Exhibit 10.7
AMENDED AND RESTATED SECURITY AGREEMENT
     THIS AMENDED AND RESTATED SECURITY AGREEMENT (the “Agreement”), dated as of
June 26, 2008, is entered into by and among each of the undersigned and each of
the other Persons which become Guarantors under the Credit Agreement (defined
below) from time to time, (each a “Debtor” and collectively the “Debtors”), and
U.S. Bank National Association, successor by merger to Firstar Bank, N.A., as
Collateral Agent (the “Collateral Agent”) for the Banks (as defined below);
WITNESSETH THAT:
     WHEREAS, the Debtors are (or will be with respect to after-acquired
property) the legal and beneficial owners and the holders of the Collateral (as
defined in Section 1 hereof); and
     WHEREAS, certain Loan Parties and Firstar Bank, N.A. (“Firstar”) have
entered into the Original Security Agreement (as defined herein) in connection
with that certain $20,000,000 Revolving Credit Facility Credit Agreement dated
April 27, 2001 (the “Original Credit Agreement”).
     WHEREAS, the parties have agreed to amend and restate the Original Credit
Agreement and pursuant to that certain Amended and Restated Credit Agreement (as
it may hereafter from time to time be restated, amended, modified or
supplemented, the “Credit Agreement”) of even date herewith by and among PNC
Bank, National Association, as agent thereunder (“PNC”), the Banks now or
hereafter party thereto (the “Banks”), the Guarantors now or hereafter party
thereto and Westmoreland Mining LLC, a Delaware limited liability company (the
“Borrower”), PNC and the Banks have agreed to make certain loans to the
Borrower; and
     WHEREAS, the obligation of the Banks to make loans under the Credit
Agreement is subject to the condition, among others, that the Debtors secure
their obligations and the obligations of the Borrower to the Banks under the
Credit Agreement and the other Loan Documents in the manner set forth herein;
and
     WHEREAS, each Debtor acknowledges its receipt of benefit, whether direct or
indirect, from the Credit Agreement which is being made available, either
directly or indirectly, to each Debtor and for the sale and purchase of certain
notes under the Note Purchase Agreement, concurrently with the closing of the
Credit Agreement.
     NOW, THEREFORE, intending to be legally bound hereby, the parties hereto
covenant and agree as follows:
     1. Terms which are defined in the Credit Agreement and not otherwise
defined herein are used herein as defined therein and the rules of construction
set forth in Section 1.2 [Construction] of the Credit Agreement shall apply to
this Agreement. The following words and terms shall have the following meanings,
respectively, unless the context hereof otherwise clearly requires:

 

--------------------------------------------------------------------------------

 

     (a) “Code” “ means the Uniform Commercial Code as in effect in the State of
New York on the date hereof and as amended from time to time except to the
extent that the conflict of law rules of such Uniform Commercial Code shall
apply the Uniform Commercial Code as in effect from time to time in any other
state to specific property or other matters.
     (b) “Collateral” means all of each Debtor’s right, title and interest in,
to and under the following described property of such Debtor (each capitalized
term used in this Section 1(b) shall have in this Agreement the meaning given to
it by the Code):
     (i) all now existing and hereafter acquired or arising Accounts, Goods,
General Intangibles, Payment Intangibles, Deposit Accounts, Chattel Paper
(including without limitation Electronic Chattel Paper), Documents, Instruments,
Software, Investment Property, Letters of Credit, Letter of Credit Rights,
advices of credit, money, Commercial Tort Claims as listed on Schedule B hereto
(as such Schedule is amended or supplemented from time to time), Equipment,
Inventory, As-Extracted Collateral (including As-Extracted Collateral from such
Debtor’s present and future operations regardless of whether such mineral or gas
interests are presently owned or hereafter acquired by such Debtor), Fixtures
and Supporting Obligations, together with all products of and Accessions to any
of the foregoing and all Proceeds of any of the foregoing (including without
limitation all insurance proceeds);
     (ii) to the extent, if any, not included in clause (i) above, such Debtor’s
present and future contracts, agreements, arrangements, or understandings
(A) for the sale, supply, provision or disposition of any coal, natural gas,
coalbed methane gas or other minerals by such Debtor, or any one or more of its
agents, representatives, successors, or assigns, to any purchaser or acquirer
thereof, and all products, replacements, and proceeds thereof (including without
limitation all coal, natural gas and coalbed methane gas sales contracts) and
(B) relating to the mining, drilling or recovery of any mineral or gas reserves
for the benefit of or on behalf of such Debtor or any of its agents,
representatives, successors, or assigns (including without limitation all
contract mining, drilling or recovery agreements and arrangements), and all
products and Proceeds thereof and payments thereunder, together with all
products and Proceeds (including all insurance proceeds) of and any Accessions
to any of the foregoing;
     (iii) to the extent, if any, not included in clauses (i) and (ii) above,
each and every other item of personal property and fixtures, whether now
existing or hereafter arising or acquired, including without limitation all
licenses, contracts and agreements, and all collateral for the payment or
performance of any contract or agreement, together with all products and
Proceeds (including without limitation all insurance proceeds) of and any
Accessions to any of the foregoing;
     (iv) Without limiting the foregoing, Collateral includes all business
records and information, including computer tapes and other storage media
containing the same and computer programs and software (including without
limitation, source code, object code and related manuals and documentation and
all licenses to use such software) for accessing and manipulating such
information. Notwithstanding the foregoing provisions

- 2 -

--------------------------------------------------------------------------------

 

of Section 1(b), (i) this Agreement shall not be deemed to be an assignment of
any agreements, contracts or licenses to the extent the terms of such
agreements, contracts or licenses would be violated by such assignment and
(ii) the term “Collateral” shall not include, (A) any agreements, contracts or
licenses which are now or hereafter held by the Debtor to the extent that
(a) the terms of such agreements contracts or licenses would be violated by
being included in “Collateral”, (b) such agreements, contracts or licenses are
not capable of being encumbered as a matter of law or (c) an encumbrance thereon
or security interest therein, or the inclusion thereof otherwise in the
Collateral, without the consent of the other applicable party thereto results in
a violation, breach, default or termination of such agreement, contract or
license, and such consent has not been obtained; provided, however, that the
term “Collateral” shall include such otherwise excluded agreements, contracts or
licenses once consent has been obtained and any and all proceeds thereof that
might have theretofore been excluded from such grant of a security interest (it
is understood that each Debtor shall use commercially reasonable efforts to
exclude from all hereafter acquired and hereafter renewed material agreements,
contracts and licenses restrictions on the encumbrancing of the same or granting
of security interests therein) and (B) the Subsidiary Shares of TWCC and any and
all Proceeds thereof.
     (c) “Original Security Agreement” means that certain Security Agreement
dated April 27, 2001, by and between the Debtors party thereto and Firstar.
     (d) “Receivables” means all of the Collateral except Equipment, Inventory
and As-Extracted Collateral of each Debtor.
     (e) “Secured Obligations” shall mean and include the full and punctual
payment and performance when due (whether on demand, at stated maturity, by
acceleration, or otherwise and including any amounts which would become due but
for the operation of an automatic stay under the federal bankruptcy code of the
U.S. or any similar laws of any country or jurisdiction) of (i) all Obligations
(including any interest or currency swap, future, option or other interest rate
protection or similar agreements (collectively, “Bank-Provided Interest Rate
Hedges”), including, without limiting the generality of the foregoing, all
obligations, liabilities, and indebtedness from time to time of the Borrower or
any other Loan Party to the Collateral Agent or any of the Banks or any
affiliate of any Bank or the Collateral Agent under or in connection with the
Credit Agreement or any other Loan Document or any Bank-Provided Interest Rate
Hedge, whether for principal, interest, fees, indemnities, expenses, or
otherwise, and all refinancings or refundings thereof, whether such obligations,
liabilities, or indebtedness are direct or indirect, secured or unsecured, joint
or several, absolute or contingent, due or to become due, whether for payment or
performance, now existing or hereafter arising (and including obligations,
liabilities, and indebtedness arising or accruing after the commencement of any
bankruptcy, insolvency, reorganization, or similar proceeding with respect to
the Borrower or any other Loan Party or which would have arisen or accrued but
for the commencement of such proceeding (including without limitation interest
after default), even if the claim for such obligation, liability, or
indebtedness is not enforceable or allowable in such proceeding, and including
all Obligations, liabilities, and indebtedness arising from any extensions of
credit under or in connection with the Loan Documents or any Bank-Provided
Interest Rate Hedges from time to time, regardless

- 3 -

--------------------------------------------------------------------------------

 

whether any such extensions of credit are in excess of the amount committed
under or contemplated by the Loan Documents or any Bank-Provided Interest Rate
Hedges or are made in circumstances in which any condition to extension of
credit is not satisfied), (ii) any obligation or liability of any of the Loan
Parties arising out of overdrafts on deposits or other accounts or out of
electronic funds (whether by wire transfer or through automated clearing houses
or otherwise) or out of the return unpaid of, or other failure of the Collateral
Agent or any Bank to receive final payment for, any check, item, instrument,
payment order or other deposit or credit to a deposit or other account, or out
of the Collateral Agent’s or any Bank’s non-receipt of or inability to collect
funds or otherwise not being made whole in connection with depository or other
similar arrangements, and (iii) any amendments, extensions, renewals and
increases of or to any of the foregoing.
     2. As security for the due and punctual payment and performance of the
Secured Obligations in full, each Debtor hereby agrees that the Collateral
Agent, PNC and the Banks and any Affiliate of any Bank shall have, and each
Debtor hereby grants to and creates in favor of the Collateral Agent for the
benefit of PNC, the Banks and their respective Affiliates, a continuing first
priority security interest in and to the Collateral subject only to Permitted
Liens of the types described in clauses (i) through (iii), (v) through (vii) and
(ix) of the definition of that term set forth in the Credit Agreement. Without
limiting the generality of Section 4 below, each Debtor further agrees that with
respect to each item of Collateral as to which (i) the creation of a valid and
enforceable security interest is not governed exclusively by the Code or
(ii) the perfection of a valid and enforceable security interest therein under
the Code cannot be accomplished either by the Collateral Agent taking possession
thereof or by the filing in appropriate locations of appropriate Code financing
statements executed by such Debtor, such Debtor will at its expense execute and
deliver to the Collateral Agent, and hereby does authorize the Collateral Agent
to execute and file such documents, agreements, notices, assignments and
instruments and take such further actions as may be reasonably requested by PNC
from time to time for the purpose of creating a valid and perfected first
priority Lien on such item, subject only to Permitted Liens, enforceable against
such Debtor and all third parties to secure the Secured Obligations.
     3. Except as otherwise provided or permitted in the Credit Agreement and
without limiting any provisions thereof, each Debtor represents and warrants to
the Collateral Agent and the Banks that (a) each Debtor has good and marketable
title to its Collateral, (b) except for the security interest granted to and
created in favor of the Collateral Agent for the benefit of PNC and the Banks
and their respective Affiliates hereunder and Permitted Liens, all the
Collateral is free and clear of any Lien (c) each Debtor will defend the
Collateral against all claims and demands of all persons at any time claiming
the same or any interest therein (other than Permitted Liens), (d) each Account
and General Intangible is genuine and enforceable in accordance with its terms
and such Debtor will defend the same against all claims, demands, recoupment,
setoffs (other than setoffs validly asserted under the Note Purchase Agreement)
and counterclaims at any time asserted, (e) at the time any Account becomes
subject to this Agreement, such Account will be a good and valid Account
representing a bona fide sale of goods or services by such Debtor and such goods
will have been shipped to the respective account debtors or the services will
have been performed for the respective account debtors (or for those on behalf
of whom the account debtors are obligated on the Accounts), and no such Account
which is a Qualified Account will be subject to any claim for credit, allowance,
setoff,

- 4 -

--------------------------------------------------------------------------------

 

recoupment, defense, counterclaim or adjustment by an account debtor or any
setoff, defense or counterclaim, and (f) no consent are necessary for the
granting of the security interest in the Collateral by such Debtor to the
Collateral Agent.
     4. Each Debtor will faithfully preserve and protect the Collateral Agent’s
security interest in the Collateral as a prior perfected security interest under
the Code, superior and prior to the rights of all third Persons, except for
Permitted Liens of the type described in clauses (i) through (iii), (v) through
(vii) and (ix) of the definition of that term in the Credit Agreement, and will
do all such other acts and things and will, upon reasonable request therefor by
PNC, execute, deliver, file and record, and each Debtor hereby authorizes the
Collateral Agent to so file, all such other documents and instruments,
including, without limitation, financing statements and extensions thereof,
security agreements, assignments and documents and powers of attorney with
respect to the Collateral, and pay all filing fees and taxes related thereto, as
PNC in its reasonable discretion may deem necessary or advisable from time to
time in order to attach, continue, preserve, perfect and protect said security
interest including the filing at any time or times after the date hereof
financing statements under, and in the locations advisable pursuant to, the
Code); and each Debtor hereby irrevocably appoints the Collateral Agent, its
officers, employees and agents, or any of them, as attorneys-in-fact for such
Debtor to execute, deliver, file and record such items for such Debtor and in
such Debtor’s name, place and stead. This power of attorney, being coupled with
an interest, shall be irrevocable for the life of this Agreement.
     5. Each Debtor covenants and agrees that:
     (a) it will defend the Collateral Agent’s, PNC’s and the Banks’ right,
title and security interest in and to the Collateral and the proceeds thereof
against the claims and demands of all Persons whomsoever, other than (i) any
Person claiming a right in the Collateral pursuant to an agreement between such
Person and the Collateral Agent or (ii) Permitted Liens;
     (b) it will not suffer or permit to exist on any Collateral any Lien except
for Permitted Liens;
     (c) it will not take or omit to take any action, the taking or the omission
of which might reasonably be expected to result in a material alteration or
impairment of the Collateral or of the Collateral Agent’s rights under this
Agreement;
     (d) it will not sell, assign or otherwise dispose of any portion of the
Collateral except as permitted in Section 8.2.7 [Disposition of Assets or
Subsidiaries] of the Credit Agreement;
     (e) it will (i) obtain and maintain sole and exclusive possession of the
Collateral, (ii) keep the Collateral and all records pertaining thereto at the
locations specified on the Security Interest Data Summary attached as Schedule A
hereto, unless it shall have given the Collateral Agent prior notice and taken
any action reasonably requested by the Collateral Agent to maintain its security
interest therein, (iii) notify the Collateral Agent if an Account becomes
evidenced or secured by an Instrument or Chattel Paper and deliver to the
Collateral Agent upon the Collateral Agent’s request therefor all Collateral
consisting of Chattel Paper immediately upon such Debtor’s receipt of a request
therefor, (iv) deliver to the Collateral Agent possession of all

- 5 -

--------------------------------------------------------------------------------

 

Collateral the possession of which is required to perfect the Collateral Agent’s
lien thereon or security interest therein or the possession of which grants
priority over a Person filing a financing statement with respect thereto,
(v) execute control agreements and cause other Persons to execute
acknowledgments in form and substance satisfactory to the Collateral Agent
evidencing the Collateral Agent’s control with respect to all Collateral the
control or acknowledgment of which perfects the Collateral Agent’s security
interest therein, including Letters of Credit, Letter of Credit Rights,
Electronic Chattel Paper, Deposit Accounts and Investment Property, and
(vi) keep materially accurate and complete books and records concerning the
Collateral and such other books and records required in accordance with the
Credit Agreement;
     (f) it will promptly furnish to the Collateral Agent such information and
documents relating to the Collateral as PNC may reasonably request, including,
without limitation, all invoices, Documents, contracts, Chattel Paper,
Instruments and other writings pertaining to such Debtor’s contracts or the
performance thereof, all of the foregoing to be certified upon request of PNC by
an authorized officer of such Debtor; and
     (g) it shall immediately notify the Collateral Agent if any material
account arises out of contracts with the United States, Canada or any
department, agency or instrumentality thereof or any one or more of the states
of the United States or of provinces of Canada or any department, agency, or
instrumentality thereof, and will execute any instruments and take any steps
required by the Collateral Agent so that all monies due under such contract
shall be assigned to the Collateral Agent and notice of the assignment given to
and acknowledged by the appropriate government agency or authority under the
Federal Assignment of Claims Act (or applicable similar legislation);
     (h) such Debtor will not change its state of incorporation, formation or
organization, as applicable, without providing ten (10) days prior written
notice to the Collateral Agent;
     (i) such Debtor will not change its name without providing ten (10) days
prior written notice to the Collateral Agent;
     (j) if any Debtor shall at any time acquire a Commercial Tort Claim, as
defined in the Code having a value in excess of $250,000, such Debtor shall
promptly notify the Collateral Agent in a writing signed by such Debtor of the
details thereof and grant to the Collateral Agent, for the benefit of itself,
the Banks and their respective affiliates, in such writing a security interest
therein and in the proceeds thereof, with such writing to be in form and
substance satisfactory to PNC and such writing shall constitute a supplement to
Schedule B hereto;
     (k) each Debtor hereby authorizes the Collateral Agent to, at any time and
from time to time, file in any one or more jurisdictions financing statements
that describe the Collateral, together with continuation statements thereof and
amendments thereto, without the signature of such Debtor and which contain any
information required by the Code or any other applicable statute applicable to
such jurisdiction for the sufficiency or filing office acceptance of any
financing statements, continuation statements, or amendments. Each Debtor agrees
to furnish any such information to the Collateral Agent promptly upon request.
Any such financing statements, continuation statements, or amendments may be
signed by the Collateral Agent on

- 6 -

--------------------------------------------------------------------------------

 

behalf of any Debtor if the Collateral Agent so elects and may be filed by the
Collateral Agent at any time in any jurisdiction;
     (l) such Debtor shall at any time and from time to time take such steps as
PNC may reasonably request as are necessary for the Collateral Agent to insure
the continued perfection of the Collateral Agent’s and the Banks’ security
interest in the Collateral with the same priority required hereby and the
preservation of its rights therein;
     (m) upon an Event of Default then in existence, such Debtor shall at its
sole expense, and shall cause all of the other Loan Parties at their sole
expense to, upon the request of the Collateral Agent (i) execute and deliver to
the Collateral Agent a lockbox agreement, in form, substance and scope
satisfactory to the Collateral Agent, with respect to any cash, checks, notes,
drafts or other similar items of payment relating to or constituting the
Collateral (or proceeds thereof) received by such Debtor or any other Loan Party
(other than TWCC) (or any of its respective Affiliates (other than TWCC),
shareholders, directors, officers, employees, agents or Persons acting for or in
concert with such Debtor or such Loan Party), and (ii) notify all Account
Debtors to make all payments due from them to such Debtor or any other Loan
Party directly to a lockbox for collection pursuant to such lockbox agreement;
and
     (n) each Debtor waives and agrees it will not exercise any rights against
the Borrower or any other Debtor arising in connection with, or any Collateral
securing, the Secured Obligations (including rights of subrogation,
contribution, and the like) until the Secured Obligations have been indefeasibly
paid in full, and all Commitments have been terminated and all Letters of Credit
and Bank-Provided Interest Rate Hedges have expired or been terminated. If any
amount shall be paid to any Debtor by or on behalf of the Borrower or any other
Debtor by virtue of any right of subrogation, contribution, or the like, such
amount shall be deemed to have been paid to such Debtor for the benefit of, and
shall be held in trust for the benefit of, the Collateral Agent and the Banks
and shall forthwith be paid to the Collateral Agent to be credited and applied
upon the Secured Obligations, whether matured or unmatured, in accordance with
the terms of the Credit Agreement.
     6. Each Debtor assumes full responsibility for taking any and all necessary
steps to preserve the Collateral Agent’s, PNC’s and the Banks’ rights with
respect to the Collateral against all Persons other than anyone asserting rights
in respect of a Permitted Lien. The Collateral Agent shall be deemed to have
exercised reasonable care in the custody and preservation of the Collateral in
its possession if the Collateral Agent takes such action for that purpose as
such Debtor shall request in writing, provided that such requested action will
not, in the judgment of PNC, impair the security interest in the Collateral
created hereby or the Collateral Agent’s and the Banks’ rights in, or the value
of, the Collateral, and provided further that such written request is received
by the Collateral Agent in sufficient time to permit the Collateral Agent to
take the requested action.
     7. The pledge, security interests, and other Liens and the obligations of
each Debtor hereunder shall not be discharged or impaired or otherwise
diminished by any failure, default, omission, or delay, willful or otherwise, by
the Collateral Agent, any Bank, such Debtor or any other obligor on any of the
Secured Obligations, or by any other act or thing or omission or delay

- 7 -

--------------------------------------------------------------------------------

 

to do any other act or thing which may or might in any manner or to any extent
vary the risk of any Debtor or which would otherwise operate as a discharge of
any Debtor as a matter of law or equity. Without limiting the generality of the
foregoing, each Debtor hereby consents to, and the pledge, security interests,
and other Liens given by any Debtor hereunder shall not be diminished,
terminated, or otherwise similarly affected by any of the following at any time
and from time to time:
     (a) Any lack of genuineness, legality, validity, enforceability, or
allowability (in a bankruptcy, insolvency, reorganization or similar proceeding,
or otherwise), or any avoidance or subordination, in whole or in part, of any
Loan Document, any Bank-Provided Interest Rate Hedge or any of the Secured
Obligations and regardless of any law, regulation, or order now or hereafter in
effect in any jurisdiction affecting any of the Secured Obligations, any of the
terms of the Loan Documents or the Bank-Provided Interest Rate Hedges, or any
rights of the Collateral Agent or the Banks or any other Person with respect
thereto;
     (b) Any increase, decrease, or change in the amount, nature, type or
purpose of any of, or any release, surrender, exchange, compromise or settlement
of any of the Secured Obligations (whether or not contemplated by the Loan
Documents or the Bank-Provided Interest Rate Hedges as presently constituted);
any change in the time, manner, method, or place of payment or performance of,
or in any other term of, any of the Secured Obligations; any execution or
delivery of any additional Loan Documents or any Bank-Provided Interest Rate
Hedges; or any amendment, modification or supplement to, or refinancing or
refunding of, any Loan Document, any Bank-Provided Interest Rate Hedge or any of
the Secured Obligations;
     (c) Any failure to assert or any breach of or default under any Loan
Document, any Bank-Provided Interest Rate Hedge or any of the Secured
Obligations; any extensions of credit in excess of the amount committed under or
contemplated by the Loan Documents or the Bank-Provided Interest Rate Hedges, or
in circumstances in which any condition to such extensions of credit has not
been satisfied; any other exercise or non-exercise, or any other failure,
omission, breach, default, delay, or wrongful action in connection with any
exercise or non-exercise, of any right or remedy against any Debtor or any other
Person under or in connection with any Loan Document, any Bank-Provided Interest
Rate Hedge or any of the Secured Obligations; any refusal of payment or
performance of any of the Secured Obligations, whether or not with any
reservation of rights against any Debtor; or any application of collections
(including but not limited to collections resulting from realization upon any
direct or indirect security for the Secured Obligations) to other obligations,
if any, not entitled to the benefits of this Agreement, in preference to Secured
Obligations entitled to the benefit of this Agreement or, if any collections are
applied to Secured Obligations, any application to particular Secured
Obligations;
     (d) Any taking, exchange, amendment, modification, supplement, termination,
subordination, release, loss, or impairment of, or any failure to protect,
perfect, or preserve the value of, or any enforcement of, realization upon, or
exercise of rights or remedies under or in connection with, or any failure,
omission, breach, default, delay, or wrongful action by the Collateral Agent or
the Banks, or any of them, or any other Person in connection with the
enforcement of, realization upon, or exercise of rights or remedies under or in
connection with, or, any other action or inaction by the Collateral Agent or any
other Person in respect of, any

- 8 -

--------------------------------------------------------------------------------

 

direct or indirect security for any of the Secured Obligations (including the
Collateral). As used in this Agreement, “direct or indirect security” for the
Secured Obligations, and similar phrases, includes any collateral security,
guaranty, suretyship, letter of credit, capital maintenance agreement, put
option, subordination agreement, or other right or arrangement of any nature
providing direct or indirect assurance of payment or performance of any of the
Secured Obligations, made by or on behalf of any Person;
     (e) Any merger, consolidation, liquidation, dissolution, winding-up,
charter revocation, or forfeiture, or other change in, restructuring or
termination of the corporate, limited liability company or partnership structure
or existence of any Debtor or any other Person; any bankruptcy, insolvency,
reorganization or similar proceeding with respect to any Debtor or any other
Person; or any action taken or election (including but not limited to any
election under Section 1111(b)(2) of the U.S. Bankruptcy Code or any comparable
law of any jurisdiction) made by the Collateral Agent or the Banks, or any of
them, or any Debtor or by any other Person in connection with any such
proceeding;
     (f) Any defense, setoff, or counterclaim which may at any time be available
to or be asserted by any Debtor or any other Person with respect to any Loan
Document, any Bank-Provided Interest Rate Hedge or any of the Secured
Obligations; or any discharge by operation of law or release of any Debtor or
any other Person from the performance or observance of any Loan Document, any
Bank-Provided Interest Rate Hedge or any of the Secured Obligations; or
     (g) Any other event or circumstance, whether similar or dissimilar to the
foregoing, and whether known or unknown, which might otherwise constitute a
defense available to, or limit the liability of a guarantor or a surety,
including any Debtor, excepting only full, strict, and indefeasible payment and
performance of the Secured Obligations in full.
     8. Each Debtor hereby waives any and all defenses which such Debtor may now
or hereafter have based on principles of suretyship, impairment of collateral,
or the like and each Debtor hereby waives any defense to or limitation on its
obligations under this Agreement arising out of or based on any event or
circumstance referred to in the immediately preceding Section hereof. Without
limiting the generality of the foregoing and to the fullest extent permitted by
applicable Law, each Debtor hereby further waives each of the following:
     (a) Except as otherwise required under any of the Loan Documents, all
notices, disclosures and demands of any nature which otherwise might be required
from time to time to preserve intact any rights against any Debtor, including
the following: any notice of any event or circumstance described in the
immediately preceding Section hereof; any notice required by any law, regulation
or order now or hereafter in effect in any jurisdiction; any notice of
nonpayment, nonperformance, dishonor, or protest under any Loan Document, any
Bank-Provided Interest Rate Hedge or any of the Secured Obligations; any notice
of the incurrence of any Secured Obligations; any notice of any default or any
failure on the part of any Debtor or any other Person to comply with any Loan
Document, any Bank-Provided Interest Rate Hedge or any of the Secured
Obligations or any requirement pertaining to any direct or indirect security for
any of the Secured Obligations; and any notice or other information pertaining
to the business, operations, condition (financial or otherwise), or prospects of
any Debtor or any other Person;

- 9 -

--------------------------------------------------------------------------------

 

     (b) Any right to any marshalling of assets, to the filing of any claim
against any Debtor or any other Person in the event of any bankruptcy,
insolvency, reorganization, or similar proceeding, or to the exercise against
any Debtor, or any other Person of any other right or remedy under or in
connection with any Loan Document, any Bank-Provided Interest Rate Hedge or any
of the Secured Obligations or any direct or indirect security for any of the
Secured Obligations; any requirement of promptness or diligence on the part of
the Collateral Agent or the Banks, or any of them, or any other Person; any
requirement to exhaust any remedies under or in connection with, or to mitigate
the damages resulting from default under, any Loan Document, any Bank-Provided
Interest Rate Hedge or any of the Secured Obligations or any direct or indirect
security for any of the Secured Obligations; any benefit of any statute of
limitations; and any requirement of acceptance of this Agreement or any other
Loan Document or any Bank-Provided Interest Rate Hedge, and any requirement that
any Debtor receive notice of any such acceptance; and
     (c) Any defense or other right arising by reason of any Law now or
hereafter in effect in any jurisdiction pertaining to election of remedies
(including anti-deficiency laws, “one action” laws, or the like), or by reason
of any election of remedies or other action or inaction by the Collateral Agent
or the Banks, or any of them (including but not limited to commencement or
completion of any judicial proceeding or nonjudicial sale or other action in
respect of collateral security for any of the Secured Obligations), which
results in denial or impairment of the right of the Collateral Agent or the
Banks, or any of them, to seek a deficiency against any Debtor or any other
Person or which otherwise discharges or impairs any of the Secured Obligations.
     9. Each of the obligations and additional liabilities of each and every
Debtor under this Agreement are joint and several with the obligations of the
other Debtors, and each Debtor hereby waives to the full extent permitted by Law
any defense it may otherwise have to the payment and performance of the
Obligations that its liability hereunder is limited and not joint and several.
Each Debtor acknowledges and agrees that the foregoing waivers and those set
forth below serve as a material inducement to the agreement of the Collateral
Agent and the Banks to make the Loans and issue the Letters of Credit, and that
the Collateral Agent and the Banks are relying on each specific waiver and all
such waivers in entering into this Agreement. The undertakings of each Debtor
hereunder secure the obligations of the Borrower, itself and the other Loan
Parties. The Collateral Agent and the Banks, or any of them, may, in their sole
discretion, elect to enforce this Agreement against any Debtor without any duty
or responsibility to pursue any other Loan Party and such an election by the
Collateral Agent and the Banks, or any of them, shall not be a defense to any
action the Collateral Agent and the Banks, or any of them, may elect to take
against any Debtor. Each of the Banks and the Collateral Agent hereby reserves
all rights against each Debtor.
     10. (a) At any time and from time to time whether or not an Event of
Default then exists and without prior notice to or consent of any Debtor, the
Collateral Agent may at its option take such actions as the Collateral Agent
deems appropriate (i) to attach, perfect, continue, preserve and protect the
Collateral Agent’s, PNC’s and the Banks’ prior security interest in the
Collateral, and/or (ii) subject to the provisions of Section 8.1.6 [Visitation
Rights] of the Credit Agreement, to inspect, audit and verify the Collateral,
including reviewing all of such Debtor’s books and records and copying and
making excerpts therefrom, provided that prior to an Event of

- 10 -

--------------------------------------------------------------------------------

 

Default or a Potential Default, the same is done with advance notice during
normal business hours to the extent access to such Debtor’s premises is
required, and (iii) to add all liabilities, obligations, reasonable costs and
expenses reasonably incurred in connection with the foregoing clauses (i) and
(ii) to the Secured Obligations, to be paid by the Debtors to the Collateral
Agent for the benefit of PNC and the Banks upon demand; and
     (a) At any time and from time to time after an Event of Default exists and
is continuing and without prior notice to or consent of any Debtor, the
Collateral Agent may at its option take such action as the Collateral Agent
deems appropriate (i) to maintain, repair, protect and insure the Collateral,
and/or (ii) to perform, keep, observe and render true and correct any and all
covenants, agreements, representations and warranties of any Debtor hereunder,
and (iii) to add all liabilities, obligations, costs and expenses reasonably
incurred in connection with the foregoing clauses (i) and (ii) to the Secured
Obligations, to be paid by any Debtor to the Collateral Agent for the benefit of
PNC and the Banks upon demand.
     11. After there exists any Event of Default under the Credit Agreement:
     (a) The Collateral Agent shall have and may exercise all the rights and
remedies available to a secured party under the Code in effect at the time, and
such other rights and remedies as may be provided by Law and as set forth below,
including without limitation to take over and collect any or all of any Debtor’s
Collateral and all other Collateral, and to this end each Debtor hereby appoints
the Collateral Agent, its officers, employees and agents, as its irrevocable,
true and lawful attorneys-in-fact with all necessary power and authority to
(i) take possession immediately, with or without notice, demand, or legal
process, of any of or all of the Collateral wherever found, and for such
purposes, enter upon any premises upon which the Collateral may be found and
remove the Collateral therefrom, (ii) require any Debtor to assemble the
Collateral and deliver it to the Collateral Agent or to any place designated by
the Collateral Agent at such Debtor’s expense, (iii) receive, open and dispose
of all mail addressed to any Debtor and notify postal authorities to change the
address for delivery thereof to such address as the Collateral Agent may
designate, (iv) demand payment of all of the Collateral except Equipment and
Inventory, (v) enforce payment of all of the Collateral except Equipment and
Inventory by legal proceedings or otherwise, (vi) exercise all of any Debtor’s
rights and remedies with respect to the collection of all of the Collateral
except Equipment and Inventory, (vii) settle, adjust, compromise, extend or
renew all of the Collateral except Equipment and Inventory, (viii) settle,
adjust or compromise any legal proceedings brought to collect all of the
Collateral except Equipment and Inventory, (ix) to the extent permitted by
applicable Law, sell or assign all of the Collateral except Equipment and
Inventory upon such terms, for such amounts and at such time or times as the
Collateral Agent deems advisable, (x) discharge and release all of the
Collateral except Equipment and Inventory, (xi) take control, in any manner, of
any item of payment or proceeds from any account debtor, (xii) prepare, file and
sign any Debtor’s name on any Proof of Claim in Bankruptcy or similar document
against any account debtor, (xiii) prepare, file and sign any Debtor’s name on
any notice of Lien, assignment or satisfaction of Lien or similar document in
connection with all of the Collateral except Equipment and Inventory, (xiv) do
all acts and things necessary, in PNC’s sole discretion, to fulfill any Debtor’s
obligations under the Loan Documents, (xv) endorse the name of any Debtor upon
any check, Chattel Paper, Document, Instrument, invoice, freight bill, bill of
lading or similar document or agreement

- 11 -

--------------------------------------------------------------------------------

 

relating to all of the Collateral except Equipment; (xvi) use any Debtor’s
stationery and sign such Debtor’s name to verifications of all of the Collateral
except Equipment and Inventory and notices thereof to account debtors;
(xvii) access and use the information recorded on or contained in any data
processing equipment or computer hardware or software relating to the Collateral
or proceeds thereof to which any Debtor has access, (xviii) demand, sue for,
collect, compromise and give acquittances for any and all Collateral,
(xix) prosecute, defend or compromise any action, claim or proceeding with
respect to any of the Collateral, and (xx) take such other action as PNC may
deem appropriate, including extending or modifying the terms of payment of any
Debtor’s debtors. This power of attorney, being coupled with an interest, shall
be irrevocable for the life of this Agreement. To the extent permitted by Law,
each Debtor hereby waives all claims of damages due to or arising from or
connected with any of the rights or remedies exercised by the Collateral Agent
pursuant to this Agreement, except claims arising (to the extent so arising)
from gross negligence or willful misconduct by the Collateral Agent.
     (b) The Collateral Agent shall have the right to lease, sell or otherwise
dispose of all or any of the Collateral at public or private sale or sales for
cash, credit or any combination thereof, with such notice as may be required by
Law (it being agreed by each Debtor that, in the absence of any contrary
requirement of Law, ten (10) business days’ prior notice of a public or private
sale of Collateral shall be deemed reasonable notice), in lots or in bulk, for
cash or on credit, all as PNC, in its sole discretion, may deem advisable. Such
sales may be adjourned from time to time with or without notice. The Collateral
Agent shall have the right to conduct such sales on any Debtor’s premises or
elsewhere and shall have the right to use any Debtor’s premises without charge
for such sales for such time or times as the Collateral Agent may see fit. The
Collateral Agent may purchase all or any part of the Collateral at public or, if
permitted by Law, private sale and, in lieu of actual payment of such purchase
price, may set off the amount of such price against the Secured Obligations.
     12. The security interest in each Debtor’s Collateral granted to and
created in favor of the Collateral Agent by this Agreement shall be for the
benefit of the Collateral Agent, PNC and the Banks. Each of the rights,
privileges, and remedies provided to the Collateral Agent hereunder or otherwise
by Law with respect to any Debtor’s Collateral shall be exercised by the
Collateral Agent only for its own benefit and the benefit of PNC and the Banks,
and any of such Debtor’s Collateral or proceeds thereof held or realized upon at
any time by the Collateral Agent shall be applied as set forth in Section 9.2.5
[Application of Proceeds] of the Credit Agreement. Each Debtor shall remain
liable to PNC and the Banks for and shall pay to the Collateral Agent for the
benefit of PNC and the Banks any deficiency which may remain after such sale or
collection.
     13. If the Collateral Agent repossesses or seeks to repossess any of the
Collateral pursuant to the terms hereof because of the occurrence of an Event of
Default, then to the extent it is commercially reasonable for the Collateral
Agent to store any Collateral on any of any Debtor’s premises, each Debtor
hereby agrees to lease to the Collateral Agent on a month-to-month tenancy for a
period not to exceed one hundred twenty (120) days at the Collateral Agent’s
election, at a rental of One Dollar ($1.00) per month, the premises on which the
Collateral is located, provided it is located on premises owned or leased by
such Debtor.

- 12 -

--------------------------------------------------------------------------------

 

     14. Upon indefeasible payment in full of the Secured Obligations and
termination of the Credit Agreement, this Agreement shall terminate and be of no
further force and effect, and the Collateral Agent shall thereupon promptly
return to a Debtor such of the Collateral and such other documents delivered by
such Debtor hereunder as may then be in the Collateral Agent’s possession. Until
such time, however, this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.
     15. No failure or delay on the part of the Collateral Agent in exercising
any right, remedy, power or privilege hereunder shall operate as a waiver
thereof or of any other right, remedy, power or privilege of the Collateral
Agent hereunder; nor shall any single or partial exercise of any such right,
remedy, power or privilege preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. No waiver of a single
Event of Default shall be deemed a waiver of a subsequent Event of Default. All
waivers under this Agreement must be in writing. The rights and remedies of the
Collateral Agent under this Agreement are cumulative and in addition to any
rights or remedies which it may otherwise have, and the Collateral Agent may
enforce any one or more remedies hereunder successively or concurrently at its
option.
     16. All notices, statements, requests, demands, directions and other
communications (collectively, “notices”) given to or made upon any party hereto
under the provisions of this Agreement shall be given to the applicable party
hereto at the address set forth on Schedule 1.1(B) to the Credit Agreement and
in the manner provided in Section 11.6 [Notices] of the Credit Agreement. The
Collateral Agent and the Banks may rely on any notice (whether or not made in
the manner contemplated by this Agreement) reasonably believed to have been made
by or on behalf of any Debtor, and the Collateral Agent and the Banks shall have
no duty to verify the identity or authority of the Person giving such notice.
     17. Each Debtor agrees that as of the date hereof, all information
contained on the Security Interest Data Schedule attached hereto as Schedule A
is accurate and complete in all material respects and contains no material
omission or misrepresentation. Each Debtor shall promptly notify the Collateral
Agent of any changes in the information set forth thereon.
     18. Each Debtor acknowledges that the provisions hereof giving the
Collateral Agent rights of access to books, records and information concerning
the Collateral and such Debtor’s operations and providing the Collateral Agent
access to such Debtor’s premises are intended to afford the Collateral Agent
with immediate access to current information concerning such Debtor and its
activities, including without limitation, the value, nature and location of the
Collateral so that the Collateral Agent can, among other things, make an
appropriate determination after the occurrence of an Event of Default, whether
and when to exercise its other remedies hereunder and at Law, including without
limitation, instituting a replevin action should any Debtor refuse to turn over
any Collateral to the Collateral Agent. Each Debtor further acknowledges that
should such Debtor at any time fail to promptly provide such information and
access to the Collateral Agent, each Debtor acknowledges that the Collateral
Agent would have no adequate remedy at Law to promptly obtain the same. Each
Debtor agrees that the provisions hereof may be specifically enforced by the
Collateral Agent and waives any claim or defense in any such action or
proceeding that the Collateral Agent has an adequate remedy at Law.

- 13 -

--------------------------------------------------------------------------------

 

     19. This Agreement shall be binding upon and inure to the benefit of the
Collateral Agent, PNC, the Banks and their respective successors and assigns,
and each Debtor and each of its respective successors and assigns, except that
no debtor may assign or transfer such Debtor’s obligations hereunder or any
interest herein, and any such purported assignment or transfer shall be null and
void.
     20. This Agreement shall be deemed to be a contract under the laws of the
State of New York and for all purposes shall be governed by and construed and
enforced in accordance with the laws of said State.
     21. (a) It is the intention of the parties that this Agreement be
enforceable to the fullest extent permissible under applicable Law, but that the
unenforceability (or modification to conform to such Law) of any provision or
provisions hereof shall not render unenforceable, or impair, the remainder
hereof. If any provision in this Agreement shall be held invalid or
unenforceable in whole or in part in any jurisdiction, this Agreement shall, as
to such jurisdiction, be deemed amended to modify or delete, as necessary, the
offending provision or provisions and to alter the bounds thereof in order to
render it or them valid and enforceable to the maximum extent permitted by
applicable Law, without in any manner affecting the validity or enforceability
of such provision or provisions in any other jurisdiction or the remaining
provisions hereof in any jurisdiction.
     (b) Without limitation of the preceding subsection (a), to the extent that
applicable Law (including applicable Laws pertaining to fraudulent conveyance or
fraudulent or preferential transfer) otherwise would render the full amount of
any Debtor’s obligations hereunder invalid, voidable or unenforceable on account
of the amount of a Debtor’s aggregate liability under this Agreement, then,
notwithstanding any other provision of this Agreement to the contrary, the
aggregate amount of such liability shall, without any further action by the
Collateral Agent or any of the Banks or such Debtor or any other Person, be
automatically limited and reduced to the highest amount which is valid and
enforceable as determined in such action or proceeding, which (without limiting
the generality of the foregoing) may be an amount which is equal to the greater
of:
     (i) the fair consideration actually received by such Debtor under the terms
and as a result of the Loan Documents and the Bank-Provided Interest Rate Hedges
and the value of the benefits described in Paragraph 25(b) hereof, including
(and to the extent not inconsistent with applicable federal and state laws
affecting the enforceability of guaranties) distributions, commitments, and
advances made to or for the benefit of such Debtor with the proceeds of any
credit extended under the Loan Documents or the Bank-Provided Interest Rate
Hedges, or
     (ii) the excess of (1) the amount of the fair value of the assets of such
Debtor as of the date of this Agreement as determined in accordance with
applicable federal and state laws governing determinations of the insolvency of
debtors as in effect on the date hereof, over (2) the amount of all liabilities
of such Debtor as of the date of this Agreement, also as determined on the basis
of applicable federal and state laws governing the insolvency of debtors as in
effect on the date hereof.

- 14 -

--------------------------------------------------------------------------------

 

     (c) Notwithstanding anything to the contrary in this Section 21 or
elsewhere in this Agreement, this Agreement shall be presumptively valid and
enforceable to its full extent in accordance with its terms, as if this
Section 21 (and references elsewhere in this Agreement to enforceability to the
fullest extent permitted by Law) were not a part of this Agreement, and in any
related litigation the burden of proof shall be on the party asserting the
invalidity or unenforceability of any provision hereof or asserting any
limitation on any Debtor’s obligations hereunder as to each element of such
assertion.
     22. EACH DEBTOR HEREBY IRREVOCABLY SUBMITS TO THE NONEXCLUSIVE JURISDICTION
OF THE COURTS OF NEW YORK OR THE U.S. DISTRICT COURT FOR THE SOUTHERN DISTRICT
OF NEW YORK, AND WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND
CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY CERTIFIED OR REGISTERED
MAIL DIRECTED TO SUCH DEBTOR AT THE ADDRESS PROVIDED FOR IN SECTION 11.6
[NOTICES] OF THE CREDIT AGREEMENT AND SERVICE SO MADE SHALL BE DEEMED TO BE
COMPLETED UPON ACTUAL RECEIPT THEREOF. EACH DEBTOR HEREBY IRREVOCABLY WAIVES ANY
OBJECTION TO JURISDICTION AND VENUE OF ANY ACTION INSTITUTED AGAINST IT AS
PROVIDED HEREIN AND AGREES NOT TO ASSERT ANY DEFENSE BASED ON SUCH LACK OF
JURISDICTION OR VENUE.
     23. EACH DEBTOR HEREBY IRREVOCABLY WAIVES TRIAL BY JURY IN ANY ACTION,
SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO THIS
AGREEMENT, THE CREDIT AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE COLLATERAL TO
THE FULLEST EXTENT PERMITTED BY LAW.
     24. At any time after the initial execution and delivery of this Agreement
to the Collateral Agent for the benefit of the Banks, additional Persons may
become parties to this Agreement and thereby acquire the duties and rights of
being Debtors hereunder by executing and delivering to the Collateral Agent and
the Banks a Guarantor Joinder pursuant to the Credit Agreement and, in addition,
a new Schedule A and Schedule B hereto shall be provided to the Collateral Agent
with respect to such new Debtor. No notice of the addition of any Debtor shall
be required to be given to any pre-existing Debtor and each Debtor hereby
consents thereto.
     25. (a) Each Debtor hereby acknowledges that it has received a copy of the
Credit Agreement and the other Loan Documents and each Debtor certifies that the
representations and warranties made therein with respect to such Debtor are true
and correct. Further, each Debtor acknowledges and agrees to perform, comply
with, and be bound by all of the provisions of the Credit Agreement and the
other Loan Documents.
     (a) Each Debtor hereby acknowledges, represents, and warrants that it
receives synergistic benefits by virtue of its affiliation with the Borrower and
the other Debtors and that it will receive direct and indirect benefits from the
financing arrangements contemplated by the Credit Agreement and that such
benefits, together with the rights of contribution and subrogation

- 15 -

--------------------------------------------------------------------------------

 

that may arise in connection herewith are a reasonably equivalent exchange of
value in return for providing this Agreement.
     26. This Agreement supersedes all prior understandings and agreements,
whether written or oral, between the parties hereto relating to a grant of a
security interest in the Collateral by any Debtor. This Agreement is subject to
waiver, modification, supplement or amendment only by a writing signed by the
parties, except as provided in this Agreement with respect to additions and
supplements to Schedule A and Schedule B hereto.
     27. This Agreement may be executed by different parties hereto on any
number of separate counterparts, each of which, when so executed and delivered,
shall be deemed an original, and all such counterparts shall together constitute
one and the same instrument. Each Debtor acknowledges and agrees that a telecopy
or electronic transmission to the Collateral Agent or any Bank of the signature
pages hereof purporting to be signed on behalf of any Debtor shall constitute
effective and binding execution and delivery hereof by such Debtor.
     28. This Agreement amends and restates the Original Security Agreement and
this Agreement is not intended to constitute, nor does it constitute, an
interruption, suspension of continuity, satisfaction, discharge of prior duties,
novation, or termination of the indebtedness, liabilities, expenses, or
obligations under the Original Security Agreement. This Agreement and the Credit
Agreement and the other Loan Documents constitute the entire agreement of the
parties hereto with respect to the subject matter hereof and supersede any and
all other prior and contemporaneous understandings and agreements.
[SIGNATURE PAGES FOLLOW]

- 16 -

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 1 OF 2 TO
AMENDED AND RESTATED SECURITY AGREEMENT]
     IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly
authorized, have executed and delivered this Agreement as of the day and year
first above set forth.

            WESTMORELAND MINING LLC
      By:   /s/ Douglas P. Kathol   (SEAL)    Name:   Douglas P. Kathol     
Title:   Vice President        DAKOTA WESTMORELAND CORPORATION
      By:   /s/ Douglas P. Kathol   (SEAL)    Name:   Douglas P. Kathol     
Title:   Vice President        WESTMORELAND SAVAGE CORPORATION
      By:   /s/ Douglas P. Kathol   (SEAL)    Name:   Douglas P. Kathol     
Title:   Vice President        WESTERN ENERGY COMPANY
      By:   /s/ Douglas P. Kathol   (SEAL)    Name:   Douglas P. Kathol     
Title:   Vice President   

--------------------------------------------------------------------------------

 

         

[SIGNATURE PAGE 2 OF 2 TO
AMENDED AND RESTATED SECURITY AGREEMENT]

            U.S. BANK NATIONAL ASSOCIATION, as
Collateral Agent
      By:   /s/ Brian J. Kabbes       Name:   Brian J. Kabbes      Title:   Vice
President   

- 18 -