenant
(a) Subject to the other provisions of this Section 4.23 and the provisions of the Security Documents, from and after the Issue Date, with respect to the portion of the Collateral securing the Notes for which a valid and perfected Lien in favor of the Note Collateral Agent has not been created or cannot be perfected by the filing of UCC-1 financing statements or the delivery of capital stock or instruments on or prior to the Closing Date, the Issuers shall, and shall cause each of the Subsidiary Guarantors and Absaloka to have all security interests and Liens contemplated by this Indenture and the Security Documents in place and perfected as soon as practicable following the Issue Date, but in any event, no later than (i) (x) 90 days after the Issue Date (provided, if such 90th day shall not be a Business Day, then upon the succeeding Business Day) or (y) such later date as the Trustee agrees, the security interests and Liens in favor of the Holders of the Note are required to be valid and perfected or (ii) with respect to any asset that is an Excluded Property, 90 days after an asset ceases to be an Excluded Property; and in each case, complete those actions required to create and perfect all of such Liens in such portion of the Collateral.

 

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(b) WRI shall use its commercially reasonable efforts to obtain the Mineral Consents as soon as practicable, but in any event, no later than 120 days after the Issue Date (provided that if such 120th day shall not be a Business Day, then upon the succeeding Business Day); provided, that in no event will WRI be required to pay any consent or similar fee to obtain any and all Mineral Consents in excess of $10,000 in the aggregate.
(c) As soon as practicable following the Issue Date, but in any event, no later than 90 days following the Issue Date (provided that if such 90th day shall not be a Business Day, then upon the succeeding Business Day), the Issuer and WRI shall execute and deliver one or more Mortgages in accordance with the terms of this Indenture (for the avoidance of doubt, including the terms of Section 4.20(c) hereof) in favor of the Note Collateral Agent for the benefit of the Holders of the Notes, which Mortgages shall cover any Real Property owned in fee by WRI in Big Horn County, Montana which is material to the operations of WRI and its subsidiaries.
(d) The Issuer, the Co-Issuer, any Subsidiary Guarantor or Absaloka, as applicable, shall use commercially reasonable efforts to obtain the deposit account control agreements required under the Security Documents, as soon as practicable, but in any event, no later than 120 days after the Issue Date (provided that if such 120th day shall not be a Business Day, then upon the succeeding Business Day).
(e) The Issuers shall use commercially reasonable efforts to obtain and deliver to Note Collateral Agent a release of that certain mortgage from Westmoreland-LG&E Partners to Virginia Electric and Power Company, recorded in Book 1591, Page 611, Halifax County Registry, as affected by instruments recorded in Book 1633, Page 443 and Book 2233, Page 629, in said Registry (“VEPCO Mortgage”), which release shall be in form and substance satisfactory to Note Collateral Agent in its sole discretion, and Issuers shall cause the title company issuing the Mortgage Policies to issue or endorse such policies, as applicable, free and clear of any lien related to the VEPCO Mortgage.
Section 4.24 Conduct of Business.
The Issuer will not, and will not permit any Restricted Subsidiary to, engage in any business other than a Permitted Business.
Section 4.25 Limitation on Activities of Certain Subsidiaries.
The Issuer will not permit Basin Resources Inc. to engage in any activities other than in relation to providing benefits to former mining operation employees and activities incidental to its organization and existence, and shall not permit Basin Resources Inc. to incur any Indebtedness, grant Liens over its assets or enter into any transactions other than in the ordinary course. The Issuer will not permit Westmoreland Terminal Company, Eastern Coal & Coke Company, and Criterion Coal Company to engage in any activities other than activities incidental to their organization and existence and activities incidental to their respective dissolution and shall not permit Westmoreland Terminal Company, Eastern Coal & Coke Company or Criterion Coal Company to incur any Indebtedness, grant Liens over their assets or enter into any transactions.

 

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Section 4.26 Payments for Consent.
The Issuers will not, and will not permit any of their Restricted Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration whether by way of interest, fee or otherwise, whether by the way of interest, fee or otherwise, to or for the benefit of any Holder of Notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Notes unless such consideration is offered to be paid and is paid to all Holders of the Notes that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or amendment.
Section 4.27 Events of Loss.
(a) Subject to any intercreditor agreement and the Security Documents, in the event of an Event of Loss with respect to any Collateral, the Issuer, the Co-Issuer or the affected Guarantor, as the case may be, will apply the Net Loss Proceeds from such Event of Loss, within 365 days after receipt, at its option to:
(1) repay obligations under any revolving credit facility with the Net Loss Proceeds of borrowing base assets, and effect a permanent reduction in the availability under such revolving credit facility;
(2) repay any Indebtedness which was secured by the assets to which Event of Loss related; and/or
(3) invest all or any part of the Net Loss Proceeds in (A) the purchase of assets (other than securities) to be used by the Issuer, the Co-Issuer or any Restricted Subsidiary in a Permitted Business, (B) capital expenditures to be used by the Issuer, the Co-Issuer or any Restricted Subsidiary in a Permitted Business, (C) acquisition of Qualified Equity Interests in a Person that is a Restricted Subsidiary or in a Person engaged in a Permitted Business that shall become a Restricted Subsidiary immediately upon the consummation of such acquisition or (D) a combination of (A), (B) and (C).
(b) Pending the final application of any Net Loss Proceeds, the Issuer, the Co-Issuer or the affected Guarantor shall deposit such Net Loss Proceeds in accordance with the Security Documents and the Intercreditor Agreement (if any).

 

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(c) Any Net Loss Proceeds from an Event of Loss that are not applied or invested as provided in the Section 4.27(a) will be deemed to constitute “Excess Loss Proceeds.” When the aggregate amount of Excess Loss Proceeds exceeds $10.0 million, the Issuer will be required to make an offer to purchase from all Holders and, if applicable, redeem (or make an offer to do so) any Pari Passu Indebtedness of the Issuer the provisions of which require the Issuer to redeem such Indebtedness with the Net Loss Proceeds (or offer to do so) (a “Loss Proceeds Offer”) in an aggregate principal amount of Notes and such Pari Passu Indebtedness equal to the amount of such Excess Loss Proceeds at an offer price in cash in an amount equal to 100% of their principal amount plus accrued and unpaid interest to the date of purchase or redemption, as applicable. If the aggregate principal amount of Notes surrendered by Holders exceeds the Excess Loss Proceeds to be used to purchase the Notes, the Trustee shall select the Notes to be purchased pursuant to the Loss Proceeds Offer on a pro rata basis or on as nearly a pro rata basis as is practicable, subject to the procedures of the Depository Trust Company.
(d) The Issuer will comply with the applicable tender offer rules, including Rule 14e-1 under the Exchange Act, and any other applicable securities laws or regulations in connection with a Loss Proceeds Offer, and the relevant provisions of this Indenture will be deemed modified as necessary to permit such compliance.
Section 4.28 Rights Offering.
(a) At the end of each of the Issuer’s fiscal quarters beginning with the fiscal quarter ended June 30, 2015, if the Total Leverage Ratio equals or exceeds 3.50 to 1.0, the Company shall be required within 90 days (the “Rights Offering Deadline”) (subject to requirements of applicable securities laws as provided below) of the end of the first such fiscal quarter to provide Holders of the Notes with the right to purchase, on a pro rata basis (or on as nearly a pro rata basis as is practicable, subject to the procedures of The Depository Trust Company) with respect to Notes held as of such date, an amount of Additional Notes equal to the amount necessary to repurchase and/or redeem all WML Notes that remain outstanding as of such date, including any make-whole payment, at an issue price of 100% (the “Rights Offering”); provided, that the Issuer shall not be required to undertake more than one Rights Offering during the term of the Notes; provided, further, that a condition to the consummation of the Rights Offering shall be the subscription by existing Holders of the Notes to purchase Additional Notes equal to the amount necessary to repurchase all of the outstanding WML Notes, including any make-whole payment. The proceeds from the sale of such Additional Notes shall be used to repurchase and/or redeem all outstanding WML Notes.
(b) In conducting the Rights Offering, the Issuer will comply with all securities laws or regulations applicable thereto. To the extent the Issuer is required to register the Rights Offering under the Securities Act, the Issuer shall use its commercially reasonable efforts to cause any such registration statement (a “Rights Offering Registration Statement”) to become effective as promptly as practicable In the event such Rights Offering Registration Statement has not been declared effective by the Commission on or prior to the date that is 60 days following the Rights Offering Deadline, each of the Issuers and the Guarantors, jointly and severally, shall pay Additional Interest in cash to each Holder in an amount equal to 0 25% per annum of the aggregate principal amount of the Notes for the period of occurrence of the registration default until such time as no registration default is in effect, which rate shall increase by 0 25% per annum for each subsequent 90-day period during which such registration default continues, but in no event shall such increase exceed 1 00% per annum Following cure of the registration default, such Additional Interest will cease to accrue from the date of such cure and the interest rate on the Notes will revert to the interest rate borne by the Notes prior to such registration default. Compliance with the requirements of this Section 4.28 shall not constitute a breach of any other provision of this Indenture.

 

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ARTICLE FIVE
SUCCESSOR CORPORATION
Section 5.01 Mergers, Consolidations, Etc.
(a) The Issuer will not, directly or indirectly, in a single transaction or a series of related transactions, (i) consolidate or merge with or into another Person, or sell, lease, transfer, convey or otherwise dispose of or assign all or substantially all of the assets of the Issuer, the Co-Issuer and the Restricted Subsidiaries (taken as a whole) or (ii) adopt a Plan of Liquidation unless, in either case:
(1) either:
(A) the Issuer will be the surviving or continuing Person; or
(B) the Person formed by or surviving such consolidation or merger or to which such sale, lease, conveyance or other disposition shall be made (or, in the case of a Plan of Liquidation, any Person to which assets are transferred) (collectively, the “Successor”) is a corporation, limited liability company or limited partnership organized and existing under the laws of any State of the United States of America or the District of Columbia, and the Successor expressly assumes, by a supplemental indenture in form and substance reasonably satisfactory to the Trustee, all of the obligations of the Issuer and the Co-Issuer under the Notes, this Indenture, the Security Documents, the Registration Rights Agreement and, if the Revolving Credit Facility is then outstanding, the Intercreditor Agreement, and shall cause (i) such amendments, supplements or other instruments to be executed, filed and recorded in such jurisdiction as may be required by applicable law to preserve and protect the lien on the Collateral pledged by the Issuer, together with such financing statements or comparable documents as may be required to perfect any security interest in such Collateral which may be perfected by the filing of a financing statement or a similar document under the UCC or other similar statute or regulation of the relevant states or jurisdictions and (ii) the property and assets of the Person which is merged or consolidated with or into the Successor, to the extent that they are property or assets of the types which would constitute Collateral under the Security Documents (other than assets that would qualify as Excluded Property or assets that otherwise may not be made subject to a Lien), to be treated as after-acquired property and the Successor shall take such actions as may be reasonably necessary to cause such property and assets to be made subject to the Lien of the Security Documents in the manner and to the extent provided in this Indenture, in each case in a form reasonably satisfactory to the Trustee;

 

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(2) immediately prior to and immediately after giving effect to such transaction and the assumption of the obligations as set forth in clause (1)(B) above and the incurrence of any Indebtedness to be incurred in connection therewith, and the use of any net proceeds therefrom on a pro forma basis, no Default or Event of Default shall have occurred and be continuing;
(3) immediately after and giving effect to such transaction and the assumption of the obligations set forth in clause (1)(B) above and the incurrence of any Indebtedness to be incurred in connection therewith, and the use of any net proceeds therefrom on a pro forma basis, the Issuer or the Successor, as the case may be, (x) could incur $1.00 of additional Indebtedness pursuant to the Coverage Ratio Exception or (y) shall have an Fixed Charge Coverage Ratio greater than the Fixed Charge Coverage Ratio of the Issuer immediately prior to such transaction and assumption; and
(4) the Issuer shall have delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that such transaction and such supplemental indentures, if any, comply with this Indenture.
(b) Notwithstanding the foregoing, Section 5.01(a)(3) and Section 5.01(a)(4) shall not be applicable to (i) the Issuer consolidating with, merging into or selling, assigning, transferring, conveying, leasing or otherwise disposing of all or part of its properties and assets to a Restricted Subsidiary and (ii) the Issuer merging with an Affiliate solely for the purpose and with the sole effect of reincorporating the Issuer, as the case may be, in another jurisdiction so long as the amount of Indebtedness of the Issuer, the Co-Issuer and the Restricted Subsidiaries is not increased thereby.
(c) For purposes of Section 5.01(a), any Indebtedness of the Successor which was not Indebtedness of the Issuer immediately prior to the transaction shall be deemed to have been incurred in connection with such transaction.
(d) Except as provided in Section 11.04, no Guarantor or the Co-Issuer may consolidate with or merge with or into (whether or not such Guarantor or the Co-Issuer is the surviving Person) another Person, other than the Issuer, the Co-Issuer or another Guarantor, unless:
(1) either:
(A) such Guarantor will be the surviving or continuing Person; or

 

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(B) the Person formed by or surviving any such consolidation or merger assumes, by supplemental indenture in form and substance satisfactory to the Trustee, all of the obligations of such Guarantor under the Note Guarantee of such Guarantor, this Indenture, the Security Documents, the Registration Rights Agreement and, if the Revolving Credit Facility is then outstanding, the Intercreditor Agreement and shall cause (i) such amendments, supplements or other instruments to be executed, filed and recorded in such jurisdiction as may be required by applicable law to preserve and protect the lien on the Collateral pledged by such Guarantor, together with such financing statements or comparable documents as may be required to perfect any security interest in such Collateral which may be perfected by the filing of a financing statement or a similar document under the UCC or other similar statute or regulation of the relevant states or jurisdictions and (ii) the property and assets of the Person which is merged or consolidated with or into the Successor, to the extent that they are property or assets of the types which would constitute Collateral under the Security Documents (other than assets that would qualify as Excluded Property or assets that otherwise may not be made subject to a Lien), to be treated as after-acquired property and the Successor shall take such actions as may be reasonably necessary to cause such property and assets to be made subject to the Lien of the Security Documents in the manner and to the extent provided in this Indenture, in each case in a form reasonably satisfactory to the Trustee; and
(2) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing.
(e) For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise, in a single transaction or series of transactions) of all or substantially all of the properties or assets of the Co-Issuer or one or more Restricted Subsidiaries, the Equity Interests of which constitute all or substantially all of the properties and assets of the Issuer, will be deemed to be the transfer of all or substantially all of the properties and assets of the Issuer.
(f) Upon any consolidation, combination or merger of the Issuer, the Co-Issuer or a Guarantor, or any transfer of all or substantially all of the assets of the Issuer in accordance with the foregoing, in which the Issuer, the Co-Issuer or such Guarantor is not the continuing obligor under the Notes or its Note Guarantee, the surviving entity formed by such consolidation or into which the Issuer, the Co-Issuer or such Guarantor is merged or the Person to which the conveyance, lease or transfer is made will succeed to, and be substituted for, and may exercise every right and power of, the Issuer, the Co-Issuer or such Guarantor under this Indenture, the Notes, the Note Guarantees, the Security Documents, the Registration Rights Agreement and, if the Revolving Credit Facility is then outstanding, the Intercreditor Agreement with the same effect as if such surviving entity had been named therein as the Issuer, the Co-Issuer or such Guarantor and, except in the case of a lease, the Issuer, the Co-Issuer or such Guarantor, as the case may be, will be released from the obligation to pay the principal of and interest on the Notes or in respect of its Note Guarantee, as the case may be, and all of the Issuer’s, the Co-Issuer’s or such Guarantor’s other obligations and covenants under the Notes, this Indenture, its Note Guarantee, the Security Documents, the Registration Rights Agreement and the Intercreditor Agreement, if applicable.

 

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(g) Notwithstanding the foregoing, any Guarantor may consolidate with, merge with or into or convey, transfer or lease, in one transaction or a series of transactions, all or substantially all of its assets to the Issuer, the Co-Issuer or another Guarantor; provided, that the Issuer, the Co-Issuer and such Guarantors shall cause such amendments, supplements or other instruments to be executed, filed and recorded in such jurisdiction as may be required by applicable law to preserve and protect the lien on the Collateral pledged by such entity, together with such financing statements or comparable documents as may be required to perfect any security interest in such Collateral which may be perfected by the filing of a financing statement or a similar document under the UCC or other similar statute or regulation of the relevant states or jurisdictions.
ARTICLE SIX
DEFAULT AND REMEDIES
Section 6.01 Events of Default.
Each of the following is an “Event of Default”:
(1) failure by the Issuer and the Co-Issuer to pay interest or Additional Interest on any of the Notes when it becomes due and payable and the continuance of any such failure for 30 days;
(2) failure by the Issuer and the Co-Issuer to pay the principal of or premium, if any, on any of the Notes when due and payable, whether at stated maturity, upon redemption, upon purchase, upon acceleration or otherwise;
(3) failure by the Issuer and the Co-Issuer to comply with any of its agreements or covenants described in Section 5.01, or in respect of its obligations to make a Change of Control Offer as described in Section 4.09;
(4) failure by the Issuer and the Co-Issuer to comply with any of its agreements or covenants described in Section 4.10 or Section 4.11 and continuance of this failure for 30 days after notice of the failure has been given to the Issuer by the Trustee or by the Holders of at least 25% of the aggregate principal amount of the Notes then outstanding;

 

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(5) failure by the Issuer and the Co-Issuer to comply with any other agreement or covenant in this Indenture and continuance of this failure for 60 days after notice of the failure has been given to the Issuer by the Trustee or by the Holders of at least 25% of the aggregate principal amount of the Notes then outstanding;
(6) (a) default with respect to any payment when due under any mortgage, indenture or other instrument or agreement under which there may be issued or by which there may be secured or evidenced Indebtedness of the Issuer, the Co-Issuer or any Restricted Subsidiary, whether such Indebtedness now exists or is incurred after the Issue Date; provided, that the principal amount of such Indebtedness aggregates to $15.0 million or more or such Indebtedness is incurred under the Revolving Credit Facility or any of the WML Credit Agreements or (b) any default under any of the WML Credit Agreements that results in the prohibition, or reduction of the amount, of any payments, dividends or distributions permitted to be made by WML or any of its Subsidiaries, directly or indirectly, to the Issuer;
(7) one or more judgments or orders that exceed $15.0 million in the aggregate (net of amounts covered by insurance or bonded) for the payment of money have been entered by a court or courts of competent jurisdiction against the Issuer, the Co-Issuer or any Restricted Subsidiary and such judgment or judgments have not been satisfied, stayed, annulled or rescinded within 60 days of being entered;
(8) the Issuer, the Co-Issuer or any Significant Subsidiary pursuant to or within the meaning of any applicable bankruptcy law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief against it in an involuntary case,
(C) consents to the appointment of a Custodian of it or for all or substantially all of its assets, or
(D) makes a general assignment for the benefit of its creditors;
(9) a court of competent jurisdiction enters an order or decree under any applicable bankruptcy law that:
(A) is for relief against the Issuer, the Co-Issuer or any Significant Subsidiary as debtor in an involuntary case,
(B) appoints a Custodian of the Issuer, the Co-Issuer or any Significant Subsidiary or a Custodian for all or substantially all of the assets of the Issuer, the Co-Issuer or any Significant Subsidiary, or

 

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(C) orders the liquidation of the Issuer, the Co-Issuer or any Significant Subsidiary,
and the order or decree remains unstayed and in effect for 60 days;
(10) any Note Guarantee of any Significant Subsidiary ceases to be in full force and effect (other than in accordance with the terms of such Note Guarantee and this Indenture) or is declared in a judicial proceeding null and void and unenforceable or found in a judicial proceeding to be invalid or any Guarantor denies its liability under its Note Guarantee (other than by reason of release of a Guarantor from its Note Guarantee in accordance with the terms of this Indenture and the Note Guarantee); or
(11) so long as the Security Documents have not been otherwise terminated in accordance with their terms and the Note Collateral as a whole has not been released from the Lien of the Security Documents securing the Notes in accordance with the terms thereof, with respect to Collateral having a Fair Market Value in excess of $15.0 million, (a) any default by the Issuer, the Co-Issuer or any Guarantor in the performance of its obligations under the Security Documents (after the lapse of any applicable grace periods) or this Indenture which adversely affects the condition or value of such Collateral, in any material respect, (b) repudiation or disaffirmation of the Issuer, the Co-Issuer or any Guarantor of its respective obligations under the Security Documents and (c) the determination in a judicial proceeding that the Security Documents are unenforceable or invalid against the Issuer, the Co-Issuer or any Guarantor for any reason.
Section 6.02 Acceleration.
If an Event of Default (other than an Event of Default specified in Section 6.01(8) or Section 6.01(9) with respect to the Issuer or the Co-Issuer) shall have occurred and be continuing under this Indenture, the Trustee, by written notice to the Issuer, or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding, by written notice to the Issuer and the Trustee, may declare (an “acceleration declaration”) all amounts owing under the Notes to be due and payable immediately. If an Event of Default specified in Section 6.01(8) or Section 6.01(9) with respect to the Issuer or the Co-Issuer occurs, all outstanding Notes shall become due and payable without any further action or notice. Notwithstanding the foregoing, after any such acceleration pursuant to either of the preceding two sentences, but before a judgment or decree based on acceleration, the Holders of a majority in aggregate principal amount of outstanding Notes may rescind and annul such acceleration:
(1) if the rescission would not conflict with any judgment or decree;
(2) if all existing Defaults have been cured or waived except nonpayment of principal or interest that has become due solely because of this acceleration;

 

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(3) to the extent the payment of such interest is lawful, interest on overdue installments of interest and overdue principal, which has become due otherwise than by such declaration of acceleration, has been paid;
(4) if the Issuer has paid to the Trustee its reasonable compensation and reimbursed the Trustee of its expenses, disbursements and advances; and
(5) in the event of a cure or waiver of an Event of Default of the type set forth in Section 6.01(8) or Section 6.01(9), the Trustee shall have received an Officers’ Certificate and an Opinion of Counsel that such Default has been cured or waived.
Section 6.03 Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy by proceeding at law or in equity to collect the payment of principal of or interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Default. No remedy is exclusive of any other remedy. All available remedies are cumulative to the extent permitted by law.
Section 6.04 Waiver of Past Defaults.
Subject to Section 2.09, Section 6.07 and Section 9.02, the Holders of a majority in principal amount of the outstanding Notes (which may include consents obtained in connection with a tender offer or Exchange Offer of Notes) by notice to the Trustee may waive an existing Event of Default and its consequences, except a default in the payment of principal of or interest on any Note as specified in Section 6.01(1)or Section 6.01(2). The Issuers shall deliver to the Trustee an Officers’ Certificate stating that the requisite percentage of Holders have consented to such waiver and attaching copies of such consents. When an Event of Default is waived, it is cured and ceases.

 

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Section 6.05 Control by Majority.
The Holders of not less than a majority in principal amount of the outstanding Notes may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on it. Subject to Section 7.01, however, the Trustee may refuse to follow any direction that conflicts with any law or this Indenture, any Security Document or, if applicable, the Intercreditor Agreement, that the Trustee determines may be unduly prejudicial to the rights of another Holder, or that may involve the Trustee in personal liability; provided that the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. In the event the Trustee takes any action or follows any direction pursuant to this Indenture, the Trustee shall be entitled to indemnification against any loss or expense caused by taking such action or following such direction.
Section 6.06 Limitation on Suits.
No Holder will have any right to institute any proceeding with respect to this Indenture, the Notes, the Security Documents or, if applicable, the Intercreditor Agreement or for any remedy thereunder, unless the Trustee:
(1) has failed to act for a period of 60 days after receiving written notice of a continuing Event of Default by such Holder and a request to act by Holders of at least 25% in aggregate principal amount of Notes outstanding;
(2) has been offered indemnity, security or prefunding reasonably satisfactory to it; and
(3) has not received from the Holders of a majority in aggregate principal amount of the outstanding Notes a direction inconsistent with such request.
However, such limitations do not apply to a suit instituted by a Holder of any Note for enforcement of payment of the principal of or interest on such Note on or after the due date therefor (after giving effect to the grace period specified in Section 6.01(1)).
A Holder may not use this Indenture to prejudice the rights of another Holder or to obtain a preference or priority over such other Holder.
Section 6.07 Rights of Holders To Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of principal of and interest on a Note, on or after the respective due dates therefor, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of the Holder.

 

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Section 6.08 Collection Suit by Trustee.
If a default in payment of principal or interest specified in Section 6.01(1)or Section 6.01(2) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Issuers or any other obligor on the Notes for the whole amount of principal and accrued interest and fees remaining unpaid, together with interest on overdue principal and, to the extent that payment of such interest is lawful, interest on overdue installments of interest, in each case at the rate per annum borne by the Notes and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel.
Section 6.09 Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders allowed in any judicial proceedings relating to the Issuers, their creditors or their property and shall be entitled and empowered to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same, and any Custodian in any such judicial proceedings is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the compensation, expenses, disbursements and advances of the Trustee, its agent and counsel, and any other amounts due the Trustee under Section 7.07. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, compromise, adjustment or composition affecting the Notes or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. The Trustee shall be entitled to participate as a member of any official committee of creditors in the matters as it deems necessary or advisable.
Section 6.10 Priorities.
Subject to the Intercreditor Agreement (if any) and the Security Documents, if the Trustee collects any money or property pursuant to this Article Six, it shall pay out the money or property in the following order:
First: to the Trustee for amounts due under Section 7.07;
Second: to Holders for interest accrued on the Notes, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for interest;
Third: to Holders for principal amounts due and unpaid on the Notes, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal; and

 

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Fourth: to the Issuers or, if applicable, the Guarantors, as their respective interests may appear.
The Trustee, upon prior notice to the Issuers, may fix a record date and payment date for any payment to Holders pursuant to this Section 6.10.
Section 6.11 Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys’ fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07, or a suit by a Holder or Holders of more than 10% in principal amount of the outstanding Notes.
ARTICLE SEVEN
TRUSTEE
Section 7.01 Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture and use the same degree of care and skill in its exercise as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs.
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties as are specifically set forth herein or, to the extent applicable, in the Trust Indenture Act and no duties, covenants, responsibilities or obligations shall be implied in this Indenture against the Trustee.
(2) In the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates (including Officers’ Certificates) or opinions (including Opinions of Counsel) furnished to the Trustee and conforming to the requirements of this Indenture. However, in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture.

 

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(c) Notwithstanding anything to the contrary herein, the Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that:
(1) This paragraph does not limit the effect of Section 7.01(b).
(2) The Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05.
(d) No provision of this Indenture, the Notes or the Security Documents shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or to take or omit to take any action under this Indenture or take any action at the request or direction of Holders if it shall have reasonable grounds for believing that repayment of such funds is not assured to it.
(e) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to this Section 7.01.
(f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Issuer. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law.
(g) In the absence of bad faith, negligence or willful misconduct on the part of the Trustee, the Trustee shall not be responsible for the use or application of any money by any Paying Agent other than the Trustee.
Section 7.02 Rights of Trustee.
Subject to Section 7.01:
(a) The Trustee may rely conclusively on any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an Officers’ Certificate and an Opinion of Counsel, which shall conform to the provisions of Section 12.05. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officer’s Certificate or Opinion of Counsel.

 

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(c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent (other than an agent who is an employee of the Trustee) appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it reasonably believes to be authorized or within its rights or powers.
(e) The Trustee may consult with counsel of its selection and the advice or opinion of such counsel as to legal matters, including with respect to this Indenture and the Security Documents, shall be full and complete authorization and protection from liability in respect of any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel.
(f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Holders pursuant to the provisions of this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity satisfactory to it against the costs, expenses and liabilities which may be incurred therein or thereby.
(g) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate (including any Officers’ Certificate), statement, instrument, opinion (including any Opinion of Counsel), notice, request, direction, consent, order, bond, debenture, or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled, upon reasonable notice to the Issuers, to examine the books, records, and premises of the Issuers, personally or by agent or attorney at the sole cost of the Issuers.
(h) The Trustee shall not be required to give any bond or surety in respect of the performance of its powers and duties hereunder.
(i) The permissive rights of the Trustee to do things enumerated in this Indenture shall not be construed as duties.
(j) The Trustee shall have no duty to inquire as to the performance of the Issuers with respect to (i) the covenants, agreements or other terms and conditions set forth herein or in any Security Document, (ii) the occurrence of any default, or the validity, enforceability, effectiveness or genuineness of this Indenture, any Security Document or any other agreement, instrument or document, (iii) the creation, perfection or priority of any Lien purported to be created by the Security Documents, (iv) the value or the sufficiency of any Collateral, or (v) the satisfaction of any condition set forth herein or in any Security Documents, other than to confirm receipt of items expressly required to be delivered to the Trustee.

 

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(k) The rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and to each agent, custodian and other Person employed to act hereunder.
(l) The Trustee may request that the Issuers deliver a certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture.
(m) The Trustee shall not be deemed to have notice of any Default or Event of Default unless a Responsible Officer has actual knowledge thereof or unless written notice is given of any event which is in fact such a Default or an Event Default and such notice references the Notes and this Indenture.
(n) In the event that the Trustee (in such capacity or in any other capacity hereunder or under any Security Document) is unable to decide between alternative courses of action permitted or required by the terms of this Indenture or any Security Document, or in the event that the Trustee is unsure as to the application of any provision of this Indenture or any Security Document, or believes any such provision is ambiguous as to its application, or is, or appears to be, in conflict with any other application provision, or in the event that this Indenture or any Security Document permits any determination by or the exercise of discretion on the part of the Trustee or is silent or is incomplete as to the course of action that the Trustee is required to take with respect to a particular set of facts, the Trustee shall promptly give notice (in such form as shall be appropriate under the circumstances) to the Holders requesting instruction as to the course of action to be adopted, and to the extent the Trustee acts in good faith in accordance with any written instructions received from a majority in aggregate principal amount of the then outstanding Notes, the Trustee shall not be liable on account of such action to any Person. If the Trustee shall not have received appropriate instruction within 10 days of such notice (or such shorter period as reasonably may be specified in such notice or as may be necessary under the circumstances) it may, but shall be under no duty to, take or refrain from taking such action as it shall deem to be in the best interests of the Holders and the Trustee shall have no liability to any Person for such action or inaction.
(o) Whenever in the administration of or in connection with this Indenture, the Notes or the Security Documents, the Issuers are required to provide an Officers’ Certificate, the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder or thereunder, the Trustee (unless other evidence be herein specifically prescribed) may, as the case may be, request and in the absence of bad faith or willful misconduct on its part, rely upon such Officers’ Certificate.
(p) In no event shall the Trustee be responsible or liable for any special, indirect or consequential loss or damage of any kind whatsoever (including, but not limited to, loss of profit), irrespective of whether the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action.

 

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Section 7.03 Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Issuers, their Subsidiaries or their respective Affiliates with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. However, the Trustee must comply with Sections 7.10 and 7.11.
Section 7.04 Trustee’s Disclaimer.
The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Issuers’ use of the proceeds from the Notes, and it shall not be responsible for any statement of the Issuers in this Indenture or any document issued in connection with the sale of Notes or any statement in the Notes other than the Trustee’s certificate of authentication. The Trustee makes no representations with respect to the effectiveness or adequacy of this Indenture.
Section 7.05 Notice of Default.
The Trustee shall mail to each Holder notice of all uncured Defaults actually known to the Trustee within 30 days after obtaining actual knowledge of such Default. Except in the case of a default in payment of principal of, or interest on, any Note, including an accelerated payment and the failure to make a payment on the Change of Control Payment Date pursuant to a Change of Control Offer, the Net Proceeds Payment Date pursuant to a Net Proceeds Offer or the Excess Cash Flow Payment Date pursuant to an Excess Cash Flow Offer or a default in complying with the provisions of Article Five, the Trustee may withhold the notice if and so long as the Board of Directors, the executive committee, or a trust committee of directors and/or Responsible Officers, of the Trustee in good faith determines that withholding the notice is in the interest of the Holders.
Section 7.06 Reports by Trustee to Holders.
Within 60 days after each June 1st, beginning with June 1, 2011, the Trustee shall, to the extent that any of the events described in Trust Indenture Act § 313(a) (but not § 313(a)(5), (a)(6) and (a)(7)) occurred within the previous twelve months, but not otherwise, mail to each Holder a brief report dated as of such date that complies with Trust Indenture Act § 313(a) (but not §§ 313(a)(5), (a)(6) and (a)(7)). The Trustee also shall comply with Trust Indenture Act §§ 313(b) (but not § 313(b)(1)), 313(c) and 313(d).

 

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A copy of each report at the time of its mailing to Holders shall be mailed to the Issuers and filed with the SEC and each securities exchange, if any, on which the Notes are listed.
The Issuers shall notify the Trustee if the Notes become listed on any securities exchange or of any delisting thereof and the Trustee shall comply with Trust Indenture Act § 313(d).
Section 7.07 Compensation and Indemnity.
The Issuers shall pay to the Trustee from time to time such compensation as the Issuers and the Trustee shall from time to time agree in writing for its services hereunder. The Trustee’s compensation shall not be limited by any law on compensation of a trustee of an express trust. The Issuers shall reimburse the Trustee upon request for all reasonable disbursements, expenses (including reasonable fees and expenses of agents and counsel) and advances incurred or made by it in addition to the compensation for its services, except any such disbursements, expenses and advances as may be attributable to the Trustee’s negligence, bad faith or willful misconduct.
The Issuers shall indemnify each of the Trustee or any predecessor Trustee and its agents, employees, officers, stockholders and directors for, and hold them harmless against, any and all loss, damage, claims or expenses including taxes (other than taxes based upon, measured by or determined by the taxable income of the Trustee) or liability incurred by them except for such actions to the extent caused by any negligence, bad faith or willful misconduct on their part, arising out of or in connection with the acceptance or administration of this trust including the reasonable costs and expenses of defending themselves against or investigating any claim or liability in connection with the exercise or performance of any of the Trustee’s rights, powers or duties hereunder. In addition to the foregoing, the Issuers shall indemnify the Trustee and the Note Collateral Agent or any successor Trustee and Note Collateral Agent and their respective agents, employees, officers, stockholders and directors for, and hold them harmless against, any and all loss, damage, claims, liability or expense incurred by them arising out of, or in any way related to, any actual or alleged presence or release or threatened release of any Hazardous Materials on, at, under or from any property owned, leased or operated by the Issuer or any of its Subsidiaries at any time, or any Environmental Claim related in any way to the Issuer or any of its Subsidiaries except to the extent caused by any negligence, bad faith or willful misconduct on the part of the Trustee and Note Collateral Agent or any predecessor Trustee and Note Collateral Agent and their respective agents, employees, officers, stockholders and directors. For purposes of this paragraph, (i) “Hazardous Materials” shall mean the following: hazardous substances; hazardous wastes; polychlorinated biphenyls (“PCBs”) or any substance or compound containing PCBs; asbestos or any asbestos-containing materials in any form or condition; radon or any other radioactive materials including any source, special nuclear or by-product material; petroleum, crude oil or any fraction thereof; and any other pollutant or contaminant or chemicals, wastes, materials, compounds, constituents or substances,

 

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subject to regulation or which can give rise to liability under any Environmental Laws and (ii) “Environmental Claim” shall mean any claim, notice, demand, order, action, suit, proceeding or other communication alleging liability for or obligation with respect to any investigation, remediation, removal, cleanup, response, corrective action, damages to natural resources, personal injury, property damage, fines, penalties or other costs resulting from, related to or arising out of (i) the presence, release or threatened release in or into the environment of Hazardous Material at any location or (ii) any violation or alleged violation of any Environmental Law, and shall include any claim seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from, related to or arising out of the presence, release or threatened release of Hazardous Material or alleged injury or threat of injury to health, safety or the environment. The Trustee shall notify the Issuers promptly of any claim asserted against the Trustee or any of its agents, employees, officers, stockholders and directors for which it may seek indemnity. Failure of the Trustee to so notify the Issuers shall not relieve the Issuers of their obligations hereunder. The Issuers may, subject to the approval of the Trustee (which approval shall not be unreasonably withheld), defend the claim and the Trustee shall cooperate in the defense. The Trustee and its agents, employees, officers, stockholders and directors subject to the claim may have separate counsel and the Issuers shall pay the reasonable fees and expenses of such counsel; provided, however, that the Issuers will not be required to pay such fees and expenses if, subject to the approval of the Trustee (which approval shall not be unreasonably withheld), it assumes the Trustee’s defense and there is no conflict of interest between the Issuers and the Trustee and its agents, employees, officers, stockholders and directors subject to the claim in connection with such defense as reasonably determined by the Trustee. The Issuers need not pay for any settlement made without its written consent. The Issuers need not reimburse any expense or indemnify against any loss or liability to the extent incurred by the Trustee through its gross negligence, bad faith or willful misconduct.
To secure the Issuers’ payment obligations in this Section 7.07, the Trustee shall have a senior claim prior to the Notes against all money or property held or collected by the Trustee, in its capacity as Trustee or as Collateral Agent.
When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(8) or Section 6.01(9) occurs, such expenses and the compensation for such services shall be paid to the extent allowed under any Bankruptcy Law.
Notwithstanding any other provision in this Indenture, the foregoing provisions of this Section 7.07 shall survive the satisfaction and discharge of this Indenture or the appointment of a successor Trustee.

 

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Section 7.08 Replacement of Trustee.
The Trustee may resign at any time by so notifying the Issuers in writing. The Holders of a majority in principal amount of the outstanding Notes may remove the Trustee by so notifying the Issuer and the Trustee and may appoint a successor Trustee. The Issuer may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an insolvent;
(3) a receiver or other public officer takes charge of the Trustee or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Issuer shall notify each Holder of such event and shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Issuers.
A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Issuer. Immediately after that, the retiring Trustee shall transfer, after payment of all sums then owing to the Trustee pursuant to Section 7.07, all property held by it as Trustee to the successor Trustee, subject to the Lien provided in Section 7.07, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. A successor Trustee shall mail notice of its succession to each Holder.
If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Issuer or the Holders of at least 10% in principal amount of the outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee at the expense of the Issuer.
If the Trustee fails to comply with Section 7.10, any Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Issuer’s obligations under Section 7.07 shall continue for the benefit of the retiring Trustee.
Section 7.09 Successor Trustee by Merger, Etc.
If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the resulting, surviving or transferee corporation without any further act shall, if such resulting, surviving or transferee corporation is otherwise eligible hereunder, be the successor Trustee; provided that such corporation shall be otherwise qualified and eligible under this Article Seven.

 

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Section 7.10 Eligibility; Disqualification.
This Indenture shall always have a Trustee who satisfies the requirement of Trust Indenture Act §§ 310(a)(1), 310(a)(2) and 310(a)(5). The Trustee shall have a combined capital and surplus of at least $150,000,000 as set forth in its most recent published annual report of condition. In addition, if the Trustee is a corporation included in a bank holding company system, the Trustee, independently of the bank holding company, shall meet the capital requirements of Trust Indenture Act § 310(a)(2). The Trustee shall comply with Trust Indenture Act § 310(b); provided, however, that there shall be excluded from the operation of Trust Indenture Act § 310(b)(1) any indenture or indentures under which other securities, or certificates of interest or participation in other securities, of the Issuers are outstanding, if the requirements for such exclusion set forth in Trust Indenture Act § 310(b)(1) are met. The provisions of Trust Indenture Act § 310 shall apply to the Issuers and any other obligor of the Notes.
Section 7.11 Preferential Collection of Claims Against the Issuers.
The Trustee, in its capacity as Trustee hereunder, shall comply with Trust Indenture Act § 311(a), excluding any creditor relationship listed in Trust Indenture Act § 311(b). A Trustee who has resigned or been removed shall be subject to Trust Indenture Act § 311(a) to the extent indicated.
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
Section 8.01 Termination of the Issuers’ Obligations.
The Issuers may terminate their obligations under the Notes, this Indenture and the Security Documents, and this Indenture shall cease to be of further effect, except those obligations referred to in the penultimate paragraph of this Section 8.01, if all Notes previously authenticated and delivered (other than destroyed, lost or stolen Notes which have been replaced or paid) have been delivered to the Trustee for cancellation and the Issuers have paid all sums payable by them hereunder, or if:
(1) all the Notes that have been authenticated and delivered (except lost, stolen or destroyed Notes which have been replaced or paid and Notes for whose payment money has been deposited in trust or segregated and held in trust by the Issuer and thereafter repaid to the Issuer or discharged from this trust) have been delivered to the Trustee for cancellation, or
(2) (a) all Notes not delivered to the Trustee for cancellation otherwise have become due and payable or have been called for redemption pursuant to Section 5 or Section 6 of the Notes in each case on arrangements reasonably satisfactory to the Trustee, and the Issuer has irrevocably deposited or caused to be deposited with the Trustee trust funds in an amount of money sufficient to pay and discharge the entire Indebtedness (including all principal and accrued interest) on the Notes not theretofore delivered to the Trustee for cancellation,

 

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(b) the Issuer and the Co-Issuer have paid all sums payable by them under this Indenture,
(c) the Issuer and the Co-Issuer have delivered irrevocable instructions to the Trustee to apply the deposited money toward the payment of the Notes at maturity or on the date of redemption, as the case may be, and
(d) the Holders have a valid, perfected, exclusive Lien in this trust.
In addition, the Issuer must deliver to the Trustee an Officers’ Certificate and an Opinion of Counsel stating that all conditions precedent to satisfaction and discharge have been satisfied.
Subject to the next sentence and notwithstanding the foregoing paragraph, the Issuers’ obligations in Sections 2.05, 2.06, 2.07, 2.08, 4.01, 4.02, 4.03 (as to legal existence of the Issuers only), 7.07, 8.05 and 8.06 shall survive until the Notes are no longer outstanding pursuant to the last paragraph of Section 2.08. After the Notes are no longer outstanding, the Issuers’ obligations in Sections 7.07, 8.05 and 8.06 shall survive.
After such delivery or irrevocable deposit, the Trustee upon request shall acknowledge in writing the discharge of the Issuers’ obligations under the Notes, the Security Documents and this Indenture except for those surviving obligations specified above.
Section 8.02 Legal Defeasance and Covenant Defeasance.
(a) The Issuers may, at their option and at any time, elect to have either paragraph (b) or (c) below be applied to all outstanding Notes upon compliance with the conditions set forth in Section 8.03.
(b) Upon the Issuer’s exercise under paragraph (a) hereof of the option applicable to this paragraph (b), the Issuer, the Co-Issuer and the Guarantor shall, subject to the satisfaction of the conditions set forth in Section 8.03, be deemed to have been discharged from their obligations with respect to all outstanding Notes on the date the conditions set forth below are satisfied (hereinafter, “Legal Defeasance”). For this purpose, Legal Defeasance means that the Issuers and the Guarantors shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes and the Note Guarantees, which shall thereafter be deemed to be “outstanding” only for the purposes of Section 8.04 hereof and the other Sections of this Indenture referred to in (i) and (ii) below, and to have satisfied all their other obligations under such Notes and this Indenture and the Security Documents and the Guarantors shall be deemed to have satisfied all of their obligations under the Note Guarantees, this Indenture and the Security Documents (and the Trustee, on demand of and at the expense of the Issuers, shall execute proper instruments acknowledging the same), except for the following provisions which shall survive until otherwise terminated or discharged hereunder:
(i) the rights of Holders of outstanding Notes to receive, solely from the trust fund described in Section 8.04 hereof, and as more fully set forth in such Section 8.04, payments in respect of the principal of, premium, if any, and interest on such Notes when such payments are due;

 

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(ii) the Issuers’ obligations with respect to such Notes under Article Two and Section 4.02 hereof;
(iii) the rights, powers, trust, duties and immunities of the Trustee and Note Collateral Agent and the Issuers’ obligations in connection therewith; and
(iv) this Article Eight.
Subject to compliance with this Article Eight, the Issuer may exercise its option under this Section 8.02(b) notwithstanding the prior exercise of its option under Section 8.02(c) hereof.
(c) Upon the Issuers’ exercise under paragraph (a) hereof of the option applicable to this paragraph (c), the Issuers and the Guarantors shall, subject to the satisfaction of the conditions set forth in Section 8.03 hereof, be released from their respective obligations under the Note Guarantees, the Security Documents and the covenants contained in Sections 4.03 (other than with respect to the legal existence of the Issuers), 4.04, 4.05, 4.07 and 4.09 through Section 4.27 and Section 5.01(a)(3) hereof with respect to the outstanding Notes on and after the date the conditions set forth in Section 8.03 are satisfied (hereinafter, “Covenant Defeasance”), and the Notes shall thereafter be deemed not “outstanding” for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed “outstanding” for all other purposes hereunder (it being understood that such Notes shall not be deemed outstanding for accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the outstanding Notes, the Issuers and the Guarantors may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute an Event of Default under Section 6.01 hereof, but, except as specified above, the remainder of this Indenture and such Notes shall be unaffected thereby. In addition, upon the Issuers’ exercise under paragraph (a) hereof of the option applicable to this paragraph (c), subject to the satisfaction of the conditions set forth in Section 8.03 hereof, Sections 6.01(3), 6.01(4), 6.01(5), 6.01(6), 6.01(7), 6.01(10) and 6.01(11) hereof shall not constitute Events of Default.

 

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Section 8.03 Conditions to Legal Defeasance or Covenant Defeasance.
The following shall be the conditions to the application of either Section 8.02(b) or 8.02(c) hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) the Issuer must irrevocably deposit with the Trustee, as trust funds, in trust solely for the benefit of the Holders, U.S. Legal Tender, U.S. Government Obligations or a combination thereof, in such amounts as will be sufficient (without reinvestment), in the opinion of a nationally recognized firm of independent public accountants selected by the Issuer, to pay the principal of and interest on the Notes on the stated date for payment or on the redemption date of the principal or installment of principal of or interest on the Notes, and the Holders must have a valid, perfected, exclusive Lien in such trust,
(2) in the case of Legal Defeasance, the Issuer shall have delivered to the Trustee an Opinion of Counsel in the United States confirming that:
(a) the Issuer has received from, or there has been published by the Internal Revenue Service, a ruling, or
(b) since the date of this Indenture, there has been a change in the applicable U.S. federal income tax law,
in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Legal Defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred,
(3) in the case of Covenant Defeasance, the Issuer shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that the Holders will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Covenant Defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred,
(4) no Default shall have occurred and be continuing on the date of such deposit (other than a Default resulting from the borrowing of funds to be applied to such deposit and the grant of any Lien securing such borrowing),

 

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(5) the Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a Default under this Indenture (other than a Default resulting solely from the borrowing of funds to be applied to such deposit specified in clause (1) above and the grant of any Lien on such deposit in favor of the Trustee and/or the Holders), the Revolving Credit Facility or any other material agreement or instrument to which the Issuer or any of its Subsidiaries is a party or by which the Issuer or any of its Subsidiaries is bound,
(6) the Issuer shall have delivered to the Trustee an Officers’ Certificate certifying that the deposit specified in clause (1) above was not made by it with the intent of defeating, hindering, delaying or defrauding any other of its creditors or others, and
(7) the Issuer shall have delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that the conditions provided for in, in the case of the Officers’ Certificate, clauses (1) through (6) and, in the case of the Opinion of Counsel, clauses (1) (with respect to the validity and perfection of the Lien), (2) and/or (3), as applicable, and (5) of this paragraph have been complied with.
If the funds deposited with the Trustee to effect Covenant Defeasance are insufficient to pay the principal of and interest on the Notes when due, then the Issuer’s and the Co-Issuer’s obligations and the obligations of Guarantors under this Indenture will be revived and no such defeasance will be deemed to have occurred.
Section 8.04 Application of Trust Money.
The Trustee or Paying Agent shall hold in trust U.S. Legal Tender and U.S. Government Obligations deposited with it pursuant to this Article Eight, and shall apply the deposited U.S. Legal Tender and the money from U.S. Government Obligations in accordance with this Indenture to the payment of principal of and interest on the Notes. The Trustee shall be under no obligation to invest said U.S. Legal Tender and U.S. Government Obligations except as it may agree with the Issuer. U.S. Legal Tender and U.S. Government Obligations so held in trust are not subject to Article Ten.
The Issuers shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Legal Tender and U.S. Government Obligations deposited pursuant to Section 8.03 or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Notes.
Anything in this Article Eight to the contrary notwithstanding, the Trustee shall deliver or pay to the Issuers from time to time upon the Issuer’s request any U.S. Legal Tender and U.S. Government Obligations held by it as provided in Section 8.03 which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.

 

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Section 8.05 Repayment to the Issuers.
Subject to this Article Eight, the Trustee and the Paying Agent shall promptly pay to the Issuers upon request any excess U.S. Legal Tender and U.S. Government Obligations held by them at any time and thereupon shall be relieved from all liability with respect to such money. The Trustee and the Paying Agent shall pay to the Issuers upon request any money held by them for the payment of principal or interest that remains unclaimed for two years; provided that the Trustee or such Paying Agent, before being required to make any payment, may at the expense of the Issuers cause to be published once in a newspaper of general circulation in the City of New York or mail to each Holder entitled to such money notice that such money remains unclaimed and that after a date specified therein which shall be at least 30 days from the date of such publication or mailing any unclaimed balance of such money then remaining will be repaid to the Issuers. After payment to the Issuers, Holders entitled to such money must look to the Issuers for payment as general creditors unless an applicable law designates another Person.
Section 8.06 Reinstatement.
If the Trustee or Paying Agent is unable to apply any U.S. Legal Tender and U.S. Government Obligations in accordance with this Article Eight by reason of any legal proceeding or by reason of any order or judgment of any court or Governmental Authority enjoining, restraining or otherwise prohibiting such application, the Issuers’ obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to this Article Eight until such time as the Trustee or Paying Agent is permitted to apply all such U.S. Legal Tender and U.S. Government Obligations in accordance with this Article Eight; provided that if the Issuers have made any payment of interest on or principal of any Notes because of the reinstatement of its obligations, the Issuers shall be subrogated to the rights of the Holders of such Notes to receive such payment from the U.S. Legal Tender and U.S. Government Obligations held by the Trustee or Paying Agent.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS, WAIVERS AND ENTRY INTO INTERCREDITOR AGREEMENT
Section 9.01 Without Consent of Holders.
(a) The Issuer, the Co-Issuer, the Guarantors, the Trustee and the Note Collateral Agent, as applicable, may (i) enter into the Intercreditor Agreement on the terms set forth in Section 9.07 in all material respects, without the consent of any Holder and (ii) amend this Indenture, the Note Guarantees, the Notes, the Security Documents or, if applicable, an Intercreditor Agreement, without the consent of any Holder:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated Notes in addition to or in place of certificated Notes;

 

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(3) to provide for the assumption of the obligations of the Issuer and the Co-Issuer to the Holders in the case of a merger, consolidation or sale of all or substantially all of the assets, in accordance with Article Five;
(4) to release any Guarantor from any of its obligations under its Note Guarantee or this Indenture (to the extent permitted by this Indenture);
(5) to provide for the accession or succession of any parties to any Intercreditor Agreement or the Security Documents (and other amendments that are administrative or ministerial in nature) in connection with the execution or an amendment, renewal, extension, substitution, refinancing, restructuring, replacement, supplementing or other modification from time to time of a Revolving Credit Facility, the WML Credit Agreements, the Notes or any other agreement or action that is not prohibited by this Indenture;
(6) to provide for the release of Collateral in accordance with the terms of this Indenture, the Intercreditor Agreement, if applicable, and the Security Documents (it being understood that the Liens on the Collateral with respect to the Notes and the Note Guarantees will be released to the extent the corresponding Revolving Facility First-Priority Liens securing Revolving Credit Facility Obligations are released);
(7) to provide security for additional borrowings under the Revolving Credit Facility or any additional Indebtedness, which Liens are permitted to be incurred in accordance with this Indenture;
(8) to expand the Note Collateral or the Note Guarantees;
(9) to evidence and provide the acceptance of the appointment of a successor trustee under this Indenture or successor Note Collateral Agent;
(10) to provide for the issuance of Exchange Notes pursuant to the terms of this Indenture and the Registration Rights Agreement; or
(11) to make any change that does not materially adversely affect the rights of any Holder, or, in the case of this Indenture, to qualify or maintain the qualification of this Indenture under the Trust Indenture Act, if applicable;

 

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provided, that the Issuer has delivered to the Trustee an Opinion of Counsel and an Officers’ Certificate, each stating that such amendment or supplement complies with the provisions of this Section 9.01.
(b) In the case of execution of an Intercreditor Agreement without the consent of the Holders, the Issuer shall have delivered to the Trustee an Officers’ Certificate, signed by the Chief Executive Officer and Chief Financial Officer of the Issuer, certifying that the Intercreditor Agreement shall have been entered into on the terms set forth in Section 9.07 in all material respects and any additional terms are not inconsistent with the terms set forth herein and not materially adverse to the Holders.
Section 9.02 With Consent of Holders.
(a) Subject to the terms of this Indenture and the Security Documents, the Issuer, the Co-Issuer, the Guarantors, the Trustee and the Note Collateral Agent, as applicable, may amend this Indenture with the consent of the Holders of a majority in principal amount of the Notes then outstanding (voting as one class) (including consents obtained in connection with a tender offer for, exchange for or purchase of, the Notes) and any past default or compliance with any provisions may also be waived with the consent of the Holders of at least a majority in principal amount of the Notes then outstanding. An intercreditor agreement containing terms that differ from those set forth in Section 9.07 may be entered into and, subject to certain exceptions, the Intercreditor Agreement and the Security Documents may be amended, in each case with the consent of the Holders of a majority in principal amount of the Notes then outstanding (including consents obtained in connection with a tender offer for, exchange for or purchase of, the Notes) and any past default or compliance with any provisions in an Intercreditor Agreement and the Security Documents may also be waived with the consent of the Holders of a majority in principal amount of the Notes then outstanding (including consents obtained in connection with a tender offer for, exchange for or purchase of, the Notes); and such amendments may not, without the consent of the Holders of 75% in principal amount of the Notes then outstanding, release all or substantially all of the Collateral other than in accordance with this Indenture, an Intercreditor Agreement and the Security Documents; provided, that without the consent of each Holder affected, no amendment or waiver may:
(1) change the maturity of any Note;
(2) reduce the amount, extend the due date or otherwise affect the terms of any scheduled payment of interest on or principal of the Notes;
(3) reduce any premium payable upon optional redemption of the Notes, change the date on, or the circumstances under which, any Notes are subject to redemption or otherwise alter the provisions with respect to the redemption of the Notes (other than provisions relating to the repurchase of Notes under Sections 4.09 and 4.13 except that if a Change of Control has occurred, no amendment or other modification of the obligation of the Issuer and the Co-Issuer to make a Change of Control Offer relating to such Change of Control shall be made without the consent of each Holder of the Notes affected);

 

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(4) make any Note payable in money or currency other than that stated in the Notes;
(5) make any change in the ranking or priority of any Note that would adversely affect the Holders of the Notes;
(6) reduce the percentage of Holders necessary to consent to an amendment or waiver to this Indenture or the Notes;
(7) impair the rights of Holders to receive payments of principal of or interest on the Notes;
(8) release any Guarantor from any of its obligations under its Note Guarantee or this Indenture, except as permitted by this Indenture; or
(9) make any change in these amendment and waiver provisions.
(b) It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed amendment, supplement or waiver but it shall be sufficient if such consent approves the substance thereof.
(c) After an amendment, supplement or waiver under this Section 9.02 becomes effective, the Issuer shall mail to the Holders affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Issuer to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amendment, supplement or waiver.
Section 9.03 Compliance with the Trust Indenture Act.
From the date on which this Indenture is qualified under the Trust Indenture Act, every amendment, waiver or supplement of this Indenture, the Notes or the Note Guarantees shall comply with the Trust Indenture Act as then in effect.
Section 9.04 Revocation and Effect of Consents.
Until an amendment, waiver or supplement becomes effective, a consent to it by a Holder is a continuing consent by the Holder and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder’s Note, even if notation of the consent is not made on any Note. However, any such Holder or subsequent Holder may revoke the consent as to his Note or portion of his Note by notice to the Trustee or the Issuer received before the date on which the Trustee receives an Officers’ Certificate certifying that the Holders of the requisite principal amount of Notes have consented (and not theretofore revoked such consent) to the amendment, supplement or waiver.

 

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The Issuer may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any amendment, supplement or waiver which record date shall be at least 30 days prior to the first solicitation of such consent. If a record date is fixed, then notwithstanding the last sentence of the immediately preceding paragraph, those Persons who were Holders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to revoke any consent previously given, whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 90 days after such record date. The Issuer shall inform the Trustee in writing of the fixed record date if applicable.
After an amendment, supplement or waiver becomes effective, it shall bind every Holder, unless it makes a change described in any of Section 9.02(a)(1) through Section 9.02(a)(9), in which case, the amendment, supplement or waiver shall bind only each Holder of a Note who has consented to it and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder’s Note; provided that any such waiver shall not impair or affect the right of any Holder to receive payment of principal of and interest on a Note, on or after the respective due dates therefor, or to bring suit for the enforcement of any such payment on or after such respective dates without the consent of such Holder.
Section 9.05 Notation on or Exchange of Notes.
If an amendment, supplement or waiver changes the terms of a Note, the Issuers may require the Holder of the Note to deliver it to the Trustee. The Issuer shall provide the Trustee with an appropriate notation on the Note about the changed terms and cause the Trustee to return it to the Holder at the Issuers’ expense. Alternatively, if the Issuer or the Trustee so determines, the Issuers in exchange for the Note shall issue and the Trustee shall authenticate a new Note that reflects the changed terms. Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver.
Section 9.06 Trustee and the Note Collateral Agent To Sign Amendments, Etc..
The Trustee and the Note Collateral Agent shall execute any amendment, supplement or waiver authorized pursuant to this Article Nine; provided, that the Trustee or the Note Collateral Agent, as applicable, may, but shall not be obligated to, execute any such amendment, supplement or waiver which affects the Trustee’s or the Note Collateral Agent’s own rights, duties or immunities, as applicable, under this Indenture. The Trustee or the Note Collateral Agent, as applicable, shall be entitled to receive, and shall be fully protected in relying upon, an Opinion of Counsel and an Officers’ Certificate each stating that the execution of any amendment, supplement or waiver authorized pursuant to this Article Nine is authorized or permitted by this Indenture and constitutes the legal, valid and binding obligations of the Issuers enforceable in accordance with its terms. Such Opinion of Counsel shall be at the expense of the Issuers.

 

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Section 9.07 Terms of Intercreditor Agreement.
(a) After the Issue Date, the Issuer, the Co-Issuer, the Subsidiary Guarantors and Absaloka shall be permitted to enter into or guarantee the Revolving Credit Facility, which may be secured by the Revolving Facility First-Priority Collateral. Notwithstanding the time, order or method of grant, creation, attachment or perfection of any Liens securing the Notes, the Liens of the Notes on the Revolving Facility First-Priority Collateral shall rank junior to the Revolving Facility First-Priority Liens under the Revolving Credit Facility. Concurrent with the Revolving Credit Facility, an intercreditor agreement shall be entered into between the Note Collateral Agent, the collateral agent under the Revolving Credit Facility (the “Revolving Collateral Agent”) and the relevant borrowers and guarantors parties thereto on the terms described in this section in all material respects (the “Intercreditor Agreement”). Compliance with this provision shall be evidenced by an Officers’ Certificate delivered to the Trustee.
(b) In no event will the Intercreditor Agreement or the Revolving Credit Facility require or permit a Lien of any priority on the Note Collateral other than the Revolving Facility First-Priority Liens, nor impair or condition any right of the Trustee, the Note Collateral Agent or the Holders of the Notes with respect to the Note Collateral, other than the Revolving Facility First-Lien Collateral on the terms described herein and in the Intercreditor Agreement, nor impair or condition any other rights of the Trustee, the Note Collateral Agent or the Holders of the Notes with respect to the relevant borrowers and guarantors under the Revolving Credit Facility or their Subsidiaries.
(c) The rights of the Holders of the Notes with respect to the Note Second Lien Collateral securing the Notes and the Note Guarantees will be materially limited pursuant to the terms of the Intercreditor Agreement. Under the terms of such Intercreditor Agreement, the Note Second-Priority Liens in the Revolving Facility First-Priority Collateral securing the Notes shall rank junior to the Revolving Facility First-Priority Liens. Any proceeds received upon a realization of the Revolving Facility First-Priority Collateral securing the Revolving Credit Facility Obligations and the Notes shall be applied as follows:
(1) first, to the Revolving Collateral Agent to be applied as required under the Revolving Credit Facility until the payment and discharge of the Revolving Credit Facility Obligations has occurred; and
(2) second, to the Trustee to be applied ratably to the Holders of the Notes and in such order as specified in this Indenture and the Security Documents (with the Note Collateral Agent entitled to apply any proceeds in respect of the Notes to its costs and expenses prior to principal and interest being paid to the Holders of the Notes).

 

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(d) In the event of any release of the Note Collateral under this Indenture or Revolving Credit Facility, as the case may be, (i) in connection with an exercise of remedies (even if, with respect to the Revolving Facility First-Priority Collateral, such release violates this Indenture but complies with the Intercreditor Agreement) or (ii) that does not cause an express Default under this Indenture, the Note Liens on the Note Collateral and the Revolving Facility First-Priority Collateral shall be automatically released and the Agents shall be required to take any action (and be deemed to have authorized such action) as necessary to effect such release.
(e) (i) Prior to the discharge of the Revolving Facility First-Priority Liens, the Revolving Collateral Agent shall determine whether, and if so, the time and method by which to enforce its Revolving Facility First-Priority Lien in the Revolving Facility First-Priority Collateral. Neither the Note Collateral Agent nor the Revolving Collateral Agent will be permitted (whether directly or indirectly) to enforce the security interests and other rights related to any Collateral upon which it does not have a first-priority Lien or take any enforcement action against or in respect of the Note Collateral in which it does not have a first-priority Lien, even if an Event of Default has occurred and the Notes have been accelerated, except (i) in any insolvency or liquidation proceeding of the Issuer, the Co-Issuer or any Significant Subsidiary, the Note Collateral Agent may file a proof of claim with respect to the Notes or any Note Guarantee and (ii) exercise such rights as described in the following paragraphs and certain other limited rights.
(ii) After the discharge of the Revolving Facility First-Priority Liens, the Note Collateral Agent, acting at the instruction of the Holders of a majority in principal amount of the Notes, voting as one class, in accordance with the provisions of this Indenture and the Security Documents, shall determine the time and method by which its liens in the Note Second Lien Collateral will be enforced and, if applicable, shall distribute proceeds (after payment of the costs of enforcement and Collateral administration) of the Note Second Lien Collateral received by it under the Security Documents for the ratable benefit of the Holders of the Notes.
(f) The Note Collateral Agent may exercise rights and remedies with respect to the security interests in the Note Second Lien Collateral after the passage of a period of 180 days from the first date on which the Note Collateral Agent has notified the Revolving Collateral Agent that (i) an Event of Default consisting of nonpayment of any principal or interest then due under the Notes has been declared, or (ii) an Event of Default other than an Event of Default consisting of nonpayment of any principal or interest then due under the Notes has been declared and the repayment of all the principal amount under the Notes has been demanded. However, the Note Collateral Agent is only permitted to exercise remedies to the extent that the Revolving Collateral Agent, or the secured parties, under the Revolving Credit Facility Obligations are not diligently pursuing the exercise of its rights and remedies with respect to a material portion of the Note Second Lien Collateral.

 

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(g) In the event a bankruptcy proceeding shall be commenced by or against the Issuer, the Co-Issuer, any Subsidiary Guarantor or Absaloka, and the Note Collateral Agent, at the institution of the majority of the Holders of Notes, and the Revolving Collateral Agent shall desire to permit the Issuer, the Co-Issuer, any Subsidiary Guarantor or Absaloka the use of cash collateral which constitutes Collateral or to enter into a debtor-in-possession financing (a “DIP Financing”) in such proceeding, (i) the Note First-Priority Liens on the Note Collateral other than the Revolving Facility First-Priority Collateral and (ii) the Note Second-Priority Liens on the Revolving Facility First-Priority Collateral may, in each case be made junior and subordinated to Liens granted to secure such DIP Financings. The use of cash collateral or the provision of DIP Financing will require the approval of the governmental authority having jurisdiction over such bankruptcy proceeding, to the extent required by law. To the extent the first-priority Liens securing the Revolving Credit Facility Obligations are subordinated to or pari passu with such DIP Financing, the Note Collateral Agent (a) shall subordinate or make pari passu its Note Second-Priority Liens in the Revolving Facility First-Priority Collateral to the same extent that the Revolving Credit Facility Obligations are subordinated or pari passu to (x) the Liens securing such DIP Financing (and all obligations relating thereto), (y) adequate protection provided to the representative for, or holders of, the Revolving Credit Facility Obligations, and (z) any “carve-out” agreed by the representative for, or holders of, the Revolving Credit Facility Obligations and (b) shall not request adequate protection or any other relief in connection with the Note Second-Priority Liens (other than as described below).
(h) The Agents will only be permitted to seek adequate protection without the consent of the Holders of the Notes or the Revolving Collateral Agent, as applicable, (i) in the form of the benefit of additional or replacement Liens on the Note Collateral (including Proceeds thereof arising after the commencement of any insolvency or liquidation proceeding), or additional or replacement collateral to secure the Notes or the Revolving Credit Facility Obligations, as long as the Trustee and the Revolving Collateral Agent, as applicable, are also granted such additional or replacement Liens or additional or replacement collateral and such additional or replacement Liens are in the case of the Revolving Facility First-Priority Collateral, subordinated to the Liens securing the Revolving Credit Facility Obligations to the same extent as the Note Second-Priority Liens on the Revolving Facility First-Priority Collateral are subordinated to the Revolving Facility First-Priority Liens and (ii) to obtain adequate protection in the form of reports, notices, inspection rights and similar forms of adequate protection to the extent granted to the Trustee or the representative of the Revolving Credit Facility Obligations, as applicable. The Intercreditor Agreement shall limit the right of the Agents to seek relief from the “automatic stay” and shall provide that neither Agent may assert any right of marshalling, appraisal, valuation or other similar right that may be available under applicable law with respect to the Note Collateral.

 

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(i) (1) Upon the occurrence of any acceleration under the Revolving Credit Facility Obligations, the Holders shall have the right to buy-out all of the Revolving Credit Facility Obligations as described below. In addition, upon any acceleration of the Revolving Credit Facility Obligations, no action to enforce remedies may be taken by any lender under the Revolving Credit Facility (“Revolving Lender”) or the Revolving Collateral Agent with respect to the Revolving Credit Facility Obligations for a period of (a) initially, 30 days from the date of the acceleration notice given by the Revolving Lenders to the Issuer and (b) if the Holder Buy-out Right (as defined below) is exercised prior to the conclusion of such 30-day period, an additional 10 days (such period, the “Standstill Period”); provided, that actions to prepare for sale of or other enforcement against the Collateral, including notifying account debtors to make payments to the Revolving Lenders, that do not result in any disposition of the Collateral shall be deemed not to violate the foregoing.
(2) Each Holder shall have the right (but not the obligation) to purchase (or to designate an Affiliate or other party to purchase) all of the rights and obligations of the Revolving Lenders, including all of the commitments or Revolving Credit Facility Obligations owing to them (the “Holder Buy-out Right”) for an aggregate purchase price equal to the sum of (x) the then outstanding principal amount of such Revolving Credit Facility Obligations, plus (y) all accrued and unpaid interest thereon, plus (z) all other amounts accrued and unpaid in respect thereof (the “Revolving Buy-out Price”).
(3) (A) The Holder Buy-out Right may be exercised by Holders upon written notice thereof to the administrative agent under the Revolving Credit Facility (the “Administrative Agent”) and the Issuer within 30 days of public notice of any event of default or acceleration of the Revolving Credit Facility Obligations committing to the purchase of 100% of the Revolving Credit Facility Obligations; provided, that so long as 100% of the Revolving Credit Facility Obligations are committed to be purchased, such Revolving Credit Facility Obligations shall be allocated as described below.
(B) Such written notice shall identify the Holder or Holders exercising such Holder Buy-out Right and contain no conditions other than the satisfaction of the requirements of the Revolving Credit Facility as to the assignment of Revolving Credit Facility Obligations to a Holder purchasing such Revolving Credit Facility Obligations. Such notice shall constitute an irrevocable commitment by (x) the delivering Holders to the Revolving Lenders to purchase the Revolving Credit Facility Obligations for the Revolving Buy-out Price no later than the last day of the Standstill Period and (y) the Revolving Lenders to sell the Revolving Credit Facility Obligations to the Holders upon delivery of the Revolving Buy-out Price to the Administrative Agent.

 

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(C) Each Holder exercising its Holder Buy-Out Right shall be entitled to a share of the Revolving Credit Facility Obligations based on its pro-rata share of the aggregate amount of outstanding Notes, subject to increases by a pro-rata share of Notes allocable to Holders that do not elect to purchase their pro rata share.
(4) The Revolving Buy-out Price shall be paid in immediately available funds to the Administrative Agent on behalf of the Revolving Lenders, and the Administrative Agent shall promptly pay the proceeds thereof to such Revolving Lenders in accordance with their interests. If the Revolving Buy-out Price is not received by the Administrative Agent in accordance with the foregoing, the Administrative Agent may enforce such commitment on behalf of the Revolving Lenders and may exercise all other remedies hereunder, including enforcement of all remedies against the Collateral.
ARTICLE TEN
COLLATERAL
Section 10.01 Collateral and Security Documents.
The due and punctual payment of the principal of, premium (if any) and interest on the Notes when and as the same shall be due and payable, whether on an Interest Payment Date, at maturity, by acceleration, repurchase, redemption or otherwise, and interest on the overdue principal of and (to the extent permitted by law) interest on the Notes and performance of all other obligations of the Issuers, the Subsidiary Guarantors and Absaloka to the Holders, the Trustee or the Note Collateral Agent under this Indenture, the Notes, the Intercreditor Agreement (if any) and the Security Documents, according to the terms hereunder or thereunder, shall be secured by the Note Liens on the Collateral, subject to Permitted Liens and the exclusion of Excluded Property, as provided in the Security Documents, which may be subject to the terms of the Intercreditor Agreement (if any). Each Holder, by accepting a Note, consents and agrees to the terms of the Security Documents (including the provisions providing for the possession, use, release and foreclosure of Collateral) and, if applicable, the Intercreditor Agreement (subject to Section 9.01(b), Section 9.02(a) and Section 10.09) as the same may be in effect or may be amended from time to time in accordance with their terms and this Indenture and the Intercreditor Agreement, and authorizes and directs the Note Collateral Agent to enter into the Security Documents (including mortgages and deeds of trusts for the Real Property identified in the Security Documents) and the Intercreditor Agreement (subject to Section 10.09) and to perform its obligations and exercise its rights thereunder in accordance therewith; provided, however, that if any of the provisions of the Security Documents limit, qualify or conflict with the duties imposed by the provisions of the Trust Indenture Act incorporated herein, the Trust Indenture Act shall control. The Issuers shall, and shall cause the Subsidiary Guarantors and Absaloka to, deliver to the Note Collateral Agent copies of all documents pursuant to the Security Documents, and will do or cause to

 

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be done all such acts and things as may be reasonably required by the next sentence of this Section 10.01, to assure and confirm to the Note Collateral Agent the security interest in the Collateral contemplated hereby, by the Security Documents or any part thereof, as from time to time constituted, so as to render the same available for the security and benefit of this Indenture and of the Notes secured hereby, according to the intent and purposes herein expressed. The Issuers shall, and shall cause the Subsidiary Guarantors and Absaloka to, take any and all actions reasonably required to cause the Security Documents to create and maintain, as security for the Obligations under the Notes, a valid and enforceable, except as enforceability thereof may be limited by bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium or other similar laws affecting creditors’ rights generally and general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity), perfected Lien and security interest (subject to Permitted Liens) in and on all of the Collateral (subject to the terms of the Intercreditor Agreement (if any)), in favor of the Note Collateral Agent for the benefit of the Holders, in each case subject to and in accordance with the terms of the Security Documents.
Section 10.02 Recordings and Opinions.
(a) To the extent applicable, the Issuer will cause Trust Indenture Act § 313(b), relating to reports, and Trust Indenture Act § 314(d), relating to the release of property or securities, to be complied with.
(b) Any release of Collateral permitted by Section 10.03 hereof will be deemed not to impair the Note Liens under this Indenture and the Security Documents in contravention thereof. Any certificate or opinion required by Trust Indenture Act § 314(d) may be made by an Officer or legal counsel, as applicable, of the Issuer except in cases where Trust Indenture Act § 314(d) requires that such certificate or opinion be made by an independent Person, which Person will be an independent engineer, appraiser or other expert selected by or reasonably satisfactory to the Trustee.
(c) Notwithstanding anything to the contrary contained in this Section 10.02, so long as no Default or Event of Default under this Indenture would result therefrom and such transaction would not violate the Trust Indenture Act, the Issuer, the Co-Issuer, the Subsidiary Guarantors and Absaloka may, among other things, without any release or consent by the Trustee or the Note Collateral Agent, conduct ordinary course activities with respect to Collateral, including, without limitation, (i) selling or otherwise disposing of, in any transaction or series of related transactions, any property subject to the Lien of the Security Documents which has become worn out, defective or obsolete or not used or useful in the business; (ii) abandoning, terminating, canceling, releasing or making alterations in or substitutions of any leases or contracts subject to the Lien of this Indenture or any of the Security Documents; (iii) surrendering or modifying any license or permit subject to the Lien of this Indenture or any of the Security Documents which it may own or under which it may be operating; (iv) granting a license of any intellectual property; (v) selling, transferring or otherwise disposing of inventory in the ordinary course of business; (vi) selling, collecting, liquidating, factoring or otherwise disposing of accounts

 

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receivable in the ordinary course of business; (vii) making cash payments (including for the scheduled repayment of Indebtedness) from cash that is at any time part of the Note Collateral in the ordinary course of business that are not otherwise prohibited by this Indenture and the Security Documents; and (viii) abandoning any intellectual property which is no longer used or useful in the Issuer’s, the Co-Issuer’s, Subsidiary Guarantor’s or Absaloka’s business. The Issuer and the Co-Issuer must deliver to the Note Collateral Agent, within 30 calendar days following the end of each six month period beginning on January 1 and July 1 of any year, an Officers’ Certificate to the effect that none of the releases and withdrawals occurring during the preceding six month period (or since the Issue Date, in the case of the first such certificate) were prohibited by this Indenture.
Section 10.03 Release of Collateral.
(a) The Liens on the Collateral under the Security Documents securing the Obligations with respect to the Notes and the Note Guarantees and this Indenture will be released, subject to this Section 10.03,
(1) in whole, upon payment in full of the principal of, accrued and unpaid interest, and premium, if any, on the Notes;
(2) in whole, upon satisfaction and discharge as set forth under Section 8.01;
(3) in whole, upon a Legal Defeasance or Covenant Defeasance as set forth under Section 8.02;
(4) as to any asset constituting Note Collateral (A) that is sold or otherwise disposed of by the Issuer, the Co-Issuer, any of the Subsidiary Guarantors or Absaloka (to a person that is not the Issuer, the Co-Issuer or a Subsidiary Guarantor or Absaloka) in a transaction permitted by Section 4.13 and by the Security Documents (to the extent of the interest sold or disposed of) or otherwise permitted by this Indenture and the Security Documents, if all Liens on that asset then securing the Notes and the Note Guarantees then secured by that asset (including all commitments thereunder) are released or (B) that is otherwise released in accordance with, and as expressly provided for in accordance with, this Indenture, the Intercreditor Agreement and the Security Documents;
(5) in compliance with Section 9.02, as to property that constitutes less than all or substantially all of the Note Collateral, with the consent of the Controlling Secured Parties (or, in the case of a release of all or substantially all of the Note Collateral, with the consent of the Holders of 75% in principal amount of the Notes then outstanding), including consents obtained in connection with a tender offer or Exchange Offer for, or purchase of, Notes; and
(6) with respect to assets of a Guarantor upon release of such Guarantor from its Note Guarantee pursuant to Section 11.04.

 

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provided that, in the case of any release in whole pursuant to clause (a)(1) above, all amounts owing to the Note Collateral Agent, the Trustee under the Notes, the Note Guarantees, the Security Documents and the Intercreditor Agreement have been paid.
(b) In no event shall any purchaser in good faith of any property purported to be released hereunder be bound to ascertain the authority of the Note Collateral Agent or the Trustee to execute the release or to inquire as to the satisfaction of any conditions required by the provisions hereof for the exercise of such authority or to see to the application of any consideration given by such purchaser or other transferee; nor shall any purchaser or other transferee of any property or rights permitted by this Article Ten to be sold be under any obligation to ascertain or inquire into the authority of the Issuers or the applicable Guarantor to make any such sale or other transfer.
(c) Any release of any Lien on the Collateral under the Security Documents securing the Obligations under the Notes and this Indenture under this Section 10.03 will occur automatically as provided in Sections 10.03(a)(4)(A) and 10.03(a)(4)(B), upon receipt of an Officers’ Certificate and an Opinion of Counsel that all conditions precedent to such release have been satisfied, the Note Collateral Agent shall promptly execute, deliver or acknowledge such appropriate instruments or releases to evidence such release as the applicable Issuer or Guarantor may request. Upon receipt of an Officers’ Certificate and an Opinion of Counsel that all conditions precedent to such release have been satisfied, the Note Collateral Agent shall also release the Liens on the Collateral under the Security Documents securing the Obligations under the Notes and this Indenture as provided in the other subparts of Section 10.03(a).
Section 10.04 Suits to Protect the Collateral.
Subject to the provisions of Article Seven hereof and the provisions of the Intercreditor Agreement (if any), the Trustee in its sole discretion and without the consent of the Holders, on behalf of the Holders, may or may direct the Note Collateral Agent to take all actions it deems necessary or appropriate in order to:
(a) Enforce any of the terms of the Security Documents; and
(b) Collect and receive any and all amounts payable in respect of the Obligations hereunder.
Subject to the terms, conditions and provisions of this Indenture and the Security Documents and the Intercreditor Agreement (if any), the Trustee shall have power to institute and to maintain such suits and proceedings as it may deem expedient to prevent any impairment of the Note Collateral by any acts which may be unlawful or in violation of any of the Security Documents or this Indenture, and such suits and proceedings as the Trustee, in its sole discretion, may deem expedient to preserve or protect its interests and the interests of the Holders in the Note Collateral (including power to institute and maintain suits or proceedings to restrain the enforcement of or compliance with any legislative or other governmental enactment, rule or order that may be unconstitutional or otherwise invalid if the enforcement of, or compliance with, such enactment, rule or order would impair the Note Liens on the Note Collateral or be prejudicial to the interests of the Holders or the Trustee). Nothing in this Section 10.03 shall be considered to impose any such duty or obligation to act on the part of the Trustee.

 

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Section 10.05 Authorization of Receipt of Funds by the Trustee Under the Security Documents.
As may be subject to the provisions of the Intercreditor Agreement (if any), the Trustee is authorized to receive any funds for the benefit of the Holders distributed under the Security Documents, and to make further distributions of such funds to the Holders according to the provisions of this Indenture and the Security Documents.
Section 10.06 Powers Exercisable by Receiver or Trustee.
In case the Collateral shall be in the possession of a receiver or trustee, lawfully appointed, the powers conferred in this Article Ten upon any Issuers or a Guarantor with respect to the release, sale or other disposition of such property may be exercised by such receiver or trustee, and an instrument signed by such receiver or trustee shall be deemed the equivalent of any similar instrument of such Issuer or Guarantor or of any officer or officers thereof required by the provisions of this Article Ten; and if the Collateral shall be in the possession of the Note Collateral Agent under any provision of this Indenture, then such powers may be exercised by the Note Collateral Agent.
Section 10.07 Note Collateral Agent.
(a) The Trustee and each of the Holders by acceptance of the Notes hereby designates and appoints the Note Collateral Agent as its agent under this Indenture, the Security Documents and the Intercreditor Agreement (if any) and the Trustee and each of the Holders by acceptance of the Notes hereby irrevocably authorizes the Note Collateral Agent to take such action on its behalf under the provisions of this Indenture, the Security Documents and the Intercreditor Agreement and to exercise such powers and perform such duties as are expressly delegated to the Note Collateral Agent by the terms of this Indenture, the Security Documents and the Intercreditor Agreement, together with such powers as are reasonably incidental thereto. The Note Collateral Agent agrees to act as such on the express conditions contained in this Section 10.07. The provisions of this Section 10.07 are solely for the benefit of the Note Collateral Agent and none of the Trustee, any of the Holders nor any of the Issuers or Guarantors shall have any rights as a third party beneficiary of any of the provisions contained herein other than as expressly provided in Section 10.03. Notwithstanding any provision to the contrary contained elsewhere in this Indenture, the Security Documents and the Intercreditor Agreement, the Note Collateral Agent shall not have any duties or responsibilities, except those expressly set forth herein, nor shall the Note Collateral Agent have or be deemed to have any fiduciary relationship with the Trustee, any Holder, any Issuer or any Subsidiary of the Issuer or

 

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the Co-Issuer, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Indenture, the Security Documents and the Intercreditor Agreement or otherwise exist against the Note Collateral Agent. The Note Collateral Agent shall not be required to take any action which is contrary to applicable law or any provision of this Indenture, the Security Documents or the Intercreditor Agreement. Without limiting the generality of the foregoing sentence, the use of the term “agent” in this Indenture with reference to the Note Collateral Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties. Except as expressly otherwise provided in this Indenture, the Note Collateral Agent shall have and may use its sole discretion with respect to exercising or refraining from exercising any discretionary rights or taking or refraining from taking any actions which the Note Collateral Agent is expressly entitled to take or assert under this Indenture, the Security Documents and the Intercreditor Agreement, including the exercise of remedies pursuant to Article Six, and any action so taken or not taken shall be deemed consented to by the Trustee and the Holders.
(b) The Note Collateral Agent may execute any of its duties under this Indenture, the Security Documents or the Intercreditor Agreement by or through agents, sub-agents, employees, attorneys-in-fact, custodians, nominees or through its related Persons and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Note Collateral Agent shall not be responsible for the negligence or misconduct of any such Persons that it selects with due care as long as such selection was made without gross negligence or willful misconduct.
(c) None of the Note Collateral Agent, nor any of its respective related Persons shall (i) be liable for any action taken or omitted to be taken by any of them under or in connection with this Indenture or the transactions contemplated hereby (except for its own gross negligence, willful misconduct, or bad faith) or under or in connection with any Security Document or Intercreditor Agreement or the transactions contemplated thereby (except for its own negligence, willful misconduct or bad faith), or (ii) be responsible in any manner to any of the Trustee or any Holder for any recital, statement, representation, warranty, covenant or agreement made by any Issuer or any Guarantor, Officer or related Person thereof, contained in this Indenture, or in any certificate, report, statement or other document referred to or provided for in, or received by the Note Collateral Agent under or in connection with, this Indenture, the Security Documents or the Intercreditor Agreement, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Indenture, the Security Documents or the Intercreditor Agreement, or for any failure of any Issuer, Guarantor or any other party to this Indenture, the Security Documents or the Intercreditor Agreement to perform its obligations hereunder or thereunder. None of the Note Collateral Agent or any of its respective related Persons shall be under any obligation to the Trustee or any Holder to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Indenture, the Security Documents or the Intercreditor Agreement or to inspect the properties, books, or records of any Issuer, Guarantor or Absaloka.

 

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(d) The Note Collateral Agent shall be entitled to rely conclusively, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex, electronic transmission or telephone message, statement, or other document or conversation believed by it to be genuine and correct and to have been signed, sent, or made by the proper Person or Persons, and upon advice and statements of legal counsel (including, without limitation, counsel to any Issuer or Guarantor), independent accountants and other experts and advisors selected by the Note Collateral Agent. The Note Collateral Agent shall be fully justified in failing or refusing to take any action under this Indenture, the Security Documents or the Intercreditor Agreement unless it shall first receive such advice or concurrence of the Trustee as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Holders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Note Collateral Agent shall in all cases be fully protected in acting, or in refraining from acting, under this or any other Indenture, the Security Documents or the Intercreditor Agreement in accordance with a request or consent of the Trustee and such request and any action taken or failure to act pursuant thereto shall be binding upon all of the Holders.
(e) The Note Collateral Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default, unless the Note Collateral Agent shall have received written notice from the Trustee or an Issuer or Guarantor referring to this Indenture, describing such Default or Event of Default and stating that such notice is a “notice of default.” The Note Collateral Agent shall take such action with respect to such Default or Event of Default as may be requested by the Trustee in accordance with Article Six (subject to this Section 10.07); provided, however, that unless and until the Note Collateral Agent has received any such request, the Note Collateral Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable.
(f) Wells Fargo Bank, National Association and its respective Affiliates (and any successor Note Collateral Agent and its affiliates) may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory, underwriting, or other business with any Issuer, Guarantor or Absaloka and its Affiliates as though it was not the Note Collateral Agent hereunder and without notice to or consent of the Trustee. The Trustee and the Holders acknowledge that, pursuant to such activities, Wells Fargo Bank, National Association or its respective Affiliates (and any successor Note Collateral Agent and its affiliates) may receive information regarding any Issuer, Guarantor or Absaloka or its Affiliates (including information that may be subject to confidentiality obligations in favor of any such Issuer, Guarantor, Absaloka or such Affiliate) and acknowledge that the Note Collateral Agent shall not be under any obligation to provide such information to the Trustee or the Holders. Nothing herein shall impose or imply any obligation on the part of Wells Fargo Bank, National Association (or any successor Note Collateral Agent) to advance funds.

 

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(g) The Note Collateral Agent may resign at any time upon thirty (30) days’ prior written notice to the Trustee and the Issuers, the Guarantors and Absaloka, such resignation to be effective upon the acceptance of a successor agent to its appointment as Note Collateral Agent. If the Note Collateral Agent resigns under this Indenture, the Trustee, subject to the consent of the Issuer (which shall not be unreasonably withheld and which shall not be required during a continuing Event of Default), shall appoint a successor collateral agent. If no successor collateral agent is appointed prior to the intended effective date of the resignation of the Note Collateral Agent (as stated in the notice of resignation), the Note Collateral Agent may appoint, after consulting with the Trustee, subject to the consent of the Issuer (which shall not be unreasonably withheld and which shall not be required during a continuing Event of Default), a successor collateral agent. If no successor collateral agent is appointed and consented to by the Issuer pursuant to the preceding sentence within thirty (30) days after the intended effective date of resignation (as stated in the notice of resignation) the Note Collateral Agent shall be entitled to petition a court of competent jurisdiction to appoint a successor. Upon the acceptance of its appointment as successor collateral agent hereunder, such successor collateral agent shall succeed to all the rights, powers and duties of the retiring Note Collateral Agent, and the term “Note Collateral Agent” shall mean such successor collateral agent, and the retiring Note Collateral Agent’s appointment, powers and duties as the Note Collateral Agent shall be terminated. After the retiring Note Collateral Agent’s resignation hereunder, the provisions of this Section 10.07 (and Section 10.08) shall continue to inure to its benefit and the retiring Note Collateral Agent shall not by reason of such resignation be deemed to be released from liability as to any actions taken or omitted to be taken by it while it was the Note Collateral Agent under this Indenture. The Trustee shall initially act as Note Collateral Agent and shall be authorized to appoint co-Note Collateral Agents as necessary in its sole discretion. Except as otherwise explicitly provided herein or in the Security Documents or, if applicable, the Intercreditor Agreement, neither the Note Collateral Agent nor any of its respective officers, directors, employees or agents or other related Persons shall be liable for failure to demand, collect or realize upon any of the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of any other Person or to take any other action whatsoever with regard to the Collateral or any part thereof. The Note Collateral Agent shall be accountable only for amounts that it actually receives as a result of the exercise of such powers, and neither the Note Collateral Agent nor any of its officers, directors, employees or agents shall be responsible for any act or failure to act hereunder, except for its own willful misconduct, gross negligence or bad faith.
(h) The Trustee, as such and as Note Collateral Agent, is authorized and directed by each Holder to (i) enter into the Security Documents, (ii) enter into the Intercreditor Agreement (subject to Section 9.01, Section 9.02(a) and Section 10.09), (iii) bind the Holders on the terms as set forth in the Security Documents and the Intercreditor Agreement and (iv) perform and observe its obligations under the Security Documents and the Intercreditor Agreement.

 

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(i) The Trustee agrees that it shall not (and shall not be obliged to), and shall not instruct the Note Collateral Agent to, unless specifically requested to do so by the Controlling Secured Parties, take or cause to be taken any action to enforce its rights under this Indenture, the Notes or the Security Documents or against any Issuer or Guarantor, including the commencement of any legal or equitable proceedings, to foreclose any Lien on, or otherwise enforce any security interest in, any of the Collateral.
(j) If at any time or times the Trustee shall receive (i) by payment, foreclosure, setoff or otherwise, any proceeds of Collateral or any payments with respect to the Obligations secured by the Security Documents arising under, or relating to, this Indenture, except for any such proceeds or payments received by the Trustee from the Note Collateral Agent pursuant to the terms of this Indenture, the Security Documents or the Intercreditor Agreement, or (ii) payments from the Note Collateral Agent in excess of the amount required to be paid to the Trustee pursuant to this Indenture, the Security Documents or the Intercreditor Agreement, the Trustee shall promptly turn the same over to the Note Collateral Agent, in kind, and with such endorsements as may be required to negotiate the same to the Note Collateral Agent.
(k) The Note Collateral Agent is each Holder’s agent for the purpose of perfecting the Holders’ security interest in assets which, in accordance with Article 9 of the UCC, can be perfected only by possession.
(l) The Note Collateral Agent shall have no obligation whatsoever to the Trustee or any of the Holders to assure that the Collateral exists or is owned by any Issuer, Guarantor or Absaloka or is cared for, protected, or insured or has been encumbered, or that the Note Collateral Agent’s Liens have been properly or sufficiently or lawfully created, perfected, protected, maintained or enforced or are entitled to any particular priority, or to determine whether all of the Issuer’s, Guarantor’s or Absaloka’s property constituting collateral intended to be subject to the Lien and security interest of the Security Documents has been properly and completely listed or delivered, as the case may be, or the genuineness, validity, marketability or sufficiency thereof or title thereto, or to exercise at all or in any particular manner or under any duty of care, disclosure, or fidelity, or to continue exercising, any of the rights, authorities, and powers granted or available to the Note Collateral Agent pursuant to this Indenture, any Security Document or the Intercreditor Agreement, it being understood and agreed that in respect of the Collateral, or any act, omission, or event related thereto, the Note Collateral Agent may act in any manner it may deem appropriate, in its sole discretion given the Note Collateral Agent’s interest in the Collateral and that the Note Collateral Agent shall have no other duty or liability whatsoever to the Trustee or any Holder as to any of the foregoing.
(m) No provision of this Indenture, the Intercreditor Agreement or any Security Document shall require the Note Collateral Agent (or the Trustee) to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or thereunder or to take or omit to take any action hereunder or thereunder or take any action at the request or direction of Holders (or the Trustee in the case of the Note Collateral Agent) if it shall have reasonable grounds for believing that repayment of such funds is not assured to it.

 

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(n) The Note Collateral Agent (i) shall not be liable for any action it takes or omits to take in good faith which it believes in good faith to be authorized or within its rights or powers, or for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Note Collateral Agent was grossly negligent in ascertaining the pertinent facts, (ii) shall not be liable for interest on any money received by it except as the Note Collateral Agent may agree in writing with the Issuers (and money held in trust by the Note Collateral Agent need not be segregated from other funds except to the extent required by law), (iii) may consult with counsel of its selection and the advice or opinion of such counsel as to matters of law shall be full and complete authorization and protection from liability in respect of any action taken, omitted or suffered by it in good faith and in accordance with the advice or opinion of such counsel. The grant of permissive rights or powers to the Note Collateral Agent shall not be construed to impose duties to act.
(o) Neither the Note Collateral Agent nor the Trustee shall be liable for delays or failures in performance resulting from acts beyond its control. Such acts shall include but not be limited to acts of God, strikes, lockouts, riots, acts of war, epidemics, governmental regulations imposed after the fact, fire, communication line failures, computer viruses, power failures, earthquakes or other disasters. Neither the Note Collateral Agent nor the Trustee shall be liable for any indirect, special or consequential damages (included but not limited to lost profits) whatsoever, even if it has been informed of the likelihood thereof and regardless of the form of action.
Section 10.08 Compensation and Indemnity.
The Note Collateral Agent shall be entitled to the compensation and indemnity set forth in Section 7.07 (with the references to the Trustee therein being deemed to refer to the Note Collateral Agent).
Section 10.09 Intercreditor Agreement and Other Security Documents.
(a) Subject to Section 9.01, Section 9.02 and clause (b) below, the Trustee and Note Collateral Agent is each hereby directed and authorized to execute and deliver the Intercreditor Agreement or any other Security Documents in which it is named as a party. It is hereby expressly acknowledged and agreed that, in doing so, the Trustee and the Note Collateral Agent are not responsible for the terms or contents of such agreements, or for the validity or enforceability thereof, or the sufficiency thereof for any purpose. Whether or not so expressly stated therein, in entering into, or taking (or forbearing from) any action pursuant to the Intercreditor Agreement or any Security Document, the Trustee and Note Collateral Agent each shall have all of the rights, immunities, indemnities and other protections granted to it under this Indenture (in addition to those that may be granted to it under the terms of such other agreement or agreements).

 

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(b) To the extent that the Intercreditor Agreement contains terms that are in addition to those specified in Section 9.07, the Issuer shall be authorized to determine such terms with the Revolving Credit Lender, which shall be customary terms not inconsistent with the terms set forth therein and not materially adverse to the Holders of the Notes. If the Issuer and the Revolving Lenders are unable to agree on an Intercreditor Agreement on the terms set forth in Section 9.07 in all material respects, the terms of any proposed intercreditor agreement shall require the consent of the Holders of a majority in principal amount of the Notes then outstanding in accordance with Section 9.02(a).
ARTICLE ELEVEN
NOTE GUARANTEE
Section 11.01 Unconditional Guarantee.
Subject to the provisions of this Article Eleven, each of the Guarantors hereby, jointly and severally, unconditionally and irrevocably guarantees, on a senior secured basis, to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of this Indenture, the Notes, the Security Documents or the obligations of the Issuers or any other Guarantors to the Holders, the Trustee or the Note Collateral Agent hereunder or thereunder (the “Note Guarantees”): (a) (x) the due and punctual payment of the principal of, premium, if any, and interest on the Notes when and as the same shall become due and payable, whether at maturity, upon redemption or repurchase, by acceleration or otherwise, (y) the due and punctual payment of interest on the overdue principal and (to the extent permitted by law) interest, if any, on the Notes and (z) the due and punctual payment and performance of all other obligations of the Issuers and all other obligations of the other Guarantors (including under the Note Guarantees and the Security Documents), in each case, to the Holders, the Trustee or the Note Collateral Agent hereunder or thereunder (including amounts due the Trustee or the Note Collateral Agent under Section 7.07 hereof), all in accordance with the terms hereof and thereof (collectively, the “Guarantee Obligations”); and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, the due and punctual payment and performance of Guarantee Obligations in accordance with the terms of the extension or renewal, whether at maturity, upon redemption or repurchase, by acceleration or otherwise. Failing payment when due of any amount so guaranteed, or failing performance of any other obligation of the Issuers to the Holders under this Indenture, under the Notes or the Security Documents, for whatever reason, each Guarantor shall be obligated to pay, or to perform or cause the performance of, the same immediately. An Event of Default under this Indenture, the Notes or the Security Documents shall constitute an event of default under the Note Guarantees, and shall entitle the Holders of Notes to accelerate the obligations of the Guarantors thereunder in the same manner and to the same extent as the obligations of the Issuers.

 

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Each of the Guarantors hereby agrees that its obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes, this Indenture or the Security Documents, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, any release of any other Guarantor, the recovery of any judgment against the Issuers, any action to enforce the same, whether or not a Note Guarantee is affixed to any particular Note, or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a Guarantor. Each of the Guarantors hereby waives the benefit of diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Issuers, any right to require a proceeding first against the Issuers, protest, notice and all demands whatsoever and covenants that its Note Guarantee shall not be discharged except by complete performance of the obligations contained in the Notes, this Indenture, this Note Guarantee and the Security Documents. This Note Guarantee is a guarantee of payment and not of collection. If any Holder, the Trustee or the Note Collateral Agent is required by any court or otherwise to return to the Issuers or to any Guarantor, or any custodian, trustee, liquidator or other similar official acting in relation to the Issuers or such Guarantor, any amount paid by the Issuers or such Guarantor to the Trustee, such Holder or the Note Collateral Agent, this Note Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. Each Guarantor further agrees that, as between it, on the one hand, and the Holders of Notes and the Trustee, on the other hand, (a) subject to this Article Eleven, the maturity of the obligations guaranteed hereby may be accelerated as provided in Article Six for the purposes of this Note Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (b) in the event of any acceleration of such obligations as provided in Article Six hereof, such obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantors for the purpose of this Note Guarantee.
Section 11.02 Limitation on Guarantor Liability.
Each Guarantor, and by its acceptance of Notes, each Holder, hereby confirms that it is the intention of all such parties that the Note Guarantee of such Guarantor not constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Code, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal, state, provincial, territorial or foreign law to the extent applicable to any Note Guarantee. To effectuate the foregoing intention, the Trustee, the Holders and the Guarantors hereby irrevocably agree that the obligations of such Guarantor under its Note Guarantee and this Article Eleven shall be limited to the maximum amount as will, after giving effect to (i) all other contingent and fixed liabilities of such Guarantor (including any guarantees under any revolving credit agreement permitted by Section 4.10(b)(1) that are relevant under such laws), and (ii) any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under this Article Eleven, result in the obligations of such Guarantor under its Note Guarantee not constituting a fraudulent transfer or conveyance. In order to provide for just and equitable contribution among the Guarantors, each Guarantor agrees that, in the event that any payment or distribution is made by any Guarantor (a “Funding Guarantor”) under its Note Guarantee, such Funding Guarantor shall be entitled to a contribution from each other Guarantor in a pro rata amount based on the adjusted Net Assets of each Guarantor (including the Funding Guarantor) for all payments, damages and expenses incurred by that Funding Guarantor in discharging the Guarantee Obligations.

 

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Section 11.03 Execution and Delivery of Note Guarantee.
To further evidence its Note Guarantee set forth in Section 11.01, each Guarantor hereby agrees that a notation of such Note Guarantee, substantially in the form of Exhibit C hereto, shall be endorsed on each Note authenticated and delivered by the Trustee. Such Note Guarantee shall be executed on behalf of each Guarantor by either manual or facsimile signature of one Officer or other person duly authorized by all necessary corporate action of each Guarantor who shall have been duly authorized to so execute by all requisite corporate action. The validity and enforceability of any Note Guarantee shall not be affected by the fact that it is not affixed to any particular Note.
Each of the Guarantors hereby agrees that its Note Guarantee set forth in Section 11.01 shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Note Guarantee.
If an Officer of a Guarantor whose signature is on this Indenture or a Note Guarantee no longer holds that office at the time the Trustee authenticates the Note on which such Note Guarantee is endorsed or at any time thereafter, such Guarantor’s Note Guarantee of such Note shall nevertheless be valid.
The delivery of any Note by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of any Note Guarantee set forth in this Indenture on behalf of each Guarantor.
Section 11.04 Release of a Guarantor.
A Guarantor shall be automatically released from its obligations under its Notes Guarantee and its obligations under this Indenture and the Security Documents and any of its assets that constitute Collateral will be released from the Liens created by the Security Documents:
(1) in the event of a sale or other disposition of all or substantially all of the assets of such Guarantor, by way of merger, consolidation or otherwise, a sale or other disposition of all of the Equity Interests of such Guarantor then held by the Issuers or any Restricted Subsidiary; provided, that in the case of a sale or disposition constituting an Asset Sale, the Net Available Proceeds of such sale or other disposition are applied in accordance with the provisions under Section 4.13;

 

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(2) if such Guarantor is designated as an Unrestricted Subsidiary in accordance with the provisions of this Indenture, upon effectiveness of such designation; or
(3) if the Notes are discharged or defeased in accordance with the procedures described in Sections 8.01 and 8.02.
The Trustee shall execute an appropriate instrument prepared by the Issuer evidencing the release of a Guarantor from its obligations under its Note Guarantee upon receipt of a request by the Issuers or such Guarantor accompanied by an Officers’ Certificate and an Opinion of Counsel certifying as to the compliance with this Section 11.04; provided, however, that the legal counsel delivering such Opinion of Counsel may rely as to matters of fact on one or more Officers’ Certificates of the Issuer.
Except as set forth in Articles Four and Five and this Section 11.04, nothing contained in this Indenture or in any of the Notes shall prevent any consolidation or merger of a Guarantor with or into the Issuers or another Guarantor or shall prevent any sale or conveyance of the property of a Guarantor as an entirety or substantially as an entirety to the Issuers or another Guarantor.
Section 11.05 Waiver of Subrogation.
Until this Indenture is discharged and all of the Notes are discharged and paid in full, each Guarantor hereby irrevocably waives and agrees not to exercise any claim or other rights which it may now or hereafter acquire against the Issuers or any other Guarantor that arise from the existence, payment, performance or enforcement of the Issuers’ obligations or any other Guarantor’s obligations, in each case under the Notes, this Indenture or the Security Documents and such Guarantor’s obligations under this Note Guarantee, this Indenture or the Security Documents, in any such instance including, without limitation, any right of subrogation, reimbursement, exoneration, contribution, indemnification, and any right to participate in any claim or remedy of the Holders against the Issuers or any other Guarantor, whether or not such claim, remedy or right arises in equity, or under contract, statute or common law, including, without limitation, the right to take or receive from the Issuers, directly or indirectly, in cash or other assets or by setoff or in any other manner, payment or security on account of such claim or other rights. If any amount shall be paid to any Guarantor in violation of the preceding sentence and any amounts owing to the Trustee, the Holders of Notes or the Note Collateral Agent under the Notes, this Indenture, or any other document or instrument delivered under or in connection with such agreements or instruments, shall not have been paid in full, such amount shall have been deemed to have been paid to such Guarantor for the benefit of, and held in trust for the benefit of, the Trustee, the Holders or the Note Collateral Agent and shall forthwith be paid to the Trustee for the benefit of itself, such Holders or the Note Collateral Agent to be credited and applied to the Obligations in favor of the Trustee, the Holders or the Note Collateral Agent, as the case may be, whether matured or unmatured, in accordance with the terms of this Indenture. Each Guarantor acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by this Indenture and that the waiver set forth in this Section 11.05 is knowingly made in contemplation of such benefits.

 

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Section 11.06 Immediate Payment.
Each Guarantor agrees to make immediate payment to the Trustee on behalf of the Holders of all Guarantee Obligations owing or payable to the respective Holders upon receipt of a demand for payment therefor by the Trustee to such Guarantor in writing.
Section 11.07 No Setoff.
Each payment to be made by a Guarantor hereunder in respect of the Guarantee Obligations shall be payable in the currency or currencies in which such Guarantee Obligations are denominated (the “Denominated Currency”), and shall be made without setoff, counterclaim, reduction or diminution of any kind or nature. If any Guarantor makes payment relative to any Guarantee Obligations in a currency (the “Other Currency”) other than the Denominated Currency (whether voluntarily or pursuant to an order or judgment of a court or tribunal of any jurisdiction), such payment shall constitute a discharge of such Guarantor’s Guarantee Obligations only to the extent of the amount of the Denominated Currency which the Trustee is able to purchase on behalf of the Holders of all Guarantee Obligations with the amount it receives on the date of receipt. If the amount of the Denominated Currency which the Trustee is able to purchase is less than the amount of such currency originally due to it in respect to the relevant Guarantee Obligations, the relevant Guarantor shall indemnify and save the Trustee harmless from and against any loss or damage arising as a result of such deficiency. This indemnity constitutes an obligation separate and independent from the other obligations contained in this Indenture, gives rise to a separate and independent cause of action, applies irrespective of any indulgence granted by the Trustee and continues in full force and effect notwithstanding any judgment or order in respect of any amount due hereunder or under any judgment or order.
Section 11.08 Note Guarantee Obligations Absolute.
The obligations of each Guarantor hereunder are and shall be absolute and unconditional and any monies or amounts expressed to be owing or payable by each Guarantor hereunder which may not be recoverable from such Guarantor on the basis of a Note Guarantee shall be recoverable from such Guarantor as a primary obligor and principal debtor in respect thereof.

 

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Section 11.09 Note Guarantee Obligations Continuing.
The obligations of each Guarantor hereunder shall be continuing and shall remain in full force and effect until all such obligations have been paid and satisfied in full. Each Guarantor agrees with the Trustee that it will from time to time deliver to the Trustee suitable acknowledgments of this continued liability hereunder and under any other instrument or instruments in such form as the Trustee shall reasonably request and as will prevent any action brought against it in respect of any default hereunder being barred by any statute of limitations now or hereafter in force and, in the event of the failure of a Guarantor so to do, it hereby irrevocably appoints the Trustee the attorney and agent of such Guarantor to make, execute and deliver such written acknowledgment or acknowledgments or other instruments as may from time to time become necessary or advisable, in the reasonable judgment of the Trustee on the advice of counsel, to fully maintain and keep in force the liability of such Guarantor hereunder.
Section 11.10 Note Guarantee Obligations Not Reduced.
The obligations of each Guarantor hereunder shall not be satisfied, reduced or discharged solely by the payment of such principal, premium, if any, interest, fees and other monies or amounts as may at any time prior to discharge of this Indenture pursuant to Article Eight be or become owing or payable under or by virtue of or otherwise in connection with the Notes, this Indenture or the Security Documents.
Section 11.11 Note Guarantee Obligations Reinstated.
The obligations of each Guarantor hereunder shall continue to be effective or shall be reinstated, as the case may be, if at any time any payment which would otherwise have reduced the obligations of any Guarantor hereunder (whether such payment shall have been made by or on behalf of the Issuers or by or on behalf of a Guarantor) is rescinded or reclaimed from any of the Holders upon the insolvency, bankruptcy, liquidation or reorganization of the Issuers or any Guarantor or otherwise, all as though such payment had not been made. If demand for, or acceleration of the time for, payment by the Issuers or any other Guarantor is stayed upon the insolvency, bankruptcy, liquidation or reorganization of the Issuers or such Guarantor, all such Indebtedness otherwise subject to demand for payment or acceleration shall nonetheless be payable by each Guarantor as provided herein.
Section 11.12 Note Guarantee Obligations Not Affected.
To the fullest extent permitted by applicable law, the obligations of each Guarantor hereunder shall not be affected, impaired or diminished in any way by any act, omission, matter or thing whatsoever, occurring before, upon or after any demand for payment hereunder (and whether or not known or consented to by any Guarantor or any of the Holders) which, but for this provision, might constitute a whole or partial defense to a claim against any Guarantor hereunder or might operate to release or otherwise exonerate any Guarantor from any of its obligations hereunder or otherwise affect such obligations, whether occasioned by default of any of the Holders or otherwise, including, without limitation:
(a) any limitation of status or power, disability, incapacity or other circumstance relating to the Issuers or any other Person, including any insolvency, bankruptcy, liquidation, reorganization, readjustment, composition, dissolution, winding-up or other proceeding involving or affecting the Issuers or any other Person;

 

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(b) any irregularity, defect, unenforceability or invalidity in respect of any indebtedness or other obligation of the Issuers or any other Person under this Indenture, the Notes or any other document or instrument;
(c) any failure of the Issuers or any other Guarantor, whether or not without fault on its part, to perform or comply with any of the provisions of this Indenture, the Notes, the Security Documents or any Note Guarantee, or to give notice thereof to a Guarantor;
(d) the taking or enforcing or exercising or the refusal or neglect to take or enforce or exercise any right or remedy from or against the Issuers or any other Person or their respective assets or the release or discharge of any such right or remedy;
(e) the granting of time, renewals, extensions, compromises, concessions, waivers, releases, discharges and other indulgences to the Issuers or any other Person;
(f) any change in the time, manner or place of payment of, or in any other term of, any of the Notes, or any other amendment, variation, supplement, replacement or waiver of, or any consent to departure from, any of the Notes or this Indenture, including, without limitation, any increase or decrease in the principal amount of or premium, if any, or interest on any of the Notes;
(g) any change in the ownership, control, name, objects, businesses, assets, capital structure or constitution of the Issuer, the Co-Issuer or a Guarantor;
(h) any merger or amalgamation of the Issuers or a Guarantor with any Person or Persons;
(i) the occurrence of any change in the laws, rules, regulations or ordinances of any jurisdiction by any present or future action of any Governmental Authority or court amending, varying, reducing or otherwise affecting, or purporting to amend, vary, reduce or otherwise affect, any of the Guarantee Obligations or the obligations of a Guarantor under its Note Guarantee; and
(j) any other circumstance, including release of another Guarantor pursuant to Section 11.04 (other than by complete, irrevocable payment) that might otherwise constitute a legal or equitable discharge or defense of the Issuers under this Indenture or the Notes or of a Guarantor in respect of its Note Guarantee hereunder.

 

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Section 11.13 Waiver.
Without in any way limiting the provisions of Section 11.01, each Guarantor hereby waives notice of acceptance hereof, notice of any liability of any Guarantor hereunder, notice or proof of reliance by the Holders upon the obligations of any Guarantor hereunder, and diligence, presentment, demand for payment on the Issuers, protest, notice of dishonor or non-payment of any of the Guarantee Obligations, or other notice or formalities to the Issuers or any Guarantor of any kind whatsoever.
Section 11.14 No Obligation To Take Action Against the Issuers.
Neither the Trustee nor any other Person shall have any obligation to enforce or exhaust any rights or remedies against the Issuers or any other Person or any property of the Issuers or any other Person before the Trustee is entitled to demand payment and performance by any or all Guarantors of their liabilities and obligations under their Note Guarantees or under this Indenture.
Section 11.15 Dealing with the Issuers and Others.
The Holders, without releasing, discharging, limiting or otherwise affecting in whole or in part the obligations and liabilities of any Guarantor hereunder and under the Note Guarantees and without the consent of or notice to any Guarantor, may
(a) grant time, renewals, extensions, compromises, concessions, waivers, releases, discharges and other indulgences to the Issuers or any other Person;
(b) take or abstain from taking security or collateral from the Issuers or from perfecting security or collateral of the Issuers;
(c) release, discharge, compromise, realize, enforce or otherwise deal with or do any act or thing in respect of (with or without consideration) any and all collateral, mortgages or other security given by the Issuers or any third party with respect to the obligations or matters contemplated by this Indenture or the Notes;
(d) accept compromises or arrangements from the Issuers;
(e) apply all monies at any time received from the Issuers or from any security upon such part of the Guarantee Obligations as the Holders may see fit or change any such application in whole or in part from time to time as the Holders may see fit; and
(f) otherwise deal with, or waive or modify their right to deal with, the Issuers and all other Persons and any security as the Holders or the Trustee may see fit.

 

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Section 11.16 Default and Enforcement.
If any Guarantor fails to pay in accordance with Section 11.06 hereof, subject to the provisions of the Intercreditor Agreement (if any), the Trustee may proceed in its name as trustee hereunder in the enforcement of the Note Guarantee of any such Guarantor and such Guarantor’s obligations thereunder and hereunder by any remedy provided by law, whether by legal proceedings or otherwise, and to recover from such Guarantor the obligations.
Section 11.17 Amendment, Etc.
No amendment, modification or waiver of any provision of this Indenture relating to any Guarantor or consent to any departure by any Guarantor or any other Person from any such provision will in any event be effective unless it is signed by such Guarantor and the Trustee.
Section 11.18 Acknowledgment.
Each Guarantor hereby acknowledges communication of the terms of this Indenture and the Notes and consents to and approves of the same.
Section 11.19 Costs and Expenses.
Each Guarantor shall pay on demand by the Trustee any and all reasonable, documented out-of-pocket costs, fees and expenses (including, without limitation, reasonable legal fees) incurred by the Trustee, the Note Collateral Agent and their respective agents, advisors and counsel or any of the Holders in enforcing any of their rights under any Note Guarantee.
Section 11.20 No Merger or Waiver; Cumulative Remedies.
No Note Guarantee shall operate by way of merger of any of the obligations of a Guarantor under any other agreement, including, without limitation, this Indenture. No failure to exercise and no delay in exercising, on the part of the Trustee or the Holders, any right, remedy, power or privilege under the Note Guarantees or under this Indenture or the Notes, shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege under the Note Guarantees or under this Indenture or the Notes preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges in the Note Guarantee and under this Indenture, the Notes, the Intercreditor Agreement (if any), the Security Documents and any other document or instrument between a Guarantor and/or the Issuers and the Trustee are cumulative and not exclusive of any rights, remedies, powers and privilege provided by law.

 

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Section 11.21 Survival of Note Guarantee Obligations.
Without prejudice to the survival of any of the other obligations of each Guarantor hereunder, the obligations of each Guarantor under Section 11.01 shall survive the payment in full of the Guarantee Obligations and shall be enforceable against such Guarantor, to the fullest extent permitted by law, without regard to and without giving effect to any defense, right of offset or counterclaim available to or which may be asserted by the Issuers or any Guarantor.
Section 11.22 Note Guarantee in Addition to Other Guarantee Obligations.
The obligations of each Guarantor under its Note Guarantee and this Indenture are in addition to and not in substitution for any other obligations to the Trustee or to any of the Holders in relation to this Indenture or the Notes and any guarantees or security at any time held by or for the benefit of any of them.
Section 11.23 Severability.
Any provision of this Article Eleven which is prohibited or unenforceable in any jurisdiction shall not invalidate the remaining provisions and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction unless its removal would substantially defeat the basic intent, spirit and purpose of this Indenture and this Article Eleven.
Section 11.24 Successors and Assigns.
Each Note Guarantee shall be binding upon and inure to the benefit of each Guarantor and the Trustee and the other Holders and the Note Collateral Agent and their respective successors and permitted assigns, except that no Guarantor may assign any of its obligations under the Note Guarantees and this Indenture.

 

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ARTICLE TWELVE
MISCELLANEOUS
Section 12.01 Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies, or conflicts with another provision which is required or deemed to be included in this Indenture by the Trust Indenture Act, such required or deemed provision shall control.
Section 12.02 Notices.
Any notices or other communications required or permitted hereunder shall be in writing, and shall be sufficiently given if made by hand delivery, by telex, by nationally recognized overnight courier service, by telecopier or registered or certified mail, postage prepaid, return receipt requested, addressed as follows:
if to the Issuers or a Guarantor:
Westmoreland Coal Company
2 North Cascade Avenue, 2nd Floor
Colorado Springs, CO 80903
Attention: General Counsel
Telephone: (719) 442-2600
Facsimile: (719) 448-5826
with a copy to:
Davis Graham & Stubbs LLP
1550 Seventeenth Street, Suite 500
Denver, CO 80202
Attention: John A. Elofson, Esq.
Facsimile: (303) 893-1379
if to the Trustee:
Wells Fargo Bank, National Association
201 Main Street
Suite 301
Fort Worth, TX 76102
Attention: Corporate Trust and Escrow Services
Telephone: (817) 334-7065
Facsimile: (817) 885-8650
if to the Note Collateral Agent:
Wells Fargo Bank, National Association
201 Main Street
Suite 301
Fort Worth, TX 76102
Attention: Corporate Trust and Escrow Services
Telephone: (817) 334-7065
Facsimile: (817) 885-8650

 

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Each of the Issuer and the Trustee by written notice to each other such Person may designate additional or different addresses for notices to such Person. Any notice or communication to the Issuers and the Trustee, shall be deemed to have been given or made as of the date so delivered if personally delivered; when answered back if by telex; when receipt is acknowledged, if telecopied; five (5) calendar days after mailing if sent by registered or certified mail, postage prepaid (except that a notice of change of address shall not be deemed to have been given until actually received by the addressee); and next Business Day if by nationally recognized overnight courier service.
Any notice or communication mailed to a Holder shall be mailed to him by first class mail or other equivalent means at his address as it appears on the registration books of the Registrar and shall be sufficiently given to him if so mailed within the time prescribed.
Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it.
Section 12.03 Communications by Holders with Other Holders.
Holders may communicate pursuant to Trust Indenture Act § 312(b) with other Holders with respect to their rights under this Indenture, the Notes or the Note Guarantees. The Issuers, the Guarantors, the Trustee, the Registrar and any other Person shall have the protection of Trust Indenture Act § 312(c).
Section 12.04 Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Issuer to the Trustee to take any action under this Indenture, the Issuer shall furnish to the Trustee at the request of the Trustee:
(1) an Officers’ Certificate, in form and substance satisfactory to the Trustee, stating that, in the opinion of the signers, all conditions precedent to be performed or effected by the Issuers or the Guarantors, if any, provided for in this Indenture relating to the proposed action have been complied with; and
(2) an Opinion of Counsel stating that, in the opinion of such counsel, any and all such conditions precedent have been complied with.
Section 12.05 Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture, other than the Officers’ Certificate required by Section 4.06, shall include:
(1) a statement that the Person making such certificate or opinion has read such covenant or condition;

 

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(2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with or satisfied; and
(4) a statement as to whether or not, in the opinion of each such Person, such condition or covenant has been complied with; provided, however, that with respect to matters of fact an Opinion of Counsel may rely on an Officers’ Certificate or certificates of public officials.
Section 12.06 Rules by Trustee, Paying Agent, Registrar.
The Trustee, Paying Agent or Registrar may make reasonable rules for its functions.
Section 12.07 Legal Holidays.
If a payment date is not a Business Day, payment may be made on the next succeeding day that is a Business Day.
Section 12.08 Governing Law.
This Indenture, the Notes, the Note Guarantees, the Security Documents (except as to real estate and certain other security documents required to be governed by local law) and the Intercreditor Agreement will be governed by, and construed in accordance with, the laws of the State of New York.
Section 12.09 No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or debt agreement of any of the Issuers or any of its Subsidiaries. Any such indenture, loan or debt agreement may not be used to interpret this Indenture.
Section 12.10 No Recourse Against Others.
No director, officer, employee, incorporator, stockholder, member or manager of the Issuer, the Co-Issuer or any Restricted Subsidiary will have any liability for any obligations of the Issuer or the Co-Issuer under the Notes, this Indenture, the Security Documents or the Intercreditor Agreement or of any Guarantor under its Note Guarantee or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes and the Note Guarantees. The waiver may not be effective to waive liabilities under the federal securities laws. It is the view of the SEC that this type of waiver is against public policy.

 

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Section 12.11 Successors.
All agreements of the Issuers and the Guarantors in this Indenture, the Notes and the Note Guarantees shall bind their respective successors. All agreements of the Trustee in this Indenture shall bind its successor.
Section 12.12 Duplicate Originals.
All parties may sign any number of copies of this Indenture. Each signed copy or counterpart shall be an original, but all of them together shall represent the same agreement. Delivery of an executed counterpart of this Indenture by facsimile or electronic transmission shall be equally as effective as delivery of an original executed counterpart of this Indenture. Any party delivering an executed counterpart of this Indenture by facsimile or electronic transmission also shall deliver an original executed counterpart of this Indenture, but the failure to deliver an original executed counterpart shall not affect the validity, enforceability and binding effect of this Indenture.
Section 12.13 Severability.
In case any one or more of the provisions in this Indenture, in the Notes or in the Note Guarantees shall be held invalid, illegal or unenforceable, in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions shall not in any way be affected or impaired thereby, it being intended that all of the provisions hereof shall be enforceable to the full extent permitted by law.
[Signature Page Follows]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed all as of the date first written above.
                 
    WESTMORELAND COAL COMPANY    
 
                
    By:   /s/ Keith E. Alessi    
             
        Name: Keith E. Alessi    
        Title: President and Chief Executive Officer    
 
                
    WESTMORELAND PARTNERS    
 
                
    By:   Westmoreland-Roanoke Valley, L.P.
its general partner		    
 
                
    By:   WEI-Roanoke Valley, Inc.
its general partner		    
 
                
 
      By:   /s/ Jennifer S. Grafton    
 
               
 
          Name: Jennifer S. Grafton    
 
          Title: General Counsel and Secretary    
 
                
    By:   Westmoreland-North Carolina Power, L.L.C.
its general partner		    
 
                
 
      By:   /s/ Jennifer S. Grafton    
 
               
 
          Name: Jennifer S. Grafton    
 
          Title: General Counsel and Secretary    
[Signature Page to Indenture]

 

 

 

             
    WESTMORELAND ENERGY LLC    
 
            
 
  By:   /s/ Jennifer S. Grafton
 
Name: Jennifer S. Grafton 		   
 
      Title: General Counsel and Secretary    
 
            
    WESTMORELAND - NORTH CAROLINA POWER L.L.C.    
 
            
 
  By:   /s/ Jennifer S. Grafton
 
Name: Jennifer S. Grafton 		   
 
      Title: General Counsel and Secretary    
 
            
    WEI-ROANOKE VALLEY, INC.    
 
            
 
  By:   /s/ Jennifer S. Grafton
 
Name: Jennifer S. Grafton 		   
 
      Title: General Counsel and Secretary    
 
            
    WESTMORELAND RESOURCES, INC.    
 
            
 
  By:   /s/ Jennifer S. Grafton
 
Name: Jennifer S. Grafton 		   
 
      Title: General Counsel and Secretary    
[Signature Page to Indenture]

 

 

             
    WRI PARTNERS, INC.    
 
            
 
  By:   /s/ Jennifer S. Grafton
 
Name: Jennifer S. Grafton 		   
 
      Title: General Counsel and Secretary    
 
            
    WESTMORELAND MINING SERVICES, INC.    
 
            
 
  By:   /s/ Jennifer S. Grafton
 
Name: Jennifer S. Grafton 		   
 
      Title: Associate General Counsel and Assistant Secretary    
 
            
    WESTMORELAND COAL SALES COMPANY, INC.    
 
            
 
  By:   /s/ Jennifer S. Grafton
 
Name: Jennifer S. Grafton 		   
 
      Title: Associate General Counsel and Assistant Secretary    
 
            
    WESTMORELAND POWER, INC.    
 
            
 
  By:   /s/ Jennifer S. Grafton
 
Name: Jennifer S. Grafton 		   
 
      Title: Associate General Counsel and Assistant Secretary    
[Signature Page to Indenture]

 

 

                 
    WCC LAND HOLDING COMPANY, INC.    
 
                
    By:   /s/ Jennifer S. Grafton    
             
        Name: Jennifer S. Grafton    
        Title: Associate General Counsel and Assistant Secretary    
 
                
    WESTMORELAND - ROANOKE VALLEY, L.P.    
 
                
    By:   WEI-Roanoke Valley, Inc.,    
        its general partner    
 
                
 
      By:   /s/ Jennifer S. Grafton
 
Name: Jennifer S. Grafton 		   
 
          Title: Secretary    
[Signature Page to Indenture]

 

 

             
    WELLS FARGO BANK, NATIONAL ASSOCIATION    
    as Trustee    
 
            
 
  By:   /s/ John C. Stohlman
 
Name: John C. Stohlmann 		   
 
      Title: Vice President    
 
            
    WELLS FARGO BANK, NATIONAL ASSOCIATION    
    as Note Collateral Agent    
 
            
 
  By:   /s/ John C. Stohlman
 
Name: John C. Stohlmann 		   
 
      Title: Vice President    
[Signature Page to Indenture]

 

 

EXHIBIT A
[Insert the Restricted Notes Legend, if applicable pursuant to the provisions of the Indenture]
[Insert the Temporary Regulation S Global Note Legend, if applicable pursuant to the provisions of the Indenture]
[Insert the Global Note Legend, if applicable pursuant to the provisions of the Indenture]
[Insert the OID Legend, if applicable pursuant to the provisions of the Indenture]
WESTMORELAND COAL COMPANY
WESTMORELAND PARTNERS
10.75% Senior Secured Notes due 2018
       
      CUSIP No.
No.     $
WESTMORELAND COAL COMPANY, a Delaware corporation (the “Issuer”), and WESTMORELAND PARTNERS, a Virginia partnership (the “Co-Issuer” and, together with the Issuer, the “Issuers”), for value received promise to pay to CEDE & CO. or its registered assigns, the principal sum of  _____  on February 1, 2018.
Interest Payment Dates: February 1 and August 1, commencing August 1, 2011.
Record Dates: January 15 and July 15.
Reference is made to the further provisions of this Note contained herein, which will for all purposes have the same effect as if set forth at this place.

 

A-1

 

IN WITNESS WHEREOF, the Issuers have caused this Note to be signed manually or by facsimile by its duly authorized officer.
Dated:
                 
    WESTMORELAND COAL COMPANY    
 
                
 
  By:            
             
        Name: Keith E. Alessi    
        Title: President and Chief Executive Officer    
 
                
    WESTMORELAND PARTNERS    
 
                
    By:   Westmoreland-Roanoke Valley, L.P.    
        its general partner    
 
                
 
  By:    WEI-Roanoke Valley, Inc.    
 
      its general partner    
 
                
 
      By:        
 
         
 
Name: Jennifer S. Grafton 		   
 
          Title: General Counsel and Secretary    
 
                
    By:   Westmoreland-North Carolina Power, L.L.C.    
        its general partner    
 
                
 
      By:        
 
         
 
Name: Jennifer S. Grafton 		   
 
          Title: General Counsel and Secretary    
[Signature Page to the Note]

 

 

This is one of the 10.75% Senior Secured Notes due 2018 described in the within-mentioned Indenture.
             
Dated:   WELLS FARGO BANK, NATIONAL ASSOCIATION,    
    as Trustee    
 
            
 
  By:        
 
     
 
Name: John C. Stohlmann 		   
 
      Title: Vice President    
[Signature Page to the Note]

 

 

(Reverse of Note)
10.75% Senior Secured Notes due 2018
Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated.
SECTION 1. Interest. WESTMORELAND COAL COMPANY, a Delaware corporation (the “Issuer”), and WESTMORELAND PARTNERS, a Virginia partnership (the “Co-Issuer” and, together with the Issuer, the “Issuers”), promise to pay interest on the principal amount of this Note at 10.75% per annum from February 4, 20111 until maturity. [The Holder of this Note is entitled to the benefits of the Registration Rights Agreement, dated February 4, 2011, between the Issuers, the Guarantors and the Initial Purchaser named therein (the “Registration Rights Agreement”), including the right to receive Special Interest (as defined in the Registration Rights Agreement).]2 The Issuers will pay interest semi-annually on February 1 and August 1 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each an “Interest Payment Date”), commencing August 1, 2011. Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of original issuance. Interest will be computed on the basis of a 360-day year of twelve 30-day months. Interest (including post-petition interest in any proceedings under bankruptcy law) on overdue principal and premium, if any, and (to the extent permitted by law) on overdue installments of interest and Additional Interest will accrue at 2% per annum in excess of the rate of interest on the Notes without regard to any applicable grace period, and in each case will be payable from time to time on demand.
SECTION 2. Method of Payment. The Issuers will pay interest on the Notes (except defaulted interest) to the Persons who are registered Holders of Notes at the close of business on the January 15 or July 15 next preceding the Interest Payment Date, even if such Notes are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. The Notes will be issued in denominations of $2,000 or integral multiples of $1,000 in excess thereof.
The Issuers shall pay principal, premium, if any, and interest on the Notes in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts (“U.S. Legal Tender”). Principal, premium, if any, and interest on the Notes will be payable at the office or agency of the Issuer maintained for such purpose except that, at the option of the Issuer, the payment of interest may be made by check mailed to the Holders of the Notes at their respective addresses set forth in the register of Holders of Notes; provided that all payments of principal, premium and interest with respect to Notes the Holders of which have given wire transfer instructions to the Issuer at least ten Business Days prior to the relevant Interest Payment Date will be required to be made by wire transfer of immediately available funds to the accounts specified by the Holders thereof to an account in the United States. Until otherwise designated by the Issuer, the Issuer’s office or agency in New York will be the office of the Trustee maintained for such purpose.
 
     
1   For Initial Notes only.
 
2   Include only for Initial Note.

 

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SECTION 3. Paying Agent and Registrar. Initially, Wells Fargo Bank, National Association, the Trustee under the Indenture, will act as Paying Agent and Registrar. The Issuer may change any Paying Agent or Registrar without notice to any Holder. The Issuers or any of their Subsidiaries may act in any such capacity.
SECTION 4. Indenture. The Issuers issued the Notes under an Indenture dated as of February 4, 2011 (“Indenture”) by and among the Issuer, the Co-Issuer, the Guarantors, the Note Collateral Agent and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code §§ 77aaa-77bbbb) (the “Trust Indenture Act”). The Notes are subject to all such terms, and Holders are referred to the Indenture and the Trust Indenture Act for a statement of such terms.
SECTION 5. Optional Redemption. Except as set forth in Section 6 hereof, the Notes may not be redeemed prior to February 1, 2015. At any time or from time to time on or after February 1, 2015, the Issuer, at its option, may redeem the Notes, in whole or in part, upon not less than 30 nor more than 60 days’ notice, at the redemption prices (expressed as percentages of principal amount) set forth below, together with accrued and unpaid interest thereon, if any, to the Redemption Date, if redeemed during the 12-month period beginning February 1 of the years indicated:
         
Year   Percentage  
 
2015
     103.583 %
2016
     101.792 %
2017 and thereafter
     100.000 %
SECTION 6. Optional Redemption upon Qualified Equity Offerings. (a) At any time or from time to time prior to February 1, 2015, the Issuer, at its option, may redeem up to 35% of the aggregate principal amount of Notes issued under the Indenture (including the principal amount of any Additional Notes issued under the Indenture but without duplication with respect to the Exchange Notes) with the net cash proceeds of one or more Qualified Equity Offerings at a redemption price equal to 110.75% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest thereon, if any, to the Redemption Date; provided that (i) at least 65% of the aggregate principal amount of Notes issued under the Indenture (including the principal amount of any Additional Notes issued under the Indenture but without duplication with respect to the Exchange Notes) remains outstanding immediately after the occurrence of such redemption and (ii) such redemption shall occur within 60 days of the date of the closing of any such Qualified Equity Offering.

 

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SECTION 7. Repurchase at Option of Holder. Upon the occurrence of a Change of Control, and subject to certain conditions set forth in the Indenture, the Issuer will be required to offer to purchase all of the outstanding Notes at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, thereon to the date of repurchase.
The Issuer is, subject to certain conditions and exceptions, obligated to make an offer to purchase Notes at 100% of their principal amount, plus accrued and unpaid interest, if any, thereon to the date of repurchase, with (i) net cash proceeds of certain sales or other dispositions of assets and (ii) Excess Cash Flow, in each case in accordance with the Indenture.
SECTION 8. Notice of Redemption. Notice of redemption will be mailed by first class mail at least 30 days but not more than 60 days before the date of redemption to each Holder of Notes to be redeemed at its registered address. Notes in denominations larger than $2,000 may be redeemed in part. If any Note is to be redeemed in part only, the notice of redemption that relates to such Note shall state the portion of the principal amount thereof to be redeemed. A new Note in principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Note. Notes called for redemption become due on the date fixed for redemption. On and after the date of redemption, interest will cease to accrue on Notes or portions thereof called for redemption and redeemed Notes will be cancelled as of the redemption date so long as the Issuer has deposited with the paying agent for the Notes funds in satisfaction of the redemption price (including accrued and unpaid interest on the Notes to be redeemed) pursuant to the Indenture.
SECTION 9. Denominations, Transfer, Exchange. The Notes are in registered form without coupons in denominations of $2,000 or integral multiples of $1,000 in excess thereof. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Issuers may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Issuers and the Registrar are not required to transfer or exchange any Note selected for redemption. Also, the Issuers and the Registrar are not required to transfer or exchange any Notes for a period of 15 days before a selection of Notes to be redeemed.
SECTION 10. Persons Deemed Owners. The registered Holder of a Note may be treated as its owner for all purposes.

 

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SECTION 11. Amendment, Supplement and Waiver. Subject to certain exceptions, the Indenture and the Notes may be amended or supplemented with the written consent of the Holders of at least a majority in aggregate principal amount of the Notes then outstanding, and any existing Default or compliance with any provision may be waived with the consent of the Holders of a majority in aggregate principal amount of the Notes then outstanding. Without notice to or consent of any Holder, the parties thereto may amend or supplement the Indenture and the Notes to, among other things, cure any ambiguity, defect or inconsistency in the Indenture, provide for uncertificated Notes in addition to certificated Notes, maintain the qualification of the Indenture under the Trust Indenture Act, or make any change that does not materially adversely affect the rights of any Holder of a Note. In addition, without notice to or consent of any Holder, the Issuers may enter into an Intercreditor Agreement if a Revolving Credit Facility is entered into after the date of the Indenture; provided that any such Intercreditor Agreement shall contain the terms as are specified in Section 9.07 of the Indenture, in all material respects.
SECTION 12. Defaults and Remedies. If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes generally may declare all the Notes to be due and payable immediately. Notwithstanding the foregoing, in the case of a Default arising from certain events of bankruptcy or insolvency as set forth in the Indenture, with respect to the Issuer or the Co-Issuer, all outstanding Notes will become due and payable without further action or notice. Holders of the Notes may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default (except a Default relating to the payment of principal or interest including an accelerated payment or the failure to make a payment on the Change of Control Payment Date, the Net Proceeds Payment Date pursuant to a Net Proceeds Offer or the Excess Cash Flow Payment Date pursuant to an Excess Cash Flow Offer or a Default in complying with the provisions of Article Five of the Indenture) if it determines that withholding notice is in their interest. The Holders of a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default and its consequences under the Indenture except a continuing Default in the payment of interest on, or the principal of, or the premium on, the Notes.
SECTION 13. Restrictive Covenants. The Indenture contains certain covenants that, among other things, limit the ability of the Issuer, the Co-Issuer and the Restricted Subsidiaries of the Issuer to make restricted payments, to incur indebtedness, to create liens, to sell assets, to permit restrictions on dividends and other payments by Restricted Subsidiaries of the Issuer, to consolidate, merge or sell all or substantially all of their assets or to engage in transactions with affiliates. The Indenture also requires the Issuer to provide Holders of the Notes with the right to purchase, on a pro rata basis with respect to Notes held as of such date, Additional Notes in certain circumstances after June 30,2015. The limitations are subject to a number of important qualifications and exceptions. The Issuers must annually report to the Trustee on compliance with such limitations.

 

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SECTION 14. No Recourse Against Others. No director, officer, employee, incorporator, stockholder, partner, member or manager of the Issuer, the Co-Issuer or any Guarantor shall have any liability for any obligations of the Issuers under the Notes or the Indenture, or of any Guarantor under its Note Guarantee or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes.
SECTION 15. Note Guarantees. This Note will be entitled to the benefits of certain Note Guarantees made for the benefit of the Holders. Reference is hereby made to the Indenture for a statement of the respective rights, limitations of rights, duties and obligations thereunder of the Guarantors, the Trustee and the Holders.
SECTION 16. Collateral. The Notes and the Note Guarantees are secured by the Note Liens on the Collateral, subject to Permitted Liens and the exclusion of Excluded Property, on the terms and conditions set forth in the Indenture, the Intercreditor Agreement (if a Revolving Credit Facility is entered into) and the Security Documents. If the Issuer, the Co-Issuer, any Guarantor or Absaloka enters into a Revolving Credit Facility after the date of the Indenture on the terms permitted by the Indenture, the Revolving Lenders will be entitled, pursuant to an Intercreditor Agreement to be entered into on such terms set forth in Section 9.07 of the Indenture, to a Revolving Facility First-Priority Lien on the Revolving Facility First-Priority Collateral, and the holders of the Notes would have a Note Second-Priority Lien on the Revolving Facility First-Priority Collateral. The Note Collateral Agent holds the Note Lien on the Collateral in trust for the benefit of the Trustee and the Holders pursuant to the Indenture, the Security Documents and (if applicable) the Intercreditor Agreement. Each Holder, by accepting this Note, consents and agrees to the terms of the Security Documents (including the provisions providing for the foreclosure and release of Collateral) and the Intercreditor Agreement on the terms set forth in Section 9.07 of the Indenture as the same may be in effect or may be amended from time to time in accordance with their terms and the Indenture, and authorizes and directs the Note Collateral Agent to enter into the Security Documents and the Intercreditor Agreement, and to perform its obligations and exercise its rights thereunder in accordance therewith.
SECTION 17. Trustee Dealings with the Issuers. The Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with the Issuers, their Subsidiaries or their respective Affiliates as if it were not the Trustee.
SECTION 18. Authentication. This Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent.
SECTION 19. Abbreviations. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entirety), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).

 

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SECTION 20. CUSIP Numbers. The Issuers in issuing the Notes may use “CUSIP” numbers, “ISINs” and “Common Code” numbers (if then generally in use) and, if so, the Trustee shall use CUSIP numbers, ISINs and “Common Code” numbers in notices of redemption or exchange as a convenience to Holders; provided, however, that any such notice may state that no representation is made as to the correctness of such numbers, either as printed on the Notes or as contained in any notice of a redemption that reliance may be placed only on the other identification numbers printed on the Notes and that any such redemption shall not be affected by any defect in or omission of such numbers. The Issuer shall promptly advise the Trustee in writing of any change in the CUSIP numbers, ISINs and Common Code numbers.
SECTION 21. Governing Law. This Note shall be governed by, and construed in accordance with, the laws of the State of New York without giving effect to applicable principles of conflicts of laws to the extent that the application of the laws of another jurisdiction would be required thereby.
The Issuers will furnish to any Holder upon written request and without charge a copy of the Indenture.

 

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ASSIGNMENT FORM
I or we assign and transfer this Note to
 
 
(Print or type name, address and zip code of assignee or transferee)
 
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint                                                                 agent to transfer this Note on the books of the Issuer. The agent may substitute another to act for him.
                   
Dated:
            Signed:    
               
 
                (Sign exactly as name appears on the other side of this Note)
Signature Guarantee:              
             
            Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor program reasonably acceptable to the Trustee)
In connection with any transfer of this Note occurring prior to the date which is the earlier of (i) the date of the declaration by the SEC of the effectiveness of a registration statement under the Securities Act of 1933, as amended (the “Securities Act”), covering resales of this Note (which effectiveness shall not have been suspended or terminated at the date of the transfer) and (ii) the date following the first anniversary of the original issuance of this Note, the undersigned confirms that it has not utilized any general solicitation or general advertising in connection with the transfer:
[Check One]
(1) o   to the Issuer, the Co-Issuer or a subsidiary thereof; or
 
(2) o   pursuant to and in compliance with Rule 144A under the Securities Act; or
 
(3) o   outside the United States to a “foreign purchaser” in compliance with Rule 904 of Regulation S under the Securities Act; or
 
(4) o   pursuant to the exemption from registration provided by Rule 144 under the Securities Act; or
 
(5) o   pursuant to an effective registration statement under the Securities Act; or
 
(6) o   pursuant to another available exemption from the registration statement requirements of the Securities Act of 1933;

 

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and unless the box below is checked, the undersigned confirms that such Note is not being transferred to an “affiliate” of the Issuers as defined in Rule 144 under the Securities Act (an “Affiliate”):
o The transferee is an Affiliate of the Issuer.
Unless one of the items is checked, the Trustee will refuse to register any of the Notes evidenced by this certificate in the name of any person other than the registered Holder thereof; provided, however, that if item (3), (4) or (6) is checked, the Issuer or the Trustee may require, prior to registering any such transfer of the Notes, in their sole discretion, such written legal opinions, certifications (including an investment letter in the case of box (3)) and other information as the Trustee or the Issuer has reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act.
If none of the foregoing items are checked, the Trustee or Registrar shall not be obligated to register this Note in the name of any person other than the Holder hereof unless and until the conditions to any such transfer of registration set forth herein and in Section 2.16 of the Indenture shall have been satisfied.
                 
Dated:
          Signed:    
             
 
              (Sign exactly as name appears on the other side of this Note)
Signature Guarantee:            
         
            Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor program reasonably acceptable to the Trustee)
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a “qualified institutional buyer” within the meaning of Rule 144A under the Securities Act and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Issuers as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned’s foregoing representations in order to claim the exemption from registration provided by Rule 144A.
         
Dated:
        
 
       
 
      NOTICE: To be executed by an executive officer

 

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[TO BE ATTACHED TO GLOBAL NOTES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE
The following increases or decreases in this Global Note have been made:
                                 
    Amount of decrease in     Amount of increase in     Principal amount of this     Signature of authorized  
Date of   Principal amount of this     Principal amount of this     Global Note following such     officer of Trustee or Notes  
Exchange   Global Note     Global Note     decrease or increase     Custodian  
 
                                

 

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EXHIBIT B
[FORM OF LEGENDS]
(i) (a) [Global Notes Legend]:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), NEW YORK, NEW YORK, TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.
(b) [For Temporary Regulation S Global Note Only]:
A PURCHASER IN A SALE THAT OCCURS OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S ACKNOWLEDGES THAT UNTIL THE EXPIRATION OF THE “40-DAY DISTRIBUTION COMPLIANCE PERIOD” WITHIN THE MEANING OF RULE 903 OF REGULATION S, ANY OFFER OR SALE OF THE NOTES SHALL NOT BE MADE BY IT TO A U.S. PERSON OR FOR THE ACCOUNT OR BENEFIT OF A U.S. PERSON WITHIN THE MEANING OF RULE 902(K) OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED.
(iii) [Form OID Legend]:
THE FOLLOWING INFORMATION IS SUPPLIED SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES. THIS NOTE WAS ISSUED WITH “ORIGINAL ISSUE DISCOUNT” (“OID”) WITHIN THE MEANING OF SECTION 1273 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), AND THIS LEGEND IS REQUIRED BY SECTION 1275(c) OF THE CODE:
HOLDERS MAY OBTAIN INFORMATION REGARDING THE AMOUNT OF OID, THE ISSUE PRICE, THE ISSUE DATE, AND THE YIELD TO MATURITY RELATING TO THE NOTES BY CONTACTING THE OFFICE OF THE CHIEF FINANCIAL OFFICER, WESTMORELAND COAL COMPANY, 2 NORTH CASCADE AVE., 2ND FLOOR, COLORADO SPRINGS, COLORADO 80903.

 

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(iv) [Certificated Notes Legend]:
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.
(v) [Restricted Notes Legend for all Restricted Notes]:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE EXPIRATION OF THE APPLICABLE HOLDING PERIOD WITH RESPECT TO RESTRICTED SECURITIES SET FORTH IN RULE 144 UNDER THE SECURITIES ACT (THE “RESALE RESTRICTION TERMINATION DATE”) ONLY (A) TO THE ISSUER OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHICH NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS IN OFFSHORE TRANSACTIONS WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL “ACCREDITED INVESTOR” WITHIN THE MEANING OF SUBPARAGRAPH (A)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION

 

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FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, AND IN EACH CASE IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER APPLICABLE JURISDICTIONS SUBJECT TO THE ISSUER’S AND THE TRUSTEE’S, OR TRANSFER AGENT’S, AS APPLICABLE, RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE OR TRANSFER AGENT. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.

 

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EXHIBIT C
NOTE GUARANTEE
For value received, each of the undersigned hereby unconditionally guarantees, as principal obligor and not only as a surety, to the Holder of this Note the cash payment in United States dollars of principal of, premium, if any, and interest on this Note in the amounts and at the times when due and interest on the overdue principal, premium, if any, and interest, if any, of this Note, if lawful, and the payment or performance of all other obligations of the Issuers under the Indenture (as defined below), the Security Documents or the Notes, to the Holder of this Note and the Trustee, all in accordance with and subject to the terms and limitations of this Note, Article Eleven of the Indenture and this Note Guarantee. This Note Guarantee will become effective in accordance with Article Eleven of the Indenture and its terms shall be evidenced therein. The validity and enforceability of any Note Guarantee shall not be affected by the fact that it is not affixed to any particular Note.
Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Indenture dated as of February 4, 2011, among Westmoreland Coal Company, a Delaware corporation (the “Issuer”), and Westmoreland Partners, a Virginia partnership (the “Co-Issuer” and, together with the Issuer, the “Issuers”), the Guarantors named therein and Wells Fargo Bank, National Association, a national banking association, as trustee (in such capacity, the “Trustee”) and collateral agent, as amended or supplemented (the “Indenture”).
The obligations of the undersigned to the Holders of Notes and to the Trustee pursuant to this Note Guarantee and the Indenture are expressly set forth in Article Eleven of the Indenture and reference is hereby made to the Indenture for the precise terms of the Note Guarantee and all of the other provisions of the Indenture to which this Note Guarantee relates.
No director, officer, employee, incorporator, stockholder, partner, member or manager of any Guarantor, as such, shall have any liability for any obligations of such Guarantors under such Guarantors’ Note Guarantee or for any claim based on, in respect of, or by reason of, such obligation or its creation.
This Note Guarantee shall be governed by, and construed in accordance with, the laws of the State of New York. The undersigned Guarantor hereby agrees to submit to the jurisdiction of the courts of the State of New York in any action or proceeding arising out of or relating to this Note Guarantee.
This Note Guarantee is subject to release upon the terms set forth in the Indenture.

 

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IN WITNESS WHEREOF, each Guarantor has caused its Note Guarantee to be duly executed.
Date:
         
  [                                        ]
 		  
  By:      
    Name:      
    Title:      

 

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EXHIBIT D
Regulation S Certificate
_________, ____
Wells Fargo Bank, National Association
201 Main Street
Suite 301
Fort Worth, TX 76102
Attention: Corporate Trust Administration
         
 
  Re:   WESTMORELAND COAL COMPANY and
 
      WESTMORELAND PARTNERS, as issuers of
 
      10.75% Senior Secured
 
      Notes due 2018 (the “Notes”)
 
      Issued under the Indenture (the “Indenture”) dated as of
 
      February 4, 2011 relating to the Notes
Ladies and Gentlemen:
Terms are used in this Certificate as used in Regulation S (“Regulation S”) under the Securities Act of 1933, as amended (the “Securities Act”), except as otherwise stated herein.
[CHECK A OR B AS APPLICABLE.]
  o A.   This Certificate relates to our proposed transfer of $            principal amount of Notes issued under the Indenture. We hereby certify as follows:
  1.   The offer and sale of the Notes was not and will not be made to a U.S. Person or a person in the United States (unless such person is excluded from the definition of “U.S. person” pursuant to Rule 902(k)(2)(vi) or the account held by it for which it is acting is excluded from the definition of “U.S. person” pursuant to Rule 902(k)(2)(i) under the circumstances described in Rule 902(h)(3)) and such offer and sale was not and will not be specifically targeted at an identifiable group of U.S. citizens abroad.
 
  2.   Unless the circumstances described in the parenthetical in paragraph 1 above are applicable, either (a) at the time the buy order was originated, the buyer was outside the United States or we and any person acting on our behalf reasonably believed that the buyer was outside the United States or (b) the transaction was executed in, on or through the facilities of a designated offshore securities market, and neither we nor any person acting on our behalf knows that the transaction was pre-arranged with a buyer in the United States.

 

D-1

 

  3.   Neither we, any of our affiliates, nor any person acting on our or their behalf has made any directed selling efforts in the United States with respect to the Notes.
 
  4.   The proposed transfer of Notes is not part of a plan or scheme to evade the registration requirements of the Securities Act.
 
  5.   If we are a dealer or a person receiving a selling concession, fee or other remuneration in respect of the Notes, and the proposed transfer takes place during the Distribution Compliance Period (as defined in the Indenture), or we are an officer or director of the Issuers or an Initial Purchaser (as defined in the Indenture), we certify that the proposed transfer is being made in accordance with the provisions of Rule 904(b) of Regulation S.
 
  6.   We are not an affiliate of the Issuers or any Guarantor.
  o B.   This Certificate relates to our proposed exchange of $            principal amount of Notes issued under the Indenture for an equal principal amount of Notes to be held by us. We hereby certify as follows:
  1.   At the time the offer and sale of the Notes was made to us, either (i) we were not a U.S. Person and we were not in the United States or (ii) we were excluded from the definition of “U.S. person” pursuant to Rule 902(k)(2)(vi) or the account held by us for which we were acting was excluded from the definition of “U.S. person” pursuant to Rule 902(k)(2)(i) under the circumstances described in Rule 902(h)(3); and we were not a member of an identifiable group of U.S. citizens abroad.
 
  2.   Unless the circumstances described in paragraph 1(ii) above are applicable, either (a) at the time our buy order was originated, we were outside the United States or (b) the transaction was executed in, on or through the facilities of a designated offshore securities market and we did not pre-arrange the transaction in the United States.
 
  3.   The proposed exchange of Notes is not part of a plan or scheme to evade the registration requirements of the Securities Act.

 

D-2

 

You and the Issuers are entitled to rely upon this Certificate and are irrevocably authorized to produce this Certificate or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby.
         
  Very truly yours,

[NAME OF SELLER (FOR TRANSFERS)
OR OWNER (FOR EXCHANGES)]
 		  
  By:      
    Name:      
    Title:      
    Address:     
Date:                      

 

D-3

 

EXHIBIT E
Rule 144A Certificate
_________, ____
Wells Fargo Bank, National Association
201 Main Street
Suite 301
Fort Worth, TX 76102
Attention: Corporate Trust Administration
         
 
  Re:   WESTMORELAND COAL COMPANY and
 
      WESTMORELAND PARTNERS, as issuers of
 
      10.75% Senior Secured
 
      Notes due 2018 (the “Notes”)
 
      Issued under the Indenture (the “Indenture”) dated as of
 
      February 4, 2011 relating to the Notes
Ladies and Gentlemen:
TO BE COMPLETED BY PURCHASER IF (2) ON THE ASSIGNMENT FORM ON THE NOTE IS CHECKED.
This Certificate relates to:
[CHECK A OR B AS APPLICABLE.]
  o A.   Our proposed purchase of $           principal amount of Notes issued under the Indenture.
 
  o B.   Our proposed exchange of $           principal amount of Notes issued under the Indenture for an equal principal amount of Notes to be held by us.
We and, if applicable, each account for which we are acting, in the aggregate owned and invested more than $100,000,000 in securities of issuers that are not affiliated with us (or such accounts, if applicable), as of                      , 20          , which is a date on or since close of our most recent fiscal year. We and, if applicable, each account for which we are acting, are a qualified institutional buyer within the meaning of Rule 144A (“Rule 144A”) under the Securities Act of 1933, as amended (the “Securities Act”). If we are acting on behalf of an account, we exercise sole investment discretion with respect to such account. We are aware that the transfer of Notes to us, or such exchange, as applicable, is being made in reliance upon the exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A. Prior to the date of this Certificate we have received such information regarding the Issuers as we have requested pursuant to Rule 144A(d)(4) or have determined not to request such information.

 

E-1

 

You and the Issuers are entitled to rely upon this Certificate and are irrevocably authorized to produce this Certificate or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby.
         
  Very truly yours,

[NAME OF PURCHASER (FOR TRANSFERS)
OR OWNER (FOR EXCHANGES)]
 		  
  By:      
    Name:      
    Title:      
    Address:     
Date:                      

 

E-2

 

EXHIBIT F
Institutional Accredited Investor Certificate
Wells Fargo Bank, National Association
201 Main Street
Suite 301
Fort Worth, TX 76102
Attention: Corporate Trust Administration
         
 
  Re:   WESTMORELAND COAL COMPANY and
 
      WESTMORELAND PARTNERS, as issuers of
 
      10.75% Senior Secured
 
      Notes due 2018 (the “Notes”)
 
      Issued under the Indenture (the “Indenture”) dated as of
 
      February 4, 2011 relating to the Notes
Ladies and Gentlemen:
This Certificate relates to:
[CHECK A OR B AS APPLICABLE.]
  o A.   Our proposed purchase of $_____  principal amount of Notes originally issued to a QIB or a Person that is not a U.S. Person under Regulation S under the Indenture.
 
  o B.   Our proposed exchange of $____  principal amount of Notes issued under the Indenture for an equal principal amount of Notes to be held by us.
We hereby confirm that:
  1.   We are an institutional “accredited investor” within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended (the “Securities Act”) (an “Institutional Accredited Investor”).
 
  2.   Any acquisition of Notes by us will be for our own account or for the account of one or more other Institutional Accredited Investors as to which we exercise sole investment discretion.
 
  3.   We have such knowledge and experience in financial and business matters that we are capable of evaluating the merits and risks of an investment in the Notes and we and any accounts for which we are acting are able to bear the economic risks of and an entire loss of our or their investment in the Notes.

 

F-1

 

  4.   We are not acquiring the Notes with a view to any distribution thereof in a transaction that would violate the Securities Act or the securities laws of any State of the United States or any other applicable jurisdiction; provided that the disposition of our property and the property of any accounts for which we are acting as fiduciary will remain at all times within our and their control.
 
  5.   We acknowledge that the Notes have not been registered under the Securities Act and that the Notes may not be offered or sold within the United States or to or for the benefit of U.S. persons except as set forth below.
 
  6.   The principal amount of Notes to which this Certificate relates is at least equal to $250,000.
We agree for the benefit of the Issuers, on our own behalf and on behalf of each account for which we are acting, that such Notes may be offered, sold, pledged or otherwise transferred only in accordance with the Securities Act and any applicable securities laws of any State of the United States and only (a) to the Issuers, (b) pursuant to a registration statement which has become effective under the Securities Act, (c) to a qualified institutional buyer in compliance with Rule 144A under the Securities Act, (d) in an offshore transaction in compliance with Rule 904 of Regulation S under the Securities Act, (e) in a principal amount of not less than $250,000, to an Institutional Accredited Investor that, prior to such transfer, delivers to the Trustee a duly completed and signed certificate (the form of which may be obtained from the Trustee) relating to the restrictions on transfer of the Notes or (f) pursuant to an exemption from registration provided by Rule 144 under the Securities Act or any other available exemption from the registration requirements of the Securities Act.
Prior to the registration of any transfer in accordance with (c) or (d) above, we acknowledge that a duly completed and signed certificate (the form of which may be obtained from the Trustee) must be delivered to the Trustee. Prior to the registration of any transfer in accordance with (e) or (f) above, we acknowledge that the Issuers reserve the right to require the delivery of such legal opinions, certifications or other evidence as may reasonably be required in order to determine that the proposed transfer is being made in compliance with the Securities Act and applicable state securities laws. We acknowledge that no representation is made as to the availability of any Rule 144 exemption from the registration requirements of the Securities Act.
We understand that the Trustee will not be required to accept for registration of transfer any Notes acquired by us, except upon presentation of evidence satisfactory to the Issuers and the Trustee that the foregoing restrictions on transfer have been complied with. We further understand that the Notes acquired by us will be in the form of definitive physical certificates and that such certificates will bear a legend reflecting the substance of the preceding paragraph. We further agree to provide to any person acquiring any of the Notes from us a notice advising such person that resales of the Notes are restricted as stated herein and that certificates representing the Notes will bear a legend to that effect.

 

F-2

 

We agree to notify you promptly in writing if any of our acknowledgments, representations or agreements herein ceases to be accurate and complete.
We represent to you that we have full power to make the foregoing acknowledgments, representations and agreements on our own behalf and on behalf of any account for which we are acting.
You and the Issuers are entitled to rely upon this Certificate and are irrevocably authorized to produce this Certificate or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby.
         
  Very truly yours,


[NAME OF PURCHASER (FOR
TRANSFERS) OR OWNER (FOR
EXCHANGES)]
 		  
  By:      
    Name:      
    Title:
Address:		    
Date:                                         

 

F-3

 

Upon transfer, the Notes would be registered in the name of the new beneficial owner as follows:
         
By:
        
 
 
 
    
 
        
Date:
        
 
 
 
    
         
Taxpayer ID number:
  
 
    
 
  
 
    

 

F-4

 

EXHIBIT G
[COMPLETE FORM I OR FORM II AS APPLICABLE.]
[FORM I]
Certificate of Beneficial Ownership
Wells Fargo Bank, National Association
201 Main Street
Suite 301
Fort Worth, TX 76102
Attention: Corporate Trust Administration
         
 
  Re:   WESTMORELAND COAL COMPANY and
 
      WESTMORELAND PARTNERS, as issuers of
 
      10.75% Senior Secured
 
      Notes due 2018 (the “Notes”)
 
      Issued under the Indenture (the “Indenture”) dated as of
 
      February 4, 2011 relating to the Notes
Ladies and Gentlemen:
We are the beneficial owner of $_____  principal amount of Notes issued under the Indenture and represented by a Temporary Regulation S Global Note (as defined in the Indenture).
We hereby certify as follows:
[CHECK A OR B AS APPLICABLE.]
  o A.   We are a non-U.S. person (within the meaning of Regulation S under the Securities Act of 1933, as amended).
 
  o B.   We are a U.S. person (within the meaning of Regulation S under the Securities Act of 1933, as amended) that purchased the Notes in a transaction that did not require registration under the Securities Act of 1933, as amended.
You and the Issuers are entitled to rely upon this Certificate and are irrevocably authorized to produce this Certificate or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby.
         
  Very truly yours,


[NAME OF BENEFICIAL OWNER]
 		  
  By:      
    Name:      
    Title:
Address:		    
Date:                                         

 

G-1

 

[FORM II]
Certificate of Beneficial Ownership
Ladies and Gentlemen:
This is to certify that based solely on certifications we have received in writing, by tested telex or by electronic transmission from Institutions appearing in our records as persons being entitled to a portion of the principal amount of Notes represented by a Temporary Regulation S Global Note issued under the above-referenced Indenture, that as of the date hereof, $_____  principal amount of Notes represented by the Temporary Regulation S Global Note being submitted herewith for exchange is beneficially owned by persons that are either (i) non-U.S. persons (within the meaning of Regulation S under the Securities Act of 1933, as amended) or (ii) U.S. persons that purchased the Notes in a transaction that did not require registration under the Securities Act of 1933, as amended.
We further certify that (i) we are not submitting herewith for exchange any portion of such Temporary Regulation S Global Note excepted in such certifications and (ii) as of the date hereof we have not received any notification from any Institution to the effect that the statements made by such Institution with respect to any portion of such Temporary Regulation S Global Note submitted herewith for exchange are no longer true and cannot be relied upon as of the date hereof.
You and the Issuers are entitled to rely upon this Certificate and are irrevocably authorized to produce this Certificate or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby.
         
  Yours faithfully,

[Name of DTC Participant]
 		  
  By:      
    Name:      
    Title:
Address:		    
Date:                                         

 

G-2

EX-4.3 38 d82642exv4w3.htm EX-4.3 exv4w3
Exhibit 4.3
EXECUTION COPY
REGISTRATION RIGHTS AGREEMENT
by and among
Westmoreland Coal Company, as Issuer
Westmoreland Partners, as Co-Issuer
The Guarantors named herein
and
Gleacher & Company Securities, Inc., as Initial Purchaser
Dated as of February 4, 2011

 

 

 

REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this “Agreement”) is made and entered into as of February 4, 2011, by and among Westmoreland Coal Company, a Delaware corporation (the “Company”), Westmoreland Partners, a Virginia partnership and an indirect wholly owned subsidiary of the Company (together with the Company, the “Issuers”), certain subsidiaries of the Company listed on Schedule I hereto (collectively, the “Guarantors”), and Gleacher & Company Securities, Inc. (the “Initial Purchaser”), who has agreed to purchase the Issuers’ 10.750% Senior Secured Notes due 2018 (the “Initial Securities”). This Agreement is made pursuant to the Purchase Agreement, dated as of February 1, 2011, by and among the Initial Purchaser, the Issuers and the Guarantors with respect to $150,000,000 aggregate principal amount of Initial Securities (the “Purchase Agreement”) for the benefit of the holders from time to time of the Initial Securities. In order to induce the Initial Purchaser to purchase the Initial Securities, the Issuers and the Guarantors have agreed to provide the registration rights set forth in this Agreement. The execution and delivery of this Agreement is a condition to the obligations of the Initial Purchaser set forth in the Purchase Agreement. The Initial Securities are issued under an indenture, dated as of the date hereof, as amended or supplemented from time to time, (the “Indenture”), among the Issuers, the Guarantors and Wells Fargo Bank, National Association, as trustee (the “Trustee”).
The parties hereby agree as follows:
SECTION 1. Definitions. As used in this Agreement, the following capitalized terms shall have the following meanings:
Advice: As defined in Section 6(c) hereof.
Broker-Dealer: Any broker or dealer registered under the Exchange Act.
Business Day: Any day other than a Saturday, Sunday or U.S. federal holiday or a day on which banking institutions or trust companies located in New York, New York are authorized or obligated to be closed. For purposes of this Agreement, if the day on which any deadline specified in this Agreement expires is not a Business Day, such deadline shall be deemed to expire on the next succeeding Business Day.
Closing Date: The date of this Agreement.
Commission: The Securities and Exchange Commission.
Company: As defined in the preamble hereto.
Consummate: A registered Exchange Offer shall be deemed “Consummated” for purposes of this Agreement upon the occurrence of (i) the filing and effectiveness under the Securities Act of the Exchange Offer Registration Statement relating to the Exchange Securities to be issued in the Exchange Offer, (ii) the maintenance of such Registration Statement continuously effective and the keeping of the Exchange Offer open for a period not less than the minimum period required pursuant to Section 3(b) hereof, and (iii) the delivery by the Issuers to the Registrar under the Indenture of Exchange Securities in the same aggregate principal amount as the aggregate principal amount of Initial Securities that were validly tendered and not withdrawn by Holders thereof pursuant to the Exchange Offer.

 

 

 

Effectiveness Target Date: As defined in Section 5 hereof.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Exchange Dates: As defined in Section 3(a) hereof.
Exchange Offer: The registration by the Issuers under the Securities Act of the Exchange Securities pursuant to a Registration Statement pursuant to which the Issuers offer the Holders of all outstanding Transfer Restricted Securities the opportunity to exchange all such outstanding Transfer Restricted Securities held by such Holders for Exchange Securities in an aggregate principal amount equal to the aggregate principal amount of the Transfer Restricted Securities validly tendered and not withdrawn in such exchange offer by such Holders.
Exchange Offer Registration Statement: The Registration Statement relating to the Exchange Offer, including the related Prospectus.
Exchange Securities: The Issuers’ 10.750% Senior Secured Notes due 2018, of the same series under the Indenture as the Initial Securities, to be issued to Holders in exchange for Transfer Restricted Securities pursuant to this Agreement.
FINRA: Financial Industry Regulatory Authority, Inc.
Guarantors: As defined in the preamble hereto.
Holder: As defined in Section 2(b) hereof.
Indemnified Holder: As defined in Section 8(a) hereof.
Indenture: As defined in the preamble hereto.
Initial Placement: The issuance and sale by the Issuers of the Initial Securities to the Initial Purchaser pursuant to the Purchase Agreement.
Initial Purchaser: As defined in the preamble hereto.
Initial Securities: As defined in the preamble hereto.
Interest Payment Date: As defined in the Indenture and the Securities.
Issuers: As defined in the preamble hereto.
Participating Broker-Dealer: Any Broker-Dealer electing to exchange Transfer Restricted Securities, acquired for its own account as a result of market making activities or other trading activities (other than Transfer Restricted Securities acquired directly from the Issuers or their affiliates), for Exchange Securities.

 

-2-

 

Person: An individual, partnership, corporation, trust or unincorporated organization, or a government or agency or political subdivision thereof.
Prospectus: The prospectus included in a Registration Statement (including, without limitation, any “issuer free writing prospectus” as defined in Rule 433 under the Securities Act), as amended or supplemented by any prospectus supplement and by all other amendments thereto, including post-effective amendments, and all material incorporated by reference into such Prospectus.
Purchase Agreement: As defined in the preamble hereto.
Registration Actions: As defined in Section 4(c) hereof.
Registration Default: As defined in Section 5 hereof.
Registration Statement: Any registration statement of the Issuers relating to (a) an offering of Exchange Securities pursuant to an Exchange Offer or (b) the registration for resale of Transfer Restricted Securities pursuant to the Shelf Registration Statement, which is filed pursuant to the provisions of this Agreement, in each case, including the Prospectus included therein, all amendments and supplements thereto (including post-effective amendments) and all exhibits and material incorporated by reference therein.
Securities: The Initial Securities and the Exchange Securities.
Securities Act: The Securities Act of 1933, as amended.
Shelf Registration: A registration of securities pursuant to a Registration Statement filed with the Commission in accordance with and pursuant to Rule 415 promulgated under the Securities Act (or any successor rule in effect).
Shelf Registration Statement: As defined in Section 4(a) hereof.
Suspension Notice: As defined in Section 4(c) hereof.
Suspension Period: As defined in Section 4(c) hereof.
Transfer Restricted Securities: Each Initial Security, until the earliest to occur of (a) the date on which such Initial Security is exchanged in the Exchange Offer for an Exchange Security entitled to be resold to the public by the Holder thereof without complying with the prospectus delivery requirements of the Securities Act, (b) the date on which such Initial Security has been effectively registered under the Securities Act and disposed of in accordance with a Shelf Registration Statement, (c) the date on which such Initial Security is distributed to the public by a Broker-Dealer pursuant to the “Plan of Distribution” contemplated by the Exchange Offer Registration Statement (including delivery of the Prospectus contained therein) and (d) the date on which such Initial Security is actually sold by the Holder thereof pursuant to Rule 144 under the Securities Act under circumstances in which any legend borne by such Initial Security relating to restrictions on transferability thereof, under the Securities Act or otherwise, is removed by the Company or pursuant to the Indenture.

 

-3-

 

Trust Indenture Act: The Trust Indenture Act of 1939, as amended.
Trustee: As defined in the preamble hereto.
Underwritten Registration or Underwritten Offering: A registration in which securities of the Issuers are sold to an underwriter for reoffering to the public.
SECTION 2. Securities Subject to this Agreement.
(a) Transfer Restricted Securities. The securities entitled to the benefits of this Agreement are the Transfer Restricted Securities.
(b) Holders of Transfer Restricted Securities. A Person is deemed to be a holder of Transfer Restricted Securities (each, a “Holder”) whenever such Person owns Transfer Restricted Securities.
SECTION 3. Registered Exchange Offer.
(a) Unless the Exchange Offer shall not be permissible under applicable law or Commission policy (after the procedures set forth in Section 6(a)(i) hereof have been complied with), the Issuers shall (i) cause to be filed with the Commission on or prior to the 120th day after the Initial Placement, a Registration Statement under the Securities Act relating to the Exchange Securities and the Exchange Offer, (ii) use their commercially reasonable efforts to cause such Registration Statement to become effective on or prior to the 210th day after the Initial Placement, (iii) in connection with the foregoing, (A) file all pre-effective amendments to such Registration Statement as may be necessary in order to cause such Registration Statement to become effective, (B) if applicable, file a post-effective amendment to such Registration Statement pursuant to Rule 430A under the Securities Act and (C) use their commercially reasonable efforts to cause all necessary filings in connection with the registration and qualification of the Exchange Securities to be made under the state securities or blue sky laws of such jurisdictions as any Holder shall reasonably request in writing by the time the Exchange Offer Registration Statement is declared effective by the Commission, it being agreed that no such registration or qualification will be made unless so requested, to permit Consummation of the Exchange Offer; provided, however, that none of the Issuers or any of the Guarantors shall be required to (x) qualify as a foreign corporation or as a dealer in securities in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(a), or (y) take any action which would subject it to general service of process or taxation in any such jurisdiction where it is not then so subject and (iv) as promptly as practicable after the effectiveness of such Registration Statement, commence the Exchange Offer. The Exchange Offer shall be on the appropriate form permitting registration of the Exchange Securities to be offered in exchange for the Transfer Restricted Securities and to permit resales of Initial Securities held by Broker-Dealers as contemplated by Section 3(c) hereof. The Issuers and the Guarantors shall commence the Exchange Offer by mailing or otherwise furnishing the related Prospectus, appropriate letter of transmittal and other accompanying documents to each Holder of record stating, in addition to such other disclosures as are required by applicable law, substantially the following:
(i) that the Exchange Offer is being made pursuant to this Agreement and that all Transfer Restricted Securities validly tendered and not properly withdrawn will be accepted for exchange;

 

-4-

 

(ii) the dates of acceptance for exchange (which shall be a period of at least 20 Business Days from the date such notice is mailed) (the “Exchange Dates”);
(iii) that any Transfer Restricted Security not tendered will remain outstanding and continue to accrue interest but will not retain any rights under this Agreement, except as otherwise specified herein; and
(iv) that any Holder will be entitled to withdraw its election, not later than the close of business on the last Exchange Date, by effecting such withdrawal in compliance with the applicable procedures of the depositary for the Transfer Restricted Securities.
(b) The Issuers shall use their commercially reasonable efforts to cause the Exchange Offer Registration Statement to be continuously effective and shall keep the Exchange Offer open for a period of not less than the minimum period required under applicable federal and state securities laws to Consummate the Exchange Offer; provided, however, that in no event shall such period be less than 20 days or more than 45 days (or longer if required by applicable law) after the date notice of the Exchange Offer is mailed to the Holders. The Issuers shall cause the Exchange Offer to comply in all material respects with all applicable federal and state securities laws. No securities other than the Exchange Securities shall be included in the Exchange Offer Registration Statement. The Issuers shall use their commercially reasonable efforts to cause the Exchange Offer to be Consummated on or prior to the 255th day after the Initial Placement.

 

-5-

 

(c) The Issuers shall indicate in a “Plan of Distribution” section contained in the Prospectus forming a part of the Exchange Offer Registration Statement that any Participating Broker-Dealer may exchange such Initial Securities pursuant to the Exchange Offer; provided, however, that such Participating Broker-Dealer may be deemed to be an “underwriter” within the meaning of the Securities Act and must, therefore, deliver a prospectus meeting the requirements of the Securities Act in connection with any resales of the Exchange Securities received by such Participating Broker-Dealer in the Exchange Offer, which prospectus delivery requirement may be satisfied by the delivery by such Participating Broker-Dealer of the Prospectus contained in the Exchange Offer Registration Statement. Such Participating Broker-Dealer must satisfy any other applicable provisions of the Securities Act in connection with such resales and represent that it did not purchase such Initial Securities to be exchanged in the Exchange Offer from the Company or any of its affiliates. Such “Plan of Distribution” section shall also contain all other information with respect to such resales by Participating Broker-Dealers that the Commission may require in order to permit such resales pursuant thereto, but such “Plan of Distribution” shall not name any such Participating Broker-Dealer or disclose the amount of Initial Securities held by any such Participating Broker-Dealer except to the extent required by the Commission as a result of a change in policy after the date of this Agreement.
The Issuers shall use their commercially reasonable efforts to keep the Exchange Offer Registration Statement continuously effective, supplemented and amended as required by the provisions of Section 6(c) hereof to the extent necessary to ensure that it is available for resales of Initial Securities acquired by Participating Broker-Dealers for their own accounts as a result of market-making activities or other trading activities, and to ensure that it conforms in all material respects with the requirements of this Agreement, the Securities Act and the policies, rules and regulations of the Commission as announced from time to time, for a period ending on the earlier of (i) 180 days from the date on which the Exchange Offer Registration Statement is declared effective and (ii) the date on which a Participating Broker-Dealer is no longer required to deliver a prospectus in connection with market-making or other trading activities; provided however, if no Holder indicated it is a Broker-Dealer on the letter of transmittal, then Issuers shall have no duty to keep the Exchange Offer Registration Statement effective after Consummation.
The Company shall furnish as soon as practicable as many copies of the latest version of such Prospectus to Broker-Dealers as are reasonably requested at any time during such 180-day (or shorter as provided in the foregoing sentence) period in order to facilitate such resales.

 

-6-

 

SECTION 4. Shelf Registration.
(a) Shelf Registration. If (i) the Exchange Offer is not permitted by changes in law or applicable interpretations thereof by the staff of the Commission (after the procedures set forth in Section 6(a)(i) hereof have been complied with), (ii) for any reason the Exchange Offer is not Consummated within 255 days after the Initial Placement or (iii) with respect to any Holder of Transfer Restricted Securities (A) such Holder is prohibited by applicable law or Commission policy from participating in the Exchange Offer, or (B) such Holder may not resell the Exchange Securities acquired by it in the Exchange Offer to the public without delivering a prospectus and that the Prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales by such Holder or (C) such Holder is a Broker-Dealer and holds Initial Securities acquired directly from the Issuers or one of its affiliates then, upon such Holder’s or the Initial Purchaser’s request, the Issuers shall:
(x) as promptly as practicable cause to be filed a shelf registration statement pursuant to Rule 415 under the Securities Act, which may be an amendment to the Exchange Offer Registration Statement (in either event, the “Shelf Registration Statement”) on or prior to the earliest to occur of (1) the later of (x) the 60th day after the date on which the Company is no longer permitted to file the Exchange Offer Registration Statement and (y) the 150th day after the Initial Placement (in the case of clause (i) above), (2) the 255th day after the Initial Placement (in the case of clause (ii) above) and (3) the 45th day after the date on which the Company receives notice from a Holder of Transfer Restricted Securities or the Initial Purchaser (in the case of clause (iii) above) (such earliest date being the “Shelf Filing Deadline”), which Shelf Registration Statement shall provide for resales of all Transfer Restricted Securities the Holders of which shall have provided the information required pursuant to Section 4(b) hereof; and
(y) use their commercially reasonable efforts to cause such Shelf Registration Statement to be declared effective by the Commission on or before the later of (x) the 75th day after the Shelf Filing Deadline and (y) the 210th day after the Initial Placement.
The Issuers shall use their commercially reasonable efforts to keep such Shelf Registration Statement continuously effective, supplemented and amended as required by the provisions of Sections 6(b) and (c) hereof to the extent necessary to ensure that it is available for resales of Initial Securities by the Holders of Transfer Restricted Securities entitled to the benefit of this Section 4(a), and to ensure that it conforms in all material respects with the requirements of this Agreement, the Securities Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of one year following the Closing Date (or shorter period that will terminate when all the Initial Securities covered by such Shelf Registration Statement have been sold pursuant to such Shelf Registration Statement).
(b) Provision by Holders of Certain Information in Connection with the Shelf Registration Statement. No Holder of Transfer Restricted Securities may include any of its Transfer Restricted Securities in any Shelf Registration Statement pursuant to this Agreement unless and until such Holder furnishes to the Company in writing, within 20 Business Days after receipt of a request therefor, such information as the Company may reasonably request for use in connection with any Shelf Registration Statement or Prospectus or preliminary Prospectus included therein. Each Holder as to which any Shelf Registration Statement is being effected agrees to furnish promptly to the Company all information required to be disclosed in order to make the information previously furnished to the Company by such Holder not materially misleading.

 

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(c) Suspension. Notwithstanding anything to the contrary and subject to the limitation set forth in the next succeeding paragraph, at any time after the effectiveness of the Shelf Registration Statement, each of the Issuers shall be entitled to suspend its obligation to file any amendment to the Shelf Registration Statement, furnish any supplement or amendment to a Prospectus included in the Shelf Registration Statement, make any other filing with the Commission, cause the Shelf Registration Statement or other filing with the Commission to remain effective or take any similar action (collectively, “Registration Actions”) upon (A) the issuance by the Commission of a stop order suspending the effectiveness of the Shelf Registration Statement or the initiation of proceedings with respect to the Shelf Registration Statement under Section 8(d) or 8(e) of the Securities Act, (B) the occurrence of any event or the existence of any fact as a result of which the Shelf Registration Statement would or shall contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, or the related Prospectus would or shall contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, (C) the occurrence or existence of any corporate development that, in the discretion of the Company, makes it appropriate to postpone or suspend the availability of the Shelf Registration Statement and the related Prospectus or (D) information is required to be set forth in such Shelf Registration Statement or the prospectus included therein or in an amendment to the Shelf Registration Statement or an amendment or supplement to such prospectus, in the reasonable opinion of counsel to the Initial Purchaser or the underwriter(s), if any, in order that such Shelf Registration Statement, prospectus, amendment or supplement, as the case may be, complies with applicable requirements of the federal securities laws and the rules and regulations of the Commission and does not contain an untrue statement of a material fact or omit to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing. Upon the occurrence of any of the conditions described in clause (A), (B), (C) or (D) above, the Company shall give prompt notice (a “Suspension Notice”) thereof to the Holders of record. Upon the termination of such condition, the Company shall give prompt notice thereof to the Holders of record and shall promptly proceed with all Registration Actions that were suspended pursuant to this paragraph.
The Issuers may only suspend Registration Actions pursuant to the preceding paragraph twice during any 365-day period (each, a “Suspension Period”) not to exceed, in the aggregate, (x) sixty days in any three month period or (y) ninety days in any twelve month period, during which no Additional Interest (as defined in Section 5 hereof) shall be payable. Each Suspension Period shall be deemed to begin on the date the relevant Suspension Notice is given to the Holders and shall be deemed to end on the earlier to occur of (1) the date on which the Company gives the Holders a notice that the Suspension Period has terminated and (2) the date on which the number of days during which a Suspension Period has been in effect exceeds, in the aggregate, (x) sixty days in any three month period or (y) ninety days in any twelve month period.

 

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SECTION 5. Additional Interest. Subject to the Issuers’ ability to declare Suspension Periods with respect to clause (iv) below, if (i) any of the Registration Statements required by this Agreement is not filed with the Commission on or prior to the date specified for such filing in this Agreement, (ii) any of such Registration Statements has not been declared effective by the Commission on or prior to the date specified for such effectiveness in this Agreement (the “Effectiveness Target Date”), (iii) the Exchange Offer has not been Consummated on or prior to the date specified for such consummation in this Agreement, (iv) any Registration Statement required by this Agreement is filed and declared effective but shall thereafter cease to be effective or fail to be usable for its intended purpose for more than 30 days, other than as may be permitted during a Suspension Period or (v) Holders are unable to sell the Initial Securities under Rule 144 under the Securities Act as a result of either Issuers’ failure to meet the adequate current public information requirement of Rule 144(c)(1) under the Securities Act if applicable to such Issuer (each such event referred to in clauses (i) through (v), a “Registration Default”), each of the Issuers and Guarantors jointly and severally hereby agrees to pay additional interest (“Additional Interest”) in the form of additional interest in cash to each Holder in an amount equal to 0.25% per annum of the aggregate principal amount of the Transfer Restricted Securities for the period of occurrence of the Registration Default until such time as no Registration Default is in effect, which rate shall increase by 0.25% per annum for each subsequent 90-day period during which such Registration Default continues, but in no event shall such increase exceed 1.00% per annum. Following the cure of all Registration Defaults relating to any particular Transfer Restricted Securities, the Additional Interest will cease to accrue from the date of such cure and the interest rate on the Transfer Restricted Securities will revert to the original interest rate borne by such Transfer Restricted Securities; provided, however, that, if after the date such Additional Interest ceases to accrue, a different Registration Default occurs, Additional Interest may again commence accruing pursuant to the foregoing provisions.
Notwithstanding the foregoing, (i) the amount of Additional Interest payable shall not increase because more than one Registration Default has occurred and is continuing and (ii) a Holder of Transfer Restricted Securities who is not entitled to the benefits of the Shelf Registration Statement shall not be entitled to Additional Interest with respect to a Registration Default that pertains to the Shelf Registration Statement.
All references in the Indenture to “interest” include the Additional Interest payable pursuant to this Section 5, and all accrued Additional Interest shall be payable to the Holders entitled thereto, in the manner provided for the payment of interest in the Indenture, as more fully set forth in the Indenture and the Securities. All obligations of the Issuers and the Guarantors set forth in the preceding paragraph that are outstanding with respect to any Transfer Restricted Security at the time such security ceases to be a Transfer Restricted Security shall survive until such time as all such obligations with respect to such security shall have been satisfied in full.

 

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SECTION 6. Registration Procedures.
(a) Exchange Offer Registration Statement. In connection with the Exchange Offer, each of the Issuers and Guarantors shall comply with all of the provisions of Section 6(c) hereof, shall use its commercially reasonable efforts to effect such exchange to permit the sale of Transfer Restricted Securities being sold in accordance with the intended method or methods of distribution thereof set forth in the Registration Statement and shall comply with all of the following provisions:
(i) If in the reasonable opinion of counsel to the Issuers there is a question as to whether the Exchange Offer is permitted by applicable law, the Issuers hereby agree to seek a no-action letter or other favorable decision from the Commission staff allowing the Issuers to Consummate an Exchange Offer for such Initial Securities. The Issuers hereby agree to pursue the issuance of such a decision to the Commission staff level but shall not be required to appeal to the Commission or take commercially unreasonable action to effect a change of Commission or Commission staff policy. Each of the Issuers hereby agrees, however, to (A) participate in telephonic conferences with the Commission staff, (B) deliver to the Commission staff an analysis prepared by counsel to the Issuers setting forth the legal bases, if any, upon which such counsel has concluded that such an Exchange Offer should be permitted and (C) diligently pursue a favorable resolution by the Commission staff of such submission.
(ii) As a condition to its participation in the Exchange Offer pursuant to the terms of this Agreement, each Holder of Transfer Restricted Securities shall furnish, upon the request of the Company, prior to the Consummation thereof, a written representation to the Company (which may be contained in the letter of transmittal contemplated by the Exchange Offer Registration Statement) to the effect that (A) it is not an affiliate of either of the Issuers or Guarantors, (B) it is not engaged in, and does not intend to engage in, and has no arrangement or understanding with any Person to participate in, a distribution of the Exchange Securities to be issued in the Exchange Offer, (C) it is acquiring the Exchange Securities in its ordinary course of business, (D) such Holder is not holding Securities that have the status of an unsold allotment in the Initial Placement, (E) if such Holder is a Broker-Dealer, that it will receive Exchange Securities for its own account in exchange for Transfer Restricted Securities that were acquired as a result of market-making activities or other trading activities and that it will be required to acknowledge that it will comply with all applicable provisions of the Securities Act, including delivering a Prospectus in connection with any resale of such Exchange Securities, (F) if such Holder is a Broker-Dealer, that it did not purchase the Transfer Restricted Securities to be exchanged in the Exchange Offer from the Issuers or any of their affiliates, and (G) it is not acting on behalf of any Person who could not truthfully and completely make the representations contained in the foregoing subclauses (A) through (F). In addition, all such Holders of Transfer Restricted Securities shall otherwise cooperate in the Issuers’ preparations for the Exchange Offer. Each Holder will further acknowledge and agree that any Broker-Dealer and any such Holder using the Exchange Offer to participate in a distribution of the securities to be acquired in the Exchange Offer (1) could not under Commission policy as in effect on the date of this Agreement rely on the position of the Commission enunciated in Morgan Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital Holdings Corporation (available May 13, 1988), as interpreted in the Commission’s letter to Shearman & Sterling dated July 2, 1993, and similar no-action letters (which may include any no-action letter obtained pursuant to clause (i) above) and (2) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction and that such a secondary resale transaction should be covered by an effective registration statement containing the selling security holder information required by Item 507 or 508, as applicable, of Regulation S-K if the resales are of Exchange Securities obtained by such Holder in exchange for Initial Securities acquired by such Holder directly from the Issuers.

 

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(b) Shelf Registration Statement. In connection with the Shelf Registration Statement, each of the Issuers and Guarantors shall comply with all the provisions of Section 6(c) hereof and shall use its commercially reasonable efforts to effect such registration to permit the sale of the Transfer Restricted Securities being sold in accordance with the intended method or methods of distribution thereof set forth in such Shelf Registration Statement, and pursuant thereto each of the Issuers will within the timeframes set forth in Section 4(a)(x), prepare and file with the Commission a Registration Statement relating to the registration on any appropriate form under the Securities Act, which form shall be available for the sale of the Transfer Restricted Securities in accordance with the intended method or methods of distribution thereof set forth in such Shelf Registration Statement.
(c) General Provisions. Except as otherwise provided, in connection with any Registration Statement and any Prospectus required by this Agreement to permit the sale or resale of Transfer Restricted Securities (including, without limitation, any Registration Statement and the related Prospectus required to permit resales of Initial Securities by Broker-Dealers), each of the Issuers shall:
(i) use its commercially reasonable efforts to keep such Registration Statement continuously effective and provide all requisite financial statements for the period specified in Section 3 or 4 hereof, as applicable; upon the occurrence of any event that would cause any such Registration Statement or the Prospectus contained therein (A) to contain a material misstatement or omission or (B) not to be effective and usable for resale of Transfer Restricted Securities during the period required by this Agreement, the Issuers shall file as promptly as practicable an appropriate amendment to such Registration Statement, in the case of clause (A), correcting any such misstatement or omission, and, in the case of either clause (A) or (B), use its commercially reasonable efforts to cause such amendment to be declared effective and such Registration Statement and the related Prospectus to become usable for their intended purpose(s) as soon as practicable thereafter;
(ii) prepare and file with the Commission such amendments and post-effective amendments to the applicable Registration Statement as may be necessary to keep the Registration Statement effective for the applicable period set forth in Section 3 or 4 hereof, as applicable, or such shorter period as will terminate when all Transfer Restricted Securities covered by such Registration Statement have been sold; cause the Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Securities Act, and to comply fully with the applicable provisions of Rules 424 and 430A under the Securities Act in a timely manner; and comply in all material respects with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the sellers thereof set forth in such Registration Statement or supplement to the Prospectus;

 

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(iii) in the case of a Shelf Registration Statement, advise the underwriter(s), if any, and selling Holders named in the Registration Statement as promptly as practicable and, if requested by such Persons, to confirm such advice in writing, (A) when the Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to any Registration Statement or any post-effective amendment thereto, when the same has become effective, (B) of any request by the Commission for amendments to the Registration Statement or amendments or supplements to the Prospectus or for additional information relating thereto, (C) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement under the Securities Act or of the suspension by any state securities commission of the qualification of the Transfer Restricted Securities for offering or sale in any jurisdiction, or the initiation of any proceeding for any of the preceding purposes and (D) of the existence of any fact or the happening of any event that makes any statement of a material fact made in the Registration Statement, the Prospectus, any amendment or supplement thereto, or any document incorporated by reference therein untrue, or that requires the making of any additions to or changes in the Registration Statement or the Prospectus in order to make the statements therein not misleading (provided, however, that no advice by the Issuers shall be required pursuant to this clause (D) in the event that the Issuers either promptly file a Prospectus supplement to update the Prospectus or a Form 8-K or other appropriate Exchange Act report that is incorporated by reference into such Registration Statement, which, in either case, contains the requisite information with respect to such event or facts that results in such Registration Statement no longer containing any untrue statement of material fact or omitting to state a material fact necessary to make the statements contained therein not misleading). If at any time the Commission shall issue any stop order suspending the effectiveness of the Registration Statement, or any state securities commission or other regulatory authority shall issue an order suspending the qualification or exemption from qualification of the Transfer Restricted Securities under state securities or blue sky laws, each of the Issuers shall use its commercially reasonable efforts to obtain the withdrawal or lifting of such order at the earliest practicable time;

 

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(iv) in the case of a Shelf Registration or if a Prospectus is required to be delivered by any Participating Broker-Dealer in the case of an Exchange Offer, furnish without charge to the Initial Purchaser and each of the underwriters, if any, before filing with the Commission, copies of any Registration Statement or any Prospectus included therein or any amendments or supplements to any such Registration Statement or Prospectus (including all documents to be incorporated by reference after the initial filing of such Registration Statement, with respect to such documents to the Initial Purchaser and to the underwriter(s), if any, and not to the Holders named in the Registration Statement), which documents will be subject to the review and comment of such Holders, the Initial Purchaser and the underwriter(s), if any, in connection with such sale, if any, for a period of at least five Business Days (except in the case of Current Reports on Form 8-K, for which the review period shall be at least two Business Days), and the Issuers will not file any such Registration Statement or Prospectus or any amendment or supplement to any such Registration Statement or Prospectus (including all such documents incorporated by reference) to which the Initial Purchaser or the underwriter(s), if any, shall reasonably object in writing within five Business Days (except in the case of Current Reports on Form 8-K, for which the objection period shall be within two Business Days) after the receipt thereof (such objection to be deemed timely made upon confirmation of facsimile transmission within such period). Notwithstanding the foregoing, the Issuers shall not be required to take any actions under this Section 6(c)(iv) that are not, in the reasonable opinion of counsel for the Issuers, in compliance with applicable law or to include any disclosure which at the time would have an adverse effect on the business or operations of the Company and/or its subsidiaries, as determined in good faith by the Issuers; provided, however, that each of the Initial Purchaser, the underwriters, if any, and their respective legal counsel, accountants or other representatives, shall be required to maintain in confidence and not to disclose to any other person any information or records reasonably designated by the Company as being confidential, until such time as (A) such information becomes a matter of public record (whether by virtue of its inclusion in such Shelf Registration Statement or otherwise) or (B) such person shall be required so to disclose such information pursuant to a subpoena or order of any court or other governmental agency or body having jurisdiction over the matter (subject to the requirements of such order, and only after such person shall have given the Company prompt prior written notice of such requirement);
(v) in the case of a Shelf Registration, promptly prior to the filing of any document that is to be incorporated by reference into a Registration Statement or Prospectus, provide copies of such document, to the extent requested, to the Initial Purchaser and to the underwriters, if any, make each of the Issuers’ and Guarantors’ management, officers and other representatives available for discussion of such document and other customary due diligence matters, and include such information in such document prior to the filing thereof as the Initial Purchaser or the underwriter(s), if any, reasonably may request (subject to the confidentiality obligations set forth in Section 6(c)(iv) above). Notwithstanding the foregoing, the Issuers shall not be required to take any actions under this Section 6(c)(v) that are not, in the reasonable opinion of counsel for the Issuers, in compliance with applicable law;

 

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(vi) in the case of a Shelf Registration or if a Prospectus is required to be delivered by any Participating Broker-Dealer in the case of an Exchange Offer, make available at reasonable times for inspection by the Initial Purchaser and the underwriters, if any, participating in any disposition pursuant to such Registration Statement and one firm of legal counsel or accountant retained by any of the foregoing, all financial and other records, pertinent corporate documents and properties of each of the Issuers and Guarantors reasonably requested by any such Persons and cause each of the Issuers’ and Guarantors’ officers, directors and employees to supply all information reasonably requested by any such underwriter, attorney or accountant in connection with such Registration Statement or any post-effective amendment thereto subsequent to the filing thereof and prior to its effectiveness and to be available for discussion of such documents to the extent reasonably requested by the Initial Purchaser or the underwriters, if any (subject to the confidentiality obligations set forth in Section 6(c)(iv) above);
(vii) if requested by any selling Holders or the underwriter(s), if any, promptly incorporate in any Registration Statement or Prospectus, pursuant to a supplement or post-effective amendment if necessary, such information as such selling Holders and underwriter(s), if any, may reasonably request to have included therein, including, without limitation, information relating to the “Plan of Distribution” of the Transfer Restricted Securities, information with respect to the principal amount of Transfer Restricted Securities being sold to such underwriter(s), the purchase price being paid therefor and any other terms of the offering of the Transfer Restricted Securities to be sold in such offering; and make all required filings of such Prospectus supplement or post-effective amendment as soon as practicable after the Company is notified of the matters to be incorporated in such Prospectus supplement or post-effective amendment;
(viii) in the case of a Shelf Registration, use its commercially reasonable efforts to cause the Transfer Restricted Securities covered by the Registration Statement to be rated with the appropriate rating agencies, if so requested by the Holders of a majority in aggregate principal amount of Securities covered thereby or the managing underwriter, if any;
(ix) in the case of a Shelf Registration and to the extent such documents are not available through the Commission’s EDGAR System, furnish to each selling Holder and each of the underwriter(s), if any, without charge, one copy of the Registration Statement, as first filed with the Commission, and of each amendment thereto, including financial statements and schedules (without documents incorporated therein by reference or exhibits thereto, unless requested);
(x) deliver to (i) in the case of an Exchange Offer, each Participating Broker-Dealer who submits a written request to the Company and (ii) in the case of a Shelf Registration Statement, each selling Holder and each of the underwriter(s), if any, without charge, as many copies of the Prospectus (including each preliminary prospectus) and any amendment or supplement thereto as such Persons reasonably may request; subject to the final paragraph of this Section 6(c), each of the Issuers and Guarantors hereby consents to the use of the Prospectus and any amendment or supplement thereto by each of the selling Holders and each of the underwriter(s), if any, in connection with the offering and the sale of the Transfer Restricted Securities covered by the Prospectus or any amendment or supplement thereto in compliance with applicable law;

 

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(xi) in the case of a Shelf Registration Statement, enter into such customary agreements (including an underwriting agreement if such registration is an Underwritten Registration), and make such customary representations and warranties, and take all such other customary and appropriate actions in connection therewith in order to expedite or facilitate the disposition of the Transfer Restricted Securities pursuant to any Shelf Registration Statement contemplated by this Agreement, all to such extent as may be reasonably requested by any Holder of Transfer Restricted Securities or underwriter in connection with any sale or resale pursuant to any Shelf Registration Statement contemplated by this Agreement; and if the registration is an Underwritten Registration, each of the Issuers and Guarantors shall:
(A) to the extent reasonably requested, furnish to the Initial Purchaser, each selling Holder and the underwriters, in such substance and scope as they may reasonably request and as are customarily made by issuers to underwriters in primary underwritten offerings, upon the effectiveness of the Shelf Registration Statement:
(1) a certificate, dated the date of effectiveness of the Shelf Registration Statement, signed by (y) the President or any Vice President and (z) a principal financial or accounting officer of each of the Issuers and Guarantors, confirming, as of the date thereof, the matters set forth in Section 7(l) of the Purchase Agreement that are qualified as to materiality are true and correct, the matters set forth in Section 7(l) of the Purchase Agreement that are not so qualified are true and correct in all material respects and such other matters as such parties may reasonably request;
(2) an opinion, dated the date of effectiveness of the Shelf Registration Statement, of counsel for the Issuers and the Guarantors, covering the matters that are customarily covered in opinions requested in an underwritten offering, and in any event including a statement to the effect that such counsel has participated in conferences with representatives of the Issuers and the Guarantors, representatives of the independent public accountants for the Issuers and the Guarantors and representatives of the underwriter(s) and counsel to the underwriter(s) in connection with the preparation of such Registration Statement and the related Prospectus and has considered the matters required to be stated therein and the statements contained therein, although such counsel has not independently verified such information and is not passing upon and does not assume any responsibility for the accuracy, completeness or fairness of such information; and that such counsel advises that, on the basis of the foregoing, no facts came to such counsel’s

 

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attention that caused such counsel to believe that the applicable Registration Statement, at the time such Registration Statement or any post-effective amendment thereto became effective, contained any untrue statement of a material fact or omitted to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, or that the Prospectus contained in such Registration Statement as of its date, contained any untrue statement of a material fact or omitted to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. Without limiting the foregoing, such counsel may state further that such counsel expresses no opinion, assumes no responsibility for, and has not independently verified, the accuracy, completeness or fairness of the financial statements (including the notes thereto), other financial data and production, capacity and cost data, and information pertaining to coal reserves and reserve engineering data (including geologic information) contained in or omitted from any Registration Statement contemplated by this Agreement or the related Prospectus; and
(3) customary comfort letters, dated the date of effectiveness of the Shelf Registration Statement, from the Company’s independent accountants, in the customary form and covering matters of the type customarily requested to be covered in comfort letters by underwriters in connection with primary underwritten offerings, and covering or affirming the matters set forth in the comfort letters delivered pursuant to Sections 7(g), (h) and (i) of the Purchase Agreement without exception;
(B) set forth in full or incorporate by reference in the underwriting agreement, the indemnification provisions and procedures of Section 8 hereof with respect to all parties to be indemnified pursuant to said Section; and
(C) deliver such other documents and certificates as may be reasonably requested by such parties and as are customarily delivered in similar offerings to evidence compliance with Section 6(c)(xi)(A) hereof and with any customary conditions contained in the underwriting agreement or other agreement entered into by either of the Issuers or any of the Guarantors pursuant to this Section 6(c)(xi), if any.
If at any time the representations and warranties of the Issuers and the Guarantors contemplated by the certificate furnished pursuant to Section 6(c)(xi)(A)(1) hereof cease to be true and correct (which certificate will be delivered as of the date of effectiveness of the Shelf Registration Statement) the Issuers or the Guarantors shall so advise the Initial Purchaser and the underwriter(s), if any, and each selling Holder promptly and, if requested by such Persons, shall confirm such advice in writing;

 

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(xii) in the case of a Shelf Registration Statement, prior to any public offering of Transfer Restricted Securities, use its commercially reasonable efforts to cooperate with the selling Holders, the underwriter(s), if any, and their respective counsel in connection with the registration and qualification of the Transfer Restricted Securities under the state securities or blue sky laws of such jurisdictions as the selling Holders or underwriter(s), if any, may reasonably request in writing by the time the Shelf Registration Statement is declared effective by the Commission, it being agreed that no such registration or qualification will be made unless so requested, and use its commercially reasonable efforts to do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Transfer Restricted Securities covered by the Shelf Registration Statement; provided, however, that none of the Issuers or the Guarantors shall be required to register or qualify as a foreign corporation where it is not then so qualified or to take any action that would subject it to the service of process in suits or to taxation in any jurisdiction where it is not then so subject;
(xiii) shall issue, upon the request of any Holder of Initial Securities covered by the Exchange Offer Registration Statement, Exchange Securities having an aggregate principal amount equal to the aggregate principal amount of Initial Securities surrendered to the Company by such Holder in exchange therefor or being sold by such Holder; such Exchange Securities to be registered in the name of such Holder or in the name of the purchaser(s) of such Securities, as the case may be; in return, the Initial Securities held by such Holder shall be surrendered to the Company for cancellation;
(xiv) in the case of a Shelf Registration, cooperate with the selling Holders and the underwriter(s), if any, to facilitate the timely preparation and delivery of certificates representing Transfer Restricted Securities to be sold and not bearing any restrictive legends; and enable such Transfer Restricted Securities to be in such denominations and registered in such names as the Holders or the underwriter(s), if any, may request at least three Business Days prior to any sale of Transfer Restricted Securities made by such Holders or underwriter(s);
(xv) use its commercially reasonable efforts to cause the Transfer Restricted Securities covered by the Registration Statement to be registered with or approved by such other governmental agencies or authorities, if any, as may be necessary to enable the seller or sellers thereof or the underwriter(s), if any, to consummate the disposition of such Transfer Restricted Securities, subject to the proviso contained in Section 6(c)(xii) hereof;
(xvi) if any fact or event contemplated by Section 6(c)(iii)(D) hereof shall exist or have occurred, use its commercially reasonable efforts to prepare a supplement or post-effective amendment to the Registration Statement or related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of Transfer Restricted Securities, the Prospectus will not contain at the time of such delivery any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading;

 

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(xvii) provide a CUSIP number for all Exchange Securities not later than the effective date of the Registration Statement covering such Securities and provide the Trustee under the Indenture with any necessary printed certificates for such Securities which are in a form eligible for deposit with The Depository Trust Company;
(xviii) reasonably cooperate and assist in any filings required to be made with FINRA and in the performance of any due diligence investigation by any underwriter (including any “qualified independent underwriter”) that is required to be retained in accordance with the rules and regulations of FINRA;
(xix) otherwise use its commercially reasonable efforts to comply in all material respects with all applicable rules and regulations of the Commission, and make generally available to its securityholders, as soon as practicable, a consolidated earnings statement meeting the requirements of Rule 158 of the Securities Act (which need not be audited) for the twelve-month period (A) commencing at the end of any fiscal quarter in which Transfer Restricted Securities are sold to underwriters in a firm commitment or best efforts Underwritten Offering or (B) if not sold to underwriters in such an offering, beginning with the first month of the Company’s first fiscal quarter commencing after the effective date of the Registration Statement;
(xx) cause the Indenture to be qualified under the Trust Indenture Act not later than the effective date of the first Registration Statement required by this Agreement, and, in connection therewith, cooperate with the Trustee and the Holders of Securities to effect such changes to the Indenture as may be required for such Indenture to be so qualified in accordance with the terms of the Trust Indenture Act; and to execute and use its commercially reasonable efforts to cause the Trustee to execute, all documents that may be required to effect such changes and all other forms and documents required to be filed with the Commission to enable such Indenture to be so qualified in a timely manner; and
(xxi) cause all Securities covered by the Registration Statement to be listed on each securities exchange or automated quotation system on which similar debt securities issued by the Issuers are then listed if reasonably requested by the Holders of a majority in aggregate principal amount of Initial Securities or the managing underwriter(s), if any.

 

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Each Holder shall agree by acquisition of a Transfer Restricted Security that, upon (i) receipt of any notice from the Company of the existence of any fact of the kind described in Section 6(c)(iii)(D) hereof, or (ii) a Suspension Period, such Holder will forthwith discontinue disposition of Transfer Restricted Securities pursuant to the applicable Registration Statement until such Holder’s receipt of the copies of the supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof, or until it is advised in writing (the “Advice”) by the Company that the use of the Prospectus may be resumed, and has received copies of any additional or supplemental filings that are incorporated by reference in the Prospectus. If so directed by the Company, each Holder will deliver to the Company (at such Holder’s expense) all copies, other than permanent file copies then in such Holder’s possession, of the Prospectus covering such Transfer Restricted Securities that was current at the time of receipt of such notice. In the event the Company shall give any such notice, the time period regarding the effectiveness of such Registration Statement set forth in Section 3 or 4 hereof, as applicable, shall be extended by the number of days during the period from and including the date of the giving of such notice described in (i) or (ii) of this paragraph to and including the date when each selling Holder covered by such Registration Statement shall have received the copies of the supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof or shall have received the Advice.
SECTION 7. Registration Expenses.
(a) All expenses incident to the Issuers’ and the Guarantors’ performance of or compliance with this Agreement will be borne by the Issuers and the Guarantors, jointly and severally, regardless of whether a Registration Statement becomes effective, including, without limitation: (i) all registration and filing fees and expenses (including filings made by the Initial Purchaser with FINRA (and, if applicable, the fees and expenses of any “qualified independent underwriter” and its counsel that may be required by the rules and regulations of FINRA)); (ii) all fees and expenses of compliance with federal securities and state securities or blue sky laws; (iii) all expenses of printing (including printing certificates for the Exchange Securities to be issued in the Exchange Offer and printing of Prospectuses), messenger and delivery services and telephone; (iv) all fees and disbursements of counsel for the Issuers and the Guarantors and, to the extent provided for in Section 7(b) hereof, the Holders of Transfer Restricted Securities; (v) all application and filing fees in connection with listing the Exchange Securities on a securities exchange or automated quotation system pursuant to the requirements thereof; and (vi) all fees and disbursements of independent certified public accountants of the Issuers and the Guarantors (including the expenses of any special audit and comfort letters required by or incident to such performance).
Each of the Issuers and Guarantors will, in any event, bear its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expenses of any annual audit and the fees and expenses of any Person, including special experts, retained by the Issuers or the Guarantors.
(b) In connection with any Shelf Registration Statement required by this Agreement, the Issuers and the Guarantors, jointly and severally, will reimburse the Initial Purchaser and the Holders of Transfer Restricted Securities being registered pursuant to the Shelf Registration Statement, for the reasonable fees and disbursements of not more than one counsel, who shall be Paul, Weiss, Rifkind, Wharton & Garrison LLP or such other counsel as may be chosen by the Holders of a majority in principal amount of the Transfer Restricted Securities for whose benefit such Registration Statement is being prepared.

 

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Each Holder shall pay all underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of such Holder’s Transfer Restricted Securities pursuant to a Shelf Registration Statement.
SECTION 8. Indemnification.
(a) Each of the Issuers and Guarantors, jointly and severally, agrees to indemnify and hold harmless (i) each Holder and (ii) each Person, if any, who controls (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) any Holder (any of the Persons referred to in this clause (ii) being hereinafter referred to as a “controlling person”) and (iii) the respective officers, directors, partners, employees, representatives and agents of any Holder or any controlling person (any Person referred to in clause (i), (ii) or (iii) may hereinafter be referred to as an “Indemnified Holder”), to the fullest extent lawful, from and against any and all losses, claims, damages, liabilities, judgments, actions and expenses (including, without limitation, and as incurred, reimbursement of all reasonable costs of investigating, preparing, pursuing, settling, compromising, paying or defending any claim or action, or any investigation or proceeding by any governmental agency or body, commenced or threatened, including the reasonable fees and expenses of any one firm of legal counsel to any Indemnified Holder), arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or Prospectus (or any amendment or supplement thereto), or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except insofar as such losses, claims, damages, liabilities or expenses arise out of an untrue statement or omission or alleged untrue statement or omission that is made in reliance upon and in conformity with information relating to any of the Holders furnished in writing to the Company by any of the Holders expressly for use therein; provided, that this indemnity agreement shall not apply to any loss, claim, damage, liability or expense arising from an offer or sale of Transfer Restricted Securities occurring during a Suspension Period, if a notice of such Suspension Period was given to and received by such Person. This indemnity agreement shall be in addition to any liability which the Issuers and the Guarantors may otherwise have.

 

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In case any action or proceeding (including any governmental or regulatory investigation or proceeding) shall be brought or asserted against any of the Indemnified Holders with respect to which indemnity may be sought against the Issuers or the Guarantors, such Indemnified Holder (or the Indemnified Holder controlled by such controlling person) shall promptly notify the Issuers and the Guarantors in writing; provided, however, that the failure to give such notice shall not relieve any of the Issuers or the Guarantors of its obligations pursuant to this Agreement to the extent it is not materially prejudiced as a proximate result of such failure. Each of the Issuers and Guarantors may participate at its own expense in the defense of such action. If any such action or proceeding shall be brought against any Indemnified Holder, the Issuers and Guarantors shall be entitled to participate therein and to assume the defense thereof with counsel reasonably satisfactory to such Indemnified Holder. After notice from the Issuers and the Guarantors to such Indemnified Holder of their election to assume the defense of such action or proceeding, the Issuers and the Guarantors shall not be liable to such Indemnified Holder under this Section 8 for any legal or other expenses subsequently incurred by such Indemnified Holder in connection with the defense thereof other than reasonable costs of investigation; provided, however, that such Indemnified Holder shall have the right to employ counsel to represent jointly such Indemnified Holder and its respective directors, officers, employees and controlling persons who may be subject to liability arising out of any claim in respect of which indemnity may be sought by any Indemnified Holder against the Issuers or any Guarantor under this Section 8, if (i) the Issuers, the Guarantors and such Indemnified Holder shall have so mutually agreed; (ii) the Issuers and the Guarantors have failed within a reasonable time to retain counsel reasonably satisfactory to such Indemnified Holder; (iii) such Indemnified Holder and its directors, officers, employees and controlling persons shall have reasonably concluded, based on the advice of counsel, that there may be legal defenses available to them that are different from or in addition to those available to the Issuers and the Guarantors; or (iv) the named parties in any such proceeding (including any impleaded parties) include both such Indemnified Holder or its directors, officers, employees or controlling persons, on the one hand, and the Issuers and the Guarantors, on the other hand, and representation of both sets of parties by the same counsel would present a conflict due to actual or potential differing interests between them, and in any such event the fees and expenses of one firm of such separate counsel shall be paid by the Issuers and the Guarantors. The Issuers and the Guarantors shall be liable for any settlement of any such action or proceeding effected with the Issuers’ and the Guarantors’ prior written consent, which consent shall not be withheld unreasonably, and each of the Issuers and Guarantors agrees to indemnify and hold harmless any Indemnified Holder from and against any loss, claim, damage, liability or expense by reason of any settlement of any action effected with the written consent of the Issuers and the Guarantors. The Issuers and the Guarantors shall not, without the prior written consent of each Indemnified Holder, which shall not be withheld unreasonably, settle or compromise or consent to the entry of judgment in or otherwise seek to terminate any pending or threatened action, claim, litigation or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not any Indemnified Holder is a party thereto), unless such settlement, compromise, consent or termination includes an unconditional release of each Indemnified Holder from all liability arising out of such action, claim, litigation or proceeding.
(b) Each Holder of Transfer Restricted Securities agrees, severally and not jointly, to indemnify and hold harmless the Issuers and the Guarantors and their respective directors and officers who sign a Registration Statement, and any Person controlling (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) any of the Issuers or Guarantors and the respective officers, directors, partners, employees, representatives and agents of each such Person, to the same extent as the foregoing indemnity from the Issuers and the Guarantors to each of the Indemnified Holders, but only with respect to claims and actions based on information relating to such Holder furnished in writing by such Holder expressly for use in any Registration Statement. In case any action or proceeding shall be brought against any of the Issuers or Guarantors or their respective officers, directors, partners, employees, representatives, agents or any such controlling person in respect of which indemnity may be sought against a Holder of Transfer Restricted Securities, such Holder shall have the rights and duties given the Issuers and the Guarantors, and the Issuers, the Guarantors and their respective officers, directors, partners, employees, representatives, agents and such controlling person shall have the rights and duties given to each Holder by the preceding paragraph.

 

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(c) If the indemnification provided for in this Section 8 is unavailable to an indemnified party under Section 8(a) or (b) hereof (other than by reason of exceptions provided in those Sections) in respect of any losses, claims, damages, liabilities, judgments, actions or expenses referred to therein, then each applicable indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative benefits received by the Issuers and the Guarantors, on the one hand, and the Holders, on the other hand, from the Initial Placement (which, in the case of the Issuers and the Guarantors, shall be deemed to be equal to the total gross proceeds to the Issuers and the Guarantors from the Initial Placement), the amount of Additional Interest which did not become payable as a result of the filing of the Registration Statement resulting in such losses, claims, damages, liabilities, judgments actions or expenses, and such Registration Statement, or if such allocation is not permitted by applicable law, the relative fault of the Issuers and the Guarantors, on the one hand, and the Holders, on the other hand, in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of the Issuers and the Guarantors on the one hand and of the Indemnified Holder on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Issuers and the Guarantors, on the one hand, or the Indemnified Holders, on the other hand, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in the second paragraph of Section 8(a) hereof, any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim.
The Issuers, the Guarantors and each Holder of Transfer Restricted Securities agree that it would not be just and equitable if contribution pursuant to this Section 8(c) were determined by pro rata allocation (even if the Holders were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an indemnifying party as a result of the losses, claims, damages, liabilities or expenses referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 8, none of the Holders (and its related Indemnified Holders) shall be required to contribute, in the aggregate, any amount in excess of the amount by which the net proceeds received (in respect of a Shelf Registration) or relative benefits (in respect of the Exchange Offer) by such Holder with respect to the Initial Securities exceeds the amount of any damages which such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. The Holders’ obligations to contribute pursuant to this Section 8(c) are several in proportion to the respective principal amount of Initial Securities held by each of the Holders hereunder and not joint.

 

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(d) The remedies provided for in this Section 8 are not exclusive and shall not limit any rights or remedies that may otherwise be available to any Indemnified Holder at law or equity.
(e) The indemnity and contribution provisions contained in this Section 8 shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of the Initial Purchaser, any Holder or any Person controlling the Initial Purchaser or any Holder, or by or on behalf of the Issuers or the Guarantors or the officers or directors of or any Person controlling the Issuers or the Guarantors, (iii) acceptance of any of the Transfer Restricted Securities and (iv) any sale of Transfer Restricted Securities pursuant to a Shelf Registration Statement.
SECTION 9. Rule 144A. Each of the Issuers and Guarantors hereby agrees with each Holder, for so long as any Transfer Restricted Securities remain outstanding, at any time that the Company is not subject to either Section 13 or 15(d) of the Exchange Act or the Company is not in material compliance with its Exchange Act reporting obligations, to make available to any Holder or beneficial owner of Transfer Restricted Securities in connection with any sale thereof and any prospective purchaser of such Transfer Restricted Securities from such Holder or beneficial owner, the information required by Rule 144A(d)(4) under the Securities Act in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144A under the Securities Act.
SECTION 10. Underwritten Registrations. No Holder may participate in any Underwritten Registration hereunder unless such Holder (a) agrees to sell such Holder’s Transfer Restricted Securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) completes and executes all reasonable questionnaires, powers of attorney, indemnities, underwriting agreements, lock-up letters and other documents required under the terms of such underwriting arrangements.
SECTION 11. Selection of Underwriters. The Holders of at least 25% of the Transfer Restricted Securities covered by the Shelf Registration Statement who desire to do so may sell such Transfer Restricted Securities in an Underwritten Offering. In any such Underwritten Offering, the investment banker(s) and managing underwriter(s) that will administer such offering will be selected by the Company and shall be reasonably acceptable to the Holders of a majority in aggregate principal amount of such Transfer Restricted Securities included in such offering; provided, however that the Company shall not be required to pay more than an aggregate of $100,000 of registration related expenses, in addition to internal expenses of the Issuers (including, without limitation, salaries of officers and employees performing legal and accounting duties) in connection with any such underwritten offering.

 

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SECTION 12. Miscellaneous.
(a) Remedies. Each of the Issuers and Guarantors hereby agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and hereby agree to waive the defense in any action for specific performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Each of the Issuers and Guarantors will not on or after the date of this Agreement enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of any of the Issuers’ or Guarantors’ securities under any agreement in effect on the date hereof.
(c) Adjustments Affecting the Securities. The Company will not take any action, or permit any change to occur, with respect to the Securities that would materially and adversely affect the ability of the Holders to Consummate any Exchange Offer.
(d) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to or departures from the provisions hereof may not be given unless the Company has (i) in the case of Section 5 hereof and this Section 12(d)(i), obtained the written consent of Holders of all outstanding Transfer Restricted Securities and (ii) in the case of all other provisions hereof, obtained the written consent of Holders of a majority of the outstanding principal amount of Transfer Restricted Securities affected by such amendment, modification, supplement, waiver or departure.
(e) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail (registered or certified, return receipt requested), facsimile or air courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of the Registrar under the Indenture, with a copy to the Registrar under the Indenture; and

 

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(ii) if to the Company, Westmoreland Partners or any of the Guarantors:
Westmoreland Coal Company
2 North Cascade Avenue, 2nd Floor
Colorado Springs, CO 80903
Facsimile: 719-448-5826
Attention: Jennifer S. Grafton, Esq.
With a copy to:
Davis Graham & Stubbs LLP
1550 Seventeenth Street, Suit 500
Denver, CO 80202
Facsimile: 303-893-1379
Attention: John A. Elofson, Esq.
All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when transmission is confirmed by sender’s facsimile machine, if faxed; and on the next Business Day, if timely delivered to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee at the address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including, without limitation, and without the need for an express assignment, subsequent Holders of Transfer Restricted Securities; provided, however, that this Agreement shall not inure to the benefit of or be binding upon a successor or assign of a Holder unless and to the extent such successor or assign acquired Transfer Restricted Securities from such Holder. Nothing herein shall be deemed to permit any assignment, transfer or other disposition of Transfer Restricted Securities in violation of the terms of the Purchase Agreement or the Indenture.
(g) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICTS OF LAW RULES THEREOF.

 

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(j) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement together with the Purchase Agreement, the Indenture, the Securities and any related documents is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted by the Issuers with respect to the Transfer Restricted Securities. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter.
[Signature Pages Follow]

 

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.
                         
    WESTMORELAND COAL COMPANY    
 
                        
    By:   /s/ Keith E. Alessi    
             
        Name:   Keith E. Alessi    
        Title:   Chief Executive Officer and President    
 
                        
    WESTMORELAND PARTNERS    
 
                        
    By:   Westmoreland-Roanoke Valley, L.P.
its general partner		    
 
                        
    By:   WEI-Roanoke Valley, Inc.,
its general partner		    
 
                        
        By:   /s/ Jennifer S. Grafton    
                 
 
          Name:   Jennifer S. Grafton    
 
          Title:   General Counsel and Secretary    
 
                        
    By:   Westmoreland-North Carolina Power, L.L.C.,
its general partner		    
 
                        
        By:   /s/ Jennifer S. Grafton    
                 
            Name:   Jennifer S. Grafton    
            Title:   General Counsel and Secretary    
[Signature page to the Registration Rights Agreement]

 

 

 

         
  WESTMORELAND ENERGY LLC
 		  
  By:   /s/ Jennifer S. Grafton    
    Name:   Jennifer S. Grafton   
    Title:   General Counsel and Secretary   
 
  WESTMORELAND - NORTH CAROLINA POWER, L.L.C.
 		  
  By:   /s/ Jennifer S. Grafton    
    Name:   Jennifer S. Grafton   
    Title:   General Counsel and Secretary   
 
  WEI-ROANOKE VALLEY, INC.
 		  
  By:   /s/ Jennifer S. Grafton    
    Name:   Jennifer S. Grafton   
    Title:   General Counsel and Secretary   
 
  WESTMORELAND RESOURCES, INC.
 		  
  By:   /s/ Jennifer S. Grafton    
    Name:   Jennifer S. Grafton   
    Title:   General Counsel and Secretary   
[Signature page to the Registration Rights Agreement]

 

 

 

         
  WRI PARTNERS, INC.
 		  
  By:   /s/ Jennifer S. Grafton    
    Name:   Jennifer S. Grafton   
    Title:   General Counsel and Secretary   
 
  WESTMORELAND MINING SERVICES, INC.
 		  
  By:   /s/ Jennifer S. Grafton    
    Name:   Jennifer S. Grafton   
    Title:   General Counsel and Secretary   
 
  WESTMORELAND COAL SALES COMPANY, INC.
 		  
  By:   /s/ Jennifer S. Grafton    
    Name:   Jennifer S. Grafton   
    Title:   General Counsel and Secretary   
 
  WESTMORELAND POWER, INC.
 		  
  By:   /s/ Jennifer S. Grafton    
    Name:   Jennifer S. Grafton   
    Title:   General Counsel and Secretary   
[Signature page to the Registration Rights Agreement]

 

 

 

                     
    WCC LAND HOLDING COMPANY, INC.    
 
                    
    By:   /s/ Jennifer S. Grafton    
             
        Name:   Jennifer S. Grafton    
        Title:   General Counsel and Secretary    
 
                    
    WESTMORELAND-ROANOKE VALLEY, L.P.    
 
                    
    By:   WEI-Roanoke Valley, Inc.,
its general partner		    
 
                    
        By:   /s/ Jennifer S. Grafton    
                 
 
          Name:   Jennifer S. Grafton    
 
          Title:   General Counsel and Secretary    
[Signature page to the Registration Rights Agreement]

 

 

 

The foregoing Registration Rights Agreement is hereby confirmed and accepted as of the date first above written:
         
  GLEACHER & COMPANY SECURITIES, INC.
 		  
  By:   /s/ Tim O’Connor    
    Name:   Tim O’Connor   
    Title:   Managing Director   
[Signature page to the Registration Rights Agreement]

 

 

 

SCHEDULE I
GUARANTORS
1. Westmoreland Energy LLC, a Delaware limited liability company;
2. Westmoreland - North Carolina Power L.L.C., a Virginia limited liability company;
3. WEI-Roanoke Valley, Inc., a Delaware corporation;
4. Westmoreland - Roanoke Valley, L.P., a Delaware limited partnership;
5. Westmoreland Resources, Inc., a Delaware corporation;
6. WRI Partners, Inc., a Delaware corporation;
7. Westmoreland Mining Services, Inc., a Delaware Corporation;
8. Westmoreland Coal Sales Company, Inc., a Delaware corporation;
9. Westmoreland Power, Inc., a Delaware corporation; and
10. WCC Land Holding Company, Inc., a Delaware corporation.

 

 

EX-4.4 39 d82642exv4w4.htm EX-4.4 exv4w4
Exhibit 4.4
EXECUTION VERSION
PLEDGE AND SECURITY AGREEMENT
THIS PLEDGE AND SECURITY AGREEMENT (the “Agreement”) is entered into as of February 4, 2011 by and among WESTMORELAND COAL COMPANY, a Delaware corporation (the “Issuer” and a “Grantor”), WESTMORELAND PARTNERS, a Virginia general partnership (the “Co-Issuer” and a “Grantor” and, together with the Issuer, the “Issuers”), certain domestic Subsidiaries of the Issuer and the Co-Issuer, respectively, identified on the signature pages hereto as Grantors and such other domestic Subsidiaries as may from time to time be joined as Grantors hereunder (each a “Grantor”, and collectively with the Issuer and the Co-Issuer, the “Grantors”), and WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association, in its capacity as note collateral agent (the “Note Collateral Agent”) for the holders of the Notes issued pursuant to the Indenture referred to below.
PRELIMINARY STATEMENT
The Grantors (other than Absaloka Coal, LLC (“Absaloka”)), the Trustee and the Note Collateral Agent are entering into an Indenture dated as of February 4, 2011 (the “Indenture”) pursuant to which the Issuer and the Co-Issuer will issue 10.75% Senior Secured Notes due 2018 (the “Notes”). Each Grantor is entering into this Agreement in order to induce the purchase of the Notes by the Holders and to secure the following (the “Secured Obligations”): (i) in case of the Issuer and the Co-Issuer, their Obligations under the Indenture and (ii) in the case of the Grantors (other than the Issuers and Absaloka), the Obligations that the Grantors have agreed to guarantee pursuant to Article Eleven of the Indenture.
ACCORDINGLY, the Grantors and the Note Collateral Agent, on behalf of the Noteholder Secured Parties, hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Terms Defined in Indenture. All capitalized terms used herein and not otherwise defined shall have the meanings assigned to such terms in the Indenture.
1.2 Terms Defined in UCC. Terms defined in the UCC which are not otherwise defined in this Agreement or the Indenture are used herein as defined in the UCC.
1.3 Definitions of Certain Terms Used Herein. As used in this Agreement, in addition to the terms defined in the preamble and the Preliminary Statement, the following terms shall have the following meanings:
“Accounts” shall have the meaning set forth in Article 9 of the UCC.
“Account Debtors” means any Person obligated on an Account.

 

 

 

“Amendment” shall have the meaning set forth in Section 4.4.
“Article” means a numbered article of this Agreement, unless another document is specifically referenced.
“As-Extracted Collateral” shall have the meaning set forth in Article 9 of the UCC.
“Assigned Contracts” means all agreements, contracts, leases, licenses, partnership agreements, limited liability operating agreements, tax sharing agreements or hedging arrangements now or hereafter entered into by a Grantor, including each of the agreements set forth on Schedule I attached hereto, in each case as such agreements may be amended, amended and restated, supplemented or otherwise modified from time to time, including, (a) all rights of such Grantor to receive moneys due and to become due under or pursuant to the Assigned Contracts, (b) all rights of such Grantor to receive proceeds of any insurance, indemnity, warranty or guaranty with respect to the Assigned Agreements, (c) claims of such Grantor for damages arising out of or for breach of or default under the Assigned Agreements, and (d) the right of such Grantor to terminate the Assigned Agreements, to perform thereunder and to compel performance and otherwise exercise all remedies thereunder.
“Chattel Paper” shall have the meaning set forth in Article 9 of the UCC.
“Closing Date” means the date of the Indenture.
“Collateral” shall have the meaning set forth in Article II.
“Collateral Access Agreement” means any landlord waiver or other agreement, in form and substance reasonably satisfactory to the Note Collateral Agent, between the Note Collateral Agent and any third party (including any bailee, consignee, customs broker, or other similar Person) in possession of any Collateral or any landlord of the Issuer, the Co-Issuer or any Grantor for any real property where any Collateral is located.
“Collateral Deposit Account” shall have the meaning set forth in Section 7.1(a).
“Collateral Questionnaire” means the Collateral Questionnaire, dated as of the date hereof, completed and supplemented with schedules and attachments thereto and duly executed by a duly authorized officer of each Grantor, a copy of which is attached hereto as Exhibit K.
“Commercial Tort Claims” means the commercial tort claims (as that term is defined in Article 9 of the UCC), including, those commercial tort claims set forth on Exhibit J.
“Commodity Account Control Agreement” means an agreement, in form and substance reasonably satisfactory to the Note Collateral Agent, among the Issuer, the Co-Issuer or any Grantor, a commodity intermediary holding the Issuer’s or any Grantor’s assets, including funds and commodity contracts, and the Note Collateral Agent with respect to collection and control of all deposits, commodity contracts and other balances held in a commodity account maintained by any the Issuer, the Co-Issuer or any Grantor with such commodity intermediary.
“Commodity Accounts” shall have the meaning set forth in Article 9 of the UCC.

 

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“Control” shall have the meaning set forth in Article 8 or, if applicable, in Section 9-104, 9-105, 9-106 or 9-107 of Article 9 of the UCC.
“Copyrights” means, with respect to any Person, all of such Person’s right, title, and interest in and to the following: (a) all copyrights, rights and interests in copyrights, works protectable by copyright, copyright registrations, and copyright applications; (b) all renewals of any of the foregoing; (c) the right to sue for past, present, and future infringements of any of the foregoing; and (d) all rights corresponding to any of the foregoing throughout the world.
“Deed of Trust” means that certain Future Advance Deed of Trust and Security Agreement, dated as of February 4, 2011, between the Co-Issuer and Stewart Title Company, as trustee, for the use and benefit of the Note Collateral Agent, for itself and on behalf of the Trustee and the holders of Notes issued pursuant to the Indenture.
“Deposit Account Control Agreement” means an agreement, in form and substance reasonably satisfactory to the Note Collateral Agent, among the Issuer, the Co-Issuer or any Grantor, a banking institution holding the Issuer’s or any Grantor’s funds, and the Note Collateral Agent with respect to collection and control of all deposits and balances held in a deposit account maintained by the Issuer, the Co-Issuer or any Grantor with such banking institution.
“Deposit Accounts” shall have the meaning set forth in Article 9 of the UCC.
“Documents” shall have the meaning set forth in Article 9 of the UCC.
“Equipment” shall have the meaning set forth in Article 9 of the UCC, including all items of machinery, equipment, furnishings and fixtures of every kind, whether or not affixed to real property, as well as all Rolling Stock Collateral, all additions to, substitutions for, replacements of or accessions to any of the foregoing, all attachments, components, parts (including spare parts) and accessories whether installed thereon or affixed thereto and all fuel for any thereof and all options, warranties, service contracts, program services, test rights, maintenance rights, support rights, improvement rights and indemnifications relating to any of the foregoing.
“Excluded Deposit Accounts” means (a) payroll, withholding tax and other accounts for which the funds on deposit therein pertain to Liens permitted under clause (3) of the definition of “Permitted Liens” in the Indenture (provided that neither the Issuer, the Co-Issuer nor any Grantor may maintain funds in any such account in excess of amounts which are actually accrued (or in the case of fiduciary accounts, otherwise required to be maintained therein) to its employees or the relevant Governmental Authority or other beneficiary of such account) and (b) other deposit accounts (the “Other Excluded Deposit Accounts”) so long as the following conditions are satisfied: (1) all deposits into and balances maintained in the Other Excluded Deposit Accounts shall be in the ordinary course of business and (2) to the extent the aggregate balances in all Other Excluded Deposit Accounts at any time exceed $100,000 for a period of longer than three Business Days the Issuer or the Co-Issuer, as applicable, shall, or shall cause the relevant Grantor to, either (A) cause such amounts in excess of $100,000 to be transferred promptly (but in no event later than seven Business Days) to a Deposit Account subject to a Deposit Account Control Agreement or (B) cause one or more Other Excluded Deposit Accounts to become subject to a Deposit Account Control Agreement so that, after giving effect to the actions in clauses (A) and/or (B) the aggregate balance on deposit in all Other Excluded Deposit Accounts shall not at any time exceed $100,000 for a period longer than ten Business Days.

 

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“Exhibit” refers to a specific exhibit to this Agreement, unless another document is specifically referenced.
“Financial Asset” has the meaning given to such term in the UCC.
“Fixtures” shall have the meaning set forth in Article 9 of the UCC.
“General Intangibles” shall have the meaning set forth in Article 9 of the UCC.
“Goods” shall have the meaning set forth in Article 9 of the UCC.
“Instruments” shall have the meaning set forth in Article 9 of the UCC.
“Intellectual Property” means, collectively, all rights, priorities and privileges of any Grantor relating to intellectual property, whether arising under United States, multinational or foreign laws or otherwise, including Copyrights, Licenses, Patents, Trademarks, trade secrets and Internet domain names, and all rights to sue at law or in equity for any infringement or other impairment thereof, including the right to receive all proceeds and damages therefrom.
“Intercompany Note” means any promissory note evidencing loans made by any Grantor to any of its Subsidiaries or another Grantor.
“Inventory” shall have the meaning set forth in Article 9 of the UCC.
“Investment Property” shall have the meaning set forth in Article 9 of the UCC and shall include all Equity Interests in domestic Grantors (other than the Issuer) regardless of whether such Equity Interests are classified as “Investment Property” in Article 9 of the UCC.
“Letter-of-Credit Rights” shall have the meaning set forth in Article 9 of the UCC.
“Licenses” means, with respect to any Person, all of such Person’s right, title, and interest in and to (a) any and all licensing agreements or similar arrangements in and to its Patents, Copyrights, or Trademarks, and (b) all rights to sue for past, present, and future breaches thereof.
“Note Documents” means the Notes, the Notes Guarantees, the Indenture, the Agreement and the Registration Rights Agreement.
“Noteholder Secured Parties” mean the Trustee, Note Collateral Agent, each Holder and each other holder of, or obligee in respect of, any obligations in respect of the Notes outstanding at such time and the beneficiaries of each indemnification obligation undertaken by the Issuer, the Co-Issuer or any Grantor under any Note Document.

 

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“Patents” means, with respect to any Person, all of such Person’s right, title, and interest in and to: (a) any and all patents and patent applications; (b) all inventions and improvements described and claimed therein; (c) all reissues, divisions, continuations, extensions, and continuations-in-part thereof; (d) all rights to sue for past, present, and future infringements thereof; and (e) all rights corresponding to any of the foregoing throughout the world.
“Pledged Collateral” means all Instruments, Securities and other Investment Property of the Grantors, whether or not physically delivered to the Note Collateral Agent pursuant to this Agreement.
“Pledged Collateral Distribution” shall have the meaning set forth in Section 4.6(c)(i).
“Proceeds” means all proceeds of, and all other profits, products, rents or receipts, in whatever form, arising from the collection, sale, lease, exchange, assignment, licensing or other disposition of, or other realization upon, any Collateral, including all claims of the relevant Grantor against third parties for loss of, damage to or destruction of, or for proceeds payable under, or unearned premiums with respect to, policies of insurance in respect of, any Collateral, and any condemnation or requisition payments with respect to any Collateral.
“Receivables” means the accounts receivable, Chattel Paper, Documents, Instruments and any other rights or claims to receive money which are General Intangibles.
“Revolving Credit Facility” shall have the meaning set forth in Section 3.8(b).
“Rolling Stock Collateral” means all motor vehicles, automobiles, trucks, trailers, railcars, barges and vehicles of every description and handling and delivery equipment owned by the Grantors other than any Rolling Stock subject to a Lien permitted by clause (21) of the definition of “Permitted Liens” of the Indenture.
“Section” means a numbered section of this Agreement, unless another document is specifically referenced.
“Securities Account Control Agreement” means an agreement, in form and substance reasonably satisfactory to the Note Collateral Agent, among the Issuer, the Co-Issuer or any Grantor, a securities intermediary holding the Issuer’s or any Grantor’s assets, including funds and securities, and the Note Collateral Agent with respect to collection and control of all deposits, securities and other balances held in a securities account maintained by the Issuer, the Co-Issuer or any Grantor with such securities intermediary.
“Securities Accounts” shall have the meaning set forth in Article 8 of the UCC.
“Security” shall have the meaning set forth in Article 8 of the UCC.
“Special Flood Hazard Area” shall have the meaning set forth in Section 4.12.
“Specified Equity Interests” means (a) certificate number 1 issued by Westmoreland Terminal Co. to the Issuer for 1,000 shares of common stock; (b) certificate number 2 issued by Eastern Coal & Coke Co. to Westmoreland Coal Sales Company, Inc. for 100 shares of common stock, (c) certificate number 1 issued by Criterion Coal Co. to the Issuer for 1,000 shares of common stock· and (d) certificate number 3 issued by WRM to the Issuer for 80,000 shares of common stock.

 

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“Stock Rights” means all dividends, instruments or other distributions and any other right or property which the Grantors shall receive or shall become entitled to receive for any reason whatsoever with respect to, in substitution for or in exchange for any Equity Interest constituting Collateral, any right to receive an Equity Interest and any right to receive earnings, in which the Grantors now have or hereafter acquire any right, issued by an issuer of such Equity Interest.
“Supporting Obligations” shall have the meaning set forth in Article 9 of the UCC.
“Trademarks” means, with respect to any Person, all of such Person’s right, title, and interest in and to the following: (a) all trademarks (including service marks), trade names, trade dress and trade styles and the registrations and applications for registration thereof and the goodwill of the business symbolized by the foregoing; (b) all renewals of the foregoing; (c) all rights to sue for past, present, and future infringements of the foregoing, including the right to settle suits involving claims and demands for royalties owing; and (d) all rights corresponding to any of the foregoing throughout the world.
The foregoing definitions shall be equally applicable to both the singular and plural forms of the defined terms.
1.4 Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” The word “will” shall be construed to have the same meaning and effect as the word “shall.” Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, amended and restated, supplemented or otherwise modified, renewed, extended, replaced or refinanced, (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person’s permitted successors and assigns and, in the case of any Governmental Authority, any other Governmental Authority that shall have succeeded to any or all of the functions thereof, (c) the words “herein,” “hereof” and “hereunder,” and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (e) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights, (f) all references to “knowledge” of the Issuer, the Co-Issuer or any Grantor means the actual knowledge of a Responsible Officer, and (g) references to any law shall include all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting such law (including by succession of comparable successor laws).

 

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1.5 Times of Day. Unless otherwise specified, all references herein to times of day shall be references to Central time (daylight or standard, as applicable).
1.6 Timing of Payment of Performance. When the payment of any obligation or the performance of any covenant, duty or obligation is stated to be due or performance required on a day which is not a Business Day, the date of such payment or performance shall extend to the immediately succeeding Business Day.
1.7 Certifications. All certifications to be made hereunder by an officer or representative of any Grantor shall be made by such person in his or her capacity solely as an officer or a representative of such Grantor, on such Grantor’s behalf and not in such Person’s individual capacity.
ARTICLE II
GRANT OF SECURITY INTEREST
2.1 Each Grantor hereby pledges, collaterally assigns and grants to the Note Collateral Agent, on behalf of and for the ratable benefit of the Noteholder Secured Parties, a security interest in all of its right, title and interest in, to and under the following personal property, whether now owned by or owing to, or hereafter acquired by or arising in favor of such Grantor (including under any trade name or derivations thereof), and whether owned or consigned by or to, or leased from or to, such Grantor, and regardless of where located (all of which will be collectively referred to as the “Collateral”):
(a) all Accounts;
(b) all Chattel Paper;
(c) all Documents;
(d) all Equipment;
(e) all Fixtures;
(f) all General Intangibles;
(g) all Goods;
(h) all Instruments;
(i) all Intellectual Property;
(j) all Inventory;
(k) all Investment Property (including all Equity Interests in Grantors other than the Issuer);
(l) all cash or Cash Equivalents;

 

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(m) all letters of credit, Letter-of-Credit Rights and Supporting Obligations;
(n) all Deposit Accounts with any bank or other financial institution;
(o) all Commodity Accounts;
(p) all Securities Accounts;
(q) all Commercial Tort Claims;
(r) all As-Extracted Collateral;
(s) all Assigned Contracts;
(t) and all accessions to, substitutions for and replacements, Proceeds (including Stock Rights) of the foregoing, together with all books and records, customer lists, credit files, computer files, programs, printouts and other computer materials and records related thereto and any General Intangibles at any time evidencing or relating to any of the foregoing;
to secure the prompt and complete payment and performance of the Secured Obligations; provided, however, that “Collateral” (and each defined term used in the definition of Collateral) shall not include (i) property that is Excluded Property or As-Extracted Collateral (but only to the extent arising from property leased from an Indian tribe); and provided, further, that if and when any property shall cease to be an Excluded Property or at such time as the Mineral Consents are obtained, such property shall be deemed at all times from and after such date to constitute Collateral and (ii) Equity Interests in WML.
2.2 Without limiting the generality of the foregoing, this Agreement secures, as to each Grantor, the payment of all amounts that constitute part of the Secured Obligations (including any interest and fees that accrue after commencement of any bankruptcy or insolvency proceeding against any Grantor) and would be owed by such Grantor to any Noteholder Secured Party under this Agreement or the Indenture but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving a Grantor.
2.3 Anything herein to the contrary notwithstanding, (a) each Grantor shall remain liable under the Assigned Contracts included in such Grantor’s Collateral to the extent set forth therein to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed, (b) the exercise by the Note Collateral Agent of any of the rights hereunder shall not release any Grantor from any of its duties or obligations under the Assigned Contracts included in the Collateral and (c) no Noteholder Secured Party shall have any obligation or liability under the Assigned Contracts included in the Collateral by reason of this Agreement, nor shall any Noteholder Secured Party be obligated to perform any of the obligations or duties of any Grantor thereunder or to take any action to collect or enforce any claim for payment assigned hereunder.

 

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ARTICLE III
REPRESENTATIONS AND WARRANTIES
Each Grantor represents and warrants to the Note Collateral Agent and the Noteholder Secured Parties that:
3.1 Title, Perfection and Priority. Such Grantor has good and valid rights in or the power to transfer the Collateral and title to or leasehold interest in the Collateral with respect to which it has purported to grant a security interest hereunder, free and clear of all Liens except for Liens permitted under Section 4.1(e), and has full organizational power and authority to grant to the Note Collateral Agent the security interest in such Collateral pursuant hereto. When financing statements have been filed in the appropriate offices against such Grantor in the locations listed on Exhibit H and the payment of all filing and recordation fees associated therewith, the Note Collateral Agent will have a fully perfected first priority security interest in that Collateral of the Grantor in which a security interest may be perfected by filing (with the exception of an immaterial amount of As-Extracted Collateral), subject only to Liens permitted under Section 4.1(e).
3.2 Type and Jurisdiction of Organization, Organizational and Identification Numbers. The type of entity of such Grantor, its state of organization, the organizational number issued to it by its state of organization and its federal employer identification number as of the Closing Date are set forth on Exhibit A.
3.3 Principal Location. Such Grantor’s mailing address and the location of its place of business (if it has only one) or its chief executive office (if it has more than one place of business), as of the Closing Date is disclosed in Exhibit A.
3.4 Collateral Locations. All of such Grantor’s locations where tangible Collateral is located as of the Closing Date are listed on Exhibit A (other than Inventory and Equipment in transit, Equipment out for repair or refurbishment, Inventory and Equipment maintained at a customer location, and Inventory and Equipment in the possession of employees or Subsidiaries in the ordinary course of business).
3.5 Deposit Accounts, Commodity Accounts and Securities Accounts. All of such Grantor’s Deposit Accounts, Commodity Accounts and Securities Accounts as of the Closing Date are listed on Exhibit B.
3.6 Exact Names. Grantor’s name in which it has executed this Agreement is the exact name as it appears in such Grantor’s organizational documents, as amended, as filed with such Grantor’s jurisdiction of organization. Except as set forth on Exhibit A, as of the Closing Date, such Grantor has not, during the past five years, been known by or used any other legal name, or currently is not known by or does not use any other corporate or fictitious name.

 

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3.7 Letter-of-Credit Rights and Chattel Paper. Exhibit C lists all Letter-of-Credit Rights and Chattel Paper valued individually in excess of $500,000 of such Grantor as of the Closing Date. All action by such Grantor necessary to protect and perfect the Note Collateral Agent’s Lien on each item listed on Exhibit C (including the delivery of all originals and the placement of a legend on all Chattel Paper as required hereunder) has been duly taken to the extent requested in writing by the Note Collateral Agent. Upon taking of all such actions, the Note Collateral Agent will have a fully perfected first priority security interest in the Collateral listed on Exhibit C, subject only to Liens permitted under Section 4.1(e).
3.8 Accounts and Chattel Paper.
(a) The names of the obligors, amounts owing, due dates and other information with respect to such Grantor’s accounts receivable and Chattel Paper are and will be correctly stated in all material respects in all records of such Grantor relating thereto and in all invoices. As of the time when each account receivable or each item of Chattel Paper arises, such Grantor shall be deemed to have represented and warranted that such account receivable or Chattel Paper, as the case may be, and all records relating thereto, are genuine and in all material respects what they purport to be.
(b) With respect to its accounts receivable, except as specifically disclosed in writing to the Note Collateral Agent from time to time, all material accounts receivable represent bona fide sales of Inventory or rendering of services to Account Debtors in the ordinary course of such Grantor’s business and are not evidenced by a judgment, Instrument or Chattel Paper. For the avoidance of doubt, any writing delivered pursuant to this Section 3.8 or any certificate delivered pursuant to Section 4.1(a) may qualify records, invoices and other information previously furnished to the Note Collateral Agent. This Section 3.8 shall be subject to modification at such time that any Grantor enters into or guarantees a revolving credit facility as permitted by the Indenture (the “Revolving Credit Facility”).
3.9 Inventory. With respect to any of its Inventory existing on the Closing Date, (a) such Inventory (other than Inventory (i) in transit, (ii) maintained at a customer location and (iii) in the possession of employees or Subsidiaries in the ordinary course of business) is located at one of the locations set forth on Exhibit A, (b) no Inventory (other than Inventory (i) in transit, (ii) maintained at a customer location and (iii) in the possession of employees or Subsidiaries in the ordinary course of business), is now, or shall at any time or times hereafter be stored at any other location except as permitted by Section 4.1(g), (c) such Inventory is not subject to any licensing, patent, royalty, trademark, trade name or copyright agreements with any third parties which would require any consent of any third party upon sale or disposition of that Inventory or the payment of any monies to such third parties pursuant to such agreements upon such sale or other disposition, (d) such Inventory has been produced in accordance with the Federal Fair Labor Standards Act of 1938, and all rules, regulations and orders thereunder, and (e) the completion of manufacture, sale or other disposition of such Inventory by the Note Collateral Agent following an Event of Default shall not require the consent of any Person (other than consents applicable to the Note Collateral Agent generally and not as a result of this Agreement and other than landlord consents to the extent not otherwise obtained) and shall not constitute a breach or default under any contract or agreement to which such Grantor is a party or to which such property is subject. Each Grantor has good and merchantable title to its Inventory and such Inventory is not subject to any Lien or security interest or document whatsoever except for the Lien granted to the Note Collateral Agent, for the benefit of the Note Collateral Agent and the Noteholder Secured Parties, and except for Liens permitted by Section 4.1(e).

 

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3.10 Intellectual Property. As of the date hereof, such Grantor does not own any patents, patent applications, trademark applications or registrations or copyright registrations. With respect to any Intellectual Property acquired after the date hereof, such Grantor shall do or cause to be done such acts as may be necessary or proper to grant to the Note Collateral Agent on behalf of and for the ratable benefit of the Noteholder Secured Parties fully perfected and, subject only to the Liens permitted by Section 4.1(e), first priority security interests on such Grantor’s Intellectual Property so acquired. Such acts shall include, but not be limited to, the timely filing of appropriate financing statements in the offices listed on Exhibit H, any supplement hereto or any security agreements as may be requested by the Note Collateral Agent with the United States Copyright Office and the United States Patent and Trademark Office, and the payment of all filing and recordation fees associated therewith. Such perfected security interests shall be enforceable (subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law) as such as against any and all creditors of and purchasers from such Grantor; and (subject to the qualifications set forth in this Section 3.10) all action necessary to protect and perfect the Note Collateral Agent’s Lien on such Grantor’s Patents, Trademarks or Copyrights shall have been duly taken at such time. Notwithstanding the foregoing, nothing in this Agreement shall require any Grantor to make any filings or take any actions to record or perfect the Note Collateral Agent’s security interest in any Intellectual Property outside the United States.
3.11 Filing Requirements. As of the Closing Date, each item of Rolling Stock Collateral valued in excess of $50,000 is described on Part I of Exhibit E. As of the Closing Date, none of the Collateral owned by it is of a type for which security interests or liens may be perfected by filing under any federal statute except as noted in the Collateral Questionnaire and except for Patents, Trademarks and Copyrights held by such Grantor and described in Exhibit D. As of the Closing Date the general description of each property on which the mine head of any As-Extracted Collateral is located is set forth in Exhibit F together with the name and address of the record owner of each such property.
3.12 No Financing Statements, Security Agreements. No financing statement or security agreement describing all or any portion of the Collateral which has not lapsed or been terminated naming such Grantor as debtor has been filed or is of record in any jurisdiction except (a) for financing statements or security agreements naming the Note Collateral Agent on behalf of the Noteholder Secured Parties as the secured party, (b) as to which a duly authorized termination statement relating to such financing statement, pay-off letter or other instrument has been delivered to the Note Collateral Agent on the Closing Date, (c) as permitted by Section 4.1(e) and (d) the Deed of Trust.

 

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3.13 Pledged Collateral.
(a) Exhibit G sets forth a complete and accurate list as of the Closing Date of all Pledged Collateral which constitutes Equity Interests owned by such Grantor or which represents Indebtedness owed to such Grantor. Such Grantor is the direct, sole beneficial owner and sole holder of record of such Pledged Collateral as being owned by it, free and clear of any Liens, except for Liens permitted by Section 4.1(e). Such Grantor further represents and warrants that (i) all Pledged Collateral owned by it constituting an Equity Interest has been (to the extent such concepts are relevant with respect to such Pledged Collateral) duly authorized, validly issued, are fully paid and non-assessable, (ii) with respect to any certificates delivered to the Note Collateral Agent representing an Equity Interest, either such certificates are Securities as defined in Article 8 of the UCC as a result of actions by the issuer or otherwise, or, if such certificates are not Securities, such Grantor has so informed the Note Collateral Agent so that it may take steps to perfect its security interest therein as a General Intangible, (iii) all such Pledged Collateral held by a securities intermediary is covered by a control agreement among such Grantor, the securities intermediary and the Note Collateral Agent pursuant to which the Note Collateral Agent has Control and (iv) to such Grantor’s knowledge and except as otherwise disclosed to the Note Collateral Agent, all Pledged Collateral which represents Indebtedness owed to such Grantor has been duly authorized, authenticated or issued and delivered by the issuer of such Indebtedness, is the legal, valid and binding obligation of such issuer and such issuer (subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law) is not in default thereunder.
(b) Except as set forth on Exhibit G as of the Closing Date, (i) none of the Pledged Collateral owned by it has been issued or transferred in violation in any material respect of the securities registration, securities disclosure or similar laws of any jurisdiction to which such issuance or transfer may be subject, (ii) there are existing no options, warrants, calls or commitments of any character whatsoever relating to such Pledged Collateral and (iii) no consent, approval, authorization, or other action by, and no giving of notice, filing with, any governmental authority or any other Person is required for the pledge by such Grantor of such Pledged Collateral pursuant to this Agreement or for the execution, delivery and performance of this Agreement by such Grantor, or for the exercise by the Note Collateral Agent of the voting or other rights provided for in this Agreement or for the remedies in respect of the Pledged Collateral pursuant to this Agreement, except as may be required in connection with such disposition by laws affecting the offering and sale of securities generally, those that have been obtained or made and are in full force and effect.
(c) Except as set forth in Exhibit G, as of the Closing Date, such Grantor owns 100% of the issued and outstanding Equity Interests which constitute Pledged Collateral owned by it and none of the Pledged Collateral which represents Indebtedness owed to such Grantor (other than any Intercompany Note) is subordinated in right of payment to other Indebtedness or subject to the terms of an indenture.

 

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ARTICLE IV
COVENANTS
From the date of this Agreement, and thereafter until this Agreement is terminated in accordance with Section 9.14, each Grantor agrees that:
4.1 General.
(a) Collateral Records; Certification of Collateral. Such Grantor will maintain in all material respects complete and accurate books and records with respect to the Collateral owned by it. Within 30 calendar days following the end of the fiscal year of such Grantor, the Issuer and the Co-Issuer shall deliver to the Note Collateral Agent a certificate of a Responsible Officer confirming (i) there has been no material change in the information contained in Schedules 1, 2, 3, 8, 9, 11, 13, 15, 22, 23, 26 and 32 of the Collateral Questionnaire since the date of the Collateral Questionnaire or (ii) identifying such material changes. With respect to material changes in the information contained in Schedule 26 of the Collateral Questionnaire, any certificate delivered pursuant to this Section 4.1(a) shall be limited to the disposition or acquisition of assets valued in excess of $500,000.
(b) Authorization to File Financing Statements; Ratification. Such Grantor hereby authorizes the Note Collateral Agent to file, and if requested will promptly deliver to the Note Collateral Agent, all financing statements and other documents and take such other actions as may from time to time be requested by the Note Collateral Agent in order to maintain a perfected (subject to the qualifications in Section 3.1) and first priority security interest in and, if applicable, Control of, the Collateral owned by such Grantor, subject to Liens permitted under Section 4.1(e). Any financing statement filed by the Note Collateral Agent may be filed in any filing office in any UCC jurisdiction and may (i) indicate such Grantor’s Collateral (A) as “all assets” of the Grantor or words of similar effect, regardless of whether any particular asset comprised in the Collateral falls within the scope of Article 9 of the UCC or such jurisdiction, or (B) by any other description which reasonably describes the Collateral, and (ii) contain any other information required by part 5 of Article 9 of the UCC for the sufficiency or filing office acceptance of any financing statement or amendment, including (A) whether such Grantor is an organization, the type of organization and any organization identification number issued to such Grantor, and (B) in the case of a financing statement filed as a fixture filing or indicating such Grantor’s Collateral as As-Extracted Collateral or timber to be cut, a sufficient description of real property to which the Collateral relates. Such Grantor also agrees to furnish any such information to the Note Collateral Agent promptly upon its reasonable request therefor. Such Grantor also ratifies its authorization for the Note Collateral Agent to have filed in any UCC jurisdiction any initial financing statements or amendments thereto if filed prior to the date hereof. Notwithstanding the authorization provided to the Note Collateral Agent in this Section 4.1(b), each Grantor shall be responsible for filing (and in furtherance of such obligation, each Grantor is hereby authorized to file) any and all financing statements or continuations thereof or amendments thereto and shall promptly furnish copies of the filed statements to the Note Collateral Agent.

 

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(c) Further Assurances. Each Grantor agrees that from time to time, at the expense of such Grantor, such Grantor will promptly execute and deliver, or otherwise authenticate, all further instruments and documents, and take all further action that may be necessary or desirable, or that the Note Collateral Agent may reasonably request in writing, in order to perfect and protect any pledge or security interest granted or purported to be granted by such Grantor hereunder or to enable the Note Collateral Agent to exercise and enforce its rights and remedies hereunder with respect to any Collateral of such Grantor. Without limiting the generality of the foregoing, each Grantor will promptly with respect to Collateral of such Grantor: (i) at the written request of the Note Collateral Agent, mark conspicuously each chattel paper valued in excess of $500,000 and included in Receivables, and each of its records pertaining to such Collateral with a legend, in form and substance reasonably satisfactory to the Note Collateral Agent, indicating that such chattel paper, Collateral is subject to the security interest granted hereby; (ii) at the written request of the Note Collateral Agent if any such Collateral valued in excess of $500,000 shall be evidenced by a promissory note or other instrument or chattel paper, deliver and pledge to the Note Collateral Agent such note or instrument or chattel paper duly indorsed and accompanied by duly executed instruments of transfer or assignment, all in form and substance reasonably satisfactory to the Note Collateral Agent; (iii) file such financing or continuation statements, or amendments thereto, and such other instruments or notices, as may be necessary or desirable, or as the Note Collateral Agent may reasonably request in writing, in order to perfect and preserve the security interest granted or purported to be granted by such Grantor hereunder; (iv) at the request of the Note Collateral Agent, take all action to ensure that the Note Collateral Agent’s security interest, for the benefit of the Noteholder Secured Parties, is noted on any certificate of title related to any Collateral valued in excess of $250,000 that is evidenced by a certificate of title; and (v) deliver to the Note Collateral Agent evidence that all other actions that the Note Collateral Agent may deem reasonably necessary or desirable in order to perfect and protect the security interest granted or purported to be granted by such Grantor under this Agreement has been taken.
(d) Disposition of Collateral. Such Grantor will not sell, lease or otherwise dispose of the Collateral owned by it except for dispositions permitted pursuant to Section 4.13 of the Indenture.
(e) Liens. Such Grantor will not create, incur, or suffer to exist any Lien on the Collateral owned by it except (i) the security interest created by this Agreement, and (ii) other Liens permitted pursuant to Section 4.12 of the Indenture.
(f) Other Financing Statements. Such Grantor will not authorize the filing of any financing statement naming it as debtor covering all or any portion of the Collateral owned by it, except as permitted by Section 4.1(e). Such Grantor acknowledges that except as permitted by Section 4.1(e) it is not authorized to file any financing statement or amendment or termination statement with respect to any financing statement without the prior written consent of the Note Collateral Agent, subject to such Grantor’s rights under Section 9-509(d)(2) of the UCC.
(g) Locations. Such Grantor will not maintain any Collateral (other than (i) Inventory and Equipment in transit, (ii) Equipment out for repair or refurbishment, (iii) Inventory and Equipment maintained at a customer location, and (iv) Inventory and Equipment in the possession of employees or Subsidiaries in the ordinary course of business) owned by it at any location other than those locations listed on Exhibit A or otherwise disclosed to the Note Collateral Agent in accordance with Section 4.15.

 

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4.2 Receivables.
(a) Certain Agreements on Receivables. Such Grantor will not make or agree to make any discount, credit, rebate or other reduction in the original amount owing on a Receivable or accept in satisfaction of a Receivable less than the original amount thereof, except that such Grantor may or agree to reduce the amount of Accounts arising from the sale of Inventory in accordance with its present policies and in the ordinary course of business.
(b) Collection of Receivables. Except as otherwise provided in this Agreement, such Grantor will do all things commercially reasonable to collect and enforce, at such Grantor’s sole expense, all amounts due or hereafter due to such Grantor under the Receivables owned by it.
(c) Delivery of Invoices. Such Grantor will deliver to the Note Collateral Agent immediately upon its written request after the occurrence and during the continuance of an Event of Default duplicate invoices with respect to each Account owned by it bearing such language of collateral assignment as the Note Collateral Agent shall specify.
(d) Electronic Chattel Paper. Within three Business Days of obtaining electronic chattel paper, such Grantor shall take all steps necessary to grant the Note Collateral Agent Control of all electronic chattel paper valued individually in excess of $100,000 in accordance with the UCC and all “transferable records” as defined in each of the Uniform Electronic Transactions Act and the Electronic Signatures in Global and National Commerce Act.
4.3 Inventory and Equipment.
(a) Maintenance of Goods. Such Grantor will do all things commercially reasonable to maintain, preserve, protect and keep its Inventory and the Equipment necessary in the conduct of its business in good repair and working and saleable condition, except for damaged or defective goods arising in the ordinary course of such Grantor’s business and except for ordinary wear and tear and casualty and condemnation in respect of the Equipment, except where failure to do so could not reasonably be expected to have a material adverse effect on the Issuer and the Grantors, taken as a whole.
(b) Equipment Such Grantor shall not permit any Equipment to become a fixture with respect to Real Property or to become an accession with respect to other personal property with respect to which fixtures or personal property the Note Collateral Agent does not have a Lien.
(c) Titled Vehicles. Within 60 days following the acquisition of any Rolling Stock Collateral, such Grantor will give the Note Collateral Agent notice of its acquisition of any Rolling Stock Collateral covered by a certificate of title and provide and/or file all documents or instruments necessary to have the Lien of the Note Collateral Agent noted on any such certificate of title or with the appropriate state office; provided, however, that such requirement shall not apply with respect to any motor vehicle valued at less than $50,000.

 

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4.4 Delivery of Instruments, Securities, Chattel Paper and Documents. Each Grantor will (a) deliver to the Note Collateral Agent immediately upon execution of this Agreement (but in any event, no later than five days after the Closing Date), the originals of all Securities constituting Collateral owned by it (other than the Specified Equity Interests), including certificated securities representing Equity Interests in any Grantor other than the Issuer and a certificated security representing 33% of the Equity Interests in WRM held by Westmoreland Coal Company, such Securities being delivered as described on Exhibit G attached hereto, (b) hold in trust for the Note Collateral Agent upon receipt and promptly thereafter deliver to the Note Collateral Agent any such Securities hereafter constituting Collateral, (c) within three Business Days of the Note Collateral Agent’s written request, deliver to the Note Collateral Agent (and thereafter hold in trust for the Note Collateral Agent upon receipt and immediately deliver to the Note Collateral Agent) any document evidencing or constituting Pledged Collateral or chattel paper with a value in excess of $500,000 and (d) upon the Note Collateral Agent’s written request, deliver to the Note Collateral Agent a duly executed amendment to this Agreement, in substantially the form of Exhibit I hereto (the “Amendment”), pursuant to which such Grantor will pledge such additional Collateral. Such Grantor hereby authorizes the Note Collateral Agent to attach each Amendment to this Agreement and agrees that all additional Collateral owned by it set forth in such Amendments shall be considered to be part of the Collateral.
4.5 Uncertificated Pledged Collateral. Such Grantor will permit the Note Collateral Agent from time to time to cause in writing the appropriate issuers (and, if held with a securities intermediary, such securities intermediary) of uncertificated securities or other types of Pledged Collateral owned by it not represented by certificates to mark their books and records with the numbers and face amounts of all such uncertificated securities or other types of Pledged Collateral not represented by certificates and all rollovers and replacements therefor to reflect the Lien of the Note Collateral Agent granted pursuant to this Agreement. With respect to any Pledged Collateral owned by it, upon the Note Collateral Agent’s reasonable written request, such Grantor will take any actions necessary (a) to cause the issuers of uncertificated securities which are Pledged Collateral and (b) to seek to cause any securities intermediary which is the holder of any such Pledged Collateral, to cause the Note Collateral Agent to have and retain Control over such Pledged Collateral. Without limiting the foregoing, such Grantor will, with respect to any such Pledged Collateral held with a securities intermediary, seek to cause such securities intermediary to enter into a Securities Control Agreement with the Note Collateral Agent.
4.6 Pledged Collateral.
(a) Registration of Pledged Collateral. During the continuance of an Event of Default, such Grantor will permit any registerable Pledged Collateral owned by it to be registered in the name of the Note Collateral Agent or its nominee at any time at the option of the Controlling Secured Parties.
(b) Exercise of Rights in Pledged Collateral.
(i) Without in any way limiting the foregoing and subject to clause (ii) below, such Grantor shall have the right to exercise all voting rights or other rights relating to the Pledged Collateral owned by it for all purposes not in violation of this Agreement or the Indenture; provided however, that no vote or other right shall be exercised or action taken for the purpose of impairing the enforcement rights of the Note Collateral Agent in respect of such Pledged Collateral except as may be incidental to actions otherwise permitted under such documents.

 

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(ii) Such Grantor will permit the Note Collateral Agent or its nominee at any time after the occurrence and during the continuance of an Event of Default, and with prior notice, to exercise all voting rights or other rights relating to the Pledged Collateral owned by it, including, exchange, subscription or any other rights, privileges, or options pertaining to any Equity Interest or Investment Property constituting such Pledged Collateral as if it were the absolute owner thereof.
(iii) After all Events of Default have been cured or waived in accordance with the provisions of the Indenture, and so long as the Secured Obligations shall not have been and remain accelerated, each Grantor shall have the right to exercise the voting and other consensual rights and powers that it would have otherwise been entitled to pursuant to this Section 4.6.
(c) Dividends; Other Distributions.
(i) Subject to Section 4.11 of the Indenture, upon receipt by any Grantor of any and all dividends, distributions and interest paid in respect of the Pledged Collateral owned by it (the “Pledged Collateral Distributions”), such Grantor shall deposit any and all such Pledged Collateral Distributions into a Collateral Deposit Account in accordance with Section 7.1.
(ii) To the extent that any Pledged Collateral Distribution is in a form other than cash, such as any Cash Equivalent, other instruments or property received, receivable or otherwise distributed in respect of, or in exchange for, any Pledged Collateral, such Cash Equivalent, instrument or property shall be delivered to the Note Collateral Agent to hold as a Pledged Collateral Distribution and shall, if received by such Grantor, be received in trust for the benefit of the Note Collateral Agent of such Grantor. Such Grantor shall be able to make use of such Cash Equivalent, instrument or property; provided, however, any Proceeds thereof shall be deposited into a Collateral Deposit Account in accordance with Section 7.1.
4.7 Intellectual Property.
(a) Such Grantor will use its commercially reasonable efforts to secure all consents and approvals necessary or appropriate for the assignment to or benefit of the Note Collateral Agent of any material License held by such Grantor and to enforce the security interests granted hereunder.
(b) Such Grantor shall deliver written notification to the Note Collateral Agent promptly after a Responsible Officer of such Grantor has actual knowledge that any application or registration for any material Patent, Trademark or Copyright hereafter owned by such Grantor may become abandoned (except for Patents, Trademarks or Copyrights expiring at the end of their statutory terms), or of any adverse determination in any proceeding (other than office actions issued in the ordinary course of prosecution of any patent application or application to register any other Intellectual Property) against such Grantor regarding such Grantor’s ownership of any material Patent, Trademark or Copyright, its right to register the same, or to keep and maintain the same, in each case, to the extent the same could reasonably be expected to have, individually or in the aggregate, a material adverse effect on the Grantors, taken as a whole.

 

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(c) If such Grantor, either directly or through any agent, employee, licensee or designee, files an application for the registration of any Patent, Trademark or Copyright with the United States Patent and Trademark Office or the United States Copyright Office, such Grantor shall promptly give the Note Collateral Agent written notice thereof concurrently with the delivery of a Compliance Certificate under the Indenture, and shall execute and deliver any and all security agreements as the Note Collateral Agent may request in accordance with Section 3.10.
(d) Except as determined by such Grantor in its reasonable business judgment (exercised in good faith), such Grantor shall take all actions that are necessary to pursue each such application (and to obtain the relevant registration) and to maintain the validity and enforceability of each registration of its material Patents, Trademarks and Copyrights thereafter owned by such Grantor.
(e) Such Grantor shall, unless it shall reasonably determine that such Patent, Trademark or Copyright is not material to the conduct of its business or operations, take all actions deemed appropriate under the circumstances in the exercise of its reasonable business judgment (exercised in good faith) to protect such Patent, Trademark or Copyright hereafter owned by such Grantor, including if appropriate under the circumstances bringing suit and recovering all damages therefor. In the event that such Grantor institutes suit because any of its Patents, Trademarks or Copyrights constituting Collateral is infringed upon, or misappropriated or diluted by a third party, such Grantor shall comply with Section 4.8.
4.8 Commercial Tort Claims. Such Grantor shall promptly, and in any event within five Business Days after a Responsible Officer of such Grantor has actual knowledge of such commercial tort claim, notify the Note Collateral Agent in writing of such commercial tort claim (as defined in the UCC) individually in excess of $100,000 acquired by it and such Grantor shall enter into an amendment to this Agreement, substantially in the form of Exhibit I hereto, granting to Note Collateral Agent a first priority security interest (subject to Liens permitted by Section 4.1(e)) in such commercial tort claim.
4.9 Letter-of-Credit Rights. If such Grantor is or becomes the beneficiary of a letter of credit, having a face or stated amount individually in excess of $100,000, it shall promptly, and in any event within three Business Days after becoming a beneficiary, notify the Note Collateral Agent in writing thereof and use commercially reasonable efforts to cause the issuer and/or confirmation bank to (a) consent to the assignment of any Letter-of-Credit Rights to the Note Collateral Agent and (b) agree to direct all payments thereunder to a Deposit Account at the Note Collateral Agent or subject to a Deposit Account Control Agreement for application to the Secured Obligations, all in form and substance reasonably satisfactory to the Note Collateral Agent.
4.10 Federal, State, Municipal or Tribal Claims. Such Grantor will promptly notify the Note Collateral Agent in writing upon obtaining knowledge of any Collateral with a value in excess of $100,000 which constitutes a claim against the United States government, any state or local government or any tribal court or any instrumentality or agency thereof, the assignment of which claim is restricted by federal, state, municipal or tribal law.

 

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4.11 No Interference. Such Grantor agrees that it will not interfere with any right, power and remedy of the Note Collateral Agent provided for in this Agreement or now or hereafter existing at law or in equity or by statute or otherwise, or the exercise or beginning of the exercise by the Note Collateral Agent of any one or more of such rights, powers or remedies.
4.12 Insurance.
(a) In the event any Collateral is located in any area that has been designated by the Federal Emergency Management Agency as a “Special Flood Hazard Area”, such Grantor shall purchase and maintain flood insurance on such Collateral (including any personal property which is located on any real property leased by such Grantor within a “Special Flood Hazard Area”). The amount of flood insurance required by this Section shall be the amount maintained by the Grantors on the Closing Date.
(b) All insurance policies required hereunder and under Section 4.05 of the Indenture shall name the Note Collateral Agent (for the benefit of the Note Collateral Agent and the Noteholder Secured Parties) as an additional insured or as loss payee, as applicable, and commencing no later than the Closing Date shall contain loss payable clauses or mortgagee clauses, through endorsements as required by the Indenture.
(c) All premiums on any such insurance shall be paid when due by such Grantor, and copies of the policies delivered to the Note Collateral Agent. If such Grantor fails to obtain any insurance as required by this Section, the Note Collateral Agent may obtain such insurance at the Borrower’s expense. By purchasing such insurance, the Note Collateral Agent shall not be deemed to have waived any Default arising from the Grantor’s failure to maintain such insurance or pay any premiums therefor.
4.13 Collateral Access Agreements. Such Grantor shall use commercially reasonable efforts for a period not to exceed 90 days to obtain a Collateral Access Agreement, from the lessor of each leased property, mortgagee of owned property or bailee or consignee with respect to any warehouse, processor or converter facility or other location (other than any worksite or customer location) where Collateral with a value exceeding $250,000, individually or in the aggregate, is stored or located for more than 30 days (whether on the Closing Date or any time thereafter), which agreement or letter shall provide access rights, contain a waiver or subordination of all Liens or claims that the landlord, mortgagee, bailee or consignee may assert against the Collateral at that location, and shall otherwise be reasonably satisfactory in form and substance to the Note Collateral Agent. Such Grantor shall timely and fully pay and perform its obligations under all leases and other agreements (subject to any grace periods therein) with respect to each leased location or third party warehouse where any Collateral with a value exceeding $250,000, individually or in the aggregate, is or may be located.
4.14 Control Agreements. Such Grantor will provide to the Note Collateral Agent, (i) a Commodity Account Control Agreement duly executed on behalf of each commodities intermediary holding a Commodity Account of such Grantor as set forth in the Agreement, (ii) a Securities Account Control Agreement duly executed on behalf of each securities intermediary holding a Securities Account of such Grantor as set forth in the Agreement and (iii) in accordance with Section 7.1 a Deposit Account Control Agreement duly executed on behalf of each financial institution holding a Deposit Account (other than an Excluded Deposit Account) of such Grantor.

 

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4.15 Change of Name or Location; Change of Fiscal Year. Such Grantor shall not change its chief executive office, principal place of business, mailing address, corporate offices or warehouses or locations at which Collateral is held or stored, or the location of its records concerning the Collateral as set forth in the Agreement unless the Note Collateral Agent shall have received at least 15 days prior written notice of such change; provided, that any new location shall be in the continental U.S. Such grantor shall not (a) change its name as it appears in official filings in the state of its incorporation or organization, (b) change the type of entity that it is, (c) change its organization identification number, if any, issued by its state of incorporation or other organization, or (d) change its state of incorporation or organization, in each case, unless the Note Collateral Agent shall have received at least 15 days prior written notice of such change.
4.16 New Subsidiaries. Pursuant to and subject to the exceptions set forth in Sections 4.18 and 4.19 of the Indenture, any newly created or acquired direct or indirect domestic Subsidiary (whether by acquisition, creation or designation) of the Issuer, the Co-Issuer or any Guarantor (other than a direct or indirect subsidiary of WML until the WML Notes are discharged) or any Unrestricted Subsidiary that becomes a Grantor is required to enter into this Agreement by executing and delivering in favor of the Note Collateral Agent an instrument in the form of Annex I. Upon the execution and delivery of Annex I by such new domestic Subsidiary, such domestic Subsidiary shall become a Grantor hereunder with the same force and effect as if originally named as a Grantor herein. The execution and delivery of any instrument adding an additional Grantor as a party to this Agreement shall not require the consent of any Grantor hereunder (except to the extent obtained on or prior to the date of its execution and delivery of such Instrument). The rights and obligations of each Grantor hereunder shall remain in full force and effect notwithstanding the addition of any new Grantor hereunder.
4.17 Assigned Contracts.
(a) Each Grantor will at its expense perform, observe and, if applicable, enforce all terms and provisions of the Assigned Contracts to be performed or observed by it in the ordinary course of business consistent with past practices and as and to the extent deemed prudent by such Grantor in the exercise of its reasonable judgment taking into account relevant facts and circumstances. Each Grantor shall maintain the Assigned Contracts to which it is a party in full force and effect until expiration in accordance with their respective terms, except where failure to do so would not reasonably be expected to have a Material Adverse Effect;
(b) Each Grantor will furnish to the Note Collateral Agent promptly upon receipt thereof copies of all notices of default received or delivered by such Grantor under or pursuant to the Assigned Contracts to which it is a party.

 

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(c) Each Grantor agrees that it will not, except to the extent otherwise permitted under the Indenture:
(i) cancel or terminate any Assigned Contracts to which it is a party or consent to or accept any cancellation or termination thereof which could reasonably be expected to have a Material Adverse Effect;
(ii) amend, amend and restate, supplement or otherwise modify any such Assigned Contracts or give any consent, waiver or approval thereunder, in each case in a manner which could reasonably be expected to have a Material Adverse Effect;
(iii) waive any default under or breach of any such Assigned Contracts which could reasonably be expected to have a Material Adverse Effect; or
(iv) take any other action in connection with any such Assigned Contracts that would impair the value of the interests or rights of such Grantor thereunder or that would impair the interests or rights of any Noteholder Secured Party in any manner that could reasonably be expected to have a Material Adverse Effect.
ARTICLE V
EVENTS OF DEFAULT AND REMEDIES
5.1 Remedies.
(a) Upon the occurrence and during the continuance of an Event of Default, the Note Collateral Agent may, subject to the terms, conditions and provisions of the Indenture, exercise any or all of the following rights and remedies:
(i) those rights and remedies provided in this Agreement, the Indenture or any other Note Document;
(ii) those rights and remedies available to a secured party under the UCC (whether or not the UCC applies to the affected Collateral) or under any other applicable law (including any law governing the exercise of a bank’s right of setoff or bankers’ lien) when a debtor is in default under a security agreement;
(iii) give notice of sole control or any other instruction under any Deposit Account Control Agreement or other control agreement with any securities intermediary and take any action therein with respect to such Collateral; provided, however, that the Note Collateral Agent shall revoke such notice and cease to exercise sole control of any Deposit Account at such time as no Event of Default is continuing;
(iv) those rights and remedies of any of the Grantors under or in connection with the Collateral, or otherwise in respect of the Collateral, including, (A) any and all rights of such Grantor to demand or otherwise require payment of any amount under, or performance of any provision of, the Assigned Contracts, the Receivables and the other Collateral (subject to any right of a lender under a revolving credit facility with a Revolving First-Priority Lien thereon) and (B) exercise all other rights and remedies with respect to the Assigned Contracts, the Receivables and the other Collateral, including, without limitation, those set forth in Section 9-607 of the UCC.

 

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(v) without notice (except as specifically provided in Section 9.1 or elsewhere herein), demand or advertisement of any kind to any Grantor or any other Person, peaceably enter the premises of any Grantor where any Collateral is located (through self-help and without judicial process) to collect, receive, assemble, process, appropriate, sell, lease, assign, grant an option or options to purchase or otherwise dispose of, deliver, or realize upon, the Collateral or any part thereof in one or more parcels at public or private sale or sales (which sales may be adjourned or continued from time to time with or without notice and may take place at any Grantor’s premises or elsewhere), for cash, on credit or for future delivery without assumption of any credit risk, and upon such other terms as are commercially reasonable; and
(vi) immediately after written notice to the applicable Grantor, transfer and register in its name or in the name of its nominee the whole or any part of the Pledged Collateral, to exchange certificates or instruments representing or evidencing Pledged Collateral for certificates or instruments of smaller or larger denominations, to exercise the voting and all other rights as a holder with respect thereto, to collect and receive all cash dividends, interest, principal and other distributions made thereon and to otherwise act with respect to the Pledged Collateral as though the Note Collateral Agent was the outright owner thereof.
(b) The Note Collateral Agent, on behalf of the Noteholder Secured Parties, may comply with any applicable state or federal law requirements in connection with a disposition of the Collateral and compliance will not be considered to adversely affect the commercial reasonableness of any sale of the Collateral.
(c) The Note Collateral Agent shall be permitted upon any such public sale or sales and, to the extent permitted by law, upon any such private sale or sales, to purchase for the benefit of the Note Collateral Agent and the Noteholder Secured Parties, the whole or any part of the Collateral so sold, free of any right of equity redemption, which equity redemption the Grantor hereby expressly releases.
(d) Until the Note Collateral Agent is able to effect a sale, lease, or other disposition of Collateral, the Note Collateral Agent shall have the right to hold or use Collateral, or any part thereof, to the extent that it deems appropriate for the purpose of preserving Collateral or its value or for any other purpose deemed appropriate by the Note Collateral Agent. The Note Collateral Agent may, if it so elects, seek the appointment of a receiver or keeper to take possession of Collateral and to enforce any of the Note Collateral Agent’s remedies (for the benefit of the Note Collateral Agent and Noteholder Secured Parties), with respect to such appointment without prior notice or hearing as to such appointment.
(e) Notwithstanding the foregoing, except as required by applicable law, neither the Note Collateral Agent nor the Noteholder Secured Parties shall be required to (i) make any demand upon, or pursue or exhaust any of their rights or remedies against, any Grantor, any other obligor, guarantor, pledgor or any other Person with respect to the payment of the Secured Obligations or to pursue or exhaust any of their rights or remedies with respect to any Collateral therefor or any direct or indirect guarantee thereof, (ii) marshal the Collateral or any guarantee of the Secured Obligations or to resort to the Collateral or any such guarantee in any particular order, or (iii) effect a public sale of any Collateral.

 

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(f) Each Grantor recognizes that the Note Collateral Agent may be unable to effect a public sale of any or all the Pledged Collateral and may be compelled to resort to one or more private sales thereof in accordance with clause (a) above. Each Grantor also acknowledges that any private sale may result in prices and other terms less favorable to the seller than if such sale were a public sale and, notwithstanding such circumstances, agrees that any such private sale shall not be deemed to have been made in a commercially unreasonable manner solely by virtue of such sale being private. The Note Collateral Agent shall be under no obligation to delay a sale of any of the Pledged Collateral for the period of time necessary to permit any Grantor or the issuer of the Pledged Collateral to register such securities for public sale under the Securities Act of 1933, or under applicable state securities laws, even if the applicable Grantor and the issuer would agree to do so.
(g) Subject to Section 6.10 of the Indenture and the rights of a lender under a Revolving Credit Facility to the proceeds of a Grantor’s accounts receivable and Inventory, any cash held by or on behalf of the Note Collateral Agent and all cash proceeds received by or on behalf of the Note Collateral Agent in respect of any sale of, collection from, or other realization upon all or any part of the Collateral may, in the discretion of the Note Collateral Agent, be applied (after payment of any amounts payable to the Note Collateral Agent pursuant to Section 9.19) in whole or in part by the Note Collateral Agent for the ratable benefit of the Noteholder Secured Parties against, all or any part of the Secured Obligations, in the manner set forth below:
First, to payment of that portion of the Secured Obligations constituting fees, indemnities, expenses, taxes and other amounts (including fees, charges and disbursements of counsel to the Note Collateral) payable to the Note Collateral Agent in its capacity as such;
Second, to payment of that portion of the Secured Obligations constituting fees, indemnities and all other amounts payable to the Noteholder Secured Parties (without priority of any one over any other) pro rata to the Noteholder Secured Parties in proportion to the unpaid amounts of Secured Obligations with such proceeds applied as among the Noteholder Secured Parties, as set forth in the Indenture; and
Last, any surplus of such cash or cash proceeds held by or on the behalf of the Note Collateral Agent and remaining after payment in full of all the Secured Obligations shall be paid over to the applicable Grantor or to whomsoever may be lawfully entitled to receive such surplus.
5.2 Grantor’s Obligations Upon Default. Upon the request of the Note Collateral Agent after the occurrence and during the continuance of an Event of Default, each Grantor will:
(a) assemble and make available to the Note Collateral Agent the tangible Collateral and all books and records relating thereto at any place or places reasonably specified by the Note Collateral Agent, whether at a Grantor’s premises or elsewhere;

 

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(b) permit the Note Collateral Agent, by the Note Collateral Agent’s representatives and agents, to enter, occupy and use any premises where all or any part of the Collateral, or the books and records relating thereto, or both, are located, to take possession of all or any part of the Collateral or the books and records relating thereto, or both, to remove all or any part of the Collateral or the books and records relating thereto, or both, and to conduct sales of the Collateral, without any obligation to pay the Grantor for such use and occupancy;
(c) furnish to the Note Collateral Agent, or cause an issuer of Pledged Collateral to furnish to the Note Collateral Agent, any information regarding the Pledged Collateral in such detail as the Note Collateral Agent may specify; and
(d) at its own expense, cause the independent certified public accountants then engaged by each Grantor to prepare and deliver to the Note Collateral Agent and each Noteholder Secured Party, at any time, and from time to time, promptly upon the Note Collateral Agent’s request, the following reports with respect to the applicable Grantor: (i) a reconciliation of all Accounts; (ii) an aging of all Accounts; (iii) trial balances; and (iv) a test verification of such Accounts.
5.3 Grant of Intellectual Property License. For the purpose of enabling the Note Collateral Agent to exercise the rights and remedies under this Article V at and during the continuance of such time as the Note Collateral Agent shall be lawfully entitled to exercise such rights and remedies, each Grantor hereby, to the extent permitted by the applicable license or sublicense (a) grants to the Note Collateral Agent, for the benefit of the Note Collateral Agent and the Noteholder Secured Parties, an irrevocable, nonexclusive license (exercisable without payment of royalty or other compensation to any Grantor) to use, license or sublicense any Intellectual Property rights hereafter acquired by such Grantor, and wherever the same may be located, and including in such license access to all media in which any of the licensed items may be recorded or stored and to all computer software and programs used for the compilation or printout thereof and (b) irrevocably agrees that the Note Collateral Agent may sell any of such Grantor’s Inventory directly to any person, including persons who have previously purchased the Grantor’s Inventory from such Grantor and in connection with any such sale or other enforcement of the Note Collateral Agent’s rights under this Agreement, may sell Inventory which bears any Trademark owned by or licensed to such Grantor and any Inventory that may be covered by any Copyright owned by or licensed to such Grantor in the future and the Note Collateral Agent may finish any work in process and affix any Trademark owned by or licensed to such Grantor at such time and sell such Inventory as provided herein.
5.4 Waivers. Each Grantor hereby waives any and all rights that it may otherwise have (whether any such right is contractual or exists pursuant to the articles of incorporation or bylaws of any relevant entity or under applicable law) that would interfere with this Agreement or the exercise by Note Collateral Agent of any rights or remedies granted to it pursuant to this Agreement.

 

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ARTICLE VI
ACCOUNT VERIFICATION; ATTORNEY IN FACT; PROXY
6.1 Account Verification. During the continuation of an Event of Default, the Note Collateral Agent may at any time, in the Note Collateral Agent’s own name, in the name of a nominee of the Note Collateral Agent, or in the name of any Grantor communicate (by mail, telephone, facsimile or otherwise) with the Account Debtors of any such Grantor, parties to contracts with any such Grantor and obligors in respect of Instruments of any such Grantor to verify with such Persons, to the Note Collateral Agent’s reasonable satisfaction, the existence, amount, terms of, and any other matter relating to, Accounts, Instruments, Chattel Paper, payment intangibles and/or other Receivables.
6.2 Authorization for Noteholder Secured Party to Take Certain Action.
(a) Each Grantor irrevocably authorizes the Note Collateral Agent at any time and from time to time in the sole discretion of the Note Collateral Agent and appoints the Note Collateral Agent as its attorney in fact, subject to clause (b) of this Section 6.2, (i) to execute on behalf of such Grantor as debtor and to file financing statements necessary or desirable in the Note Collateral Agent’s sole discretion to perfect (subject to the qualifications set forth in Section 3.1) and to maintain the perfection and priority of the Note Collateral Agent’s security interest in the Collateral, (ii) to endorse and collect any cash proceeds of the Collateral, (iii) to file a carbon, photographic or other reproduction of this Agreement or any financing statement with respect to the Collateral as a financing statement and to file any other financing statement or amendment of a financing statement (which does not add new collateral or add a debtor) in such offices as the Note Collateral Agent in its sole discretion deems necessary or desirable to perfect (subject to the qualifications set forth in Section 3.1) and to maintain the perfection and priority of the Note Collateral Agent’s security interest in the Collateral, (iv) to contact and enter into one or more agreements with the issuers of uncertificated securities which are Pledged Collateral or with securities intermediaries holding Pledged Collateral as may be necessary or advisable to give the Note Collateral Agent Control over such Pledged Collateral, (v) to apply the proceeds of any Collateral received by the Note Collateral Agent to the Secured Obligations as provided in Section 7.3, (vi) upon five Business Days’ prior notice, to discharge past due taxes, assessments, charges, fees or Liens on the Collateral (except for such Liens as are specifically permitted hereunder or under the Indenture), (vii) to contact Account Debtors for any reason, (viii) to demand payment or enforce payment of the Receivables in the name of the Note Collateral Agent or such Grantor and to endorse any and all checks, drafts, and other instruments for the payment of money relating to the Receivables, (ix) to sign such Grantor’s name on any invoice or bill of lading relating to the Receivables, drafts against any Account Debtor of the Grantor, assignments and verifications of Receivables, (x) to exercise all of such Grantor’s rights and remedies with respect to the collection of the Receivables and any other Collateral, (xi) to settle, adjust, compromise, extend or renew the Receivables, (xii) to settle, adjust or compromise any legal proceedings brought to collect Receivables, (xiii) to the extent permitted by the Indenture, to prepare, file and sign such Grantor’s name on a proof of claim in bankruptcy or similar document against any Account Debtor of such Grantor, (xiv) to prepare, file and sign such Grantor’s name on any notice of Lien, assignment or satisfaction of Lien or similar document in connection with the Receivables, (xv) to change the address for delivery of mail addressed to such Grantor to such address as the Note Collateral Agent may designate and to receive, open and dispose of all mail addressed to such Grantor, and (xvi) to do all other acts and things necessary to carry out this Agreement; and such Grantor agrees to reimburse the Note Collateral Agent promptly following written demand (including documentation reasonably supporting such request) for any reasonable payment made or any reasonable out-of-pocket expense incurred by the Note Collateral Agent in connection with any of the foregoing; provided that, this authorization shall not relieve such Grantor of any of its obligations under this Agreement or under the Indenture.

 

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(b) All acts of said attorney or designee are hereby ratified and approved. The powers conferred on the Note Collateral Agent, for the benefit of the Note Collateral Agent and Noteholder Secured Parties, under this Section 6.2 are solely to protect the Note Collateral Agent’s interests in the Collateral and shall not impose any duty upon the Note Collateral Agent or any Noteholder Secured Party to exercise any such powers. The Note Collateral Agent agrees that, except for the powers granted in Sections 6.2(a)(i), (a)(iii), and (a)(v), it shall not exercise any power or authority granted to it under the power of attorney unless an Event of Default has occurred and is continuing.
6.3 Proxy. EACH GRANTOR HEREBY IRREVOCABLY CONSTITUTES AND APPOINTS THE NOTE COLLATERAL AGENT AS ITS PROXY AND ATTORNEY-IN-FACT (AS SET FORTH IN SECTION 6.2 ABOVE) WITH RESPECT TO ITS PLEDGED COLLATERAL, INCLUDING THE RIGHT TO VOTE SUCH PLEDGED COLLATERAL, WITH FULL POWER OF SUBSTITUTION TO DO SO. IN ADDITION TO THE RIGHT TO VOTE ANY SUCH PLEDGED COLLATERAL, THE APPOINTMENT OF THE NOTE COLLATERAL AGENT AS PROXY AND ATTORNEY-IN-FACT SHALL INCLUDE THE RIGHT TO EXERCISE ALL OTHER RIGHTS, POWERS, PRIVILEGES AND REMEDIES TO WHICH A HOLDER OF SUCH PLEDGED COLLATERAL WOULD BE ENTITLED (INCLUDING GIVING OR WITHHOLDING WRITTEN CONSENTS OF SHAREHOLDERS, CALLING SPECIAL MEETINGS OF SHAREHOLDERS AND VOTING AT SUCH MEETINGS). SUCH PROXY SHALL BE EFFECTIVE, AUTOMATICALLY AND WITHOUT THE NECESSITY OF ANY ACTION (INCLUDING ANY TRANSFER OF ANY SUCH PLEDGED COLLATERAL ON THE RECORD BOOKS OF THE ISSUER THEREOF) BY ANY PERSON (INCLUDING THE ISSUER OF SUCH PLEDGED COLLATERAL OR ANY OFFICER OR AGENT THEREOF), UPON THE OCCURRENCE AND DURING THE CONTINUANCE OF AN EVENT OF DEFAULT.
6.4 Nature of Appointment; Limitation of Duty. THE APPOINTMENT OF THE NOTE COLLATERAL AGENT AS PROXY AND ATTORNEY-IN-FACT IN THIS ARTICLE VI IS COUPLED WITH AN INTEREST AND SHALL BE IRREVOCABLE UNTIL THE DATE ON WHICH THIS AGREEMENT IS TERMINATED IN ACCORDANCE WITH SECTION 9.14. NOTWITHSTANDING ANYTHING CONTAINED HEREIN, NEITHER THE NOTE COLLATERAL AGENT, NOR ANY NOTEHOLDER SECURED PARTY, NOR ANY OF THEIR RESPECTIVE AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES SHALL HAVE ANY DUTY TO EXERCISE ANY RIGHT OR POWER GRANTED HEREUNDER OR OTHERWISE OR TO PRESERVE THE SAME AND SHALL NOT BE LIABLE FOR ANY FAILURE TO DO SO OR FOR ANY DELAY IN DOING SO, EXCEPT IN RESPECT OF DAMAGES ATTRIBUTABLE TO THEIR OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT (OR THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF ANY OF THEIR RESPECTIVE AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES) AS FINALLY DETERMINED BY A COURT OF COMPETENT JURISDICTION; PROVIDED THAT, IN NO EVENT SHALL THEY BE LIABLE FOR ANY SPECIAL, PUNITIVE, EXEMPLARY, INDIRECT OR CONSEQUENTIAL LOSS OR DAMAGES OF ANY KIND WHATSOEVER (INCLUDING, BUT NOT LIMITED TO, LOSS OF PROFIT) IRRESPECTIVE OF WHETHER THE NOTE COLLATERAL AGENT OR OTHER NOTEHOLDER SECURED PARTY HAS BEEN ADVISED OF THE LIKELIHOOD OF SUCH LOSS OR DAMAGE AND REGARDLESS OF THE FORM OF ACTION.

 

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ARTICLE VII
COLLECTION AND APPLICATION OF COLLATERAL PROCEEDS; DEPOSIT ACCOUNTS
7.1 Collection of Accounts.
(a) Each Grantor shall use commercially reasonable efforts to promptly after the Closing Date execute and deliver to the Note Collateral Agent Deposit Account Control Agreements for each Deposit Account (other than Excluded Deposit Accounts) maintained by such Grantor into which the following will be deposited (1) all cash, checks or other similar payments relating to or constituting payments made in respect of Accounts, (2) any Pledged Collateral Distribution and (3) in the case of the Issuer, the WML Payments Collateral (subject to any adjustments under Section 10.5(b) of the WML Note and Section 8.2.5 of the Amended and Restated WML Credit Agreement), (each, a “Collateral Deposit Account”), which Collateral Deposit Accounts (as of the Closing Date) are identified as such on Exhibit B. The Grantors shall obtain the Deposit Account Control Agreements required by this Section 7.1 within 120 days of the Closing Date.
(b) Each Grantor shall direct all of its Account Debtors to forward payments directly to a Collateral Deposit Account. If notwithstanding the foregoing instructions, any Grantor receives any proceeds of any Receivables, such Grantor shall receive such payments as the Note Collateral Agent’s trustee, and shall immediately deposit all cash, checks or other similar payments related to or constituting payments made in respect of Receivables received by it to a Collateral Deposit Account.
7.2 Covenant Regarding New Deposit Accounts. Before opening or replacing any Collateral Deposit Account or other Deposit Account (other than Excluded Deposit Accounts), each Grantor shall cause each bank or financial institution in which it seeks to open a Deposit Account, to enter into a Deposit Account Control Agreement with the Note Collateral Agent in order to give the Note Collateral Agent Control of such Deposit Account.
7.3 Application of Proceeds; Deficiency. Any proceeds of the Collateral shall be applied in the order set forth in the Indenture unless a court of competent jurisdiction shall otherwise direct. The Note Collateral Agent shall pay over the balance of such proceeds, if any, after all of the Secured Obligations have been satisfied, to the applicable Grantor pursuant to the written directions of the applicable Grantor. The Grantors shall remain liable for any deficiency if the proceeds of any sale or disposition of the Collateral are insufficient to pay all Secured Obligations, including any attorneys’ fees and other expenses incurred by the Note Collateral Agent or any Noteholder Secured Party to collect such deficiency.

 

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ARTICLE VIII
IMMUNITIES OF THE NOTE COLLATERAL AGENT
8.1 No Implied Duty. The Note Collateral Agent shall not have any duties or responsibilities except those expressly provided in this Agreement and no implied duties or obligations shall be read into this Agreement against the Note Collateral Agent. The Note Collateral Agent shall not be required to take any action which is contrary to applicable law or any provision of this Agreement or other Note Documents. The Note Collateral Agent makes no representation as to the validity, value, genuineness or the collectability of any security or other document or other instrument held by or delivered to the Note Collateral Agent. Notwithstanding anything to the contrary contained in the this Agreement or other Note Documents, the Note Collateral Agent shall not be called upon to advise any party as to the wisdom in taking or refraining to take any action with respect to the Collateral or be a trustee for or have any fiduciary obligation to any party.
8.2 Appointment of Co-Agents and Sub-Agents. The Note Collateral Agent may employ agents and appoint sub-agents, attorneys, custodians, nominees or co-collateral agents as it determines appropriate in the performance of its duties hereunder. The Note Collateral Agent will not be responsible for the negligence or misconduct of any of such Persons appointed by it with due care.
8.3 Solicitation of Instructions. The Note Collateral Agent may at any time solicit written direction from the holders of the Notes or, in any case, an order of a court of competent jurisdiction, as to any action that it may be requested or required to take, or which it may propose to take, in the performance of any of its obligations under this Agreement and shall be fully justified in failing or refusing to act whether under this Agreement until it shall have received such requisite direction or order.
8.4 Limitation of Liability. The Note Collateral Agent shall not be responsible or liable for any action taken or omitted to be taken by it hereunder, except for its own gross negligence, bad faith or willful misconduct.
8.5 Documents in Satisfactory Form. The Note Collateral Agent shall be entitled to require that all agreements, certificates, opinions, instruments and other documents at any time submitted to it, including those expressly provided for in this Agreement, be delivered to it in a form and upon substantive provisions reasonably satisfactory to it.

 

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8.6 Entitled to Rely. The Note Collateral Agent may rely conclusively upon any certificate, notice or other document (including any teletransmission) believed by it in good faith to be genuine and correct and to have been signed or sent by or on behalf of the proper Person or Persons and need not investigate any fact or matter stated in any such document. The Note Collateral Agent may seek and rely upon any judicial order or judgment, upon any advice, opinion or statement of legal counsel, independent consultants and other experts selected by it in good faith and upon any certification, instruction, notice or other writing delivered to it by a Grantor in compliance with the provisions of this Agreement without being required to determine the authenticity thereof or the correctness of any fact stated therein or the propriety or validity of service thereof. The Note Collateral Agent may act in reliance upon any instrument comporting, in all material respects, with the provisions of this Agreement or any signature believed by it in good faith to be genuine and may assume that any Person purporting to give notice or receipt or advice or make any statement or execute any document in connection with the provisions hereof has been duly authorized to do so. To the extent an officer’s certificate or report or an opinion of Counsel is required or permitted under this Agreement to be delivered to the Note Collateral Agent in respect of any matter, the Note Collateral Agent may rely conclusively on such officer’s certificate, report or opinion of counsel as to such matter in the absence of bad faith on the part of the Note Collateral Agent.
8.7 Security or Indemnity in favor of the Note Collateral Agent. The Note Collateral Agent shall not be required to advance or expend any funds or otherwise incur any liability, financial or otherwise, in the performance of its duties or the exercise of its powers or rights hereunder unless it has been provided with security or indemnity which it, in its discretion, deems sufficient against any and all liability or expense which may be incurred by it by reason of taking or continuing to take such action.
8.8 Limitations on Duty of Note Collateral Agent in Respect of Collateral.
(a) Beyond the exercise of reasonable care in the custody of Collateral in its possession, the Note Collateral Agent will have no duty as to any Collateral in its possession or control or in the possession or control of any agent or bailee or any income thereon or as to preservation of rights against prior parties or any other rights pertaining thereto, and the Note Collateral Agent will not be responsible for filing any financing or continuation statements or recording any documents or instruments in any public office at any time or times or otherwise perfecting or maintaining the perfection of any Liens on the Collateral. The Note Collateral Agent will be deemed to have exercised reasonable care in the custody of the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which it accords similar property, and the Note Collateral Agent will not be liable or responsible for any loss or diminution in the value of any of the Collateral by reason of the act or omission of any carrier, forwarding agency or other agent or bailee selected by the Note Collateral Agent in good faith or as selected by any other Person.
(b) The Note Collateral Agent will not be responsible for the existence, genuineness or value of any of the Collateral or for the validity, perfection, priority or enforceability of the Liens in any of the Collateral, whether impaired by operation of law or by reason of any action or omission to act on its part hereunder, except to the extent such action or omission constitutes gross negligence, bad faith or willful misconduct on the part of the Note Collateral Agent, for the validity or sufficiency of the Collateral or any agreement or assignment contained therein, for the validity of the title of the Grantor to the Collateral, for insuring the Collateral or for the payment of taxes, charges, assessments or liens upon the Collateral or otherwise as to the maintenance of the Collateral. The Note Collateral Agent hereby disclaims any representation or warranty to the present and future holders of the Secured Obligations concerning the perfection of the liens granted hereunder or in the value of any of the Collateral.

 

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8.9 No Liability for Clean Up of Hazardous Materials. In the event that the Note Collateral Agent is required to acquire title to an asset for any reason, or take any managerial action of any kind in regard thereto, in order to carry out any obligation for the benefit of another, which in the Note Collateral Agent’s sole discretion may cause the Note Collateral Agent to be considered an “owner or operator” under any environmental laws or otherwise cause the Note Collateral Agent to incur, or be exposed to, any environmental liability or any liability under any other federal, state or local law, the Note Collateral Agent reserves the right, instead of taking such action, either to resign as Note Collateral Agent or to arrange for the transfer of the title or control of the asset to a court appointed receiver. The Note Collateral Agent will not be liable to any Person for any environmental liability or any environmental claims or contribution actions under any federal, state or local law, rule or regulation by reason of the Note Collateral Agent’s actions and conduct as authorized, empowered and directed hereunder or relating to any kind of discharge or release or threatened discharge or release of any hazardous materials into the environment.
8.10 Not Responsible for Recitals; Other Matters.
(a) The recitals contained herein shall be taken as statements of the Grantor, and the Note Collateral Agent assumes no responsibility for their correctness. The Note Collateral Agent makes no representation as to the validity or sufficiency of this Agreement or the other Security Documents.
(b) The Note Collateral Agent shall not be liable for any error of judgment made in good faith by an officer or officers of the Note Collateral Agent, unless it shall be conclusively determined by a court of competent jurisdiction that the Note Collateral Agent was grossly negligent in ascertaining the pertinent facts.
(c) Whenever in the administration of the provisions of this Agreement or the Security Documents, the Note Collateral Agent shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action to be taken, such matter may, in the absence of gross negligence or bad faith on the part of the Note Collateral Agent, be deemed to be conclusively proved and established by an Officer’s Certificate or an Opinion of Counsel, which shall be full warrant to the Note Collateral Agent for any action taken, suffered or omitted by it under the provisions of the Agreement or the Security Documents upon the faith thereof.
(d) The Note Collateral Agent shall be under no obligation to exercise any of the rights vested in it by this Agreement or the Security Documents or to enforce any remedy or realize upon any of the Collateral unless (i) it has been directed to take such action pursuant to the terms of the Indenture, and (ii) it has been offered security or indemnity satisfactory to it against the costs, expenses and liabilities (including fees and expenses of its agents and counsel) that might be incurred by it in compliance with such request or direction.

 

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ARTICLE IX
GENERAL PROVISIONS
9.1 Waivers. To the extent permitted by applicable law, each Grantor hereby waives notice of the time and place of any public sale or the time after which any private sale or other disposition of all or any part of the Collateral may be made. To the extent such notice may not be waived under applicable law, any notice made shall be deemed reasonable if sent to the Grantors, addressed as set forth in Article IX, at least 10 days prior to (a) the date of any such public sale or (b) the time after which any such private sale or other disposition may be made. To the maximum extent permitted by applicable law, each Grantor waives all claims, damages, and demands against the Note Collateral Agent or any Noteholder Secured Party arising out of the repossession, retention or sale of the Collateral, except to the extent such as arise out of the gross negligence or willful misconduct of the Note Collateral Agent or such Noteholder Secured Party (or any of their respective affiliates, officers, directors, employees, agents or representatives) as finally determined by a court of competent jurisdiction. To the extent it may lawfully do so, each Grantor absolutely and irrevocably waives and relinquishes the benefit and advantage of, and covenants not to assert against the Note Collateral Agent or any Noteholder Secured Party, any valuation, stay, appraisal, extension, moratorium, redemption or similar laws and any and all rights or defenses it may have as a surety now or hereafter existing which, but for this provision, might be applicable to the sale of any Collateral made under the judgment, order or decree of any court, or privately under the power of sale conferred by this Agreement, or otherwise. Except as otherwise specifically provided herein, each Grantor hereby waives presentment, demand, protest or any notice (to the maximum extent permitted by applicable law) of any kind in connection with this Agreement or any Collateral.
9.2 Limitation on Note Collateral Agent’s and Noteholder Secured Parties’ Duty with Respect to the Collateral. The Note Collateral Agent shall have no obligation to clean-up or otherwise prepare the Collateral for sale. The Note Collateral Agent and each Noteholder Secured Party shall use reasonable care with respect to the Collateral in its possession or under its control. Neither the Note Collateral Agent nor any Noteholder Secured Party shall have any other duty as to any Collateral in its possession or control or in the possession or control of any agent or nominee of the Note Collateral Agent or such Noteholder Secured Party other than to account for money received, or any income thereon or as to the preservation of rights against prior parties or any other rights pertaining thereto. To the extent that applicable law imposes duties on the Note Collateral Agent to exercise remedies in a commercially reasonable manner, each Grantor acknowledges and agrees that it is commercially reasonable for the Note Collateral Agent (a) to fail to incur expenses deemed significant by the Note Collateral Agent to prepare Collateral for disposition or otherwise to transform raw material or work in process into finished goods or other finished products for disposition, (b) to fail to exercise collection remedies against Account Debtors or other Persons obligated on Collateral or to remove Liens on or any adverse claims against Collateral, (c) to exercise collection remedies against Account Debtors and other Persons obligated on Collateral directly or through the use of collection agencies and other collection specialists, (d) to advertise dispositions of Collateral through publications or media of general circulation, whether or not the Collateral is of a specialized nature, (e) to contact other Persons, whether or not in the same business as such Grantor, for expressions of interest in acquiring all or any portion of such Collateral, (f) to hire one or more

 

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professional auctioneers to assist in the disposition of Collateral, whether or not the Collateral is of a specialized nature, (g) to dispose of Collateral by utilizing internet sites that provide for the auction of assets of the types included in the Collateral or that have the reasonable capacity of doing so, or that match buyers and sellers of assets, (h) to dispose of assets in wholesale rather than retail markets, (i) to disclaim disposition warranties, such as title, possession or quiet enjoyment, (j) to purchase insurance or credit enhancements to insure the Note Collateral Agent against risks of loss, collection or disposition of Collateral or to provide to the Note Collateral Agent a guaranteed return from the collection or disposition of Collateral, or (k) to the extent deemed appropriate by the Note Collateral Agent, to obtain the services of other brokers, investment bankers, consultants and other professionals to assist the Note Collateral Agent in the collection or disposition of any of the Collateral. Each Grantor acknowledges that the purpose of this Section 9.2 is to provide non-exhaustive indications of what actions or omissions by the Note Collateral Agent would be commercially reasonable in the Note Collateral Agent’s exercise of remedies against the Collateral and that other actions or omissions by the Note Collateral Agent shall not be deemed commercially unreasonable solely on account of not being indicated in this Section 9.2. Without limitation upon the foregoing, nothing contained in this Section 9.2 shall be construed to grant any rights to any Grantor or to impose any duties on the Note Collateral Agent that would not have been granted or imposed by this Agreement or by applicable law in the absence of this Section 9.2.
9.3 Compromises and Collection of Collateral. The Grantors and the Note Collateral Agent recognize that setoffs, counterclaims, defenses and other claims may be asserted by obligors with respect to certain of the Accounts, that certain of the Accounts may be or become uncollectible in whole or in part and that the expense and probability of success in litigating a disputed Account may exceed the amount that reasonably may be expected to be recovered with respect to a Account. In view of the foregoing, each Grantor agrees that the Note Collateral Agent may at any time and from time to time, if an Event of Default has occurred and is continuing, compromise with the obligor on any Account, accept in full payment of any Account such amount as the Note Collateral Agent in its sole discretion shall determine or abandon any Account, and any such action by the Note Collateral Agent shall be commercially reasonable so long as the Note Collateral Agent acts in good faith based on information known to it at the time it takes any such action.
9.4 Performance of Debtor Obligations. Without having any obligation to do so, upon the occurrence and during the continuance of an Event of Default, and upon prior notice to the extent required under this Agreement, the Note Collateral Agent may perform or pay any obligation which any Grantor has agreed to perform or pay in this Agreement and the Grantors shall reimburse the Note Collateral Agent for any amounts paid by the Note Collateral Agent pursuant to this Section 9.4. The Grantors’ obligation to reimburse the Note Collateral Agent pursuant to the preceding sentence shall be a Secured Obligation payable promptly upon written demand (including documentation reasonably supporting such request).
9.5 Specific Performance of Certain Covenants. Each Grantor acknowledges and agrees that a breach of any of the covenants contained in Section 4.1(d), Section 4.1(e), Section 4.4, Section 4.5, Section 4.6, Section 4.10, Section 4.12, Section 4.13, Section 4.14, Section 4.16, Section 4.17, Section 5.2, or in Article VII will cause irreparable injury to the Note Collateral Agent and the Noteholder Secured Parties, that the Note Collateral Agent and the Noteholder Secured Parties have no adequate remedy at law in respect of such breaches and therefore agrees, without limiting the right of the Note Collateral Agent or the Noteholder Secured Parties to seek and obtain specific performance of other obligations of the Grantors contained in this Agreement, that the covenants of the Grantors contained in the Sections referred to in this Section 9.5 shall be specifically enforceable against the Grantors.

 

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9.6 Dispositions Not Authorized. No Grantor is authorized to sell or otherwise dispose of the Collateral except as set forth in Section 4.1(d) and notwithstanding any course of dealing between any Grantor and the Note Collateral Agent or other conduct of the Note Collateral Agent, no authorization to sell or otherwise dispose of the Collateral (except as set forth in Section 4.1(d)) shall be binding upon the Note Collateral Agent or the Noteholder Secured Parties.
9.7 No Waiver; Amendments; Cumulative Remedies. No delay or omission of the Note Collateral Agent or any Noteholder Secured Party to exercise any right or remedy granted under this Agreement shall impair such right or remedy or be construed to be a waiver of any Default or an acquiescence therein, and any single or partial exercise of any such right or remedy shall not preclude any other or further exercise thereof or the exercise of any other right or remedy. No waiver, amendment or other variation of the terms, conditions or provisions of this Agreement whatsoever shall be valid unless in writing signed by the Note Collateral Agent with the concurrence or at the direction of the Noteholder Secured Parties required under Section 9.02 of the Indenture and then only to the extent in such writing specifically set forth. All rights and remedies contained in this Agreement or by law afforded shall be cumulative and all shall be available to the Note Collateral Agent and the Noteholder Secured Parties until the Secured Obligations have been paid in full (other than unasserted contingent indemnification obligations).
9.8 Limitation by Law; Severability of Provisions. All rights, remedies and powers provided in this Agreement may be exercised only to the extent that the exercise thereof does not violate any applicable provision of law, and all the provisions of this Agreement are intended to be subject to all applicable mandatory provisions of law that may be controlling and to be limited to the extent necessary so that they shall not render this Agreement invalid, unenforceable or not entitled to be recorded or registered, in whole or in part. Any provision in this Agreement that is held to be inoperative, unenforceable, or invalid in any jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable, or invalid without affecting the remaining provisions in that jurisdiction or the operation, enforceability, or validity of that provision in any other jurisdiction, and to this end the provisions of this Agreement are declared to be severable.
9.9 Reinstatement. This Agreement shall remain in full force and effect and continue to be effective should any petition be filed by or against any Grantor for liquidation or reorganization, should any Grantor become insolvent or make an assignment for the benefit of any creditor or creditors or should a receiver or trustee be appointed for all or any significant part of any Grantor’s assets, and shall continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Secured Obligations, or any part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee of the Secured Obligations, whether as a “voidable preference,” “fraudulent conveyance,” or otherwise, all as though such payment or performance had not been made. In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Secured Obligations shall be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned.

 

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9.10 Benefit of Agreement. The terms and provisions of this Agreement shall be binding upon and inure to the benefit of the Grantors, the Note Collateral Agent and the Noteholder Secured Parties and their respective permitted successors and assigns (including all persons who become bound as a debtor to this Agreement), except that no Grantor shall have the right to assign its rights or delegate its obligations under this Agreement or any interest herein, without the prior written consent of the Note Collateral Agent. No sales of participations, assignments, transfers, or other dispositions of any agreement governing the Secured Obligations or any portion thereof or interest therein shall in any manner impair the Lien granted to the Note Collateral Agent, for the benefit of the Note Collateral Agent and the Noteholder Secured Parties, hereunder.
9.11 Survival of Representations. All representations and warranties of the Grantors contained in this Agreement shall survive the execution and delivery of this Agreement.
9.12 Taxes and Expenses. Any taxes (excluding income and franchise taxes) payable or ruled payable by Federal or State authority in respect of this Agreement shall be paid by the Grantors, together with interest and penalties, if any. The Grantors shall reimburse the Note Collateral Agent (and in respect of enforcement of this Agreement, any other Noteholder Secured Party) for any and all reasonable and out-of-pocket expenses (including reasonable and out-of-pocket attorneys’, auditors’, accounts’, experts or other agents fees and expenses) paid or incurred by the Note Collateral Agent in connection with (i) the preparation, execution, delivery, administration, collection and enforcement of this Agreement and in the audit, analysis, administration, custody, collection, preservation, use or operation, or sale of, collection from or other realization upon, the Collateral (including the expenses and charges associated with any periodic or special audit of the Collateral expressly provided for herein) or (ii) the failure by the Grantors to perform or observe any of the provisions of this Agreement. Any and all costs and expenses incurred by the Grantors in the performance of actions required pursuant to the terms hereof shall be borne solely by the Grantors.
9.13 Headings. The title of and section headings in this Agreement are for convenience of reference only, and shall not govern the interpretation of any of the terms and provisions of this Agreement.
9.14 Termination and Release. Subject to the terms, conditions and provisions of the Indenture:
(a) This Agreement shall continue in effect (notwithstanding the fact that from time to time there may be no Secured Obligations outstanding) until the Indenture has terminated pursuant to its express terms and all of the Secured Obligations (other than unasserted contingent indemnification obligations) have been paid in full whereupon the security interest created hereunder shall automatically terminate and be released.
(b) Any Grantor shall automatically be released from its obligations hereunder and the security interest in the Collateral of such Grantor shall be automatically released upon (i) the consummation of any transaction permitted by the Indenture (or consented to in writing pursuant to Section 9.02 of the Indenture) as a result of which such Grantor ceases to be a Subsidiary of the Issuer, as applicable or (ii) the effectiveness of any written consent to the release in accordance with Section 10.03 of the Indenture.

 

34

 

(c) Upon (i) any sale, transfer or other disposition by any Grantor of Collateral that is permitted under the Indenture (other than to another Grantor) or (ii) the effectiveness of any written consent to the release of security interest granted hereby in any Collateral pursuant to Section 10.03 of the Indenture, the security interest of the Note Collateral Agent in such Collateral and any other security interests granted hereby in such Collateral shall be automatically released.
(d) Upon the termination or release of any security interest created hereunder or release of Collateral, the Note Collateral Agent will, upon request by and at the expense of any Grantor, execute and deliver to such Grantor such documents as such Grantor shall reasonably request to evidence the termination of the security interest created hereunder or the release of such Collateral, as the case may be, provided, however, that (i) at the time of such request and such release no Default shall have occurred and be continuing and (ii) such Grantor shall have delivered to the Note Collateral Agent, at least 10 Business Days prior to the date of the proposed release, a written request for release describing the item of Collateral, if applicable, and the terms of the sale, lease, transfer or other disposition giving rise to such release in reasonable detail, including the price thereof and any expenses in connection therewith, together with a form of release for execution by the Note Collateral Agent and a certificate of such Grantor to the effect that the transaction is in compliance with this Agreement and the Indenture and as to such other matters as the Note Collateral Agent may reasonably request.
(e) Upon the earlier of (i) the payment in full in cash of the Secured Obligations and (ii) the release of all Liens created hereunder pursuant to the terms of the Indenture and each other Security Document or, if earlier the time at which such liens are required to be released hereunder or thereunder, the pledge and security interest granted hereby shall terminate and all rights to the Collateral shall revert to the applicable Grantor. Upon any such termination, the Note Collateral Agent will, at the applicable Grantor’s expense, promptly execute and deliver to such Grantor such documents as such Grantor shall reasonably request to evidence such termination.
(f) Upon any release of Collateral pursuant to this Section 9.14, none of the Noteholder Secured Parties shall have any continuing right or interest in such Collateral or the proceeds of such Collateral.
9.15 Entire Agreement. This Agreement and the Indenture embody the entire agreement and understanding between the Grantors and the Note Collateral Agent relating to the Collateral and supersedes all prior agreements and understandings between the Grantors and the Note Collateral Agent relating to the Collateral. In the event of any conflict or inconsistency between any term or provision in this Agreement and any term or provision in the Indenture, the Indenture shall control.

 

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9.16 CHOICE OF LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF NEW YORK, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
9.17 CONSENT TO JURISDICTION. EACH GRANTOR, THE NOTE COLLATERAL AGENT AND BY ACCEPTANCE OF THE BENEFITS OF THIS AGREEMENT EACH NOTEHOLDER SECURED PARTY HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY U.S. FEDERAL OR NEW YORK STATE COURT SITTING IN NEW YORK, NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND EACH SUCH PARTY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT. EACH PARTY HERETO IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE NOTE COLLATERAL AGENT OR ANY NOTEHOLDER SECURED PARTY TO BRING PROCEEDINGS AGAINST ANY GRANTOR IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY ANY GRANTOR AGAINST THE NOTE COLLATERAL AGENT OR ANY NOTEHOLDER SECURED PARTY OR ANY AFFILIATE OF THE NOTE COLLATERAL AGENT OR ANY NOTEHOLDER SECURED PARTY INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN NEW YORK, NEW YORK.
9.18 WAIVER OF JURY TRIAL. EACH GRANTOR, THE NOTE COLLATERAL AGENT AND EACH NOTEHOLDER SECURED PARTY HEREBY WAIVE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER.
9.19 Indemnity. Each Grantor hereby agrees to indemnify the Note Collateral Agent and the Noteholder Secured Parties, and their respective successors, assigns, agents and employees (each, an “Indemnitee”), from and against any and all liabilities, damages, penalties, suits, costs, and expenses of any kind and nature (including all expenses of litigation or preparation therefor whether or not the Note Collateral Agent or any Noteholder Secured Party is a party thereto) imposed on, incurred by or asserted against the Note Collateral Agent or the Noteholder Secured Parties, or their respective successors, assigns, agents and employees, in any way relating to or arising out of this Agreement, or the manufacture, purchase, acceptance, rejection, ownership, delivery, lease, possession, use, operation, condition, sale, return or other disposition of any Collateral (including latent and other defects, whether or not discoverable by the Note Collateral Agent or the Noteholder Secured Parties or any Grantor, and any claim for Patent, Trademark or Copyright infringement); provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, penalties, liabilities or related expenses (x) are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee or such Indemnitee’s Related Parties or (y) arise from any dispute solely among Indemnitees. WITHOUT LIMITATION OF THE FOREGOING BUT SUBJECT TO ANY LIMITATION CONTAINED THEREIN, IT IS THE INTENTION OF EACH GRANTOR AND EACH GRANTOR AGREES THAT THE FOREGOING INDEMNITIES SHALL APPLY TO EACH INDEMNITEE WITH RESPECT TO LOSSES, CLAIMS, DAMAGES, PENALTIES, LIABILITIES AND RELATED EXPENSES (INCLUDING ALL EXPENSES OF LITIGATION OR PREPARATION THEREFOR), WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF THE NEGLIGENCE OF SUCH (AND/OR ANY OTHER) INDEMNITEE.

 

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9.20 Counterparts. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one agreement, and any of the parties hereto may execute this Agreement by signing any such counterpart. Delivery of an executed counterpart of a signature page of this Agreement by facsimile or other electronic communication (including via email PDF) shall be effective as delivery of a manually executed counterpart of this Agreement.
9.21 Revolving Credit Facility; Intercreditor Agreement. After the Closing Date, any Grantor will be permitted to enter into or guarantee a revolving credit facility that may be secured by a Revolving Facility First-Priority Lien on the Revolving Facility First-Priority Collateral. Concurrent with such revolving credit agreement, an intercreditor agreement (the “Intercreditor Agreement”) will be entered into among the Trustee, the Revolving Collateral Agent, the Note Collateral Agent, and the applicable Grantors on the terms described in Offering Memorandum. At such time, the Note Collateral Agent agrees, without the consent of the Noteholder Secured Parties if the terms of the Intercreditor Agreement are the same, in all material respects, as the terms of the Intercreditor Agreement set forth in the Offering Memorandum, to enter into such amendments to this Agreement as may be reasonably necessary to effectuate the purposes of the Intercreditor Agreement.
9.22 Force Majeure. In no event shall the Note Collateral Agent or any Grantor be responsible or liable for any failure of delay in the performance of its obligations under this Agreement arising out of or caused by, directly or indirectly, forces beyond its reasonable control, including strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, and interruptions, loss or malfunction of utilities, communication, or computer (software or hardware) services.
9.23 Perfection in Certain Collateral. Notwithstanding anything herein to the contrary, the Note Collateral Agent agrees with the Grantors that, if and for so long as, in the reasonable judgment of the Controlling Secured Parties (confirmed in writing by notice delivered by the Note Collateral Agent to the Issuer), the cost of perfecting the Note Collateral Agent’s Lien in any item of Collateral shall be excessive in view of the benefits to be obtained by the Noteholder Secured Parties from such perfection, the Grantors shall be excused from the requirement that the Note Collateral Agent’s Lien in such item of Collateral be perfected until such time as the Controlling Secured Parties shall confirm in writing to the Issuer that, in their reasonable judgment, such situation no longer exists. The Controlling Secured Parties may, but shall not be obligated to, grant extensions of time for the perfection of security interests in particular items of Collateral (including extensions beyond the Closing Date for the perfection of security interests in any item of Collateral existing on such date) where the Controlling Secured Parties reasonably determine, in consultation with the Issuer, that perfection of the Note Collateral Agent’s Lien in such item of Collateral cannot be accomplished without undue efforts or expense within the time or times provided therefor or otherwise required by this Agreement or the other Note Documents.

 

37

 

ARTICLE X
NOTICES
10.1 Sending Notices. Any notice required or permitted to be given under this Agreement shall be sent by United States mail, telecopier, personal delivery or nationally established overnight courier service, and shall be deemed received (a) when received, if sent by hand or overnight courier service, or mailed by certified or registered mail notices or (b) when sent, if sent by telecopier (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next Business Day for the recipient), in each case addressed to the Grantors at the notice address set forth on Exhibit A, and to the Note Collateral Agent at the address set forth in accordance with Section 12.02 of the Indenture.
10.2 Change in Address for Notices. Each of the Grantors, the Note Collateral Agent and the Noteholder Secured Parties may change the address for service of notice upon it by a notice in writing to the other parties.
ARTICLE XI
THE NOTE COLLATERAL AGENT
Wells Fargo Bank, National Association has been appointed Note Collateral Agent for the Noteholder Secured Parties hereunder pursuant Section 10.07 of the Indenture. It is expressly understood and agreed by the parties to this Agreement that any authority conferred upon the Note Collateral Agent hereunder is subject to the terms of the delegation of authority made by the Noteholder Secured Parties to the Note Collateral Agent pursuant to the Indenture, and that the Note Collateral Agent has agreed to act (and any successor Note Collateral Agent shall act) as such hereunder only on the express conditions contained in such Section 10.07 of the Indenture. Any successor Note Collateral Agent appointed pursuant to Section 10.07(g) of the Indenture shall be entitled to all the rights, interests and benefits of the Note Collateral Agent hereunder.
[Signature Page Follows]

 

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IN WITNESS WHEREOF, the Grantors and the Note Collateral Agent have executed this Agreement as of the date first above written.
                         
    GRANTORS:    
 
                        
    WESTMORELAND COAL COMPANY, a
Delaware corporation		    
 
                        
    By:   /s/ Keith E. Alessi    
             
        Name:   Keith E. Alessi    
        Title:   Chief Executive Officer and President    
 
                        
    WESTMORELAND PARTNERS, a Virginia
general partnership		    
 
                        
    By:   Westmoreland-Roanoke Valley, L.P.,    
        its general partner    
 
                        
    By:   WEI-Roanoke Valley, Inc.,    
        its general partner    
 
                        
        By:   /s/Jennifer S. Grafton    
                 
 
          Name:   Jennifer S. Grafton    
 
          Title:   General Counsel and Secretary    
 
                        
    By:   Westmoreland-North Carolina Power,    
        L.L.C., its general partner    
 
                        
        By:   /s/Jennifer S. Grafton    
                 
            Name:   Jennifer Grafton    
            Title:   General Counsel and Secretary    
Signature Page to Note Pledge and Security Agreement

 

 

 

         
  ABSALOKA COAL, LLC
 		  
  By:   /s/ Jennifer S. Grafton    
    Name:   Jennifer Grafton   
    Title:   General Counsel and Secretary   
 
  WCC LAND HOLDING COMPANY, INC.
 		  
  By:   /s/ Jennifer S. Grafton    
    Name:   Jennifer Grafton   
    Title:   General Counsel and Secretary   
 
  WEI-ROANOKE VALLEY, INC.
 		  
  By:   /s/ Jennifer S. Grafton    
    Name:   Jennifer Grafton   
    Title:   General Counsel and Secretary   
 
  WESTMORELAND COAL SALES COMPANY, INC.
 		  
  By:   /s/ Jennifer S. Grafton    
    Name:   Jennifer Grafton   
    Title:   General Counsel and Secretary   
 
  WESTMORELAND ENERGY LLC
 		  
  By:   /s/ Jennifer S. Grafton    
    Name:   Jennifer Grafton   
    Title:   General Counsel and Secretary   
Signature Page to Note Pledge and Security Agreement

 

 

 

                     
    WESTMORELAND MINING SERVICES, INC.    
 
                    
    By:   /s/ Jennifer S. Grafton    
             
        Name:   Jennifer Grafton    
        Title:   General Counsel and Secretary    
 
                    
    WESTMORELAND - NORTH CAROLINA POWER L.L.C.    
 
                    
    By:   /s/ Jennifer S. Grafton    
             
        Name:   Jennifer Grafton    
        Title:   General Counsel and Secretary    
 
                    
    WESTMORELAND POWER INC.    
 
                    
    By:   /s/ Jennifer S. Grafton    
             
        Name:   Jennifer Grafton    
        Title:   General Counsel and Secretary    
 
                    
    WESTMORELAND-ROANOKE VALLEY, L.P.    
 
                    
    By:   WEI-Roanoke Valley, Inc.    
        its General Partner    
 
                    
        By:   /s/ Jennifer S. Grafton    
                 
 
          Name:   Jennifer Grafton    
 
          Title:   General Counsel and Secretary    
 
                    
    WESTMORELAND RESOURCES INC.    
 
                    
    By:   /s/ Jennifer S. Grafton    
             
        Name:   Jennifer Grafton    
        Title:   General Counsel and Secretary    
Signature Page to Note Pledge and Security Agreement

 

 

 

         
  WRI PARTNERS, INC.
 		  
  By:   /s/ Jennifer S. Grafton    
    Name:   Jennifer Grafton   
    Title:   General Counsel and Secretary   
Signature Page to Note Pledge and Security Agreement

 

 

 

         
  WELLS FARGO BANK, NATIONAL
ASSOCIATION, as Note Collateral Agent
 		  
  By:   /s/ John C. Stohlmann    
    Name:   John C. Stohlmann   
    Title:   Vice President   

 

0-1

 

ANNEX I
FORM OF SUPPLEMENT
Supplement No.  _____  (this “Supplement”) dated as of  _____, 20____, to the Pledge and Security Agreement dated as of February 4, 2011 (the “Agreement”) by each of the parties listed on the signature pages thereto and those additional entities that thereafter become parties thereto (each a “Grantor”) and WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association, in its capacity as trustee (the “Note Collateral Agent”) for the Holders party to the Indenture (as defined below).
WITNESSETH:
WHEREAS, pursuant to that certain Indenture dated as of February 4, 2011 (the “Indenture”) among Westmoreland Coal Company, a Delaware corporation (the “Issuer”), Westmoreland Partners, a Virginia limited partnership (the “Co-Issuer”) and the Note Collateral Agent, the Holders are willing purchase Notes (as defined in the Indenture) pursuant to the terms and conditions thereof;
WHEREAS, capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Agreement;
WHEREAS, the Grantors have entered into the Agreement in order to induce the Holders to purchase the notes and to secure the Secured Obligations that the Grantors have agreed to guarantee pursuant to Article Eleven of the Indenture; and
WHEREAS, pursuant to Sections 4.18 and 4.19 of the Indenture, new direct or indirect Subsidiaries (other than Foreign Subsidiaries) of the Issuer, must execute and deliver certain Note Documents, including the Agreement, and the execution of the Agreement by the undersigned new Grantor or Grantors (collectively, the “New Grantors”) may be accomplished by the execution of this Supplement in favor of the Note Collateral Agent for the benefit of the Noteholder Secured Parties.

 

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NOW, THEREFORE, for and in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the New Grantor hereby agrees as follows:
1. In accordance with Section 4.16 of the Agreement, the New Grantor, by its signature below, becomes a “Grantor” under the Agreement with the same force and effect as if originally named therein as a “Grantor” and the New Grantor hereby (a) agrees to all of the terms and provisions of the Agreement applicable to it as a “Grantor” thereunder and (b) represents and warrants that the representations and warranties made by it as a “Grantor” thereunder are true and correct in all material respects on and as of the date hereof, except to the extent such representations and warranties expressly relate to an earlier date, in which case such representations and warranties shall have been true and correct in all material respects as of such date. In furtherance of the foregoing, the New Grantor, as security for the payment in full of the Secured Obligations, does hereby grant to the Note Collateral Agent, for the benefit of itself and the Noteholder Secured Parties, a security interest in and security title to all Collateral of the New Grantor to secure the full and prompt payment of the Secured Obligations. Exhibit A, “Notice Address for All Grantors”, Exhibit B, “Deposit Accounts”, Exhibit C, “Letter of Credit Rights”, Exhibit D, “Intellectual Property Rights”, Exhibit E, “Title Documents”, Exhibit F, “Fixtures”, Exhibit G, “List of Pledged Collateral, Securities and Other Investment Property”, Exhibit H, “Offices in Which Financing Statements Have Been Filed” and Exhibit J, “Commercial Tort Claims” attached hereto supplement Exhibit A, Exhibit B, Exhibit C, Exhibit D, Exhibit E, Exhibit F, Exhibit G, Exhibit H and Exhibit J, respectively, to the Agreement and shall be deemed a part thereof for all purposes of the Agreement. Each reference to a “Grantor” in the Agreement shall be deemed to include the New Grantor. The Agreement is incorporated herein by reference.
2. The New Grantor represents and warrants to the Note Collateral Agent and the Noteholder Secured Parties that this Supplement has been duly executed and delivered by the New Grantor and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, except as enforceability thereof may be limited by bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium or other similar laws affecting creditors’ rights generally and general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity).
3. This Supplement may be executed in multiple counterparts, each of which shall be deemed to be an original, but all such separate counterparts shall together constitute but one and the same instrument. Delivery of a counterpart hereof by facsimile or other electronic method of transmission shall be as effective as delivery of a manually executed counterpart hereof.
4. Except as expressly supplemented hereby, the Agreement shall remain in full force and effect.
5. This Supplement shall be construed in accordance with and governed by the laws of the State of New York, but giving effect to federal laws applicable to national banks.
[remainder of page intentionally left blank]

 

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IN WITNESS WHEREOF, the New Grantor and the Note Collateral Agent have duly executed this Supplement to the Agreement as of the day and year first above written.
                 
NEW GRANTOR:   [NAME OF NEW GRANTOR]    
 
                
 
  By:            
             
 
      Name:        
 
         
 
    
 
      Title:        
 
         
 
    
 
  Address:        
 
                
         
 
                
         
 
                
         
 
                
NOTEHOLDER COLLATERAL AGENT:   WELLS FARGO BANK, NATIONAL ASSOCIATION    
 
                
 
  By:            
             
 
      Name:        
 
         
 
    
 
      Title:        
 
         
 
    

 

0-4

EX-5.1 40 d82642exv5w1.htm EX-5.1 exv5w1
         
Exhibit 5.1
[Letterhead of Davis Graham and Stubbs LLP]
June 3, 2011
Westmoreland Coal Company
2 North Cascade Avenue, 14th Floor
Colorado Springs, CO 80903
Ladies and Gentlemen:
     We have acted as special counsel to Westmoreland Coal Company, a Delaware corporation (the “Company”), in connection with the preparation and filing with the Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended (the “Securities Act”), of the Registration Statement on Form S-4 filed by the Company with the Commission on June 3, 2011 (the “Registration Statement”), relating to the registration of the offer by the Company to exchange up to $150,000,000 aggregate principal amount of its 10.750% Senior Secured Notes due 2018 registered under the Securities Act (the “New Notes”) for its existing 10.750% Senior Secured Notes due 2018 (the “Old Notes”). The New Notes will be fully and unconditionally guaranteed, jointly and severally, on a senior secured basis by Westmoreland Energy LLC, a Delaware limited liability company, Westmoreland — North Carolina Power L.L.C., a Virginia limited liability company, WEI-Roanoke Valley, Inc., a Delaware corporation, Westmoreland Roanoke Valley, L.P., a Delaware limited partnership, Westmoreland Resources, Inc., a Delaware corporation, WRI Partners, Inc., a Delaware corporation, Westmoreland Mining Services, Inc., a Delaware corporation, Westmoreland Coal Sales Company, Inc,. a Delaware corporation, Westmoreland Power, Inc., a Delaware corporation, and WCC Land Holding Company, Inc., a Delaware corporation (collectively, the “Guarantors”). The New Notes will be issued under an Indenture, dated as of February 4, 2011 (the “Indenture”), by and among the Company, Westmoreland Partners, a Virginia partnership and indirect wholly owned subsidiary of the Company, as co-issuer of the Old Notes and New Notes (the “Co-Issuer”), the Guarantors, and Wells Fargo Bank, National Association, as trustee and collateral agent (the “Trustee”). At your request, this opinion is being furnished to you in accordance with the requirements of Item 601(b)(5) of Regulation S-K under the Securities Act for filing as an exhibit to the Registration Statement.
     In connection with rendering this opinion, we have examined originals or copies of (1) the Registration Statement, including the form of the prospectus included therein, (2) the Indenture, including the forms of the notes attached as exhibits thereto, (3) the Form T-1 of the Trustee filed as an exhibit to the Registration Statement, and (4) such other documents and records as we have deemed necessary and relevant for purposes hereof. In addition, we have relied upon certificates of officers of the Company and of public officials as to certain matters of fact relating to this opinion and have made such investigations of law as we have deemed necessary and relevant as a basis hereof. In such examination, we have assumed the genuineness of all signatures, the authenticity of all documents, certificates and records submitted to us as originals, the conformity to original documents, certificates and records of all documents, certificates and records submitted to us as copies, and the truthfulness of all statements of fact contained therein. We have also assumed, with your approval, that (a) the Indenture has been duly authorized, executed and delivered by all parties thereto and (b) the New Notes will conform to the form thereof attached as an Exhibit to the Indenture.
     In connection with this opinion, we have assumed that the New Notes will be issued and sold in compliance with applicable federal and state securities laws and in the manner described in the Registration Statement.

 

 

     Based on the foregoing, and subject to the limitations, exceptions, assumptions and qualifications set forth herein, and having due regard for such legal considerations as we deem relevant, we are of the opinion that when (a) the Registration Statement becomes effective under the Securities Act, (b) the Indenture has been duly qualified under the Trust Indenture Act of 1939, as amended, (c) the New Notes have been exchanged for Old Notes in the manner described in the Registration Statement, including the prospectus included therein, and (d) the New Notes have been duly executed, authenticated, issued and delivered in accordance with the terms of the Indenture, (i) the New Notes will constitute valid and binding obligations of the Company and the Co-Issuer, respectively, enforceable against the Company and the Co-Issuer in accordance with their terms and (ii) the Guarantees will constitute valid and binding obligations of the Guarantors, enforceable against the Guarantors in accordance with their terms.
     We express no opinion concerning (a) the validity or enforceability of any provisions contained in the Indenture that (i) purport to waive or not give effect to rights to notices, defenses, subrogation or other rights or benefits that cannot be effectively waived under applicable law or (ii) may have the effect of discouraging or preventing a change in control of the Company, in each case to the extent otherwise contrary to public policy, (b) the enforceability of indemnification provisions to the extent they purport to relate to liabilities resulting from or based on negligence or any violation of federal or state securities laws or (c) the effect of (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws relating to or affecting creditors’ rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).
     The foregoing opinions are based on and are limited to the contract laws of the State of New York, the General Corporation Law of the State of Delaware, the Delaware Limited Liability Company Act, the Delaware Revised Uniform Limited Partnership Act, and the relevant federal law of the United States of America, and we render no opinion with respect to any other laws or the laws of any other jurisdiction. We are not admitted to the practice of law in the State of Delaware.
     We hereby consent to the filing of this opinion with the Commission as an exhibit to the Registration Statement and to the use of our name in the prospectus forming a part of the Registration Statement under the caption “Legal Matters.” By giving such consent, we do not admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Commission promulgated thereunder. This opinion is expressed as of the date hereof, and we disclaim any undertaking to advise you of any subsequent changes in the facts stated or assumed herein or of any subsequent changes in applicable law.
         
  Very truly yours,
 		  
  /s/ Davis Graham & Stubbs LLP    
     
  Davis Graham & Stubbs LLP   

 

EX-12.1 41 d82642exv12w1.htm EX-12.1 exv12w1
EXHIBIT 12.1
WESTMORELAND COAL COMPANY AND SUBSIDIARIES
RATIO OF EARNINGS TO FIXED CHARGES
                                                         
    Year Ended     Three Months Ended  
    December 31,     March 31,  
    2006     2007     2008     2009     2010     2010     2011  
                    (Dollars in thousands)                  
Earnings:
                                                        
Loss from continuing operations before income taxes
   $ (8,455 )   $ (22,125 )   $ (47,648 )   $ (46,298 )   $ (3,311 )   $ (3,835 )   $ (19,192 )
Fixed charges
     19,738       25,054       31,668       24,269       23,475       5,902       7,147  
 
                                          
 
                                                        
Total
   $ 11,283     $ 2,929     $ (15,980 )   $ (22,029 )   $ 20,164     $ 2,067     $ (12,045 )
 
                                          
                                                         
    Year Ended     Three Months Ended  
    December 31,     March 31,  
    2006     2007     2008     2009     2010     2010     2011  
                    (Dollars in thousands)                  
Fixed Charges:
                                                        
Interest expensed (includes amortization of premiums, discounts and deferred financing costs)
   $ 19,234     $ 24,638     $ 31,276     $ 23,733     $ 22,992     $ 5,723     $ 6,967  
Interest within rental expense
     504       416       392       536       483       179       180  
 
                                          
Total
   $ 19,738     $ 25,054     $ 31,668     $ 24,269     $ 23,475     $ 5,902     $ 7,147  
 
                                          
 
                                                        
Deficiency of earnings to fixed charges
   $ 8,455     $ 22,125     $ 47,648     $ 46,298     $ 3,311     $ 3,835     $ 19,192  

EX-21.1 42 d82642exv21w1.htm EX-21.1 exv21w1
Exhibit 21.1
Subsidiaries of the Registrant for the year ended December 31, 2010:
     
Subsidiary Name   State of Incorporation
 
    
WEI — Roanoke Valley, Inc. (4)
  Delaware
Westmoreland Coal Sales Company, Inc.
  Delaware
Westmoreland Energy LLC
  Delaware
Westmoreland Resources, Inc.
  Delaware
Criterion Coal Company
  Delaware
Eastern Coal and Coke Company
  Pennsylvania
Westmoreland Savage Corporation (1)
  Delaware
Westmoreland Mining LLC
  Delaware
Dakota Westmoreland Corporation (1)
  Delaware
Western Energy Company (1)
  Montana
Texas Westmoreland Coal Co. (1)
  Montana
Westmoreland Risk Management, Ltd.
  Bermuda
Basin Resources, Inc.
  Colorado
Westmoreland Power, Inc.
  Delaware
Westmoreland — Roanoke Valley, L.P. (5)
  Delaware
Westmoreland — North Carolina Power, LLC (4)
  Virginia
WRI Partners, Inc. (2)
  Delaware
Absaloka Coal, LLC (3)
  Delaware
WCC Land Holding Company, Inc.
  Delaware
WML Land Holding Company, Inc. (1)
  Delaware
Westmoreland Mining Services, Inc.
  Delaware
(1)   Wholly owned subsidiary of Westmoreland Mining LLC
 
(2)   Wholly owned subsidiary of Westmoreland Resources, Inc.
 
(3)   Subsidiary of WRI Partners, Inc.
 
(4)   Wholly owned subsidiary of Westmoreland Energy LLC
 
(5)   Majority-owned subsidiary of Westmoreland Energy LLC

 

 

EX-23.1 43 d82642exv23w1.htm EX-23.1 exv23w1
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the reference to our firm under the caption “Experts” in the Registration Statement (Form S-4) and related Prospectus of Westmoreland Coal Company for the registration of $150,000,000 of 10.75% Senior Notes due 2018 and to the inclusion of our report dated March 11, 2011 except for Note 19 as to which the date is June 3, 2011, with respect to the consolidated financial statements of Westmoreland Coal Company, and our reports dated June 3, 2011 with respect to the consolidated financial statements of Westmoreland Resources Inc. and Westmoreland Energy LLC .
/s/ ERNST & YOUNG LLP
Denver, Colorado
June 3, 2011

EX-23.2 44 d82642exv23w2.htm EX-23.2 exv23w2
         
EXHIBIT 23.2
Consent of Independent Registered Public Accounting Firm
The Board of Directors
Westmoreland Coal Company:
We consent to the inclusion in the registration statement on Form S-4 (No. 333-______) of Westmoreland Coal Company of our report dated March 13, 2009, except as to Note 19, as to which the date is June 3, 2011, with respect to the consolidated statements of operations, shareholders’ deficit and comprehensive loss, and cash flows of Westmoreland Coal Company for the year ended December 31, 2008, and the related financial statement schedule, and to the reference to our firm under the heading “Experts” in the prospectus.
Our report on the consolidated financial statements dated March 13, 2009, except as to Note 19, as to which the date is June 3, 2011, contains an explanatory paragraph that states that during the year ended December 31, 2008, the Company had suffered recurring losses from operations, had a working capital deficit, and had a net capital deficiency, which raised substantial doubt about its ability to continue as a going concern. The consolidated financial statements and financial statement schedule do not include any adjustments that might result from the outcome of that uncertainty.
/s/ KPMG LLP
Denver, Colorado
June 3, 2011

 

EX-23.3 45 d82642exv23w3.htm EX-23.3 exv23w3
EXHIBIT 23.3
Consent of Independent Public Accountants
The Board of Directors
Westmoreland Coal Company:
We consent to the inclusion in the registration statement on Form S-4 (No. 333-______) of Westmoreland Coal Company of our reports, with respect to: 1) the consolidated statements of operations, shareholder’s deficit and comprehensive loss, and cash flows of Westmoreland Resources, Inc for the year ended December 31, 2008, and 2) the consolidated statements of operations, member’s equity and comprehensive income (loss) and cash flows of Westmoreland Energy, LLC for the year ended December 31, 2008, and to the reference to our firm under the heading “Experts” in the prospectus.
Our reports on these consolidated financial statements contain an explanatory paragraph that states that during the year ended December 31, 2008, Westmoreland Coal Company had suffered recurring losses from operations, had a working capital deficit, and had a net capital deficiency, which raised substantial doubt about its ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.
/s/ KPMG LLP
Denver, Colorado
June 3, 2011

 

EX-23.4 46 d82642exv23w4.htm EX-23.4 exv23w4
Exhibit 23.4
(NORWEST LOGO)
Gary M. Stubblefield
Vice President Surface Mining
CONSENT OF INDEPENDENT CONSULTANT
We consent to the inclusion in this Registration Statement on Form S-4, and the related prospectus, of references to our name and information from our report as of September 30, 2010 relating to certain proven and probable coal reserves of Westmoreland Coal Company.
/s/ Norwest Corporation
Norwest Corporation
June 3, 2011
Yours sincerely
NORWEST CORPORATION
(-s- Signature)
Gary M. Stubblefield
Vice President Surface Mining
Enclosures
136 East South Temple, 12th Floor • Salt Lake City, Utah 84111 USA • Tel 801.539.0044 • USA 800.266.6351 • Fax 801.539.0055 • www.norwestcorp.com
Salt Lake City / Calgary / Denver / Evansville / Vancouver / Grand Junction / Charleston WV / Pittsburgh

 

EX-25.1 47 d82642exv25w1.htm EX-25.1 exv25w1
Exhibit 25.1
 
 
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
 
____ CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b) (2)
WELLS FARGO BANK, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
     
A National Banking Association
  94-1347393
(Jurisdiction of incorporation or   (I.R.S. Employer
organization if not a U.S. national bank)   Identification No.)
     
101 North Phillips Avenue    
Sioux Falls, South Dakota   57104
(Address of principal executive offices)   (Zip code)
Wells Fargo & Company
Law Department, Trust Section
MAC N9305-175
Sixth Street and Marquette Avenue, 17th Floor
Minneapolis, Minnesota 55479
(612) 667-4608
(Name, address and telephone number of agent for service)
 
_ WESTMORELAND COAL COMPANY
(exact name of registrant as specified in its charter)
         
Delaware   1221   23-1128670
(State or Other Jurisdiction of Incorporation or Organization)   (Primary Standard Industrial Classification Code Number)   (I.R.S. Employer Identification No.)
(FOR CO-REGISTRANTS, PLEASE SEE “TABLE OF CO-REGISTRANTS”
ON THE FOLLOWING PAGE)
     
    Jennifer S. Grafton
    General Counsel and Secretary
    Westmoreland Coal Company
2 North Cascade Avenue, 2nd Floor   2 North Cascade Avenue, 2nd Floor
Colorado Springs, Colorado 80903   Colorado Springs, Colorado 80903
Telephone: (719) 442-2600   Telephone: (719) 442-2600
(Address, Including Zip Code, and Telephone Number,   (Name, Address, Including Zip Code, and
Including Area Code, of Registrant’s   Telephone Number,
Principal Executive Offices)   Including Area Code, of Agent for Service)
 

10.75% Senior Secured Notes due 2018
(Title of the indenture securities)
 
 

 

 

TABLE OF CO-REGISTRANTS
             
            State or Other
    Primary Standard       Jurisdiction of
    Industrial   I.R.S. Employer   Incorporation or
Exact Name of Co-Registrant as Specified in its Charter   Classification No.   Identification No.   Organization
Westmoreland Partners
   4991   33-0487790   Virginia
Westmoreland Energy LLC.
   4991   61-1409081   Delaware
Westmoreland — North Carolina Power L.L.C.
   4991   20-5102494   Virginia
WEI-Roanoke Valley, Inc.
   4991   23-2544944   Delaware
Westmoreland Roanoke Valley, L.P.
   4991   23-2609738   Delaware
Westmoreland Resources, Inc.
   1221   81-0364990   Delaware
WRI Partners, Inc.
   1221   26-2703697   Delaware
Westmoreland Mining Services, Inc.
   1221   27-2103673   Delaware
Westmoreland Coal Sales Company, Inc.
   1221   23-1701997   Delaware
Westmoreland Power, Inc.
   1221   84-1579965   Delaware
WCC Land Holding Company, Inc.
   1221   27-3965489   Delaware
     Address, including Zip Code, and Telephone Number, including Area Code, of each Co-Registrant’s Principal Executive Offices: 2 North Cascade Avenue, 2nd Floor, Colorado Springs, CO 80903; Telephone: (719) 442-2600
     Name, Address, including Zip Code, and Telephone Number, including Area Code, of each Co-Registrant’s Agent for Service: Jennifer S. Grafton; General Counsel; 2 North Cascade Avenue, 2nd Floor, Colorado Springs, CO 80903; Telephone: (719) 442-2600

 

 

Item 1. General Information. Furnish the following information as to the trustee:
  (a)   Name and address of each examining or supervising authority to which it is subject.
 
      Comptroller of the Currency
Treasury Department
Washington, D.C.
 
      Federal Deposit Insurance Corporation
Washington, D.C.
 
      Federal Reserve Bank of San Francisco
San Francisco, California 94120
 
  (b)   Whether it is authorized to exercise corporate trust powers.
 
      The trustee is authorized to exercise corporate trust powers.
Item 2. Affiliations with Obligor. If the obligor is an affiliate of the trustee, describe each such affiliation.
  None with respect to the trustee.
No responses are included for Items 3-14 of this Form T-1 because the obligor is not in default as provided under Item 13.
Item 15. Foreign Trustee. Not applicable.
Item 16. List of Exhibits. List below all exhibits filed as a part of this Statement of Eligibility.
         
 
  Exhibit 1.   A copy of the Articles of Association of the trustee now in effect.*
 
        
 
  Exhibit 2.   A copy of the Comptroller of the Currency Certificate of Corporate Existence and Fiduciary Powers for Wells Fargo Bank, National Association, dated February 4, 2004.**
 
        
 
  Exhibit 3.   See Exhibit 2
 
        
 
  Exhibit 4.   Copy of By-laws of the trustee as now in effect.***
 
        
 
  Exhibit 5.   Not applicable.
 
        
 
  Exhibit 6.   The consent of the trustee required by Section 321(b) of the Act.
 
        
 
  Exhibit 7.   A copy of the latest report of condition of the trustee published pursuant to law or the requirements of its supervising or examining authority.
 
        
 
  Exhibit 8.   Not applicable.
 
        
 
  Exhibit 9.   Not applicable.

 

 

 
*   Incorporated by reference to the exhibit of the same number to the trustee’s Form T-1 filed as exhibit 25 to the Form S-4 dated December 30, 2005 of Hornbeck Offshore Services LLC file number 333-130784-06.
 
**   Incorporated by reference to the exhibit of the same number to the trustee’s Form T-1 filed as exhibit 25 to the Form T-3 dated March 3, 2004 of Trans-Lux Corporation file number 022-28721.
 
***   Incorporated by reference to the exhibit of the same number to the trustee’s Form T-1 filed as exhibit 25 to the Form S-4 dated May 26, 2005 of Penn National Gaming Inc. file number 333-125274.

 

 

SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, Wells Fargo Bank, National Association, a national banking association organized and existing under the laws of the United States of America, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Dallas and State of Texas on the 26th day of May, 2011.
         
  WELLS FARGO BANK, NATIONAL ASSOCIATION
 		  
  (SIGNATURE SIGN)    
  Patrick T. Giordano   
  Vice President   

 

 

         
EXHIBIT 6
May 26, 2011
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
In accordance with Section 321(b) of the Trust Indenture Act of 1939, as amended, the undersigned hereby consents that reports of examination of the undersigned made by Federal, State, Territorial, or District authorities authorized to make such examination may be furnished by such authorities to the Securities and Exchange Commission upon its request thereof.
         
  Very truly yours,


WELLS FARGO BANK, NATIONAL ASSOCIATION
 		  
  (SIGNATURE SIGN)    
  Patrick T. Giordano   
  Vice President   
 

 

 

Exhibit 7
See Attached

 

 

Consolidated Report of Condition of
Wells Fargo Bank National Association
of 101 North Phillips Avenue, Sioux Falls, SD 57104
And Foreign and Domestic Subsidiaries,
at the close of business March 31, 2011, filed in accordance with 12 U.S.C. §161 for National Banks.
                 
            Dollar Amounts  
            In Millions  
ASSETS
                
Cash and balances due from depository institutions:
                
Noninterest-bearing balances and currency and coin
           $ 17,369  
Interest-bearing balances
             74,672  
Securities:
                
Held-to-maturity securities
             0  
Available-for-sale securities
             145,551  
Federal funds sold and securities purchased under agreements to resell:
                
Federal funds sold in domestic offices
             6,481  
Securities purchased under agreements to resell
             10,955  
Loans and lease financing receivables:
                
Loans and leases held for sale
             19,408  
Loans and leases, net of unearned income
     686,307          
LESS: Allowance for loan and lease losses
     18,779          
Loans and leases, net of unearned income and allowance
             667,528  
Trading Assets
             34,595  
Premises and fixed assets (including capitalized leases)
             8,062  
Other real estate owned
             5,290  
Investments in unconsolidated subsidiaries and associated companies
             588  
Direct and indirect investments in real estate ventures
             108  
Intangible assets
                
Goodwill
             20,936  
Other intangible assets
             27,181  
Other assets
             54,306  
 
 
              
Total assets
           $ 1,093,030  
 
              
 
                
LIABILITIES
                
Deposits:
                
In domestic offices
           $ 749,729  
Noninterest-bearing
     171,738          
Interest-bearing
     577,991          
In foreign offices, Edge and Agreement subsidiaries, and IBFs
             93,508  
Noninterest-bearing
     1,895          
Interest-bearing
     91,613          
Federal funds purchased and securities sold under agreements to repurchase:
                
Federal funds purchased in domestic offices
             1,809  
Securities sold under agreements to repurchase
             14,094  

 

 

         
    Dollar Amounts  
    In Millions  
Trading liabilities
     19,802  
Other borrowed money (includes mortgage indebtedness and obligations under capitalized leases)
     38,506  
Subordinated notes and debentures
     17,445  
Other liabilities
     32,953  
 
      
 
        
Total liabilities
   $ 967,846  
 
        
EQUITY CAPITAL
        
Perpetual preferred stock and related surplus
     0  
 
      
Common stock
     519  
Surplus (exclude all surplus related to preferred stock)
     98,980  
Retained earnings
     19,029  
Accumulated other comprehensive income
     5,381  
Other equity capital components
     0  
 
      
Total bank equity capital
     123,909  
Noncontrolling (minority) interests in consolidated subsidiaries
     1,275  
 
      
 
        
Total equity capital
     125,184  
 
      
 
        
Total liabilities, and equity capital
   $ 1,093,030  
 
      
I, Timothy J. Sloan, EVP & CFO of the above-named bank do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the appropriate Federal regulatory authority and is true to the best of my knowledge and belief.
Timothy J. Sloan
EVP & CFO     
We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the appropriate Federal regulatory authority and is true and correct.
John Stumpf                                 Directors
Dave Hoyt
Michael Loughlin

 

EX-99.1 48 d82642exv99w1.htm EX-99.1 exv99w1
EXHIBIT 99.1
          THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt as to the action to be taken, you should immediately consult your broker, bank manager, lawyer, accountant, investment advisor or other professional adviser.
LETTER OF TRANSMITTAL
To Tender
$150,000,000 10.75% Senior Secured Notes due 2018
Which Have Been Registered Under the Securities Act of 1933
For Any and All Outstanding Unregistered
10.75% Senior Secured Notes due 2018
of
WESTMORELAND COAL COMPANY
WESTMORELAND PARTNERS
Pursuant to the Prospectus dated            , 2011
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON            , 2011, UNLESS EXTENDED BY THE COMPANY (SUCH DATE AND TIME, AS THEY MAY BE EXTENDED, THE “EXPIRATION DATE”). TENDERED OLD NOTES MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION OF THE EXCHANGE OFFER.
          By execution hereof, the undersigned acknowledges receipt of the prospectus dated         , 2011 (the ''Prospectus’’) of Westmoreland Coal Company, a Delaware corporation (the ''Company’’), which, together with this Letter of Transmittal (the ''Letter of Transmittal’’), constitutes the offer to exchange (the ''Exchange Offer’’) made by the Company and Westmoreland Partners, as co-issuer, to exchange up to $150,000,000 aggregate principal amount of their 10.75% Senior Secured Notes due 2018 (the ''New Notes’’), which have been registered under the Securities Act of 1933, as amended (the ''Securities Act’’), pursuant to a registration statement of which the Prospectus constitutes a part, for a like principal amount of its outstanding unregistered 10.75% Senior Secured Notes due 2018 (the ''Old Notes’’), upon the terms and subject to the conditions set forth in the Prospectus.
          All terms and conditions contained in, or otherwise referred to in, the Prospectus are deemed to be incorporated in, and form a part of, this Letter of Transmittal. Therefore you are urged to read carefully the Prospectus and the items referred to therein. Capitalized terms used but not defined herein have the meanings given to them in the Prospectus. The terms and conditions contained in the Prospectus, together with the terms and conditions governing this Letter of Transmittal and the instructions herein, are collectively referred to herein as the “terms and conditions.”
          Upon the satisfaction or waiver of the conditions to the acceptance of the Old Notes set forth in the Prospectus under “The Exchange Offer—Conditions to the Exchange Offer,” the Company will accept for settlement the Old Notes that have been validly tendered (and not subsequently validly withdrawn). The Company will deliver the New Notes on a date (the “Settlement Date”) as soon as practicable after the Expiration Date.

 

 

     
The Information Agent for the Exchange Offer is:   The Exchange Agent for the Exchange Offer is:
     
Wells Fargo Bank, National Association   Wells Fargo Bank, National Association
Corporate Trust Operations    
MAC N9303-121   By Registered & Certified Mail:
Sixth & Marquette Avenue   Corporate Trust Operations
Minneapolis, MN 55479   MAC N9303-121
Telephone: (800) 344-5128   PO Box 1517
Minneapolis, MN 55480
     
    By Regular Mail or Overnight Courier:
    Corporate Trust Operations
    MAC N9303-121
    Sixth & Marquette Avenue
    Minneapolis, MN 55479
     
    In Person By Hand Only:
    12th Floor — Northstar East Building
    Corporate Trust Operations
    608 Second Avenue South
    Minneapolis, MN 55402
          This Letter of Transmittal is to be used by holders of the Old Notes. Tender of the Old Notes is to be made using the Automated Tender Offer Program (“ATOP”) of The Depository Trust Company (“DTC”) pursuant to the procedures set forth in the Prospectus under the caption “The Exchange Offer—Procedures for Tendering.” DTC participants that are accepting the Exchange Offer must transmit their acceptance to DTC, which will verify the acceptance and execute a book-entry delivery to the Exchange Agent’s DTC account. DTC will then send a computer-generated message known as an “agent’s message” to the Exchange Agent for its acceptance. For you to validly tender your Old Notes in the Exchange Offer, the Exchange Agent must receive, prior to the Expiration Date, an agent’s message under the ATOP procedures that confirms that:
  •   DTC has received your instructions to tender your Old Notes; and
 
  •   You agree to be bound by the terms of this Letter of Transmittal (including your agreement that the Company may rely on your indication of status as a broker-dealer as set forth below).
          If you are a broker-dealer that acquired Old Notes for your own account as a result of market-making activities or other trading activities, you must indicate in this Letter of Transmittal that you are a broker-dealer and will deliver a Prospectus in connection with any resale of New Notes.
          By using the ATOP procedures to tender the Old Notes, you will not be required to deliver this Letter of Transmittal to the Exchange Agent (unless you are a broker-dealer that acquired Old Notes for your own account as a result of market-making activities or other trading activities). However, you will be bound by the terms and conditions, and you will be deemed to have made the acknowledgments and the representations and warranties this Letter of Transmittal contains, just as if you had signed it.
          The New Notes will be issued in full exchange for the Old Notes in the Exchange Offer, if consummated, on the Settlement Date and will be delivered in book-entry form.

 

 

Please read the accompanying instructions carefully.
Ladies and Gentlemen:
          Upon the terms and subject to the conditions of the Exchange Offer, the undersigned hereby tenders to the Company the aggregate principal amount of Old Notes credited by the undersigned to the Exchange Agent’s account at DTC using ATOP.
          The undersigned understands that validly tendered Old Notes (or defectively tendered Old Notes with respect to which the Company has waived such defect or caused such defect to be waived) will be deemed to have been accepted by the Company if, as and when the Company give oral or written notice thereof to the Exchange Agent. The undersigned understands that, subject to the terms and conditions, the Old Notes properly tendered and accepted (and not validly withdrawn) in accordance with the terms and conditions will be exchanged for the New Notes. The undersigned understands that, under certain circumstances, the Company may not be required to accept any of the Old Notes tendered (including any such Old Notes tendered after the Expiration Date). If any Old Notes are not accepted for exchange for any reason (or if the Old Notes are validly withdrawn), such Old Notes will be returned, without expense, to the undersigned’s account at DTC or such other account as designated herein, pursuant to the book-entry transfer procedures described in the Prospectus, as promptly as practicable after the expiration or termination of the Exchange Offer.
          By tendering the Old Notes in the Exchange Offer, the undersigned acknowledges that the Exchange Offer is being made based upon the Company’s understanding of an interpretation by the staff of the Securities and Exchange Commission (the “SEC”) as set forth in no-action letters issued to other parties, including Exxon Capital Holdings Corporation, SEC No-Action Letter (available May 13, 1988), Morgan Stanley & Co. Incorporated, SEC No-Action Letter (available June 5, 1991) and Shearman & Sterling, SEC No-Action Letter (available July 2, 1993), that the New Notes issued in exchange for the Old Notes pursuant to the Exchange Offer may be offered for resale, resold and otherwise transferred by each holder thereof (other than a broker-dealer who acquires such New Notes directly from the Company for resale pursuant to Rule 144A under the Securities Act or any other available exemption under the Securities Act or any such holder that is an “affiliate” of the Company within the meaning of Rule 405 under the Securities Act), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such New Notes are acquired in the ordinary course of such holder’s business and such holder is not engaged in, and does not intend to engage in, a distribution of such New Notes and has no arrangement with any person to participate in the distribution of such New Notes. If the undersigned is not a broker-dealer, the undersigned represents that it acquires the New Notes in the ordinary course of its business, it is not engaged in, and does not intend to engage in, a distribution of the New Notes and it has no arrangements or understandings with any person to participate in a distribution of the New Notes. If the undersigned is a broker-dealer that will receive the New Notes for its own account in exchange for the Old Notes, it represents that the Old Notes to be exchanged for the New Notes were acquired by it as a result of market-making activities or other trading activities and acknowledges that it will deliver a Prospectus in connection with any resale of such New Notes; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act.
          Upon agreement to the terms of this Letter of Transmittal pursuant to an agent’s message, the undersigned, or the beneficial holder of the Old Notes on behalf of which the undersigned has tendered, will, subject to that holder’s ability to withdraw its tender, and subject to the terms and conditions of the Exchange Offer generally, hereby:
  •   irrevocably sell, assign and transfer to or upon the order of the Company or its nominee all right, title and interest in and to, and any and all claims in respect of or arising or having arisen as a result of the undersigned’s status as a holder of, all Old Notes tendered hereby, such that thereafter it shall have no contractual or other rights or claims in law or equity against the Company or any fiduciary, trustee, fiscal agent or other person connected with the Old Notes arising under, from or in connection with such Old Notes;
 
  •   waive any and all rights with respect to the Old Notes tendered hereby, including, without limitation, any existing or past defaults and their consequences in respect of such Old Notes; and

 

 

  •   release and discharge the Company, the Co-Issuer, the Guarantors and Wells Fargo Bank, National Association, as the trustee for the Old Notes from any and all claims the undersigned may have, now or in the future, arising out of or related to the Old Notes tendered hereby, including, without limitation, any claims that the undersigned is entitled to receive additional principal or interest payments with respect to the Old Notes tendered hereby, other than as expressly provided in the Prospectus and in this Letter of Transmittal, or to participate in any redemption or defeasance of the Old Notes tendered hereby.
          The undersigned understands that tenders of the Old Notes pursuant to the procedures described in the Prospectus and in this Letter of Transmittal and acceptance of such Old Notes by the Company will, following such acceptance, constitute a binding agreement between the undersigned and the Company upon the terms and conditions.
          By tendering the Old Notes in the Exchange Offer, the undersigned represents, warrants and agrees that:
  •   it has received and reviewed the Prospectus;
 
  •   it is the beneficial owner (as defined below) of, or a duly authorized representative of one or more beneficial owners of, the Old Notes tendered hereby, and it has full power and authority to execute this Letter of Transmittal;
 
  •   the Old Notes being tendered hereby were owned as of the date of tender, free and clear of any liens, charges, claims, encumbrances, interests and restrictions of any kind, and the Company will acquire good, indefeasible and unencumbered title to such Old Notes, free and clear of all liens, charges, claims, encumbrances, interests and restrictions of any kind, when the Company accepts the same;
 
  •   it will not sell, pledge, hypothecate or otherwise encumber or transfer any Old Notes tendered hereby from the date of this Letter of Transmittal, and any purported sale, pledge, hypothecation or other encumbrance or transfer will be void and of no effect;
 
  •   in evaluating the Exchange Offer and in making its decision whether to participate in the Exchange Offer by tendering its Old Notes, the undersigned has made its own independent appraisal of the matters referred to in the Prospectus and this Letter of Transmittal and in any related communications and it is not relying on any statement, representation or warranty, express or implied, made to such holder by the Company, the Information Agent or the Exchange Agent, other than those contained in the Prospectus, as amended or supplemented through the Expiration Date;
 
  •   the execution and delivery of this Letter of Transmittal shall constitute an undertaking to execute any further documents and give any further assurances that may be required in connection with any of the foregoing, in each case on and subject to the terms and conditions described or referred to in the Prospectus;
 
  •   the agreement to the terms of this Letter of Transmittal pursuant to an agent’s message shall, subject to the terms and conditions of the Exchange Offer, constitute the irrevocable appointment of the Exchange Agent as its attorney and agent and an irrevocable instruction to such attorney and agent to complete and execute all or any forms of transfer and other documents at the discretion of that attorney and agent in relation to the Old Notes tendered hereby in favor of the Company or any other person or persons as the Company may direct and to deliver such forms of transfer and other documents in the attorney’s and agent’s discretion and the certificates and other documents of title relating to the registration of such Old Notes and to execute all other documents and to do all other acts and things as may be in the opinion of that attorney or agent necessary or expedient for the purpose of, or in connection with, the acceptance of the Exchange Offer, and to vest in the Company or its nominees such Old Notes;
 
  •   the terms and conditions of the Exchange Offer shall be deemed to be incorporated in, and form a part of, this Letter of Transmittal, which shall be read and construed accordingly;
 
  •   it is acquiring the New Notes in the ordinary course of its business;
 
  •   it is not participating in, and does not intend to participate in, a distribution of the New Notes within the meaning of the Securities Act and has no arrangement or understanding with any person to participate in a distribution of the New Notes within the meaning of the Securities Act;
 
  •   it is not a broker-dealer who acquired the Old Notes directly from the Company; and

 

 

  •   it is not an “affiliate” of the Company, within the meaning of Rule 405 of the Securities Act.
          The representations, warranties and agreements of a holder tendering the Old Notes shall be deemed to be repeated and reconfirmed on and as of the Expiration Date and the Settlement Date. For purposes of this Letter of Transmittal, the “beneficial owner” of any Old Notes means any holder that exercises investment discretion with respect to such Old Notes.
          The undersigned understands that tenders may not be withdrawn at any time after the Expiration Date, except as set forth in the Prospectus, unless the Exchange Offer is amended with changes to the terms and conditions that are, in the reasonable judgment of the Company, materially adverse to the tendering holders, in which case tenders may be withdrawn under the conditions described in the extension.
          If the Exchange Offer is amended in a manner determined by the Company to constitute a material change, the Company will extend the Exchange Offer for a period of two to ten business days, depending on the significance of the amendment and the manner of disclosure to such holders, if the Exchange Offer would otherwise have expired during such two to ten business day period.
          By crediting the Old Notes to the Exchange Agent’s account at DTC using ATOP and by complying with applicable ATOP procedures with respect to the Exchange Offer, the participant in DTC confirms on behalf of itself and the beneficial owners of such Old Notes all provisions of this Letter of Transmittal (including all representations and warranties) applicable to it and such beneficial owner as fully as if it had completed the information required herein and executed and transmitted this Letter of Transmittal to the Exchange Agent.
          All authority conferred or agreed to be conferred in this Letter of Transmittal and every obligation of the undersigned hereunder shall be binding upon the undersigned’s successors, assigns, heirs, executors, administrators, trustees in bankruptcy and legal representatives of the undersigned and shall not be affected by, and shall survive, the death or incapacity of the undersigned.
  o   CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE OLD NOTES FOR YOUR OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES. IF SO, YOU WILL RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. IN ADDITION, IF YOU ARE A BROKER-DEALER YOU MUST DELIVER A COPY OF THIS LETTER OF TRANSMITTAL TO THE EXCHANGE AGENT.
          Name:
          Address:
          Name of Tendering Institution:
          Account Number:
          Transaction Code Number:
ATTENTION BROKER-DEALERS: IMPORTANT NOTICE
CONCERNING YOUR ABILITY TO RESELL THE NEW NOTES
          IF THE EXCHANGE AGENT DOES NOT RECEIVE ANY LETTERS OF TRANSMITTAL FROM BROKER-DEALERS REQUESTING ADDITIONAL COPIES OF THE PROSPECTUS FOR USE IN CONNECTION WITH RESALES OF THE NEW NOTES, THE COMPANY INTENDS TO TERMINATE THE EFFECTIVENESS OF THE REGISTRATION STATEMENT AS SOON AS PRACTICABLE AFTER THE CONSUMMATION OR TERMINATION OF THE EXCHANGE OFFER. IF THE EFFECTIVENESS OF THE REGISTRATION STATEMENT IS TERMINATED, YOU WILL NOT BE ABLE TO USE THE PROSPECTUS IN CONNECTION WITH RESALES OF NEW NOTES AFTER

 

 

SUCH TIME. SEE SECTION ENTITLED ''THE EXCHANGE OFFER—TERMS OF THE EXCHANGE OFFER’’ CONTAINED IN THE PROSPECTUS FOR MORE INFORMATION. BY EXECUTION HEREOF, THE UNDERSIGNED AGREES THAT THE COMPANY MAY RELY ON THE UNDERSIGNED’S INDICATION OF ITS STATUS AS BROKER-DEALER AS SET FORTH ABOVE.

 

 

INSTRUCTIONS FORMING PART OF
THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
     1. Book-Entry Confirmations
          Any confirmation of a book-entry transfer to the Exchange Agent’s account at DTC of the Old Notes tendered by book-entry transfer, as well as an agent’s message, and any other documents required by this Letter of Transmittal, must be received by the Exchange Agent at its address set forth on the cover page of this Letter of Transmittal prior to 5:00 p.m., New York City time, on the Expiration Date.
     2. Validity of Tenders
          The Company will determine in its sole discretion all questions as to the validity, form, eligibility, time of receipt, acceptance of tendered Old Notes and withdrawal of tendered Old Notes. The Company’s determination will be final and binding. The Company reserves the absolute right to reject any Old Notes not properly tendered or any acceptance of the Old Notes that would, in the opinion of its counsel, be unlawful. The Company also reserves the right to waive any defect, irregularities or conditions of tender as to particular Old Notes. The Company’s interpretation of the terms and conditions of the Exchange Offer, including the instructions in this Letter of Transmittal, will be final and binding on all parties. Unless waived, all defects or irregularities in connection with tenders of the Old Notes must be cured within such time as the Company shall determine. Although the Company intends to notify holders of defects or irregularities with respect to tenders of the Old Notes, none of the Company, the Information Agent, the Exchange Agent and any other person will incur any liability for failure to give such notification. Tenders of the Old Notes will not be deemed made until such defects or irregularities have been cured or waived. Any Old Notes received by the Exchange Agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned to the tendering holder through the facilities of DTC as soon as practicable after the Expiration Date.
     3. Waiver of Conditions
          The Company reserves the absolute right to waive, in whole or part, at any time or from time to time, any of the conditions to the Exchange Offer set forth in the Prospectus or in this Letter of Transmittal.
     4. No Conditional Tender
          No alternative, conditional, irregular or contingent tender of the Old Notes will be accepted.
     5. Request for Assistance or Additional Copies
          Requests for assistance or for additional copies of the Prospectus or this Letter of Transmittal may be directed to the Information Agent at the address, telephone numbers or fax number set forth on the cover page of this Letter of Transmittal. Holders may also contact their commercial bank, broker, dealer, trust company or other nominee for assistance concerning the Exchange Offer.
     6. Withdrawal
          Tenders of the Old Notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. For a withdrawal to be effective you must comply with the appropriate ATOP procedures. Any notice of withdrawal must specify the name and number of the account at DTC to be credited with withdrawn Old Notes and otherwise comply with the ATOP procedures. For more information, see the section of the Prospectus entitled “The Exchange Offer—Withdrawal of Tenders.”

 

 

     7. Transfer Taxes
          Holders who tender their Old Notes for exchange will not be obligated to pay any transfer taxes in connection with that tender or exchange, except that holders who instruct the Company to register the New Notes in the name of, or request that the Old Notes not tendered or not accepted in the Exchange Offer be returned to, a person other than the registered tendering holder will be responsible for the payment of any applicable transfer tax on those Old Notes.
IMPORTANT: BY USING THE ATOP PROCEDURES TO TENDER THE OLD NOTES, YOU WILL NOT BE REQUIRED TO DELIVER THIS LETTER OF TRANSMITTAL TO THE EXCHANGE AGENT UNLESS YOU ARE A BROKER-DEALER. HOWEVER, YOU WILL BE BOUND BY ITS TERMS, AND YOU WILL BE DEEMED TO HAVE MADE THE ACKNOWLEDGMENTS AND THE REPRESENTATIONS AND WARRANTIES IT CONTAINS, JUST AS IF YOU HAD SIGNED IT.

 

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