Exhibit 10.61

     
(WESTMORELAND COAL COMPANY LOGO) [d44254d4425400.gif]
  Number: GPC-001                                         Page 1 of 3
 
Original Issue Date: 7/26/04
WESTMORELAND COAL COMPANY
  Supersedes Policy IV-16 Dated 10/1/94
Manual of Policies:
  Approved Issuing Officer:
COMPENSATION
   
Title:
   
 
   
SEVERANCE POLICY
  Name: Christopher K. Seglem
 
  Title: President & CEO

1.   POLICY STATEMENT       It is the policy of the Westmoreland Coal Company,
(“the Company”, or “Westmoreland”) to pay severance benefits under certain
specific and limited circumstances, as defined by this policy, to certain
non-classified employees who are involuntarily terminated for reasons other than
cause and under certain conditions described herein. The purpose of severance is
to aid employees for hardships incurred upon loss of employment. This policy
applies to non-classified employees of Westmoreland Coal Company and all of its
direct and indirect subsidiaries.   2.   FUTURE OF THE POLICY       Although the
Company currently expects to continue the provisions of this policy, the Company
reserves the right to change or amend at any time, at its sole discretion, any
and all terms and conditions of this policy, or to terminate this policy in its
entirety.   3.   PROCEDURE

  3.1   ELIGIBILITY         All full-time non-union employees with six months of
service and scheduled to work at least 1,000 hours in a calendar year are
eligible for severance benefits under this policy, but only if their employment
is terminated for one of the following reasons and the employee waives any and
all claims against the Company, its officers, directors and employees, by
signing an Employment Release and Settlement Agreement:

      3.1.1 Involuntary termination that is not for Cause.         3.1.2 A
reduction in work force.         3.1.3 Liquidation of the Company.

  3.2   INELIGIBILITY         Severance benefits will not be paid when
termination occurs under the following circumstances:

  3.2.1   Voluntary termination by the employee (except for unused vacation).  
  3.2.2   For Cause.

 

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Title:
  No.   Date Issued:   Supersedes   Page 2 of 3
SEVERANCE POLICY
  GPC-001   7/26/04   Policy IV-19           Dated 10/1/94    

  3.2.2.1   Unsatisfactory job performance.     3.2.2.2   Gross or willful
misconduct that is injurious to the Company, or its Subsidiaries or Affiliates,
which includes but is not limited to an act or acts constituting embezzlement,
misappropriation of funds or property of the Company, larceny, fraud, gross
negligence, crime or crimes resulting in a felony conviction, moral turpitude or
behavior that brings the employee into public disrepute, contempt, scandal or
ridicule or that reflects unfavorably upon the reputation or high moral or
ethical standards of the Company or violation of Company policy including but
not limited to the policies set forth on Code of Business Conduct and Fitness
for Duty; willful misrepresentation to the Company’s directors, officers,
managers, supervisors, employees or third parties; or failure to meet the duties
of care and loyalty to the Company. For purposes of this paragraph, failure to
act on the participant’s part shall be considered “willful” if done by the
participant without a reasonable belief that the omission was in the best
interest of the Company.

  3.3   DETERMINATION AND PAYMENT OF SEVERANCE PAYMENTS         Employees who
meet the eligibility requirements of this policy and who execute and adhere to
an Employment Release and Settlement Agreement, wherein any and all claims
against the Company, its Officers, Directors, Managers and Employees are waived,
will receive in consideration for that agreement and their Westmoreland service,
severance benefits according to the following formula:

  a.)   Hourly/Non-Exempt — Severance pay equal to one (1) week of base salary
for every year of continuous and completed service to the Company with a minimum
of two weeks and a maximum of 26 weeks.     b.)   Salaried/Exempt — Severance
pay equal to two (2) weeks of base salary for every year of continuous and
completed service with a minimum of four (4) weeks and a maximum of 36 weeks
base salary.     c.)   Executives — (VP/GM level and above) receive severance
pay equal to four (4) weeks of base salary for every year of continuous and
completed service with a minimum of eight (8) weeks and a maximum of 52 weeks.

      Length of service shall be determined based on original date of employment
with Westmoreland or, in the case of an acquired subsidiary, upon the date of
employment with the acquired subsidiary.         Severance payments will be paid
in equal installments on the normal payroll schedule and shall be net of any
tax, medical or other required withholdings.     3.4   CONTINUATION OF BENEFITS
        In addition to the Severance Payment, eligible employees will receive
payment for any unused vacation up to the date of termination for the calendar
year. Payment will not be made for holidays or floating holidays.

 

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Title:
  No.   Date Issued:   Supersedes   Page 3 of 3
SEVERANCE POLICY
  GPC-001   7/26/04   Policy IV-19           Dated 10/1/94    

      In the event of termination, medical, vision, and dental benefits will
continue for the balance of the month in which discharge occurred, plus three
(3) months.         All other benefits will terminate in accordance with the
respective plan documents.     3.5   SURVIVABILITY OF PAYMENTS         The
commitments under this policy shall survive, to the extent permissible by law,
upon the bankruptcy, insolvency, liquidation or dissolution of the Company.