Exhibit 10.1
 

 
 

 
LOAN AND SECURITY AGREEMENT
 
dated as of June 29, 2012
 
among
 
THE PRIVATEBANK AND TRUST COMPANY,
 
as Lender,
 
AND
 
WESTMORELAND COAL COMPANY
WESTMORELAND ENERGY LLC,
WESTMORELAND - NORTH CAROLINA POWER, L.L.C.,
WEI-ROANOKE VALLEY, INC.,
WESTMORELAND – ROANOKE VALLEY, L.P.,
WESTMORELAND PARTNERS,
WESTMORELAND RESOURCES, INC.,
WESTMORELAND KEMMERER, INC.,
WESTMORELAND COAL SALES COMPANY, INC.,
WCC LAND HOLDING COMPANY, INC., AND
WRI PARTNERS, INC.,

as the Borrowers

 

 

 

 

 
 

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Table of Contents
 
TABLE OF CONTENTS
 

   
Page
     
SECTION 1
DEFINITIONS
2
     
1.1
Definitions
2
     
SECTION 2
LOANS
20
     
2.1
Revolving Loans
20
2.2
Reserved
21
2.3
Loan Procedures
21
2.4
Repayments
22
2.5
Notes
22
2.6
Recordkeeping
23
     
SECTION 3
LETTERS OF CREDIT
23
     
3.1
General Terms
23
3.2
Letter of Credit Procedures
23
3.3
Expiration Dates of Letters of Credit
24
3.4
Cash Collateralization
24
     
SECTION 4
INTEREST, FEES AND CHARGES
25
     
4.1
Interest Rate
25
4.2
Increased Costs; Special Provisions For LIBOR Loans
26
4.3
Fees and Charges
28
4.4
Taxes
29
4.5
Treatment of Certain Refunds
30
4.6
Maximum Interest
30
     
SECTION 5
COLLATERAL
30
     
5.1
Grant of Security Interest to Lender
30
5.2
Other Security
31
5.3
Possessory Collateral
32
5.4
Electronic Chattel Paper
32
     
SECTION 6
PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY INTERESTS THEREIN
32
     
SECTION 7
POSSESSION OF COLLATERAL AND RELATED MATTERS
33
     
SECTION 8
COLLECTIONS
33
     
8.1
Blocked Account
33
8.2
Lender’s Rights
34
8.3
Application of Proceeds
35

 
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Table of Contents
 
TABLE OF CONTENTS
(continued)

   
Page
     
8.4
Account Statements
35
     
SECTION 9
COLLATERAL, AVAILABILITY AND FINANCIAL REPORTS AND SCHEDULES
35
     
9.1
Weekly Reports
35
9.2
Monthly Reports
35
9.3
Financial Statements
35
9.4
Annual Projections
36
9.5
Explanation of Budgets and Projections
36
9.6
Public Reporting
36
9.7
Other Information
36
     
SECTION 10
TERMINATION
36
     
SECTION 11
REPRESENTATIONS AND WARRANTIES
37
     
11.1
Financial Statements and Other Information
37
11.2
Locations
37
11.3
Loans by the Borrowers
38
11.4
Accounts and Inventory
38
11.5
Liens
38
11.6
Organization, Authority and No Conflict
38
11.7
Litigation
39
11.8
Compliance with Laws and Maintenance of Permits
39
11.9
Affiliate Transactions
39
11.10
Names and Trade Names
39
11.11
Equipment
39
11.12
Enforceability
39
11.13
Solvency
40
11.14
Indebtedness
40
11.15
Margin Security and Use of Proceeds
40
11.16
Parent, Subsidiaries and Affiliates
40
11.17
No Defaults
40
11.18
Employee Matters
40
11.19
Intellectual Property
40
11.20
Environmental Matters
40
11.21
ERISA Matters
41
11.22
Investment Company Act
41
11.23
Anti-Terrorism Laws
41
11.24
Excluded Subsidiaries
42
11.25
Reserved
42
11.26
Investigations, Audits, Etc
42
11.27
Capitalization; Subsidiaries
42

 
 
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Table of Contents
 
TABLE OF CONTENTS
(continued)

   
Page
     
11.28
Insurance
42
     
SECTION 12
AFFIRMATIVE COVENANTS
42
     
12.1
Maintenance of Records
42
12.2
Notices
43
12.3
Compliance with Laws and Maintenance of Permits
44
12.4
Inspection and Audits
44
12.5
Insurance
45
12.6
Collateral
46
12.7
Use of Proceeds
46
12.8
Taxes
46
12.9
Intellectual Property
47
12.10
Checking Accounts and Cash Management Services
47
12.11
USA Patriot Act, Bank Secrecy Act and Office of Foreign Asset Control
47
12.12
Further Assurances
48
     
SECTION 13
NEGATIVE COVENANTS
48
     
13.1
Guaranties
48
13.2
Indebtedness
49
13.3
Liens
49
13.4
Mergers, Sales, Acquisitions, Subsidiaries and Other Transactions Outside the
Ordinary Course of Business
49
13.5
Dividends and Distributions
50
13.6
Investments/Loans
50
13.7
Fundamental Changes, Line of Business
50
13.8
Reserved
50
13.9
Affiliate Transactions
50
13.10
Settling of Accounts
50
13.11
Restriction of Amendments to Certain Documents
50
13.12
Payments on Subordinated Debt
51
13.13
Contingent Obligations
51
13.14
Excluded Subsidiaries
51
13.15
Westmoreland Mining LLC
51
     
SECTION 14
FINANCIAL COVENANTS
51
     
14.1
Fixed Charge Coverage
51
14.2
EBITDA
52
14.3
Accounting Matters
52
     
SECTION 15
DEFAULT
52

 
 
 
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Table of Contents
 
TABLE OF CONTENTS
(continued)

   
Page
     
15.1
Payment
53
15.2
Breach of this Agreement and the other Loan Documents
53
15.3
Breach of Representations and Warranties
53
15.4
Loss of Collateral
53
15.5
Levy, Seizure or Attachment
53
15.6
Bankruptcy or Similar Proceedings
53
15.7
Appointment of Receiver
53
15.8
Judgment
54
15.9
Change of Control
54
15.10
Material Adverse Change
54
15.11
Subordinated Debt
54
15.12
Other Indebtedness
54
15.13
ERISA
54
15.14
Invalidity of Subordination Provisions, etc
54
     
SECTION 16
REMEDIES UPON AN EVENT OF DEFAULT
55
     
16.1
Acceleration
55
16.2
Other Remedies
55
     
SECTION 17
CONDITIONS PRECEDENT
56
     
17.1
Conditions to Initial Loans
56
17.2
Conditions to All Loans
56
     
SECTION 18
MISCELLANEOUS
57
     
18.1
Assignments; Participations
57
18.2
Customer Identification - USA Patriot Act Notice
58
18.3
Indemnification by Borrowers
58
18.4
Notice
59
18.5
Modification and Benefit of Agreement
60
18.6
Headings of Subdivisions
60
18.7
Power of Attorney
60
18.8
Confidentiality
60
18.9
Counterparts/Delivery
61
18.10
Electronic Submissions
61
18.11
Waiver of Jury Trial: Other Waivers
61
18.12
Choice of Governing Laws; Construction; Forum Selection
62
18.13
Revival and Reinstatement of Obligations
63
18.14
Reimbursement Among the Borrowers
63
18.15
Guaranty
63
18.16
Joint and Several Liability
63
18.17
Representatives
64

 
 
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TABLE OF CONTENTS
(continued)

    Page      
SECTION 19
NONLIABILITY OF LENDER
64

EXHIBIT A – COMPLIANCE CERTIFICATE
 
EXHIBIT B – NOTICE OF BORROWING
 
EXHIBIT C – NOTICE OF CONVERSION/CONTINUATION
 
EXHIBIT D – FORM OF RELEASE
 
EXHIBIT E – COMMERCIAL TORT CLAIMS
 
SCHEDULE 1 – PERMITTED LIENS
 
SCHEDULE 11.2 – BUSINESS AND COLLATERAL LOCATIONS
 
SCHEDULE 11.7 – LITIGATION
 
SCHEDULE 11.9 – AFFILIATE TRANSACTIONS
 
SCHEDULE 11.10 – NAMES & TRADE NAMES
 
SCHEDULE 11.14 – INDEBTEDNESS
 
SCHEDULE 11.16 – PARENT, SUBSIDIARIES AND AFFILIATES
 
SCHEDULE 11.18 – EMPLOYEE MATTERS
 
SCHEDULE 11.20 – ENVIRONMENTAL MATTERS
 
SCHEDULE 11.26 – INVESTIGATIONS, AUDITS, ETC.
 
SCHEDULE 11.27 – CAPITALIZATION; SUBSIDIARIES
 
SCHEDULE 11.28 – INSURANCE
 
SCHEDULE 13.4 – PERMITTED SALES AND ACQUISITIONS
 
SCHEDULE 17.1 – CLOSING DOCUMENT CHECKLIST
 

 
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LOAN AND SECURITY AGREEMENT
 
THIS LOAN AND SECURITY AGREEMENT (as amended, modified or supplemented from time
to time, this “Agreement”) made this 29th day of June, 2012 by and among THE
PRIVATEBANK AND TRUST COMPANY (“Lender”), and each of WESTMORELAND COAL COMPANY,
a Delaware corporation (“Westmoreland Parent”), WESTMORELAND ENERGY LLC, a
Delaware limited liability company (“Westmoreland Energy”), WESTMORELAND - NORTH
CAROLINA POWER, L.L.C., a Virginia limited liability company (“Westmoreland
NC”), WEI-ROANOKE VALLEY, INC., a Delaware corporation (“WEI”), WESTMORELAND –
ROANOKE VALLEY, L.P., a Delaware limited partnership (“Westmoreland Roanoke”),
WESTMORELAND PARTNERS, a Virginia general partnership (“Westmoreland”),
WESTMORELAND RESOURCES, INC., a Delaware corporation (“Westmoreland Resources”),
WESTMORELAND KEMMERER, INC., a Delaware corporation (“Kemmerer”), WESTMORELAND
COAL SALES COMPANY, INC., a Delaware corporation (“Coal Sales”), WRI PARTNERS,
INC., a Delaware corporation (“WRI”) and WCC LAND HOLDING COMPANY, INC., a
Delaware corporation (“WCC”; together with Westmoreland Parent, Westmoreland
Energy, Westmoreland NC, WEI, Westmoreland Roanoke, Westmoreland, Westmoreland
Resources, Kemmerer Coal Sales and WRI, individually a “Borrower” and
collectively the “Borrowers”), jointly and severally.
 
W I T N E S S E T H:
 
WHEREAS, Borrowers (other than Westmoreland Parent) are all direct or indirect
Subsidiaries (as defined below) of Westmoreland Parent, which together are
involved in the mining and production of coal and other power production
operations;
 
WHEREAS, Borrowers desire to borrow funds and obtain other financial
accommodation from Lender in order to support Borrowers’ working capital needs;
 
WHEREAS, Borrowers may, from time to time, request Loans from Lender, and the
parties wish to provide for the terms and conditions upon which such Loans or
other financial accommodations, if made by Lender, shall be made; and
 
WHEREAS, as a result of, among other things, the common Affiliate ownership
thereof and shared overhead and administrative expenses and sales synergies
achieved by Borrowers, Borrowers acknowledge that each Borrower will derive
advantage from each and every financial accommodation made by Lender to any of
them, and that Lender would be unwilling to extend the credit hereunder without
each and every Borrower agreeing to this Agreement.
 
NOW, THEREFORE, in consideration of any Loan (including any Loan by renewal or
extension) hereafter made to Borrowers by Lender, or any Letter of Credit issued
for the account of any Borrower, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged by Borrowers and
Lender, the parties agree as follows:
 
 
 

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SECTION 1
 
DEFINITIONS
 
1.1           Definitions.  When used herein the following terms shall have the
following meanings:
 
Absaloka means Absaloka Coal, LLC, a Delaware limited liability company.
 
Account shall have the meaning ascribed to such term in the UCC.
 
Account Debtor shall have the meaning ascribed to such term in the UCC.
 
Acquisition means any transaction or series of related transactions for the
purpose of or resulting, directly or indirectly, in (a) the acquisition of all
or a substantial portion of the assets of a Person, or of all or a substantial
portion of any business or division of a Person, (b) the acquisition of in
excess of 50% of the equity securities of any Person, or otherwise causing any
Person to become a Subsidiary, or (c) a merger or consolidation or any other
combination with another Person (other than a Person that is already a
Subsidiary).
 
Affiliate shall mean any Person (i) which directly or indirectly through one or
more intermediaries controls, is controlled by, or is under common control with,
Borrowers, (ii) which beneficially owns or holds ten percent (10%) or more of
the voting control or equity interests a Person, or (iii) ten percent (10%) or
more of the voting control or equity interests of which is beneficially owned or
held by a Person.
 
Asset Sales means any sale, issuance, conveyance, transfer, lease, assignment or
other disposition by any Borrower 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 interests of any Borrower)
(collectively, for purposes of this definition, a “transfer”), in one
transaction or a series of related transactions, of any assets of any Borrower;
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 that are permitted by, and made in accordance
with, Section 13.4;
 
(3)           Permitted Investments and Restricted Payments permitted under
Section 4.11 of the Second Lien Notes Indenture in effect on the date hereof;
 
(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 $2,500,000;
 
 
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(6)           a transfer of assets between or among any of the Borrowers;
 
(7)           an issuance or sale of equity interests by a Borrower (a) (other
than Westmoreland Parent) to its parent or (b) to another Borrower;
 
(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 Borrowers 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 Borrowers;
 
(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 any Borrower’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.
 
Bank Product Agreements shall mean those certain agreements pursuant to which
Lender or its Affiliates provide any of the Bank Products to any Borrower
including, without limitation, Hedging Agreements.
 
Bank Product Obligations shall mean all obligations, liabilities, contingent
reimbursement obligations, fees, and expenses owing by the Borrowers to Lender
or its Affiliates pursuant to or evidenced by the Bank Product Agreements and
irrespective of whether for the payment of money, whether direct or indirect,
absolute or contingent, due or to become due, now existing or hereafter arising,
and including all such amounts that a Borrower is obligated to reimburse to
Lender as a result of Lender purchasing participations or executing indemnities
or reimbursement obligations with respect to the Bank Products provided to the
Borrowers pursuant to the Bank Product Agreements.
 
Bank Products shall mean any service provided to, facility extended to, or
transaction entered into with, any Borrower by Lender or its Affiliates,
including, without limitation, (a) deposit accounts, (b) cash management
services, including, without limitation, controlled
 
 
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disbursement, lockbox, electronic funds transfers (including, without
limitation, book transfers, fedwire transfers, ACH transfers), online reporting
and other services relating to accounts maintained with Lender or its
Affiliates, (c) debit cards and credit cards and (d) Hedging Agreements.
 
Base Rate shall mean at any time the greater of (a) the Federal Funds Rate plus
0.5% and (b) the Prime Rate.
 
Base Rate Loan shall mean any Loan which bears interest at or by reference to
the Base Rate.
 
BSA shall have the meaning set forth in Section 12.11.
 
Business Day shall mean any day on which Lender is open for commercial banking
business in Chicago, Illinois and, in the case of a Business Day which relates
to a LIBOR Loan, any day on which dealings are carried on in the London
Interbank eurodollar market.
 
Capital Expenditures shall mean with respect to any period, the aggregate of all
unfinanced expenditures (whether paid in cash or accrued as liabilities and
including expenditures for Capital Lease obligations) by Borrowers and their
Subsidiaries during such period that are required by GAAP, consistently applied,
to be included in or reflected by the property, plant and equipment or similar
fixed asset accounts (or intangible accounts subject to amortization) on the
balance sheet of Borrowers and their Subsidiaries.
 
Capital Lease of any Person shall mean any lease of any property by such Person
as lessee which would, in accordance with GAAP, be required to be accounted for
as a capital lease on the balance sheet of such Person.
 
Cash Collateralize shall mean to deliver cash collateral to Lender in the amount
equal to 105% of the sum of the face amount of the outstanding Letters of Credit
to be held as cash collateral for outstanding Letters of Credit, pursuant to
documentation satisfactory to Lender in its sole discretion.  Derivatives of
such term have corresponding meanings.
 
Cash Equivalents shall mean (i) obligations issued 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; (ii) 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; (iii) commercial paper maturing no more than 180 days from the date
of creation thereof issued by a corporation that is not the Parent or an
Affiliate of the Parent, 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; (iv) repurchase obligations for underlying
securities of the types described in clause (i) above entered into with any
financial institution meeting the specifications of clause (ii) above; provided,
such obligations may not have a term of more than seven days; (v) demand deposit
accounts
 

 
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maintained in the ordinary course of business; (vi) investments in money market
or other mutual funds 95% of whose assets comprise securities of the types
described in clauses (i) through (v) above
 
Chattel Paper shall have the meaning ascribed to such term in the UCC.
 
Closing Date means June 29, 2012.
 
Collateral shall mean all of the property of Borrowers described in Section 5.1
hereof, together with all other real or personal property of any Obligor or any
other Person that is now or hereafter pledged to Lender to secure, either
directly or indirectly, repayment of any of the Obligations.
 
Commercial Tort Claims shall have the meaning ascribed to such term in the UCC.
 
Consolidated Amortization Expense for any period means the amortization expense
of Borrowers 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 Borrowers for
such period, determined on a consolidated basis in accordance with GAAP.
 
Consolidated Depreciation and Depletion Expense for any period means the
depreciation and depletion expense of Borrowers 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 any Borrower only if a corresponding
amount would be permitted at the date of determination to be distributed to
Westmoreland Parent by its Subsidiaries 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 Borrowers or their equity holders,
 
(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,
 

 
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(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
 
(g)           costs and expenses incurred in connection with entering into, and
the initial borrowing under, this Agreement,
 
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
Borrowers, 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 Borrowers for such period, determined on a
consolidated basis in accordance with GAAP and including, without duplication,
 
(1)           imputed interest on Capital Leases 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 Second Lien 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 (as
defined in the Second Lien Notes Indenture in effect on the date hereof) or any
Preferred Stock (as defined in the Second Lien Notes Indenture in effect on the
date hereof) of Borrowers (other than any such Disqualified Equity Interests or
any Preferred Stock held by Borrowers or to the
 

 
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extent paid in Qualified Equity Interests (as defined in the Second Lien Notes
Indenture in effect on the date hereof)), 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
Borrowers, 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
any Borrower; 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) involving interest rate swap and collar agreements,
but excluding unrealized gains and losses with respect to Hedging Obligations.
 
Contingent Obligation, as applied to any Person, shall mean any direct or
indirect liability of that Person: (a) with respect to any Indebtedness, lease,
dividend or other obligation of another Person, if the purpose or intent of the
Person incurring such liability, or the effect thereof, is to provide assurance
to the obligee of such liability that such liability will be paid or discharged,
or that any agreements relating thereto will be complied with, or that the
holders of such liability will be protected (in whole or in part) against loss
with respect thereto; (b) with respect to any letter of credit issued for the
account of that Person or as to which that Person is otherwise liable for
reimbursement of drawings; (c) to make take-or-pay or similar payments if
required regardless of nonperformance by any other party or parties to an
agreement; or (d) pursuant to any agreement to purchase, repurchase or otherwise
acquire any obligation or any property constituting security therefor, to
provide funds for the payment or discharge of such obligation or to maintain the
solvency, financial condition or any balance sheet item or level of income of
another.  The amount of any Contingent Obligation shall be equal to the amount
of the obligation so guaranteed or otherwise supported or, if not a fixed and
determined amount, the maximum amount so guaranteed.
 
Controlled Group shall mean all members of a controlled group of corporations
and all members of a controlled group of trades or businesses (whether or not
incorporated) under common control that are treated as a single employer under
Section 414 of the Internal Revenue Code or Section 4001 of ERISA.
 
Default shall mean an event or condition the occurrence of which would, with the
lapse of time or the giving of notice, or both, become an Event of Default.
 
Deposit Accounts shall have the meaning ascribed to such term in the UCC.
 
Documents shall have the meaning ascribed to such term in the UCC.
 
Electronic Chattel Paper shall have the meaning ascribed to such term in the
UCC.
 
Eligible Account shall mean an Account owing to any Borrower which is acceptable
to Lender in its reasonable discretion determined in good faith for lending
purposes.  Without
 
 
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limiting Lender’s discretion, Lender shall, in general, consider an Account to
be an Eligible Account if it meets, and so long as it continues to meet, the
following requirements:
 
(i)           it is genuine and in all respects what it purports to be;
 
(ii)           it is owned by a Borrower, such Borrower has the right to subject
it to a security interest in favor of Lender or assign it to Lender and it is
subject to a first priority perfected security interest in favor of Lender and
to no other claim, lien, security interest or encumbrance whatsoever, other than
Permitted Liens;
 
(iii)           it arises from (A) the performance of services by a Borrower in
the ordinary course of such Borrower’s business, and such services have been
fully performed and acknowledged and accepted by the Account Debtor thereunder;
or (B) the sale or lease of Goods by a Borrower in the ordinary course of such
Borrower’s business, and (x) such Goods have been completed in accordance with
the Account Debtor’s specifications (if any),and delivered to the Account
Debtor, (y) such Account Debtor has not refused to accept, returned or offered
to return, any of the Goods which are the subject of such Account, and (z) such
Borrower has possession of, or such Borrower has delivered to Lender (at
Lender’s request) shipping and delivery receipts evidencing delivery of such
Goods;
 
(iv)           it is evidenced by an invoice rendered to the Account Debtor
thereunder, is due and payable within forty-five (45) days after the date of the
invoice and does not remain unpaid ninety (90) days past the date of the invoice
date thereof; provided, however, that if more than fifty percent (50%) of the
aggregate dollar amount of Accounts owing by a particular Account Debtor are
deemed ineligible as a result of the failure of the Account Debtor to pay such
Account upon the earlier of the dates set forth above, then all Accounts owing
by that Account Debtor shall be deemed ineligible;
 
(v)           it is a valid, legally enforceable and unconditional obligation of
the Account Debtor thereunder, and it shall not be an Eligible Account (i) to
the extent of (a) any setoff, counterclaim, credit, allowance or adjustment by
such Account Debtor or (b) discounts, credits and allowances which may be taken
by or granted to Account Debtors in connection therewith in the ordinary course
of Borrowers’ business, or (ii) if such Account Debtor has made a claim denying
liability thereunder in whole or, to the extent of such claim if an Account
Debtor has made a claim denying liability thereunder in part;
 
(vi)           it does not arise out of a contract or order which fails in any
material respect to comply with the requirements of applicable law;
 
(vii)           the Account Debtor thereunder is not a director, officer,
employee or agent of any Borrower, or a Subsidiary, Parent or Affiliate (other
than Absaloka in its capacity as an Account Debtor to Westmoreland Resources);
 
(viii)           it is not an Account with respect to which the Account Debtor
is the United States of America or any state or local government, or any
department, agency or instrumentality thereof, unless the relevant Borrower
assigns its right to payment of such Account to Lender pursuant to, and in full
compliance with, the Assignment of Claims Act of 1940, as amended, or any
comparable state or local law, as applicable;
 
 
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(ix)           it is not an Account with respect to which the Account Debtor is
located in a state which requires the relevant Borrower, as a precondition to
commencing or maintaining an action in the courts of that state, either to
(A) receive a certificate of authority to do business and be in good standing in
such state; or (B) file a notice of business activities report or similar report
with such state’s taxing authority, unless (x) such Borrower has taken one of
the actions described in clauses (A) or (B); (y) the failure to take one of the
actions described in either clause (A) or (B) may be taken by such Borrower at
its election prior to commencing any such action, without prejudice to such
action; or (z) such Borrower has proven, to Lender’s satisfaction, that it is
exempt from any such requirements under any such state’s laws;
 
(x)           the Account Debtor is located within the United States of America;
 
(xi)           it is not an Account with respect to which the Account Debtor’s
obligation to pay is subject to any repurchase obligation or return right, as
with sales made on a bill-and-hold, guaranteed sale, sale on approval, sale or
return or consignment basis;
 
(xii)           it is not an Account (A) with respect to which any
representation or warranty contained in this Agreement is untrue; or (B) which
violates any of the covenants of Borrowers contained in this Agreement;
 
(xiii)           it is not an Account which, when added to a particular Account
Debtor’s other indebtedness to Borrowers, exceeds twenty percent (20%) of all
Accounts of Borrowers (provided such 20% threshold shall be increased to 50% for
Accounts from each of Dominion Virginia Power, PacifiCorp Energy and Xcel
Energy) or a credit limit determined by Lender in its sole discretion determined
in good faith for that Account Debtor (except that Accounts excluded from
Eligible Accounts solely by reason of this clause (xiii) shall be Eligible
Accounts to the extent of such credit limit), provided that Lender shall give
Borrowers written notice of any such credit limit; and
 
(xiv)           it is not an Account with respect to which the prospect of
payment or performance by the Account Debtor is impaired, as determined by
Lender in its reasonable discretion determined in good faith.
 
Eligible Inventory shall mean Inventory of Borrowers which is acceptable to
Lender in its reasonable discretion determined in good faith for lending
purposes.  Without limiting Lender’s discretion, Lender shall, in general,
consider Inventory to be Eligible Inventory if it meets, and so long as it
continues to meet, the following requirements:
 
(i)           it is owned by a Borrower, such Borrower has the right to subject
it to a security interest in favor of Lender and it is subject to a first
priority perfected security interest in favor of Lender and to no other claim,
lien, security interest or encumbrance whatsoever, other than Permitted Liens;
 
(ii)           it is located on one of the premises listed on Schedule 11.2 (or
other locations of which Lender has been advised in writing pursuant to
Section 12.2.1 hereof), such locations are within the United States and is not
in transit;
 
 
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(iii)           if held for sale or lease or furnishing, it is (except as Lender
may otherwise consent in writing) free from defects which would, in Lender’s
sole determination determined in good faith, negatively affect its market value
in any material respect;
 
(iv)           it is not stored with a bailee, consignee, warehouseman,
processor or similar party unless Lender has given its prior written approval
and Borrowers have caused any such bailee, consignee, warehouseman, processor or
similar party to issue and deliver to Lender, in form and substance acceptable
to Lender, such Uniform Commercial Code financing statements, warehouse
receipts, waivers and other documents as Lender shall require;
 
(v)           it is produced in compliance with the Fair Labor Standards Act and
is not subject to the “hot goods” provisions contained in 29 USC 215(a)(i), and
otherwise complies in all material respects with all standards imposed by any
applicable governmental entity having  authority over the disposition,
manufacture or use of that Inventory;
 
(vi)           Lender has determined in good faith, in accordance with Lender’s
customary business practices and in its reasonable discretion, that it is not
unacceptable due to age, type, category or quantity; and
 
(vii)           it is not Inventory (A) with respect to which any of the
representations and warranties contained in this Agreement are untrue; or
(B) which violates any of the covenants of Borrowers contained in this
Agreement.
 
Eligible Parts Inventory shall mean Inventory comprised of parts held for sale
in the ordinary course of business that are utilized in the mining industry and
which otherwise meet all of the requirements for Eligible Inventory.
 
Environmental Laws shall mean all federal, state, district, local and foreign
laws, rules, regulations, ordinances, and consent decrees relating to health,
hazardous substances, pollution and environmental matters, as now or at any time
hereafter in effect, applicable to Borrowers’ business or facilities owned or
operated by Borrowers, including laws relating to emissions, discharges,
releases or threatened releases of pollutants, contamination, chemicals, or
hazardous, toxic or dangerous substances, materials or wastes into the
environment (including, without limitation, ambient air, surface water, ground
water, land surface or subsurface strata) or otherwise relating to the
generation, manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials.
 
Equipment shall have the meaning ascribed to such term in the UCC.
 
ERISA shall mean the Employee Retirement Income Security Act of 1974, as
amended, modified or restated from time to time.
 
ERISA Event shall mean, as to the Borrowers and each other member of the
Controlled Group, respectively, any event or condition that causes or that is
likely to result in: (a) the Borrowers or any Controlled Group member having any
liability or obligation (whether contingent or otherwise) under Title IV of
ERISA; or (b) the imposition of a Lien under ERISA or the Internal Revenue Code
upon any property of the Borrowers or any member of the Controlled Group.
 
 
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Event of Default shall have the meaning specified in Section 15 hereof.
 
Excess Availability shall mean, as of any date of determination by Lender, the
lesser of (i) the Revolving Loan Commitment less the sum of the outstanding
Revolving Loans and Letter of Credit Obligations and (ii) the Revolving Loan
Availability less the sum of the outstanding Revolving Loans and Letter of
Credit Obligations, in each case as of the close of business on such date.
 
Excluded Deposit Accounts shall mean (a) payroll, withholding tax and other
accounts for which the funds on deposit therein pertain to Liens permitted under
clause (x) of the definition of “Permitted Liens” below (provided that no
Borrower 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 relevant Borrower
shall either (a) cause such amounts in excess of $100,000 to be transferred
promptly (but in no event later than seven Business Days) to the Lockbox Account
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 in the aggregate for a
period longer than ten Business Days.
 
Excluded Taxes shall mean taxes based upon, or measured by, Lender’s (or a
branch of Lender’s) overall net income, overall net receipts, or overall net
profits (including franchise taxes imposed in lieu of such taxes).
 
Federal Funds Rate shall mean for any day, a fluctuating interest rate equal for
each day during such period to the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve System arranged
by Federal funds brokers, as published for such day (or, if such day is not a
Business Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day on such transactions
received by Lender from three Federal funds brokers of recognized standing
selected by Lender.  Lender’s determination of such rate shall be binding and
conclusive absent manifest error.
 
Fiscal Year shall mean each twelve (12) month accounting period of Borrowers,
which ends on December 31 of each year.
 
Fixed Charges shall mean for any period, without duplication, scheduled payments
of principal during the applicable period with respect to all indebtedness of
Westmoreland Parent and its Subsidiaries, on a consolidated basis, for borrowed
money, plus scheduled payments of principal during the applicable period with
respect to all Capital Lease obligations of Westmoreland Parent and its
Subsidiaries, on a consolidated basis, plus scheduled payments of cash interest
during the applicable period with respect to all indebtedness of Westmoreland
 
 
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Parent and its Subsidiaries, on a consolidated basis, for borrowed money
including Capital Lease obligations, plus unfinanced Capital Expenditures of
Westmoreland Parent and its Subsidiaries, on a consolidated basis, during the
applicable period, plus all dividends or other distributions by Westmoreland
Parent to equityholders of Westmoreland Parent during the applicable period,
plus payments during the applicable period in respect of income or franchise
taxes of Westmoreland Parent and its Subsidiaries, on a consolidated basis.
 
Fixtures shall have the meaning ascribed to such term in the UCC.
 
FRB shall mean the Board of Governors of the Federal Reserve System or any
successor thereto.
 
GAAP shall mean generally accepted accounting principles set forth from time to
time in (i) the opinions and pronouncements of the Accounting Principles Board
and the American Institute of Certified Public Accountants and (ii) statements
and pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the U.S. accounting
profession) and the Securities and Exchange Commission, which are applicable to
the circumstances as of the date of determination, subject to the provisions of
Section 14.3 of this Agreement.
 
General Intangibles shall have the meaning ascribed to such term in the UCC.
 
Goods shall have the meaning ascribed to such term in the UCC.
 
Hazardous Materials shall mean any hazardous, toxic or dangerous substance,
materials and wastes, including, without limitation, hydrocarbons (including
naturally occurring or man-made petroleum and hydrocarbons), flammable
explosives, asbestos, urea formaldehyde insulation, radioactive materials,
polychlorinated biphenyls, pesticides, herbicides and any other kind and/or type
of pollutants or contaminants (including, without limitation, materials which
include hazardous constituents), sewage, sludge, industrial slag and solvents
that are regulated under any Environmental Law and/or any other similar
substances, materials, or wastes that are or become regulated under any
Environmental Law (including, without limitation any that are or become
classified as hazardous or toxic under any Environmental Law).
 
Hedging Agreement shall mean any agreement with respect to any swap, collar,
cap, future, forward or derivative transaction, whether exchange-traded,
over-the-counter or otherwise, including any involving, or settled by reference
to, one or more interest rates, currencies, commodities, equity or debt
instruments, any economic, financial or pricing index or basis, or any similar
transaction, including any option with respect to any of these transactions and
any combinations of these transactions.
 
Hedging Obligation shall mean, with respect to any Person, any liability of such
Person under any Hedging Agreement, including any and all cancellations, buy
backs, reversals, terminations or assignments under pay Hedging Agreement.
 
Indebtedness of any Person, shall mean, without duplication:  (a) all
indebtedness of such Person for borrowed money; (b) all obligations of such
Person evidenced by a bond, debenture, note or similar instrument; (c) all
indebtedness of others guaranteed by such Person;
 
 
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(d) that portion of obligations of such Person with respect to Capital Leases
that is properly classified as a liability on a balance sheet in conformity with
GAAP; (e) notes payable and drafts accepted of such Person representing
extensions of credit whether or not representing obligations for borrowed money;
(f) any obligation of such Person owed for all or any part of the deferred
purchase price of property or services, other than a trade account payable that
arises in the ordinary course of business; (g) “earnouts” and similar payment
obligations of such Person (other than obligations payable in such Person’s
common stock or common stock equivalents), (h) all obligations of such Person
with respect to any hedge agreement or any swap contracts; (i) all indebtedness
of such Person secured by any Lien on any property or asset owned or held by
such Person regardless of whether the indebtedness secured thereby shall have
been assumed by such Person or is non-recourse to the credit of such Person; and
(j) surety and appeal bonds, performance bonds, payment bonds and other similar
obligations.
 
Instruments shall have the meaning ascribed to such term in the UCC.
 
Interest Period shall mean, as to any LIBOR Loan, the period commencing on the
date such Loan is borrowed or continued as, or converted into, a LIBOR Loan and
ending on the date one, two or three months thereafter as selected by the
Representative pursuant to Section 2.3.2 or 2.3.3, as the case may be; provided
that:
 
(a)           if any Interest Period would otherwise end on a day that is not a
Business Day, such Interest Period shall be extended to the following Business
Day unless the result of such extension would be to carry such Interest Period
into another calendar month, in which event such Interest Period shall end on
the preceding Business Day;
 
(b)           any Interest Period that begins on a day for which there is no
numerically corresponding day in the calendar month at the end of such Interest
Period shall end on the last Business Day of the calendar month at the end of
such Interest Period; and
 
(c)           Representative may not select any Interest Period for a Revolving
Loan which would extend beyond the scheduled Maturity Date.
 
Inventory shall have the meaning ascribed to such term in the UCC.
 
Investment Property shall have the meaning ascribed to such term in the UCC.
 
Lender Party shall have the meaning set forth in Section 18.3 hereof.
 
L/C Application shall mean with respect to any request for the issuance of a
Letter of Credit, a letter of credit application in the form being used by the
L/C Issuer at the time of such request for the type of Letter of Credit
requested.
 
L/C Issuer shall mean Lender, in its capacity as the issuer of Letters of Credit
hereunder, any Affiliate of Lender that may issue Letters of Credit hereunder,
or any other financial institution that Lender may cause to issue Letters of
Credit hereunder, and each of their successors and assigns.
 
 
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Letter of Credit shall mean any letter of credit issued on behalf of any
Borrower in accordance with this Agreement.
 
Letter of Credit Obligations shall mean, as of any date of determination, the
sum of (i) the aggregate undrawn face amount of all Letters of Credit, and
(ii) the aggregate unreimbursed amount of all drawn Letters of Credit not
already converted to Loans hereunder.
 
Letter-of-Credit Right shall have the meaning ascribed to such term in the UCC.
 
Leverage Ratio shall mean the ratio of the total funded Indebtedness of the
Borrowers to Consolidated EBITDA determined for the prior four fiscal quarters.
 
LIBOR Loans shall mean the Loans bearing interest with reference to the LIBOR
Rate.
 
LIBOR Office shall mean the office or offices of Lender which shall be making or
maintaining the LIBOR Loans of Lender hereunder.  A LIBOR Office of Lender may
be, at the option of Lender, either a domestic or foreign office.
 
LIBOR Rate shall mean a rate of interest equal to (i) the per annum rate of
interest at which United States dollar deposits for a period equal to the
relevant Interest Period are offered in the London Interbank Eurodollar market
at 11:00 A.M. (London time) two (2) Business Days prior to the commencement of
such Interest Period (or three (3) Business Days prior to the commencement of
such Interest Period if banks in London, England were not open and dealing in
offshore United States dollars on such second preceding Business Day), as
displayed in the Bloomberg Financial Markets system (or other authoritative
source selected by Lender in its sole discretion), divided by (ii) a number
determined by subtracting from 1.00 the then stated maximum reserve percentage
for determining reserves to be maintained by member banks of the Federal Reserve
System for Eurocurrency funding or liabilities as defined in Regulation D (or
any successor category of liabilities under Regulation D), or as LIBOR is
otherwise determined by Lender in its sole and absolute discretion.  Lender’s
determination of the LIBOR Rate shall be conclusive, absent manifest error and
shall remain fixed during such Interest Period.
 
Loan Documents shall mean all agreements, instruments and documents, including,
without limitation, guaranties, mortgages, trust deeds, pledges, powers of
attorney, consents, assignments, contracts, notices, security agreements,
leases, financing statements, Hedging Agreements, Bank Product Agreements and
all other writings heretofore, now or from time to time hereafter executed by or
on behalf of any Borrower or any other Person and delivered to Lender or to any
parent, affiliate or subsidiary of Lender in connection with the Obligations or
the transactions contemplated hereby, as each of the same may be amended,
modified or supplemented from time to time.
 
Loans shall mean all loans and advances made by Lender to or on behalf of any
Borrower hereunder.
 
Lockbox and Lockbox Account shall have the meanings specified Section 8.1
hereof.
 
 
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Master Letter of Credit Agreement shall mean, at any time, with respect to the
issuance of Letters of Credit, a master letter of credit agreement or
reimbursement agreement in the form being used by Lender at such time.
 
Material Adverse Effect shall mean, in each case as determined by Lender in its
sole discretion, determined in good faith (i) a material adverse change in, or a
material adverse effect on the business, property, assets, financial condition
or results of operations of the Borrowers, taken as a whole, (ii) a material
impairment of the ability of any Borrower to perform any of its obligations
(other than its payment obligations) under this Agreement and the other Loan
Documents, (iii) a material impairment of the ability of the Borrowers, taken as
a whole, to make any payment required under this Agreement and the other Loan
Documents, (iv) a material adverse effect upon any Collateral or its value, or
(iv) a material impairment of the enforceability or priority of Lender’s liens
upon the Collateral with a value in excess of $500,000 in the aggregate or the
legality, validity, binding effect or enforceability of this Agreement and the
other Loan Documents.
 
Maturity Date shall mean June 30, 2017.
 
Maximum Loan Amount shall mean Twenty Million and No/100 Dollars ($20,000,000).
 
Notice of Borrowing shall have the meaning set forth in Section 2.3.2(a).
 
Notice of Conversion/Continuation shall have the meaning set forth in
Section 2.3.3(b) hereof.
 
Obligations shall mean any and all obligations, liabilities and indebtedness of
each Borrower to Lender or to any Affiliate of Lender of any and every kind and
nature pursuant to any Loan Document, howsoever created, arising or evidenced
and howsoever owned, held or acquired, whether now or hereafter existing,
whether now due or to become due, whether primary, secondary, direct, indirect,
absolute, contingent or otherwise (including, without limitation, obligations of
performance and Hedging Obligations), whether several, joint or joint and
several.
 
OFAC shall have the meaning set forth in Section 12.11 hereof.
 
Original Maturity Date shall mean the Maturity Date in effect as of the date
hereof.
 
Paid in Full means (a) the payment in full (other than contingent
indemnification obligations which are not yet due and payable) in cash and
performance of all Obligations, (b) the termination of all Revolving Loan
Commitments and (c) either (i) the cancellation and return to Lender of all
Letters of Credit or (ii) the cash collateralization of all Letters of Credit in
accordance with this Agreement.
 
Parent shall mean any Person now or at any time or times hereafter owning or
controlling (alone or with any other Person) at least a majority of the issued
and outstanding equity of any Borrower and, if a Borrower is a partnership, the
general partner of such Borrower.
 
 
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PBGC shall have the meaning specified in Section 12.2.5 hereof.
 
Permitted Acquisition means any Acquisition by any Borrower or any domestic
wholly-owned Subsidiary of Westmoreland Parent pursuant to which:
 
(a)           the business or division acquired are for use, or the Person
acquired is engaged, in the businesses engaged in by the Borrowers on the
Closing Date;
 
(b)           immediately before and after giving effect to such Acquisition, no
Default or Event of Default shall exist;
 
(c)           immediately after giving effect to such Acquisition, each Borrower
is in pro forma compliance with all the financial ratios and restrictions set
forth in Section 14 herein;
 
(d)           in the case of the Acquisition of any Person, the board of
directors or similar governing body of such Person has approved such Acquisition
to the extent required by such Person’s governing documents;
 
(e)           reasonably prior to such Acquisition, Lender shall have received
complete substantially final forms of each material document, instrument and
agreement to be executed in connection with such Acquisition together with all
lien search reports and lien release letters and other documents as Lender may
require to evidence the termination of Liens on the assets or business to be
acquired;
 
(f)           not less than ten (10) Business Days prior to such Acquisition,
Lender shall have received an acquisition summary with respect to the Person
and/or business or division to be acquired, such summary to include a reasonably
detailed description thereof (including financial information) and operating
results (including financial statements for the most recent twelve (12) month
period for which they are available and as otherwise available), the terms and
conditions, including economic terms, of the proposed Acquisition;
 
(g)           the  Borrowers shall have Revolving Loan Availability plus cash on
deposit with Lender subject to a first priority security interest in favor of
Lender of at least $10,000,000 after giving effect to such Acquisition;
 
(h)           the Borrowers have a pro-forma Leverage Ratio of no more than
4.0:1.0 as of the last day of the fiscal quarter most recently ended after
giving effect to such Acquisition;
 
(i)           opinions of counsel for the Borrowers and (if delivered to the
Borrower) the selling party in favor of Lender have been delivered;
 
(j)           consents have been obtained in favor of Lender to the collateral
assignment of rights and indemnities under the related acquisition documents;
 
 
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(k) the provisions of Section 12.12 have been satisfied at the time of the
consummation of such Acquisition (unless otherwise agreed to by Lender in its
sole discretion);
 
(l) simultaneously with the closing of such Acquisition, the target company (if
such Acquisition is structured as a purchase of equity) or the Borrower (if such
Acquisition is structured as a purchase of assets or a merger and a Borrower is
the surviving entity) executes and delivers to Lender (i) such documents
necessary to grant to Lender a first priority Lien on substantially all of the
assets of such target company or surviving company in accordance with
Section 5.1, and of their respective Subsidiaries, each in form and substance
satisfactory to Lender and (ii) an unlimited Guaranty of the Obligations, or at
the option of Lender in Lender’s absolute discretion, a joinder agreement
satisfactory to Lender in which such target company or surviving company, and
their respective Subsidiaries becomes a borrower under this Agreement and
assumes primary, joint and several liability for the Obligations; and
 
(m)           if the Acquisition is structured as a merger, a Borrower is the
surviving entity.
 
Permitted Investments shall mean (i) Cash Equivalents; (ii) corporate-issued
securities, including medium term notes and corporate bonds; (iii) receivables
owing to any Borrower 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
Borrower deems reasonable under the circumstances; (iv) ordinary course trade
credit and advances to customers; (v) advances made to employees, officers and
directors for travel and other expenses arising in the ordinary course of
business in an amount not to exceed $500,000 in the aggregate at any time;
(vi) 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; (vii) prepaid expenses, surety,
reclamation and performance bonds and lease, tax, utilities, workers’
compensation, performance and similar deposits made in the ordinary course of
business; (viii) stock, obligations or securities received in settlement of
debts created in the ordinary course of business and owing to any Borrower or in
satisfaction of judgments and (ix) Permitted Acquisitions.
 
Permitted Liens shall mean (i) statutory liens of landlords, carriers,
warehousemen, processors, mechanics, materialmen, repairmen or suppliers and
other liens imposed by law incurred in the ordinary course of business and
securing amounts not yet due or declared to be due by the claimant thereunder or
amounts which are being contested in good faith and by appropriate proceedings
and for which Borrowers have maintained adequate reserves; (ii) liens or
security interests in favor of Lender; (iii) liens for taxes, assessments and
governmental charges not yet due and payable or which are being contested in
good faith and by appropriate proceedings and with respect to which the relevant
Borrower is in compliance with clauses (i) and (iii) of Section 12.8 hereof;
(iv) zoning restrictions and easements, licenses, covenants and other
restrictions affecting the use of real property that do not individually or in
the aggregate have a material adverse effect on any Borrower’s ability to use
such real property for its intended purpose in connection with such Borrower’s
business; (v) liens in connection with
 
 
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purchase money indebtedness and Capital Leases otherwise permitted pursuant to
this Agreement, provided, that such liens attach only to the assets the purchase
of which was financed by such purchase money indebtedness or which are the
subject of such Capital Leases; (vi) liens set forth on Schedule 1; (vii) liens
specifically permitted by Lender in writing; (viii) involuntary liens securing
amounts less than $500,000 and which are released or for which a bond acceptable
to Lender in its sole discretion, determined in good faith, has been posted
within ten (10) days of its creation, (x) 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), (xi) 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; (xii) 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 and
(xiii) subordinate liens in favor of the Second Lien Note Trustee and Second
Lien Notes Holders securing the Second Lien Debt so long as such liens are at
all times subject to the Second Lien Notes Intercreditor Agreement.
 
Person shall mean any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation, limited
liability company, institution, entity, party or foreign or United States
government (whether federal, state, county, city, municipal or otherwise),
including, without limitation, any instrumentality, division, agency, body or
department thereof.
 
Plan shall have the meaning specified in Section 12.2.5 hereof.
 
Prime Rate shall mean, for any day, the rate of interest in effect for such day
as publicly announced from time to time by Lender as its prime rate (whether or
not such rate is actually charged by Lender), which is not intended to be
Lender’s lowest or most favorable rate of interest at any one time.  Any change
in the Prime Rate announced by Lender shall take effect at the opening of
business on the day specified in the public announcement of such change;
provided that Lender shall not be obligated to give notice of any change in the
Prime Rate.
 
Proceeds shall have the meaning ascribed to such term in the UCC.
 
Remote Scanning shall have the meaning set forth in Section 8.1 hereof.
 
Representative shall have the meaning set forth in Section 18.17 hereof.
 
Revolving Loan Availability shall mean the sum of the following sublimits:
(i) eighty-five percent (85%) of the face amount (less maximum discounts,
credits and allowances which may be taken by or granted to Account Debtors in
connection therewith in the ordinary course of Borrowers’ business) of
Borrowers’ Eligible Accounts, plus (ii) the lower of (x) twenty-five
percent (25%) of the lower of cost or market value of Borrowers’ Eligible
Inventory comprised
 
 
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solely of Eligible Parts Inventory and (y) Two Million Dollars ($2,000,000),
plus (iii) the lower of (x) fifty percent (50%) of the lower of cost or market
value of Borrowers’ Eligible Inventory comprised solely of raw materials and
finished goods Inventory and (y) Seven Million Dollars ($7,000,000); minus
(iii) such other reserves as Lender elects, in its sole discretion, determined
in good faith, to establish from time to time, including, without limitation,
reserves with respect to Bank Products Obligations and Hedging
Obligations.  Notwithstanding the foregoing, the aggregate amount of Revolving
Loan Availability comprised of Eligible Inventory and Eligible Parts Inventory
set forth in subsections (ii) and (iii) above and raw materials and finished
goods Inventory shall not exceed Seven Million Dollars ($7,000,000) at any time.
 
Revolving Loan Commitment shall mean an amount equal to Twenty Million Dollars
($20,000,000), except as such amount may, during the existence of an Event of
Default, be decreased by Lender in its sole discretion.
 
Revolving Loans shall have the meaning specified in Section 2.1 hereof.
 
Second Lien Notes shall mean the notes issued pursuant to the terms of the
Second Lien Notes Indenture.
 
Second Lien Notes Documents shall mean, collectively, the Second Lien Notes
Indenture, the Second Lien Notes and all other agreements, documents or
instruments related thereto.
 
Second Lien Notes Facility shall mean the senior notes facility obtained by the
Borrowers pursuant to the terms of the Second Lien Notes Indenture, in an
aggregate principal amount not to exceed $275,000,000.
 
Second Lien Notes Guarantees shall mean the Guarantee by each of Westmoreland
Energy, Westmoreland NC, WEI, Westmoreland Roanoke, Westmoreland Resources, WRI,
Coal Sales, Westmoreland Power, WCC, and Kemmerer of Westmoreland Parent’s and
Westmoreland Partners’ obligations under the Second Lien Notes Indenture and the
Second Lien Notes executed pursuant to the provisions of the Second Lien Notes
Indenture.
 
Second Lien Notes Holders shall mean the holders of the Second Lien Notes.
 
Second Lien Notes Indenture shall mean the Indenture dated as of February 4,
2011, among Westmoreland Parent, Westmoreland Partners and the Second Lien Notes
Trustee, as supplemented and amended by the First Supplemental Indenture dated
as of January 31, 2012 among Westmoreland Parent, Westmoreland Partners and the
Second Lien Notes Trustee.
 
Second Lien Notes Intercreditor Agreement shall mean that certain Intercreditor
Agreement dated as of the date hereof among Second Lien Notes Trustee, Lender
and the Borrowers, as amended, restated, supplemented or otherwise modified from
time to time.
 
Second Lien Notes Obligations means all obligations and liabilities of the
Borrowers under the Second Lien Notes Facility.
 
 
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Second Lien Notes Trustee means Wells Fargo Bank, National Association in its
capacity as trustee for the Second Lien Notes Holders under the Second Lien
Notes Indenture, and its permitted successors and assigns in such capacity.
 
Securities Account shall have the meaning set forth in the UCC.
 
Subordinated Debt shall mean (i) the Second Lien Notes and (ii) all other
indebtedness for borrowed money and any other claims or obligations arising
under, evidenced by or related to indebtedness which is subject to a
subordination agreement in form and substance acceptable to Lender.
 
Subsidiary shall mean any corporation of which more than fifty percent (50%) of
the outstanding capital stock having ordinary voting power to elect a majority
of the board of directors of such corporation (irrespective of whether at the
time stock of any other class of such corporation shall have or might have
voting power by reason of the happening of any contingency) is at the time,
directly or indirectly, owned by a Borrower, or any partnership, joint venture
or limited liability company of which more than fifty percent (50%) of the
outstanding equity interests are at the time, directly or indirectly, owned by a
Borrower or any partnership of which a Borrower is a general partner.
 
Supporting Obligations shall have the meaning set forth in the UCC.
 
Tangible Chattel Paper shall have the meaning ascribed to such term in the UCC.
 
Taxes shall mean any and all present and future taxes, duties, levies, imposts,
deductions, assessments, charges or withholdings and any and all liabilities
(including interest and penalties and other additions to taxes) with respect to
the foregoing, but excluding the Excluded Taxes.
 
UCC shall mean the Uniform Commercial Code as in effect in the State of
Illinois.
 
USA Patriot Act shall have the meaning set forth in Section 18.2 hereof.
 
Westmoreland Power shall mean Westmoreland Power, Inc., a Delaware corporation.
 
Westmoreland Risk Management shall mean Westmoreland Risk Management, Ltd., a
Montana corporation and wholly owned Subsidiary of Westmoreland Parent.
 
SECTION 2
 
LOANS
 
2.1           Revolving Loans.  Subject to the terms and conditions of this
Agreement and the other Loan Documents, prior to the Maturity Date, Lender
shall, absent the occurrence and continuance of an Event of Default, make
revolving loans and advances (the “Revolving Loans”) in an aggregate amount up
to the lesser of Revolving Loan Availability at such time and the Revolving Loan
Commitment.
 
 
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The aggregate unpaid principal balance of the Revolving Loans shall not at any
time exceed the lesser of (i) Revolving Loan Availability minus the Letter of
Credit Obligations and (ii) the Revolving Loan Commitment minus the Letter of
Credit Obligations.  If at any time the principal amount of the outstanding
Revolving Loans exceeds either the Revolving Loan Availability or the Revolving
Loan Commitment, in each case minus the Letter of Credit Obligations, or any
portion of the Revolving Loans and Letter of Credit Obligations exceeds any
applicable sublimit within Revolving Loan Availability, Borrowers shall
immediately, and without the necessity of demand by Lender, pay to Lender such
amount as may be necessary to eliminate such excess and Lender shall apply such
payment to the Revolving Loans to eliminate such excess.
 
2.2           Reserved.
 
2.3           Loan Procedures.
 
2.3.1           Various Types of Loans.  Each Revolving Loan shall be either
Base Rate Loans or LIBOR Loans (each a “type” of Loan), as Borrowers shall
specify in the related notice of borrowing or conversion pursuant to
Section 2.3.2 or 2.3.3.  LIBOR Loans having the same Interest Period which
expire on the same day are sometimes called a “Group” or collectively
“Groups.”  Base Rate Loans and LIBOR Loans may be outstanding at the same time,
provided that not more than four different Groups of LIBOR Loans shall be
outstanding at any one time.
 
2.3.2           Borrowing Procedures.
 
(a)           The Representative shall give written notice (each such written
notice, a “Notice of Borrowing”) substantially in the form of Exhibit B or
telephonic notice (followed immediately by a Notice of Borrowing) to Lender of
each proposed Base Rate or LIBOR borrowing not later than (a) in the case of a
Base Rate borrowing, 11:00 A.M., Chicago time, on the proposed date of such
borrowing, and (b) in the case of a LIBOR borrowing, 11:00 A.M., Chicago time,
at least three (3) Business Days prior to the proposed date of such
borrowing.  Each such notice shall be effective upon receipt by Lender, shall be
irrevocable, and shall specify the date, amount and type of borrowing and, in
the case of a LIBOR borrowing, the initial Interest Period therefor.  Each
borrowing shall be on a Business Day.  Each LIBOR borrowing shall be in an
aggregate amount of at least $1,000,000 and an integral multiple of at least
$1,000,000.
 
(b)           Borrowers hereby authorize Lender in its sole discretion, to
advance Revolving Loans as Base Rate Loans to pay any Obligations (whether
principal, interest, fees or other charges when due), and any such Obligations
becoming due shall be deemed a request for a Base Rate borrowing of a Revolving
Loan on the due date, in the amount of such Obligations. The proceeds of such
Revolving Loans shall be disbursed as direct payment of the relevant Obligation.
In addition, Lender may, at its option, charge such Obligations against any
operating, investment or other account of any Borrower maintained with Lender or
any of its Affiliates.
 
2.3.3                  Conversion and Continuation Procedures.  (1) Subject to
Section 2.3.1, the Representative may, upon irrevocable written notice to Lender
in accordance with clause (b) below:
 
 
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(i)            elect, as of any Business Day, to convert any Loans (or any part
thereof in an aggregate amount not less than $1,000,000 and a higher integral
multiple of $1,000,000) into Loans of the other type; or
 
(ii)           elect, as of the last day of the applicable Interest Period, to
continue any LIBOR Loans having Interest Periods expiring on such day (or any
part thereof in an aggregate amount not less than $1,000,000 or a higher
integral multiple of $1,000,000) for a new Interest Period;
 
provided that after giving effect to any prepayment, conversion or continuation,
the aggregate principal amount of each Group of LIBOR Loans shall be at least
$1,000,000 and an integral multiple of $1,000,000.
 
(b)           The Representative shall give written notice (each such written
notice, a “Notice of Conversion/Continuation”) substantially in the form of
Exhibit C or telephonic notice (followed immediately by a Notice of
Conversion/Continuation) to Lender of each proposed conversion or continuation
not later than (i) in the case of conversion into Base Rate Loans, 11:00 A.M.,
Chicago time, on the proposed date of such conversion, and (ii) in the case of
conversion into or continuation of LIBOR Loans, 11:00 A.M., Chicago time, at
least three (3) Business Days prior to the proposed date of such conversion or
continuation, specifying in each case:
 
(i)           the proposed date of conversion or continuation;
 
(ii)           the aggregate amount of Loans to be converted or continued;
 
(iii)           the type of Loans resulting from the proposed conversion or
continuation; and
 
(iv)           in the case of conversion into, or continuation of, LIBOR Loans,
the duration of the requested Interest Period therefor.
 
(c)           If upon the expiration of any Interest Period applicable to LIBOR
Loans, Representative has failed to select timely a new Interest Period to be
applicable to such LIBOR Loans, Borrowers shall be deemed to have elected to
convert such LIBOR Loans into Base Rate Loans effective on the last day of such
Interest Period.
 
Any conversion of a LIBOR Loan on a day other than the last day of an Interest
Period therefor shall be subject to Section 4.2.4.
 
2.4           Repayments.  The Revolving Loans and all other Obligations shall
be repaid on the Maturity Date.
 
2.5           Notes.  The Loans shall, in Lender’s sole discretion, be evidenced
by one or more promissory notes in form and substance satisfactory to
Lender.  However, if such Loans are not so evidenced, such Loans may be
evidenced solely by entries upon the books and records maintained by Lender.
 

 
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2.6           Recordkeeping.  Lender shall record in its records the date and
amount of each Loan made by Lender, each repayment or conversion thereof and, in
the case of each LIBOR Loan, the dates on which each Interest Period for such
Loan shall begin and end.  The aggregate unpaid principal amount so recorded
shall be rebuttably presumptive evidence of the principal amount of the Loans
owing and unpaid.  The failure to so record any such amount or any error in so
recording any such amount shall not, however, limit or otherwise affect the
Obligations of Borrowers hereunder or under any Note to repay the principal
amount of the Loans hereunder, together with all interest accruing thereon.
 
SECTION 3
 
LETTERS OF CREDIT
 
3.1           General Terms.  Subject to the terms and conditions of this
Agreement and the other Loan Documents prior to the Maturity Date for the
Revolving Loans, Lender shall, absent the occurrence and continuance of an Event
of Default, from time to time cause to be issued and co-sign for or otherwise
guarantee, upon Borrowers’ request, commercial and/or standby Letters of Credit;
provided, that the aggregate undrawn face amount of all such Letters of Credit
shall at no time exceed Two Million and No/100 Dollars ($2,000,000).  Payments
made by the L/C Issuer to any Person on account of any Letter of Credit shall be
immediately payable by Borrowers without notice, presentment or demand and
Borrowers agree that each payment made by the L/C Issuer in respect of a Letter
of Credit shall constitute a request by Borrowers for a Loan to reimburse L/C
Issuer.  In the event such Loan is not advanced by Lender for any reason, such
reimbursement obligations (whether owing to the issuer of the Letter of Credit
or Lender if Lender is not the issuer) shall become part of the Obligations
hereunder and shall bear interest at the rate then applicable to Revolving Loans
until repaid.  Borrowers shall, with respect to each Letter of Credit, remit to
Lender a Letter of Credit fee equal to three percent (3.0%) per annum on the
undrawn face amount of each Letter of Credit outstanding, which fee shall be
payable monthly in advance at the time of the issuance of such Letter of
Credit.  Said fee shall be calculated on the basis of a 360 day year.  Borrowers
shall also pay on demand the normal and customary administrative charges of L/C
Issuer for the issuance, amendment, negotiation, renewal or extension of any
Letter of Credit.  In the event of any inconsistency between the terms of the
Master Letter of Credit Agreement, any L/C Application and the terms of this
Agreement, the terms of this Agreement shall control.
 
3.2           Letter of Credit Procedures.
 
3.2.1           L/C Applications.  Borrowers shall execute and deliver to the
L/C Issuer the Master Letter of Credit Agreement from time to time in
effect.  Borrowers shall give notice to Lender and the L/C Issuer of the
proposed issuance of each Letter of Credit on a Business Day which is at least
three Business Days (or such lesser number of days as the L/C Issuer Lender
shall agree in any particular instance in their sole discretion) prior to the
proposed date of issuance of such Letter of Credit.  Each such notice shall be
accompanied by an L/C Application, duly executed by Borrowers and in all
respects satisfactory to the L/C Issuer, together with such other documentation
as the L/C Issuer may request in support thereof, it being understood that each
L/C Application shall specify, among other things, the date on which the
proposed Letter of Credit is to be issued, the expiration date of such Letter of
Credit (which shall not be later than
 
 
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the scheduled Termination Date (unless such Letter of Credit is Cash
Collateralized)) and whether such Letter of Credit is to be transferable in
whole or in part.  Any Letter of Credit outstanding after the scheduled Maturity
Date which is Cash Collateralized for the benefit of the L/C Issuer shall be the
sole responsibility of the L/C Issuer.
 
3.2.2           Reimbursement Obligations Unconditional.  Borrowers’
reimbursement obligations hereunder shall be irrevocable and unconditional under
all circumstances, including (a) any lack of validity or enforceability of any
Letter of Credit, this Agreement or any other Loan Document, (b) the existence
of any claim, set-off, defense or other right which any Borrower may have at any
time against a beneficiary named in a Letter of Credit, any transferee of any
Letter of Credit (or any Person for whom any such transferee may be acting), the
L/C Issuer or any other Person, whether in connection with any Letter of Credit,
this Agreement, any other Loan Document, the transactions contemplated herein or
any unrelated transactions (including any underlying transaction between any
Borrower and the beneficiary named in any Letter of Credit), (c) the validity,
sufficiency or genuineness of any document which the L/C Issuer has determined
complies on its face with the terms of the applicable Letter of Credit, even if
such document should later prove to have been forged, fraudulent, invalid or
insufficient in any respect or any statement therein shall have been untrue or
inaccurate in any respect, or (d) the surrender or impairment of any security
for the performance or observance of any of the terms hereof.  Without limiting
the foregoing, no action or omission whatsoever by Lender under or in connection
with any Letter of Credit or any related matters shall result in any liability
of Lender to Borrowers, or relieve Borrowers of any of their obligations
hereunder to any such Person.
 
3.3           Expiration Dates of Letters of Credit.  The expiration date of
each Letter of Credit shall be no later than the earlier of (i) one (1) year
from the date of issuance and (ii) the thirtieth (30th) day prior to the
Maturity Date for Revolving Loans, unless such Letter of Credit is Cash
Collateralized in accordance with the terms below.  Notwithstanding the
foregoing, a Letter of Credit may provide for automatic extensions of its
expiration date for one or more one (1) year periods, so long as the L/C Issuer
has the right to terminate the Letter of Credit at the end of each one (1) year
period and no extension period extends past the tenth (10th) day prior to the
Maturity Date for Revolving Loans (unless such Letter of Credit is Cash
Collateralized).
 
3.4           Cash Collateralization. If any Event of Default shall occur and be
continuing and Lender provides notice to Borrowers of the requirement that
Borrowers Cash Collateralize all outstanding Letters of Credit, or in the event
any Letter of Credit remains outstanding beyond the Maturity Date, the Borrowers
shall deposit in one or more accounts with Lender, for the benefit of the L/C
Issuer, in the name of the Lender an amount in cash equal to 105% of the face
amount of all outstanding Letters of Credit as of such date plus any accrued and
unpaid interest thereon; provided that the obligation to deposit such cash
collateral shall become effective immediately, and such deposit shall become
immediately due and payable, without demand or other notice of any kind, upon
the occurrence of any Event of Default with respect to any Borrower under
Sections 15.6 or 15.7 herein.  Such deposit shall be held by the Lender as
collateral for the payment and performance of the outstanding Letters of Credit
and all fees referred to in Section 3.1 (the “LC Exposure”).  Lender shall have
exclusive dominion and control, including the exclusive right of withdrawal,
over such account(s), and Borrowers hereby
 
 
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grant Lender a security interest in such account(s) to secure the LC
Exposure.  Other than any interest earned on the investment of such deposits,
which investments shall be made at the option and sole discretion of Lender and
at the Borrowers’ risk and expense, such deposits shall not bear
interest.  Interest or profits, if any, on such investments shall accumulate in
such account(s).  Moneys in such account(s) shall be applied by Lender to
reimburse the applicable L/C Issuer for draws under any Letter of Credit for
which it has not been reimbursed and, to the extent not so applied, shall be
held for the satisfaction of the reimbursement obligations of the Borrower for
the LC Exposure.  If the Borrowers are required to provide an amount of cash
collateral hereunder as a result of the occurrence of an Event of Default, the
Lender shall return such amount (to the extent not applied as aforesaid) to the
Borrowers after all Events of Default have been cured or waived and the Loans
de-accelerated.  If the Borrowers are required to provide cash collateral as a
result of any Letter of Credit being outstanding beyond the Maturity Date,
Lender shall return such cash collateral upon the expiration of such Letter of
Credit to the extent no claims have been made and are outstanding against such
Letter of Credit.  Upon the Payment in Full of all of the Obligations, all cash
collateral shall be returned to the Borrowers or such other party as directed by
any court of law having jurisdiction over such cash collateral.
 
SECTION 4
 
INTEREST, FEES AND CHARGES
 
4.1           Interest Rate.  Subject to the terms and conditions set forth
below, the Loans shall bear interest at the per annum rate of interest set forth
in subsection (a), (b), (c) or (d) below:
 
(a)           Base Rate Revolving Loans.  Revolving Loans bearing interest at
the Base Rate shall bear interest at the Base Rate in effect from time to time,
payable on the first Business Day of each month in arrears for interest through
the last day of the prior month.  Said rate of interest shall increase or
decrease by an amount equal to each increase or decrease in the Base Rate
effective on the effective date of each such change in the Base Rate.
 
(b)           LIBOR Rate Revolving Loans.  Revolving Loans bearing interest at
the LIBOR Rate shall bear interest at two and one-quarter of one percent (2.25%)
per annum in excess of the LIBOR Rate for the applicable Interest Period, such
rate to remain fixed for such Interest Period.  Interest shall be payable on the
first Business Day of each month in arrears for interest through the last day of
the prior month.
 
(c)           Default Rate.  Upon the occurrence of an Event of Default and
during the continuance thereof, the Loans shall bear interest at the rate of two
percent (2.0%) per annum in excess of the interest rate otherwise payable
thereon, which interest shall be payable on demand.  All interest shall be
calculated on the basis of a 360 day year.
 
(d)           LIBOR Rate Determination.  The applicable LIBOR Rate for each
Interest Period shall be determined by Lender, and notice thereof shall be given
by Lender promptly to the Representative.  Each determination of the applicable
LIBOR Rate by Lender shall be conclusive and binding upon the parties hereto, in
the absence of demonstrable error.  Lender
 
 
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shall, upon written request of the Representative, deliver to the Representative
a statement showing the computations used by Lender in determining any
applicable LIBOR Rate hereunder.
 
4.2           Increased Costs; Special Provisions For LIBOR Loans.
 
4.2.1           Increased Costs.  (2) If, after the date hereof, the adoption
of, or any change in, any applicable law, rule or regulation, or any change in
the interpretation or administration of any applicable law, rule or regulation
by any governmental authority, central bank or comparable agency charged with
the interpretation or administration thereof, or compliance by Lender with any
request or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency arising from such change or
adoption:  (i) shall impose, modify or deem applicable any reserve (including
any reserve imposed by the FRB, but excluding any reserve included in the
determination of the LIBOR Rate pursuant to Section 4), special deposit or
similar requirement against assets of, deposits with or for the account of, or
credit extended by Lender; or (ii) shall impose on Lender any other condition
affecting its LIBOR Loans, its Note or its obligation to make LIBOR Loans; and
the result of anything described in clauses (i) and (ii) above is to increase
the cost to (or to impose a cost on) Lender (or any LIBOR Office of Lender) of
making or maintaining any LIBOR Loan from the costs Lender expected to incur but
for such change or adoption, or to reduce the amount of any sum received or
receivable by Lender (or its LIBOR Office) under this Agreement or under its
Note with respect thereto below the amount that Lender expected to receive but
for such change or adoption, then within five (5) Business Days after receipt of
demand thereof from Lender, (which demand shall be accompanied by a statement
setting forth the basis for such demand and a calculation of the amount thereof
in reasonable detail), Borrowers shall pay directly to Lender such additional
amount as will compensate Lender for such increased cost or such reduction.
 
(b)           If Lender shall reasonably determine that any change after the
date hereof in, or the adoption after the date hereof of, any applicable law,
rule or regulation regarding capital adequacy, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or the compliance by Lender or any Person controlling Lender with any
request or directive regarding capital adequacy (whether or not having the force
of law) of any such authority, central bank or comparable agency arising from
such change or adoption, has or would have the effect of reducing the rate of
return on Lender’s or such controlling Person’s capital as a consequence of
Lender’s obligations hereunder or under any Letter of Credit to a level below
that which Lender or such controlling Person could have achieved but for such
change, adoption, phase-in or compliance (taking into consideration Lender’s or
such controlling Person’s policies with respect to capital adequacy) by an
amount deemed by Lender or such controlling Person to be material, then from
time to time, within five (5) Business Days after receipt of demand thereof from
Lender, (which demand shall be accompanied by a statement setting forth the
basis for such demand and a calculation of the amount thereof in reasonable
detail), Borrowers shall pay to Lender such additional amount as will compensate
Lender or such controlling Person for such reduction.
 
 
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4.2.2           Basis for Determining Interest Rate Inadequate or Unfair.  If:
 
(a)           Lender reasonably determines (which determination shall be binding
and conclusive on Borrowers) that by reason of circumstances affecting the
interbank LIBOR market adequate and reasonable means do not exist for
ascertaining the applicable LIBOR Rate; or
 
(b)           the LIBOR Rate as determined by Lender will not adequately and
fairly reflect the cost to Lender of maintaining or funding LIBOR Loans for such
Interest Period or that the making or funding of LIBOR Loans has become
impracticable as a result of an event occurring after the date of this Agreement
which in the opinion of Lender materially affects such Loans;
 
then Lender shall promptly notify the Representative and, so long as such
circumstances shall continue, (i) Lender shall not be under any obligation to
make or convert any Base Rate Loans into LIBOR Loans and (ii) on the last day of
the current Interest Period for each LIBOR Loan, such Loan shall, unless then
repaid in full, automatically convert to a Base Rate Loan.
 
4.2.3           Changes in Law Rendering LIBOR Loans Unlawful.  If, after the
date hereof, any change in, or the adoption of any new, law or regulation, or
any change in the interpretation of any applicable law or regulation by any
governmental or other regulatory body charged with the administration thereof,
should make it (or in the good faith judgment of Lender cause a substantial
question as to whether it is) unlawful for Lender to make, maintain or fund
LIBOR Loans, then Lender shall promptly notify each of the other parties hereto
and, so long as such circumstances shall continue, (a) Lender shall have no
obligation to make or convert any Base Rate Loan into a LIBOR Loan (but shall
make Base Rate Loans concurrently with the making of or conversion of Base Rate
Loans into LIBOR Loans by Lender which are not so affected, in each case in an
amount equal to the amount of LIBOR Loans which would be made or converted into
by Lender at such time in the absence of such circumstances) and (b) on the last
day of the current Interest Period for each LIBOR Loan of Lender (or, in any
event,  on such earlier date as may be required by the relevant law, regulation
or interpretation), such LIBOR Loan shall, unless then repaid in full,
automatically convert to a Base Rate Loan.  Each Base Rate Loan made by Lender
which, but for the circumstances described in the foregoing sentence, would be a
LIBOR Loan (an “Affected Loan”) shall remain outstanding until the earlier of
(i) the date on which such Base Rate Loan is converted (when and if such
conversion is lawful) or (ii) the Maturity Date.
 
4.2.4           Funding Losses.  Within five (5) Business Days after receipt of
demand thereof from Lender, (which demand shall be accompanied by a statement
setting forth the basis for the amount being claimed and a calculation of such
amount in reasonable detail), Borrowers will indemnify Lender against any net
loss or expense which Lender may sustain or incur (including any net loss or
expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by Lender to fund or maintain any LIBOR Loan), as
reasonably determined by Lender, as a result of (a) any payment, prepayment or
conversion of any LIBOR Loan of Lender on a date other than the last day of an
Interest Period for such Loan (including any conversion pursuant to
Section 2.3.3) or (b) any failure of Borrowers to borrow, prepay, convert or
continue any Loan on a date specified therefor in a notice of borrowing,
prepayment,
 
 
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conversion or continuation pursuant to this Agreement.  For this purpose, all
notices to Lender pursuant to this Agreement shall be deemed to be irrevocable.
 
4.2.5           Right of Lender to Fund through Other Offices.  Lender may, if
it so elects, fulfill its commitment as to any LIBOR Loan by causing a foreign
branch or Affiliate of Lender to make such Loan; provided that in such event for
the purposes of this Agreement such Loan shall be deemed to have been made by
Lender and the obligation of Borrowers to repay such Loan shall nevertheless be
to Lender and shall be deemed held by it, to the extent of such Loan, for the
account of such branch or Affiliate.
 
4.2.6           Discretion of Lender as to Manner of Funding.  Notwithstanding
any provision of this Agreement to the contrary, Lender shall be entitled to
fund and maintain its funding of all or any part of its Loans in any manner it
sees fit, it being understood, however, that for the purposes of this Agreement
all determinations hereunder shall be made as if Lender had actually funded and
maintained each LIBOR Loan during each Interest Period for such Loan through the
purchase of deposits having a maturity corresponding to such Interest Period and
bearing an interest rate equal to the LIBOR Rate for such Interest Period.
 
4.2.7           Mitigation of Circumstances.  Lender shall promptly notify the
Representative of any event of which Lender has knowledge which will result in,
and will use reasonable commercial efforts available to it (and not, in Lender’s
sole judgment, otherwise disadvantageous to Lender) to mitigate or avoid,
(i) any obligation by Borrowers to pay any amount pursuant to Sections 4.2.1 or
4.4 or (ii) the occurrence of any circumstances described in Sections 4.2.2 or
4.2.3 (and, if Lender has given notice of any such event described in clause (i)
or (ii) above and thereafter such event ceases to exist, Lender shall promptly
so notify Borrowers).  Without limiting the foregoing, Lender will designate a
different funding office if such designation will avoid (or reduce the cost to
Borrowers of) any event described in clause (i) or (ii) above and such
designation will not, in Lender’s sole judgment, be otherwise disadvantageous in
any material respect to Lender.
 
4.2.8           Conclusiveness of Statements; Survival of
Provisions.  Determinations and statements of Lender pursuant to Sections 4.2.1,
4.2.2, 4.2.3 or 4.2.4 shall be conclusive absent demonstrable error.  Lender may
use reasonable averaging and attribution methods in determining compensation
under Sections 4.2.1 and 4.2.4, and the provisions of such Sections shall
survive repayment of the Obligations, cancellation of any Notes, expiration or
termination of the Letters of Credit and termination of this Agreement.
 
4.3           Fees and Charges.
 
4.3.1                  Closing Fee:  Borrowers shall pay to Lender a closing fee
equal to one percent (1.0%) of the Maximum Loan Amount, which fee shall be fully
earned and payable on the date of disbursement of the initial Loans hereunder.
 
4.3.2           Unused Line Fee:  Borrowers shall pay to Lender an unused line
fee at an annual rate of three-quarters of one percent (0.75%) of the difference
between the amount of Revolving Loan Commitment as of the date of determination
and the average daily balance of the sum of the Revolving Loans plus the Letter
of Credit Obligations for each month, which fee
 
 
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shall be fully earned by Lender on the first day of each month, beginning on the
first day of the month following the Closing Date, and payable monthly in
arrears on the first (1st) day of each month with respect to all activity
through the last day of the prior month.  Said fee shall be calculated on the
basis of a 360 day year.
 
4.3.3           Collateral Monitoring Fee: Borrowers shall pay to Lender a
Collateral Monitoring Fee of Twenty Thousand Dollars ($20,000) for each 12-month
period, which fee shall be fully earned by Lender when paid and payable by
Borrowers on the date of the disbursement of the initial Loans hereunder, and on
each anniversary of such date thereafter.
 
4.3.4           Costs and Expenses: Borrowers shall reimburse Lender for all
costs and expenses, including, without limitation, reasonable legal expenses and
reasonable attorneys’ fees (for outside counsel), incurred by Lender in
connection with the (i) documentation and consummation of the transaction
contemplated by the Loan Documents, including, without limitation, Uniform
Commercial Code and other public record searches and filings, overnight courier
or other express or messenger delivery, appraisal costs, surveys, title
insurance and environmental audit or review costs; (ii) collection, protection
or enforcement of any rights of Lender in or to the Collateral; (iii) collection
by Lender of any Obligations; and (iv) administration and enforcement of any of
Lender’s rights under this Agreement or any other Loan Document (including,
without limitation, any reasonable costs and expenses of any third party
provider engaged by Lender for such purposes).  Borrowers shall also pay all
normal service charges with respect to all accounts maintained by Borrowers with
Lender and any additional services requested by Borrowers from Lender.
 
4.4           Taxes.
 
(a)           All payments made by Borrowers hereunder or under any Loan
Documents shall be made without setoff, counterclaim, or other defense.  To the
extent permitted by applicable law, all payments hereunder or under the Loan
Documents (including any payment of principal, interest, or fees) to, or for the
benefit, of any person shall be made by Borrowers free and clear of and without
deduction or withholding for, or account of, any Taxes now or hereinafter
imposed by any taxing authority.
 
(b)           If Borrowers make any payment hereunder or under any Loan Document
in respect of which it is required by applicable law to deduct or withhold any
Taxes, Borrowers shall increase the payment hereunder or under any such Loan
Document such that after the reduction for the amount of Taxes withheld (and any
taxes withheld or imposed with respect to the additional payments required under
this Section 4.4(b)), the amount paid to Lender equals the amount that was
payable hereunder or under any such Loan Document without regard to this
Section 4.4(b).  To the extent Borrowers withhold any Taxes on payments
hereunder or under any Loan Document, Borrowers shall pay the full amount
deducted to the relevant taxing authority within the time allowed for payment
under applicable law and promptly following receipt thereof shall deliver to
Lender after it has made payment to such authority any receipt issued by such
authority (or other evidence satisfactory to Lender) evidencing the payment of
all amounts so required to be deducted or withheld from such payment.
 
 
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If Lender is required by law to make any payments of any Taxes on or in relation
to any amounts received or receivable hereunder or under any other Loan
Document, or any Tax is assessed against Lender with respect to amounts received
or receivable hereunder or under any other Loan Document, Borrowers will
indemnify Lender against (i) such Tax (and any reasonable counsel fees and
expenses associated with such Tax) and (ii) any taxes imposed as a result of the
receipt of the payment under this Section 4.4.  A certificate prepared in good
faith as to the amount of such payment by Lender shall, absent manifest error,
be final, conclusive, and binding on all parties.
 
4.5           Treatment of Certain Refunds.  If Lender determines, in its sole
discretion exercised in good faith, that it has received a refund of any Taxes
as to which it has been indemnified pursuant to Section 4.4 (including by the
payment of additional amounts pursuant to Section 4.4), it shall pay to the
Borrower an amount equal to such refund (but only to the extent of indemnity
payments made under this Section with respect to the Taxes giving rise to such
refund), net of all out-of-pocket expenses (including Taxes) of Borrowers and
without interest (other than any interest paid by the relevant governmental
authority with respect to such refund).  Lender will make such payment to
Borrowers within ten (10) days after Lender has determined that it owes amounts
to the Borrowers pursuant to the first sentence of this Section 4.5.
 
4.6           Maximum Interest.  It is the intent of the parties that the rate
of interest and other charges to Borrowers under this Agreement and the other
Loan Documents shall be lawful; therefore, if for any reason the interest or
other charges payable under this Agreement are found by a court of competent
jurisdiction, in a final determination, to exceed the limit which Lender may
lawfully charge Borrowers, then the obligation to pay interest and other charges
shall automatically be reduced to such limit and, if any amount in excess of
such limit shall have been paid, then such amount shall be refunded to
Borrowers.
 
SECTION 5
 
COLLATERAL
 
5.1           Grant of Security Interest to Lender.  As security for the payment
of all Loans now or in the future made by Lender to Borrowers hereunder and for
the payment, performance or other satisfaction of all other Obligations, each
Borrower hereby assigns and grants a continuing security interest to Lender in
the following property of each Borrower, whether now or hereafter owned,
existing, acquired or arising and wherever now or hereafter located:
 
(a)           All of each Borrower’s Accounts, Inventory (whether or not
Eligible Inventory), money, contract rights, Chattel Paper, Documents, Deposit
Accounts, Securities Accounts, securities, Investment Property and Instruments
with respect thereto, and all of each Borrower’s rights, remedies, security,
Liens and supporting obligations, in, to and in respect of the foregoing,
including, without limitation, rights of stoppage in transit, replevin,
repossession and reclamation and other rights and remedies of an unpaid vendor,
lienor or secured party, guarantees or other contracts of suretyship with
respect to such property, deposits or other security for the obligation of any
Account Debtor, and credit and other insurance and all Inventory described in
invoices or other documents or instruments with respect to, or otherwise
representing or evidencing, any Account, and all returned, reclaimed or
repossessed Inventory;
 
 
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(b)           To the extent not listed above, all of each Borrower’s money,
securities, Investment Property, Deposit Accounts, Securities Accounts,
Instruments and other property and the proceeds thereof that are now or
hereafter held or received by, in transit to, in possession of, or under the
control of Lender or any parent, Affiliate or Subsidiary of Lender or any
participant in the Loans, whether for safekeeping, pledge, custody,
transmission, collection or otherwise;
 
(c)           To the extent not listed above, all of each Borrower’s now owned
or hereafter acquired Deposit Accounts or Securities Accounts into which
Accounts or the proceeds of Accounts are deposited, including the Lockbox
Account and all signature cards, account agreements and other documents relating
to the Deposit Accounts or Securities Accounts;
 
(d)           All Deposit Accounts, bank accounts, deposits and cash;
 
(e)           All of each Borrower’s general intangibles (including, without
limitation, payment intangibles) and other property of every kind and
description with respect to, evidencing or relating to its Accounts or
Inventory, including, without limitation, all existing and future customer
lists, choses in action, claims, books, records, ledger cards, contracts,
licenses, formulae, tax and other types of refunds, returned and unearned
insurance premiums, rights and claims under insurance policies, and computer
programs, tapes, programs, discs, information, software, records, and data, all
computers, word processors, printers, switches, interfaces, source codes, mask
works, software, web servers, website service contracts, internet connection
contract or line lease, website hosting service contract, website license
agreements, back-up copies of website content, contracts with website
advertisers, scripts, codes or Active-X controls, technology escrow agreements,
website content development agreements, all rights, of whatever form, in and to
domain names, instructional material, and connectors and all parts, accessories,
additions, substitutions, or options together with all property or equipment
used in connection with any of the above or which are used to operate or cause
to operate any features, special applications, format controls, options or
software of any or all of the above-mentioned items as the same relates to the
Accounts or Inventory or is otherwise necessary or helpful in the collection
thereof or realization thereto; and
 
(f)           All additions and accessions to, substitutions for, and
replacements, products and Proceeds of the foregoing property.
 
5.2           Other Security.  Lender, in its sole discretion, without waiving
or releasing (i) any obligation, liability or duty of Borrowers under this
Agreement or the other Loan Documents or (ii) any Event of Default, may at any
time or times hereafter, but shall not be obligated to, pay, acquire or accept
an assignment of any security interest, lien, encumbrance or claim asserted by
any Person in, upon or against the Collateral, provided, that Lender may take
such actions with respect to Permitted Liens only after the occurrence and
during the continuance of an Event of Default.  All sums paid by Lender in
respect thereof and all costs, fees and expenses including, without limitation,
reasonable attorney fees, all court costs and all other charges relating thereto
incurred by Lender shall constitute Obligations, payable by Borrowers to Lender
on demand, and, until paid, shall bear interest at the highest rate then
applicable to Loans hereunder.
 
 
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5.3           Possessory Collateral.  Immediately upon any Borrower’s receipt of
any portion of the Collateral that is Tangible Chattel Paper and any Investment
Property consisting of certificated securities, such Borrower shall deliver the
original thereof to Lender together with an appropriate endorsement or other
specific evidence of assignment thereof to Lender (in form and substance
acceptable to Lender).  If an endorsement or assignment of any such items shall
not be made for any reason, Lender is hereby irrevocably authorized, as
Borrowers’ attorney and agent-in-fact, to endorse or assign the same on
Borrowers’ behalf.
 
5.4           Electronic Chattel Paper.  To the extent that any Borrower obtains
or maintains any Electronic Chattel Paper constituting proceeds of the
Collateral, such Borrower shall create, store and assign the record or records
comprising the Electronic Chattel Paper in such a manner that (i) a single
authoritative copy of the record or records exists which is unique, identifiable
and except as otherwise provided in clauses (iv), (v) and (vi) below,
unalterable, (ii) the authoritative copy identifies Lender as the assignee of
the record or records, (iii) the authoritative copy is communicated to and
maintained by Lender or its designated custodian, (iv) copies or revisions that
add or change an identified assignee of the authoritative copy can only be made
with the participation of Lender, (v) each copy of the authoritative copy and
any copy of a copy is readily identifiable as a copy that is not the
authoritative copy and (vi) any revision of the authoritative copy is readily
identifiable as an authorized or unauthorized revision.
 
SECTION 6
 
PRESERVATION OF COLLATERAL AND
PERFECTION OF SECURITY INTERESTS THEREIN
 
Borrowers shall, at Lender’s request, at any time and from time to time,
authenticate, execute and deliver to Lender such financing statements, documents
and other agreements and instruments (and pay the cost of filing or recording
the same in all public offices deemed necessary or desirable by Lender) and do
such other acts and things or cause third parties to do such other acts and
things as Lender may deem necessary or desirable in its sole discretion in order
to establish and maintain a valid, attached and perfected security interest in
the Collateral in favor of Lender (free and clear of all other liens, claims,
encumbrances and rights of third parties whatsoever, whether voluntarily or
involuntarily created, except Permitted Liens) to secure payment of the
Obligations, and in order to facilitate the collection of the Collateral.  Each
Borrower irrevocably hereby makes, constitutes and appoints Lender (and all
Persons designated by Lender for that purpose) as such Borrower’s true and
lawful attorney and agent-in-fact to execute and file such financing statements,
documents and other agreements and instruments and do such other acts and things
as may be necessary to preserve and perfect Lender’s security interest in the
Collateral.  Each Borrower further ratifies and confirms the prior filing by
Lender of any and all financing statements which identify each Borrower as
debtor, Lender as secured party and any or all Collateral as collateral.
 
 
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SECTION 7
 
POSSESSION OF COLLATERAL AND RELATED MATTERS
 
Until otherwise notified by Lender following the occurrence and during the
continuance of an Event of Default, Borrowers shall have the right, except as
otherwise provided in this Agreement, in the ordinary course of Borrowers’
business, to (a) sell, lease or furnish any of Borrowers’ Inventory normally
held by Borrowers for any such purpose; and (b) use and consume any raw
materials, work in process or other materials normally held by Borrowers for
such purpose; provided, however, that a sale in the ordinary course of business
shall not include any transfer or sale in satisfaction, partial or complete, of
a debt owed by Borrowers.
 
SECTION 8
 
COLLECTIONS
 
8.1           Blocked Account.  Borrowers shall direct all of their Account
Debtors to make all payments on the Accounts that are made by (a) check directly
to a mailing address designated by, and under the exclusive control of, Lender,
at Lender or a financial institution acceptable to Lender and (b) wire transfer
to an account under the exclusive control of Lender, at Lender or a financial
institution acceptable to Lender; provided, that with respect to payments made
by check, with the consent of Lender, Borrowers may collect payments and
remotely scan such checks to Lender in a manner satisfactory to Lender (“Remote
Scanning”) on a daily basis as such checks are received.  Upon the request of
Lender following an Event of Default that is continuing, Borrowers shall
establish an account (the “Lockbox Account”) in Borrowers’ name, for the benefit
of Lender, with Lender or a financial institution acceptable to Lender, into
which all payments received in the Lockbox shall be deposited, and into which
Borrowers will immediately deposit all payments received by Borrowers on
Accounts in the identical form in which such payments were received, whether by
cash or check.  If Borrowers, any Affiliate or Subsidiary, any shareholder,
officer, director, employee or agent of Borrowers or any Affiliate or
Subsidiary, or any other Person acting for or in concert with Borrowers shall
receive any monies, checks, notes, drafts or other payments relating to or as
Proceeds of Accounts or other Collateral, Borrowers and each such Person shall
receive all such items in trust for, and as the sole and exclusive property of,
Lender and, immediately upon receipt thereof, shall remit the same (or cause the
same to be remitted) in kind to the Lockbox Account in a manner satisfactory to
Lender including by Remote Scanning.  The financial institution with which the
Lockbox Account is established shall acknowledge and agree, in a manner
satisfactory to Lender, that the checks, instruments, and other property in such
Lockbox and Lockbox Account are the sole and exclusive property of Lender, that
such financial institution will follow the instructions of Lender with respect
to disposition of funds in the Lockbox and Lockbox Account without further
consent from the Borrowers, and that the financial institution will not accept,
and Lender will not be obligated to accept, instructions of Borrowers with
respect to the Lockbox Account.  On any day on which there are outstanding
Revolving Loans, the daily ledger balance of such accounts as of the beginning
of each Business Day shall be transferred to Lender each Business Day for
application in accordance with Section 8.3.  All payments made to such Lockbox
Account or otherwise received by Lender, whether in respect of the Accounts or
as Proceeds of other Collateral or otherwise (except for proceeds of Collateral
which are required to be delivered to
 
 
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the holder of a Permitted Lien which is prior in right of payment), will be
applied on account of the Obligations in accordance with the terms of this
Agreement on any day in which Revolving Loans are outstanding; provided, that so
long as no Event of Default has occurred and is continuing, payments received by
Lender shall not be applied to the unmatured portion of the LIBOR Rate Loans,
but shall be held in a cash collateral account maintained by Lender/transferred
to Borrowers’ operating account at Lender, until the earlier of (i) the last
Business Day of the Interest Period applicable to such LIBOR Rate Loan and
(ii) the occurrence of an Event of Default; provided further, that so long as no
Event of Default has occurred and is continuing, the immediately available funds
in such cash collateral account may be disbursed, at the Representative’s
discretion, to Borrowers so long as after giving effect to such disbursement,
Borrowers’ availability under Section 2.1 hereof at such time, equals or exceeds
the outstanding Revolving Loans at such time.  Borrowers shall pay all customary
fees, costs and expenses in connection with opening and maintaining the Lockbox
and Lockbox Account.  All of such fees, costs and expenses if not paid by
Borrowers, may be paid by Lender (if at a financial institution other than
Lender) or otherwise charged to Borrowers and in such event all amounts paid by
Lender or charged by Lender shall constitute Obligations hereunder, shall be
payable to Lender by Borrowers upon demand, and, until paid, shall bear interest
at the highest rate then applicable to Loans hereunder.  All checks, drafts,
instruments and other items of payment or Proceeds of Collateral shall be
endorsed by Borrowers to Lender, and, if that endorsement of any such item shall
not be made for any reason, Lender is hereby irrevocably authorized to endorse
the same on Borrowers’ behalf.  For the purpose of this section, each Borrower
irrevocably hereby makes, constitutes and appoints Lender (and all Persons
designated by Lender for that purpose) as each Borrower’s true and lawful
attorney and agent-in-fact (i) to endorse each Borrower’s name upon said items
of payment and/or Proceeds of Collateral and upon any Chattel Paper, Document,
Instrument, invoice or similar document or agreement relating to any Account of
any Borrower or Goods pertaining thereto; (ii) to take control in any manner of
any item of payment or Proceeds thereof and (iii) to have access to any lockbox
or postal box into which any of any Borrower’s mail is deposited, and open and
process all mail addressed to each Borrower and deposited therein.
 
8.2           Lender’s Rights.  Lender may, at any time and from time to time
after the occurrence and during the continuance of an Event of Default, whether
before or after notification to any Account Debtor and whether before or after
the maturity of any of the Obligations, (i) enforce collection of any of
Borrowers’ Accounts or other amounts owed to Borrowers by suit or otherwise;
(ii) exercise all of Borrowers’ rights and remedies with respect to proceedings
brought to collect any Accounts or other amounts owed to Borrowers;
(iii) surrender, release or exchange all or any part of any Accounts or other
amounts owed to Borrowers, or compromise or extend or renew for any period
(whether or not longer than the original period) any indebtedness thereunder;
(iv) sell or assign any Account of Borrowers or other amount owed to Borrowers
upon such terms, for such amount and at such time or times as Lender deems
advisable; (v) prepare, file and sign each Borrower’s name on any proof of claim
in bankruptcy or other similar document against any Account Debtor or other
Person obligated to Borrowers; and (vi) do all other acts and things which are
necessary, in Lender’s sole discretion determined in good faith, to fulfill
Borrowers’ obligations under this Agreement and the other Loan Documents and to
allow Lender to collect the Accounts or other amounts owed to Borrowers.  In
addition to any other provision hereof, Lender may at any time, after the
occurrence and during the continuance of an Event of Default, at Borrowers’
expense, notify any
 
 
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parties obligated on any of the Accounts to make payment directly to Lender of
any amounts due or to become due thereunder.
 
8.3           Application of Proceeds.  For purposes of calculating interest and
fees, Lender shall, within one (1) Business Day after application of the daily
ledger balance to the Obligations as set forth in the immediately following
sentence, apply the whole or any part of such collections or Proceeds against
the Obligations in such order as Lender shall determine in its sole
discretion.  For purposes of determining the amount of Loans available for
borrowing purposes, Lender shall apply the daily ledger balance in the Lockbox
Account as of the beginning of each Business Day in whole or in part against the
Obligations, in such order as Lender shall determine in its sole discretion, on
the day of receipt, subject to actual collection.
 
8.4           Account Statements.  On a monthly basis, Lender shall deliver to
Borrowers an account statement showing all Loans, charges and payments, which
shall be deemed final, binding and conclusive upon Borrowers unless Borrowers
notify Lender in writing, specifying any error therein, within thirty (30) days
of the date such account statement is sent to Borrowers and any such notice
shall only constitute an objection to the items specifically identified.
 
SECTION 9
 
COLLATERAL, AVAILABILITY AND FINANCIAL REPORTS AND SCHEDULES
 
9.1           Weekly Reports.  Borrowers shall deliver to Lender an executed
loan report and certificate in Lender’s then current form at least once each
week (or if there is no borrowing, at least once each month), which shall be
accompanied by copies of Borrowers’ sales journal, cash receipts journal and
credit memo journal (as requested by Lender) for the relevant period.  Such
report shall reflect the activity of Borrowers with respect to Accounts for the
immediately preceding week, and shall be in a form and with such specificity as
is satisfactory to Lender and shall contain such additional information
concerning Accounts and Inventory as may be requested by Lender including,
without limitation, but only if specifically requested by Lender, copies of all
invoices prepared in connection with such Accounts.
 
9.2           Monthly Reports.  Borrowers shall deliver to Lender, in addition
to any other reports, as soon as practicable and in any event within
fifteen (15) days after the end of each month, (a) a detailed trial balance of
Borrowers’ Accounts aged per invoice date, in form and substance reasonably
satisfactory to Lender including, without limitation, the names and addresses of
all Account Debtors of Borrowers, (b) a summary and detail of accounts payable
(such Accounts and accounts payable divided into such time intervals as Lender
may require in its sole discretion), including a listing of any held checks, and
(c) the general ledger inventory account balance, an inventory report and
Lender’s standard form of Inventory report then in effect or the form most
recently requested from Borrowers by Lender, for Borrowers by each category of
Inventory, together with a description of the monthly change in each category of
Inventory.
 
9.3           Financial Statements.  The Borrowers shall deliver to Lender the
following financial information, all of which shall be prepared in accordance
with GAAP consistently applied, and shall be accompanied by a compliance
certificate in the form of Exhibit A hereto,
 

 
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which compliance certificate shall include a calculation of all financial
covenants contained in this Agreement:  (i) no later than thirty (30) days after
each calendar month, copies of internally prepared financial statements,
including, without limitation, balance sheets and statements of income, retained
earnings and cash flow of the Borrowers, certified by the Chief Financial
Officer of Westmoreland Parent; and (ii) no later than one hundred twenty (120)
days after the end of each of the Borrowers’ Fiscal Years, audited annual
consolidated and consolidating financial statements with an unqualified opinion
by independent certified public accountants selected by the Borrowers and
reasonably satisfactory to Lender, which consolidated and consolidating
financial statements shall be accompanied by copies of any management letters
sent to the Borrowers by such accountants.
 
9.4           Annual Projections.  No later than thirty (30) days prior to the
beginning of each Fiscal Year, the Borrowers shall deliver to Lender projected
balance sheets, statements of income and cash flow for the Borrowers, for each
of the twelve (12) months during such Fiscal Year, which shall include the
assumptions used therein, together with appropriate supporting details as
reasonably requested by Lender.
 
9.5           Explanation of Budgets and Projections.  In conjunction with the
delivery of the annual presentation of projections or budgets referred to in
Section 9.4 above, the managing member or an executive officer of the Borrowers
shall be available upon request by Lender to discuss in detail, all changes and
developments between the anticipated financial results included in such
projections or budgets and the historical financial statements of the Borrowers
and shall prepare such additional written reports explaining such charges and
developments as reasonably requested by Lender.
 
9.6           Public Reporting.  Promptly upon the filing thereof, the Borrowers
shall deliver to Lender copies of all registration statements and annual,
quarterly, monthly or other regular reports which the Borrowers or any of their
Subsidiaries files with the Securities and Exchange Commission, as well as
promptly providing to Lender copies of any reports and proxy statements
delivered to their shareholders.  Documents required to be delivered pursuant to
this Section 9.6 (to the extent any such documents are included in materials
otherwise filed with the Securities and Exchange Commission) may be delivered
electronically and if so delivered, shall be deemed to have been delivered on
the date on which any Borrower posts such documents, or provides a link thereto
on the Borrower’s website.
 
9.7           Other Information.  Promptly following request therefor by Lender,
such other business or financial data, reports, appraisals and projections as
Lender may reasonably request.
 
SECTION 10
 
TERMINATION
 
Lender’s obligations under this Agreement shall be in effect from the date
hereof until the Maturity Date or such earlier date that the Obligations are
accelerated pursuant to Section 16 hereof.  Upon the Maturity Date or the
earlier acceleration of the Obligations as set forth above, Lender shall not be
obligated to make any additional Loans on or after the date identified as the
date on which the Obligations are to be repaid; and this Agreement shall
terminate on the date
 
 
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thereafter that the Obligations are Paid in Full (except for such provisions
that by their terms survive the termination of this Agreement) and all Letters
of Credit are returned to the L/C Issuer for cancellation.  At such time as
Borrowers have repaid all of the Obligations and all Letters of Credit are
returned to L/C Issuer for cancellation and this Agreement has terminated,
Borrowers shall deliver to Lender a release, in the form of Exhibit D hereto, of
all obligations and liabilities of Lender and its officers, directors,
employees, agents, parents, subsidiaries and affiliates to Borrowers.  If,
during the term of this Agreement, Borrowers prepay all of the Obligations,
return all Letters of Credit for cancellation or Cash Collateralize such Letters
of Credit, and this Agreement is terminated, Borrowers shall pay to Lender as a
prepayment fee, in addition to the payment of all other Obligations, an amount
equal to (i) two percent (2%) of the Maximum Loan Amount if such prepayment
occurs two (2) years or more prior to the Original Maturity Date, (ii) one
percent (1%) of the Maximum Loan Amount if such prepayment occurs less than
two (2) years, but at least one (1) year prior to the Original Maturity Date, or
(iii) one-half of one percent (0.50%) of the Maximum Loan Amount if such
prepayment occurs less than one (1) year prior to (a) the Original Maturity Date
or (b) any subsequent extension of the Original Maturity Date occurring
hereafter.
 
SECTION 11
 
REPRESENTATIONS AND WARRANTIES
 
The Borrowers hereby represent and warrant to Lender, which representations and
warranties (whether appearing in this Section 11 or elsewhere) shall be true at
the time of the Borrowers’ execution hereof, shall remain true until the
repayment in full and satisfaction of all the Obligations and termination of
this Agreement, and shall be remade by the Borrowers at the time each Loan is
made pursuant to this Agreement, provided, that representations and warranties
made as of a particular date shall be true and correct as of such date:
 
11.1           Financial Statements and Other Information.  The financial
statements and other written information delivered or to be delivered by the
Borrowers to Lender at or prior to the date of this Agreement fairly present in
all material respects the financial condition of the Borrowers as of the date of
such financial statements and information, and there has been no material
adverse change in the financial condition or the operations of the Borrowers
since the date of the financial statements delivered to Lender most recently
prior to the date of this Agreement.  All written information now or heretofore
furnished by the Borrowers to Lender is true and correct as of the date with
respect to which such information was furnished.
 
11.2           Locations.  The office where each Borrower keeps its books,
records and accounts (or copies thereof) concerning the Collateral, each
Borrower’s principal place of business and all of each Borrower’s other places
of business, locations of Collateral and post office boxes and locations of bank
accounts are as set forth in Schedule 11.2 and at other locations within the
continental United States of which Lender has been advised by the Borrowers in
accordance with Section 12.2.1.  The Collateral, including, without limitation,
the Equipment (except any part thereof which the Borrowers shall have advised
Lender in writing consists of Collateral normally used in more than one state)
is kept, or, in the case of vehicles, based, only at the addresses set forth on
Schedule 11.2, and at other locations within the
 
 
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continental United States of which Lender has been advised by the Borrowers in
writing in accordance with Section 12.2.1 hereof.
 
11.3           Loans by the Borrowers.  The Borrowers have not made any loans or
advances to any Affiliate or other Person except as permitted by Section 13.6
hereof.
 
11.4           Accounts and Inventory.  Each Account or item of Inventory which
Borrowers shall, expressly or by implication, request Lender to classify as an
Eligible Account or as Eligible Inventory, respectively, shall, as of the time
when such request is made, conform in all respects to the requirements of such
classification as set forth in the respective definitions of Eligible Account
and Eligible Inventory as set forth herein and as otherwise established by
Lender from time to time.
 
11.5           Liens.  The Borrowers are the lawful owner of all Collateral now
purportedly owned or hereafter purportedly acquired by the Borrowers, free from
all liens, claims, security interests and encumbrances whatsoever, whether
voluntarily or involuntarily created and whether or not perfected, other than
the Permitted Liens.
 
11.6           Organization, Authority and No Conflict.  Westmoreland Parent is
a corporation duly organized, validly existing and in good standing in the State
of Delaware and its state organization identification number is
0024033.  Westmoreland Energy is a limited liability company duly organized,
validly existing and in good standing in the State of Delaware, and its state
organizational identification number is 2167615.  Westmoreland NC is a limited
liability company duly organized, validly existing and in good standing the
State of Virginia, and its state organizational identification number is
S183596-8.  WEI is a corporation duly organized, validly existing and in good
standing in the State of Delaware, and its state organization identification
number is 2181866.  Westmoreland Roanoke is a limited partnership duly
organized, validly existing and in good standing in the State of Delaware, and
its state organization identification number is 2201291.  Westmoreland is a
general partnership duly organized, validly existing and in good standing in the
State of Virginia.  Westmoreland Resources is a corporation duly organized,
validly existing and in good standing in the State of Delaware, and its state
organization identification number is 0829180.  Kemmerer is a corporation duly
organized, validly existing and in good standing in the State of Delaware, and
its state organization identification number is 4798657.  Coal Sales is a
corporation duly organized, validly existing and in good standing in the State
of Delaware, and its state organization identification number is 0693230.  WCC
is a corporation duly organized, validly existing and in good standing in the
State of Delaware, and its state organization identification number is
4898788.  WRI is a corporation duly organized, validly existing and in good
standing in the State of Delaware, and its state organization identification
number is 4553561.  Each Borrower is duly qualified and in good standing in all
states where the nature and extent of the business transacted by it or the
ownership of its assets makes such qualification necessary or, if such Borrower
is not so qualified, such failure does not have a Material Adverse Effect.  Each
Borrower has the right and power and is duly authorized and empowered to enter
into, execute and deliver this Agreement and the other Loan Documents to which
it is a party and perform its obligations hereunder and thereunder.  Each
Borrower’s execution and delivery of, and its performance of its obligation
under, this Agreement and the other Loan Documents to which it is a party do not
violate the provisions of the organizational documents of such Borrower, or any
statute, regulation,
 
 
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ordinance or law, or any agreement, contract or other document to which it is a
party, except for agreements, contracts or other documents which would not have
a Material Adverse Effect.  Each Borrower’s execution and delivery of, and
performance of its obligations under, this Agreement and the other Loan
Documents to which it is a party will not result in the imposition of any lien
or other encumbrance upon such Borrower’s property (other than Permitted Liens)
under any existing indenture, mortgage, deed of trust, loan or credit agreement
or other agreement or instrument to which such Borrower is a party.
 
11.7           Litigation.  Except as disclosed to Lender on Schedule 11.7
hereto, there are no actions or proceedings which are pending or, to the best of
Borrowers’ knowledge, threatened against any Borrower which is, in the
reasonable determination of such Borrower, reasonably likely to have a Material
Adverse Effect.  No Borrower has any Commercial Tort Claims pending other than
those set forth on Exhibit E hereto as Exhibit E may be amended from time to
time upon notice by any Borrower to Lender.
 
11.8           Compliance with Laws and Maintenance of Permits.  The Borrowers
have obtained all governmental consents, franchises, certificates, licenses,
authorizations, approvals and permits necessary for the operation of the
Borrowers’ businesses, the lack of which would have a Material Adverse
Effect.  The Borrowers are in compliance in all material respects with all
applicable federal, state, local and foreign statutes, orders, regulations,
rules and ordinances (including, without limitation, Environmental Laws and
statutes, orders, regulations, rules and ordinances relating to taxes, employer
and employee contributions and similar items, securities, ERISA or employee
health and safety) the failure to comply with which would have a Material
Adverse Effect.
 
11.9           Affiliate Transactions.  Except as set forth on Schedule 11.9
hereto or as permitted pursuant to Section 11.3 hereof, no Borrower is
conducting transactions with any Affiliate other than transactions with
Affiliates pursuant to terms that are no less favorable to any Borrower than the
terms upon which such transactions would have been made in a comparable
transaction at such time on an arm’s length basis by such Borrower with a Person
that is not an Affiliate.
 
11.10           Names and Trade Names.  During the five (5) years immediately
prior to the date of this Agreement, each Borrower’s name has been as set forth
on the first page of this Agreement and no Borrower uses any trade names,
assumed names, fictitious names or division names in the operation of its
business, except as set forth on Schedule 11.10 hereto.
 
11.11           Equipment.  Except for Permitted Liens, the Borrowers have good
and valid title to and ownership of all Equipment.  No Equipment is a Fixture to
real estate unless such real estate is owned by the Borrowers and is subject to
a mortgage in favor of Lender, or if such real estate is leased, is subject to a
landlord’s agreement in favor of Lender on terms acceptable to Lender, or an
accession to other personal property unless such personal property is subject to
a first priority lien in favor of Lender, subject to Permitted Liens.
 
11.12           Enforceability.  This Agreement and the other Loan Documents to
which the any Borrower is a party are the legal, valid and binding obligations
of such Borrower and are enforceable against such Borrower in accordance with
their respective terms except as limited by
 
 
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bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium or
similar federal or state laws or judicial decisions relating to the rights of
creditors.
 
11.13           Solvency.  Each Borrower is, after giving effect to the
transactions contemplated hereby, solvent, able to pay its debts as they become
due, has capital sufficient to carry on its business, now owns property having a
value both at fair valuation and at present fair saleable value greater than the
amount required to pay its debts, and will not be rendered insolvent by the
execution and delivery of this Agreement or any of the other Loan Documents to
which it is a party or by completion of the transactions contemplated hereunder
or thereunder.
 
11.14           Indebtedness.  Except as set forth on Schedule 11.14 hereto or
as otherwise provided in the Second Lien Notes Indenture, no Borrower is
obligated (directly or indirectly), for any loans or other indebtedness for
borrowed money other than the Loans.
 
11.15           Margin Security and Use of Proceeds.  None of the proceeds of
the Loans hereunder shall be used for the purpose of purchasing or carrying any
margin securities or for the purpose of reducing or retiring any indebtedness
which was originally incurred to purchase any margin securities or for any other
purpose not permitted by Regulation U of the Board of Governors of the Federal
Reserve System as in effect from time to time.
 
11.16           Parent, Subsidiaries and Affiliates.  Except as set forth on
Schedule 11.16 hereto, no Borrower has any Parents, Subsidiaries or other
Affiliates or divisions, nor is any Borrower engaged in any joint venture or
partnership with any other Person that is not a Borrower.
 
11.17           No Defaults.  No Borrower is in default under any material
contract, lease or commitment to which it is a party which default would have a
Material Adverse Effect, nor does any Borrower know of any dispute regarding any
contract, lease or commitment which would have a Material Adverse Effect.
 
11.18           Employee Matters.  Except as set forth on Schedule 11.18,
(a) neither any Borrower nor any of its employees are subject to any collective
bargaining agreement, (b) no petition for certification or union election is
pending with respect to the employees of any Borrower and no union or collective
bargaining unit has sought such certification or recognition with respect to the
employees of any Borrower and (c) there are no strikes, slowdowns, work
stoppages or controversies pending or, to the knowledge of the Borrowers,
threatened between any Borrower and its employees.  Except as set forth on
Schedule 11.18, no Borrower is a party to any employment contract with any
officer or director of any Borrower.
 
11.19           Intellectual Property.  Each Borrower possesses adequate
licenses, patents, patent applications, copyrights, service marks, trademarks,
trademark applications, tradestyles and trade names to continue to conduct its
business as heretofore conducted by it except to the extent that the failure to
possess such items would not have a Material Adverse Effect.
 
11.20           Environmental Matters.  Except as set forth on Schedule 11.20,
no Borrower has generated, used, stored, treated, transported, manufactured,
handled, produced or disposed of any Hazardous Materials, on or off its premises
(whether or not owned by it) in any manner which at any time violated Law or any
license, permit, certificate, approval or similar
 
 
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authorization thereunder, other than any violations that would not reasonably be
expected to have a Material Adverse Effect, and the operations of each Borrower
comply with all Environmental Laws and all licenses, permits, certificates,
approvals and similar authorizations thereunder, other than to the extent any
noncompliance would not be reasonably expected to have a Material Adverse
Effect.  There has been no proceeding, complaint, order, directive, claim,
citation or notice by any governmental authority or any other Person against or
to any Borrower or, to each Borrower’s knowledge, any investigation of any
Borrower, nor (ii) is any proceeding, or to each Borrower’s knowledge,
investigation, pending or, to each Borrower’s knowledge, threatened with respect
to any non-compliance with or violation of the requirements of any Environmental
Law by any Borrower or the release, spill or discharge, threatened or actual, of
any Hazardous Materials or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Materials or any other environmental or health matter, which would have a
Material Adverse Effect.  No Borrower has any material liability (contingent or
otherwise) in connection with a release, spill or discharge, threatened or
actual, of any Hazardous Materials or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Materials.
 
11.21           ERISA Matters.  The Borrowers have paid and discharged all
obligations and liabilities arising under ERISA of a character which, if unpaid
or unperformed, would reasonably be expected to have a Material Adverse Effect.
 
11.22           Investment Company Act.  No Borrower is an “investment company”
or a company “controlled” by an “investment company” or a “subsidiary” of an
“investment company” within the meaning of the Investment Company Act of 1940.
 
11.23           Anti-Terrorism Laws.
 
(a)           No Borrower (and, to the knowledge of each Borrower, no joint
venture or subsidiary thereof) is in violation in any material respect of any
United States Requirements of Law relating to terrorism, sanctions or money
laundering (the “Anti-Terrorism Laws”), including the United States Executive
Order No. 13224 on Terrorist Financing (the “Anti-Terrorism Order”) and the USA
Patriot Act.
 
(b)           No Borrower (and, to the knowledge of each Borrower, no joint
venture or subsidiary thereof) (i) is listed in the annex to, or is otherwise
subject to the provisions of, the Anti-Terrorism Order, (ii) is owned or
controlled by, or acting for or on behalf of, any person listed in the annex to,
or is otherwise subject to the provisions of, the Anti-Terrorism Order,
(iii) commits, threatens or conspires to commit or supports “terrorism” as
defined in the Anti-Terrorism Order or (iv) is named as a “specially designated
national and blocked person” in the most current list published by OFAC.
 
(c)           No Borrower (and, to the knowledge of each Borrower, no joint
venture or Affiliate thereof) (i) conducts any business or engages in making or
receiving any contribution of funds, goods or services to or for the benefit of
any person described in clauses (b)(i) through (b)(iv) above, (ii) deals in, or
otherwise engages in any transactions relating to, any property or interests in
property blocked pursuant to the Anti-Terrorism Order or (iii) engages in or
conspires
 
 
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to engage in any transaction that evades or avoids, or has the purpose of
evading or avoiding, or attempts to violate, any of the prohibitions set forth
in any Anti-Terrorism Law.
 
11.24           Excluded Subsidiaries.  None of Westmoreland Power or Basin
Resources, Inc. conducts any business or owns any assets.  WRI does not conduct
any business or own any assets other than a one percent (1%) interest in
Absaloka.
 
11.25           Reserved.
 
11.26           Investigations, Audits, Etc.  Except as set forth on
Schedule 11.26, no Borrower is the subject of any review or audit by the IRS or
any governmental investigation concerning the violation or possible violation of
any law.
 
11.27           Capitalization; Subsidiaries.  The authorized equity interests
and other securities of each Borrower and its Subsidiaries are as set forth on
Schedule 11.27.  All issued and outstanding equity interests of each Borrower
and its Subsidiaries are duly authorized and validly issued, fully paid,
nonassessable, free and clear of all Liens (other than restrictions under the
applicable organizational documents of such Borrower and its Subsidiaries,
Permitted Liens and Liens in connection with the Second Lien Notes Facility) and
such equity interests or other securities were issued in compliance with all
applicable state and federal laws concerning the issuance of such
securities.  The equity interests of each Borrower and its Subsidiaries are
owned of record by the equityholders in the amounts set forth on
Schedule 11.27.  As of the Closing Date, no equity interests of any Borrower or
any of its Subsidiaries other than those described above are issued and
outstanding.  Except as provided in Schedule 11.27, there are no preemptive or
other outstanding rights, options, warrants, conversion rights or similar
agreements or understandings for the purchase or acquisition from any Borrower
or any of its Subsidiaries relating to any equity interests or other securities
of any Borrower or any of its Subsidiaries.
 
11.28           Insurance.  Schedule 11.28 accurately summarizes or lists all of
the insurance policies or programs of the Borrowers and their Subsidiaries.  To
the Borrowers’ knowledge, all such policies are in full force and effect,
underwritten by financially sound and reputable insurers, sufficient for all
applicable Requirements of Law and otherwise are in compliance with the criteria
set forth in Section 12.5.  All such policies will not in any way be affected
by, or terminate or lapse by reason of the consummation of any of the
transactions contemplated by any of the Transaction Documents.
 
SECTION 12
 
AFFIRMATIVE COVENANTS
 
Until payment and satisfaction in full of all Obligations and termination of
this Agreement, unless the Borrowers obtain Lender’s prior written consent
waiving or modifying any of the Borrowers’ covenants hereunder in any specific
instance, each Borrower covenants and agrees as follows:
 
12.1           Maintenance of Records.  Each Borrower shall at all times keep
accurate and complete books, records and accounts with respect to all of the
Borrowers’ business activities, in
 

 
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accordance with sound accounting practices and GAAP consistently applied, and
shall keep such books, records and accounts, and any copies thereof, only at the
addresses indicated for such purpose on Schedule 11.2.
 
12.2           Notices.  The Borrowers shall:
 
12.2.1                  Locations.  Promptly (but in no event less than ten (10)
days prior to the occurrence thereof) notify Lender of the proposed opening of
any new place of business or new location of Collateral, the closing of any
existing place of business or location of Collateral, any change of in the
location of any Borrower’s books, records and accounts (or copies thereof), the
opening or closing of any post office box, the opening or closing of any bank
account or, if any of the Collateral consists of Goods of a type normally used
in more than one state, the use of any such Goods in any state other than a
state in which the Borrowers have previously advised Lender that such Goods will
be used.
 
12.2.2                  Eligible Accounts and Inventory.  Promptly upon becoming
aware thereof, notify Lender if any Account or Inventory identified by the
Borrowers to Lender as an Eligible Account or Eligible Inventory becomes
ineligible for any reason.
 
12.2.3                  Litigation and Proceedings.  Promptly upon becoming
aware thereof, notify Lender of any actions or proceedings which are pending or
threatened against any Borrower which would reasonably be expected to have a
Material Adverse Effect.
 
12.2.4                  Names and Trade Names.  Notify Lender within ten (10)
days after the change of its name or the use of any trade name, assumed name,
fictitious name or division name not previously disclosed to Lender in writing.
 
12.2.5                  ERISA Matters.  Promptly notify Lender of (x) the
Borrowers’ knowledge of the occurrence of any “reportable event” (as defined in
ERISA) which would reasonably be expected to result in the termination by the
Pension Benefit Guaranty Corporation (the “PBGC”) of any employee benefit plan
(“Plan”) covering any officers or employees of any Borrower, any benefits of
which are, or are required to be, guaranteed by the PBGC, (y) receipt of any
notice from the PBGC of its intention to seek termination of any Plan or
appointment of a trustee therefor or (z) any Borrower’s intention to terminate
or withdraw from any Plan.
 
12.2.6                  Environmental Matters.  Promptly notify Lender upon
becoming aware of any investigation, proceeding, complaint, order, directive,
claim, citation or notice with respect to any non-compliance with or violation
of the requirements of any Environmental Law by any Borrower or the generation,
use, storage, treatment, transportation, manufacture handling, production or
disposal of any Hazardous Materials (other than pursuant to or in accord with a
valid permit, consent or approval obtained from the applicable governmental
authority) or any other environmental or health matter which affects any
Borrower or its business operations or assets or any properties at which any
Borrower has transported, stored or disposed of any Hazardous Materials unless
the foregoing would not reasonably be expected to have a Material Adverse
Effect.
 
 
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12.2.7                  Default; Material Adverse Change.  Promptly advise
Lender of the occurrence of any event having or causing a Material Adverse
Effect, and the occurrence of any Default or Event of Default hereunder.
 
12.2.8                  Subordinated Debt.  Promptly from time to time, copies
of any material notices (including all notices of default or acceleration)
received from any holder or trustee of or other Person, under or with respect to
any Subordinated Debt.
 
All of the foregoing notices shall be provided by the Borrowers to Lender in
writing.
 
12.3           Compliance with Laws and Maintenance of Permits.  Each Borrower
shall maintain all governmental consents, franchises, certificates, licenses,
authorizations, approvals and permits, the lack of which would have a Material
Adverse Effect, and each Borrower shall remain in compliance with all applicable
federal, state, local and foreign statutes, orders, regulations, rules and
ordinances (including, without limitation, Environmental Laws and statutes,
orders, regulations, rules and ordinances relating to taxes, employer and
employee contributions and similar items, securities, ERISA or employee health
and safety) the failure with which to comply would have a Material Adverse
Effect.  Following any good faith determination by Lender that there is
non-compliance that would have a Material Adverse Effect, or any condition which
would have such a Material Adverse Effect and that requires any action by or on
behalf of any Borrower in order to avoid any such non-compliance, the Borrowers
shall, at their expense, cause an independent environmental consultant
acceptable to Lender to conduct such evaluations as are appropriate and prepare
and deliver a report setting forth the results of such assessments, a proposed
plan for correcting the non-compliance and an estimate of the costs thereof.
 
12.4           Inspection and Audits.  Each Borrower shall permit Lender, or any
Persons designated by it, to call at each Borrower’s place of business at any
reasonable times during business hours, upon reasonable prior written notice,
and, without hindrance or delay, to inspect the Collateral and to inspect,
audit, check and make extracts from each Borrower’s books, records, journals,
orders, receipts and any correspondence and other data relating to each
Borrower’s business, the Collateral or any transactions between the parties
hereto, and shall have the right to make such verification concerning each
Borrower’s business as Lender may consider reasonable under the circumstances;
provided, that unless an Event of Default has occurred and is continuing, no
more than two (2) inspections shall occur in any Fiscal Year.  The costs of any
such inspection for which the Borrowers shall be required to reimburse Lender
shall not exceed $10,000 per inspection.  Each Borrower shall furnish to Lender
such information relevant to Lender’s rights under this Agreement and the other
Loan Documents as Lender shall at any time and from time to time reasonably
request.  Lender, through its officers, employees or agents shall have the
right, at any time and from time to time, to verify with any Borrower the
validity, amount or any other matter relating to any of such Borrower’s
Accounts, by mail, telephone, telecopy, electronic mail, or otherwise.  Each
Borrower authorizes Lender and its agents to discuss the affairs, finances and
business of such Borrower with any officers, employees or directors of such
Borrower or with its Parent or any Affiliate or the officers, employees or
directors of its Parent or any Affiliate, and to discuss the financial condition
of each Borrower with such Borrower’s independent public accountants.  Any such
discussions shall be without liability to Lender or to the Borrowers’
independent public accountants, so long as the Borrowers
 
 
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are given a reasonable opportunity to be present for any such discussions.  The
Borrowers shall pay to Lender all reasonable customary fees and all costs and
out-of-pocket expenses incurred by Lender in the exercise of its rights under
this Section 12.4, and all of such fees, costs and expenses shall constitute
Obligations hereunder, shall be payable on demand, and, until paid, shall bear
interest at the highest rate then applicable to Loans hereunder.
 
12.5           Insurance.  The Borrowers shall:
 
12.5.1                  Casualty Insurance; Business Interruption
Insurance.  Keep the Collateral properly housed and insured for the full
insurable value thereof against loss or damage by fire, theft, explosion,
sprinklers, collision and such other risks as are customarily insured against by
Persons engaged in businesses similar to that of the Borrowers, with such
companies, in such amounts, with such deductibles, and under policies in such
form, as shall be satisfactory to Lender.  Original (or certified) copies of
such policies of insurance have been or shall be, within ninety (90) days after
the date hereof, delivered to Lender, together with evidence of payment of all
premiums therefor, and shall contain an endorsement, in form and substance
acceptable to Lender, showing loss under such insurance policies payable to
Lender.  Such endorsement, or an independent instrument furnished to Lender,
shall provide that the insurance company shall give Lender at least thirty (30)
days written notice before any such policy of insurance is altered or canceled
and that no act, whether willful or negligent, or default of the Borrowers or
any other Person shall affect the right of Lender to recover under such policy
of insurance in case of loss or damage.  In addition, within thirty (30) days
after the date of this Agreement, each Borrower shall cause its insurance broker
to execute and deliver to Lender an agreement in form and substance acceptable
to Lender providing that all proceeds of its business interruption insurance
policies shall be paid to the Lender for application to the Obligations, or,
upon satisfaction of all then-outstanding Obligations, to the Borrowers.  The
Borrowers hereby direct all insurers under all policies of insurance to pay all
proceeds payable thereunder in excess of $500,000 directly to Lender at any time
that Obligations are outstanding, subject to any requirements of the Second Lien
Notes Intercreditor Agreement.  Subject to the requirements of the Second Lien
Notes Intercreditor Agreement, the Borrowers irrevocably make, constitute and
appoint Lender (and all officers, employees or agents designated by Lender) as
each Borrower’s true and lawful attorney (and agent-in-fact), effective only
during any period(s) when any Obligations are outstanding, for the purpose of
making, settling and adjusting claims under such policies of insurance,
endorsing the name of the Borrowers on any check, draft, instrument or other
item of payment for the proceeds of such policies of insurance and making all
determinations and decisions with respect to such policies of insurance;
provided however, that if no Event of Default shall have occurred and is
continuing, the Borrowers may make, settle and adjust claims involving less than
$500,000 in the aggregate without Lender’s consent.  If no Obligations are
outstanding at the time that Lender receives any insurance proceeds, Lender
shall deliver 100% of such insurance proceeds to the Borrowers.  If any
Obligations are outstanding at the time that Lender receives any insurance
proceeds, provided no Default or Event of Default exists, the Lender shall
deliver to Borrower the lesser of (a) $500,000 of such insurance proceeds or (b)
100% of such insurance proceeds, which Borrower shall use to repair or replace
the affected property within 180 days (or such longer period of time as agreed
to by Lender) of receipt of such proceeds.  Any insurance proceeds received by
Lender that are not delivered to the Borrowers for the replacement or repair of
their properties shall be applied by Lender to the Obligations with any excess
after application to the Obligations returned to the Borrowers.
 
 
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12.5.2                  Liability Insurance.  Maintain, at its expense, such
public liability and third party property damage insurance as is customary for
Persons engaged in businesses similar to that of the Borrowers with such
companies and in such amounts, with such deductibles and under policies in such
form as shall be satisfactory to Lender and original (or certified) copies of
such policies have been or shall be, within ninety (90) days after the date
hereof, delivered to Lender, together with evidence of payment of all premiums
therefor; each such policy shall contain an endorsement showing Lender as
additional insured thereunder as its interests appear and providing that the
insurance company shall give Lender at least thirty (30) days’ written notice
before any such policy shall be altered or canceled.
 
12.5.3                  Lender May Purchase Insurance.  If the Borrowers at any
time or times hereafter shall fail to obtain or maintain any of the policies of
insurance required above (and provide evidence thereof to Lender) or to pay any
premium relating thereto, then Lender, without waiving or releasing any
obligation or default by the Borrowers hereunder, may (but shall be under no
obligation to) obtain and maintain such policies of insurance and pay such
premiums and take such other actions with respect thereto as Lender deems
advisable upon notice to the Representative.  Such insurance, if obtained by
Lender, may, but need not, protect the Borrowers’ interests or pay any claim
made by or against the Borrowers with respect to the Collateral.  Such insurance
may be more expensive than the cost of insurance the Borrowers may be able to
obtain themselves and may be cancelled only upon the Borrowers providing
evidence that they have obtained the insurance as required above.  All sums
disbursed by Lender in connection with any such actions, including, without
limitation, court costs, expenses, other charges relating thereto and reasonable
attorneys’ fees, shall constitute Loans hereunder, shall be payable within five
(5) Business Days after receipt of demand thereof from Lender, by the Borrowers
to Lender and, until paid, shall bear interest at the highest rate then
applicable to Loans hereunder.  This provision shall constitute the notice to
the Borrowers required pursuant to paragraph (3) of section 180/10 of Chapter
815 of the Illinois Compiled Statutes (2004).
 
12.6           Collateral.  The Borrowers shall keep the Collateral in good
condition, repair and order (normal wear and tear excepted) and shall make all
necessary repairs to the Equipment and replacements thereof so that the
operating efficiency and the value thereof shall at all times be preserved and
maintained in all material respects.  The Borrowers shall permit Lender to
examine any of the Collateral pursuant to Section 12.4, and shall, within five
(5) Business Days after receiving a request therefor from Lender, deliver to
Lender any and all evidence of ownership of any of the Equipment including,
without limitation, certificates of title and applications of title.  The
Borrowers shall, at the request of Lender, indicate on its records concerning
the Collateral a notation, in form satisfactory to Lender, of the security
interest of Lender hereunder.
 
12.7           Use of Proceeds.  The Borrowers shall use the proceeds of the
Loans solely for working capital purposes and for other business purposes of the
Borrowers.
 
12.8           Taxes.  Each Borrower shall file all required tax returns and pay
all of its taxes when due, subject to any extensions granted by the applicable
taxing authority, including, without limitation, taxes imposed by federal, state
or municipal agencies, and shall cause any liens for taxes to be promptly
released; provided, that a Borrower shall not be required to pay any such tax so
long as (i) the Borrower is contesting the payment of such taxes in good faith
by
 
 
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appropriate proceedings, (ii) the Borrower has created and maintains adequate
reserves on its books in accordance with GAAP for such taxes; and (iii) the
contesting of any such payment does not give rise to a lien for taxes in an
amount in excess of $500,000 in the aggregate; and (iv) Borrowers keep on
deposit with Lender (such deposit to be held without interest) or a reserve is
maintained against Borrowers’ availability to borrow money under Section 2.1, in
either case, in an amount of money which, in the sole judgment of Lender, is
sufficient to pay such taxes and any interest or penalties that may accrue
thereon; and (v) if Borrowers fail to prosecute such contest with reasonable
diligence, Lender may apply the money so deposited in payment of such taxes.  If
any Borrower fails to pay any such taxes and in the absence of any such contest
by such Borrower, Lender may (but shall be under no obligation to) advance and
pay any sums required to pay any such taxes and/or to secure the release of any
lien therefor, and any sums so advanced by Lender shall constitute Loans
hereunder, shall be payable by the Borrowers to Lender within five (5) Business
Days after receipt of demand thereof from Lender,, and, until paid, shall bear
interest at the highest rate then applicable to Loans hereunder.
 
12.9           Intellectual Property.  Each Borrower shall maintain adequate
licenses, patents, patent applications, copyrights, service marks, trademarks,
trademark applications, tradestyles and trade names to continue its business as
heretofore conducted by it or as hereafter conducted by it unless the failure to
maintain any of the foregoing would not reasonably be expected to have a
Material Adverse Effect.
 
12.10           Checking Accounts and Cash Management Services.  Unless Lender
otherwise consents in writing, in order to facilitate Lender’s maintenance and
monitoring of the Collateral, the Borrowers shall maintain, and shall cause each
of their Subsidiaries to maintain its general checking/controlled disbursement
account and its other deposit accounts with Lender.  The Borrowers shall be
responsible for all normal charges assessed thereon.  Notwithstanding the
foregoing, the Borrowers shall be permitted to (i) maintain deposit accounts
with each of PNC, Goldman Sachs and First Interstate Bank so long as such
accounts are subject to a deposit account control agreement in form and
substance acceptable to Lender at all times (except that no such agreement shall
be required to be in place until sixty (60) days after the Closing Date) and
(ii) a petty cash account with First Citizens Bank, so long as such account does
not have more than $100,000 on deposit at any time.
 
12.11           USA Patriot Act, Bank Secrecy Act and Office of Foreign Asset
Control.  The Borrowers shall ensure, and cause each other Borrower to ensure,
that no Person who owns a controlling interest in or otherwise controls a
Borrower is or shall be (i) listed on the Specially Designated Nationals and
Blocked Person List maintained by the Office of Foreign Assets Control (“OFAC”),
Department of the Treasury, and/or any other similar lists maintained by OFAC
pursuant to any authorizing statute, Executive Order or regulation or (ii) a
Person designated under Section 1(b), (c) or (d) of Executive Order No. 13224
(September 23, 2001), any related enabling legislation or any other similar
Executive Orders, and (b) comply, and cause each other Borrower to comply, with
all applicable Bank Secrecy Act (“BSA”) and anti-money laundering laws and
regulations.
 
 
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12.12           Further Assurances.
 
(a)           Promptly upon request by Lender, the Borrowers shall and shall
cause their Subsidiaries to correct any material defect or error that may be
discovered in any Loan Document or in the execution or acknowledgment thereof;
and
 
(b)           The Borrowers shall, and shall cause their Subsidiaries to
promptly upon reasonable request by Lender, do, execute, acknowledge, deliver,
record, re-record, file, re-file, register and re-register any and all such
further acts, deeds, agreements, certificates, assurances and other instruments
as Lender may reasonably require from time to time in order to (A) carry out
more effectively the purposes of the Loan Documents or (B) assure, preserve,
protect and confirm more effectively unto Lender the rights granted or now or
hereafter intended to be granted to Lender under any Loan Document or under any
other instrument executed in connection with any Loan Document to which any
Borrower is or will be a party.
 
(c)           In the event that any person becomes a domestic Subsidiary of any
Borrower, such Borrower shall as soon as practicable, but in any event no later
than 30 days after the date such Person becomes a domestic Subsidiary of such
Borrower (or such later time as the Lender may agree, in its sole discretion)
(i) cause such domestic Subsidiary to become a Borrower hereunder by executing
and delivering to Lender a counterpart agreement joining such Subsidiary to this
Agreement, and (ii) take all such actions and execute and deliver, or cause to
be executed and delivered, all such documents, instruments, agreements and
certificates reasonably requested by Lender to ensure all of such domestic
Subsidiary’s assets that are of the type described in Section 5.1 hereof are
subject to a first priority security interest in favor of Lender.  In the event
that any Person becomes a foreign Subsidiary of any Borrower, and the ownership
interests of such foreign Subsidiary are owned by any Borrower or by any
domestic Subsidiary thereof, such Borrower shall, or shall cause such domestic
Subsidiary to, within 30 days after the date such Person becomes a foreign
Subsidiary of any Borrower (or such later time as the Lender may agree in its
sole discretion), deliver all such documents, instruments, agreements and
certificates and take, or shall cause such domestic Subsidiary to take, all of
the actions necessary to grant and to perfect a first priority Lien in favor of
Lender in 65% of such ownership interests.  With respect to each such
Subsidiary, such Borrower shall promptly send to Lender written notice setting
forth the date on which such Person became a Subsidiary of such Borrower.
 
SECTION 13
 
NEGATIVE COVENANTS
 
Until payment and satisfaction in full of all Obligations and termination of
this Agreement, unless the Borrowers obtain Lender’s prior written consent
waiving or modifying any of the Borrowers’ covenants hereunder in any specific
instance, each Borrower agrees as follows:
 
13.1           Guaranties.  The Borrowers shall not, and shall not permit any
other Borrower to assume, guarantee or endorse, or otherwise become liable in
connection with, the obligations of any Person, except for the Second Lien Notes
Guarantees, or by endorsement of instruments for
 
 
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deposit or collection or similar transactions in the ordinary course of business
or as permitted by Section 13.14 hereof.
 
13.2           Indebtedness.  The Borrowers shall not, and shall not permit any
other Borrower to create, incur, assume or become obligated (directly or
indirectly), for any loans or other indebtedness for borrowed money other than
the Loans, except that the Borrowers and the Borrowers may (i) borrow money from
a Person other than Lender on an unsecured and subordinated basis if a
subordination agreement in favor of Lender and in form and substance
satisfactory to Lender in its sole discretion is executed and delivered to
Lender relative thereto; (ii) maintain their present indebtedness listed on
Schedule 11.14 hereto; (iii) incur unsecured indebtedness to trade creditors in
the ordinary course of business; (iv) incur purchase money indebtedness or
Capital Lease obligations in connection with Capital Expenditures; (v) incur the
Subordinated Debt as described in the Second Lien Note Documents as in effect on
the date hereof so long as such Subordinated Debt is at all times subject to the
subordination provisions set forth in the Second Lien Notes Intercreditor
Agreement as in effect on the date hereof; and (vi) incur operating lease
obligations requiring payments not to exceed $500,000 in the aggregate during
any Fiscal Year of the Borrowers.
 
13.3           Liens.  The Borrowers shall not, and shall not permit any other
Borrower to grant or permit to exist (voluntarily or involuntarily) any lien,
claim, security interest or other encumbrance whatsoever on any of its assets,
other than Permitted Liens.
 
13.4           Mergers, Sales, Acquisitions, Subsidiaries and Other Transactions
Outside the Ordinary Course of Business.  Except as described on Schedule 13.4
hereto, the Borrowers shall not, and shall not permit any other Borrower to
(i) change the state of any Borrower’s organization or enter into any
transaction which has the effect of changing any Borrower’s state of
organization; (ii) sell, lease or otherwise dispose of any of its assets other
than the sale, lease or dispositions of assets (a) in the ordinary course of
business, (b) that are no longer used or useful in the conduct of such
Borrower’s business or (c) from one Borrower to another Borrower; (iii) enter
into any Acquisition other than Permitted Investments; or (iv) enter into any
other transaction outside the ordinary course of the Borrowers’ business,
including, without limitation, any purchase, redemption or retirement of any
shares of any class of its stock or any other equity interest (other than the
purchase, redemption or retirement of any Borrowers stock held by officers,
directors or employees or former officers directors or employees (or their
transferees, estates or beneficiaries under their estates), 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, in all cases, in an amount not to exceed $500,000 in the
aggregate in any fiscal year), and any issuance of any shares of, or warrants or
other rights to receive or purchase any shares of, any class of its stock or any
other equity interest, other than pursuant to any employee benefit plan or
agreement.  Except in connection with any transaction described on Schedule 13.4
hereto or in connection with a Permitted Acquisition (provided that the
Borrowers comply with the provisions of Section 12.12 herein), the Borrowers
shall not form any Subsidiaries or enter into any joint ventures or partnerships
with any other Person other than another Borrower without the prior written
consent of Lender.
 
 
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13.5           Dividends and Distributions.  Upon the occurrence and during the
continuance of an Event of Default, no Borrower may declare or pay any dividend
or other distribution (whether in cash or in kind) on any class of its equity
interests other than dividends and distributions to another Borrower hereunder;
provided that, subject to applicable Delaware law, Westmoreland Parent may pay
dividends on its Series A Convertible Exchangeable Preferred Stock, not to
exceed $340,000 in any fiscal quarter, that are contemplated by Westmoreland
Parent’s Restated Certificate of Incorporation, as amended, regardless of
whether an Event of Default has occurred and is continuing.
 
13.6           Investments/Loans.  The Borrowers shall not and shall not permit
any other Borrower to purchase or otherwise acquire, or contract to purchase or
otherwise acquire, the obligations or stock of any Person, other than as
permitted pursuant to Section 13.4 hereof, nor shall the Borrowers lend or
otherwise advance funds to any Person (other than to another Borrower), other
than loans and advances that are Permitted Investments.
 
13.7           Fundamental Changes, Line of Business.  The Borrowers shall not
and shall not permit any other Borrower to (i) amend its organizational
documents or change its Fiscal Year unless (w) such actions would not have a
Material Adverse Effect; (x) such actions would not adversely affect the
obligations of any Borrower to Lender; (y) such actions would not adversely
affect the interpretation of any of the terms of this Agreement or the other
Loan Documents and (z) Lender has received five (5) days prior written notice of
such amendment or change; or (ii) enter into a new line of business materially
different from the Borrowers’ current businesses.
 
13.8           Reserved.
 
13.9           Affiliate Transactions.  Except as set forth on Schedule 11.9
hereto or as permitted pursuant to Section 11.3 hereof, the Borrowers shall not
conduct or permit any other Borrower to conduct, transactions with Affiliates
other than transactions with Affiliates pursuant to terms that are no less
favorable to any Borrower than the terms upon which such transactions would have
been made in a comparable transaction at such time on an arm’s length basis by
such Borrower with a Person that is not an Affiliate
 
13.10           Settling of Accounts.  Except for discount for prompt payment in
the ordinary course of business, the Borrowers shall not settle or adjust any
Account identified by the Borrowers as an Eligible Account, except that if no
Event of Default has occurred and is continuing, the Borrowers may settle or
adjust any Eligible Account upon providing notice to Lender of such settlement
or adjustment, at which time the Eligible Account will be removed from the
Revolving Loan Availability.  Following the occurrence and during the
continuance of an Event of Default, the Borrowers shall not settle or adjust any
Account without the consent of Lender.
 
13.11           Restriction of Amendments to Certain Documents.  The Borrowers
shall not, nor shall they permit any Subsidiary to, amend or otherwise modify,
or waive any rights under, any Second Lien Note Documents if, in any case, such
amendment, modification or waiver would be adverse in any material respect to
the interests of Lender (and unless, as applicable, in compliance with the terms
of the Second Lien Notes Intercreditor Agreement).
 
 
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13.12           Payments on Subordinated Debt. Borrower shall not, nor shall it
permit any Subsidiary to, make any redemption, prepayment, defeasance,
repurchase of any payments in respect of any Subordinated Debt except in
accordance with the terms of the applicable Second Lien Notes Intercreditor
Agreement.
 
13.13           Contingent Obligations.  The Borrowers shall not, nor shall the
Borrowers permit any of their Subsidiaries directly or indirectly to, create or
become or be liable with respect to any Contingent Obligation except:  (a) those
resulting from endorsement of negotiable instruments for collection, deposit or
negotiation and warranties of products or services, in each case incurred in the
ordinary course of business; (b) those arising under guaranties and indemnities
of or relating to the Obligations or of any Subordinated Debt; and (c) those
arising under Hedging Agreements.
 
13.14           Excluded Subsidiaries.  Without the prior written consent of
Lender, no Borrower shall (a) transfer any asset or make any investment in
(other than its ownership interests in) or make any loan to any of Westmoreland
Power, Absaloka or Westmoreland Risk Management, or (b) permit WRI, Westmoreland
Power or Absaloka to own any assets or conduct any business, other than
activities incidental to their organization and existence.  Notwithstanding the
foregoing, provided no Default or Event of Default exists or would be caused
thereby, Westmoreland Parent may make loans to or otherwise make additional
investments in (i) Westmoreland Power to fund certain post-retirement medical
liabilities of former employees of Westmoreland Power upon the written consent
of Lender and (ii) Westmoreland Risk Management in an aggregate amount not to
exceed $2,000,000 in any Fiscal Year, it being understood and agreed that the
foregoing restriction shall not prevent the payment of insurance premiums by the
Borrowers to Westmoreland Risk Management in the ordinary course of business.
 
13.15           Westmoreland Mining LLC.  No Borrower shall (i) transfer any
asset or make any investment in or loan to Westmoreland Mining LLC, without the
prior written consent of Lender or (ii) allow any proceeds of the Loans to be
utilized by Westmoreland Mining LLC.
 
SECTION 14
 
FINANCIAL COVENANTS
 
The Borrowers shall maintain and keep in full force and effect each of the
financial covenants set forth below:
 
14.1           Fixed Charge Coverage.  Westmoreland Parent and its consolidated
Subsidiaries shall not permit the ratio of Consolidated EBITDA to Fixed Charges
for each period of four consecutive quarters beginning September 30, 2012 to be
less than 1.15:1.0 tested on the last day of each quarter.  Notwithstanding the
foregoing, solely for purposes of Consolidated EBITDA for the test period ending
September 30, 2012, Consolidated EBITDA shall (a) exclude (i) up to $4,500,000
of non-cash actuarial expenses related to discount rate changes and increases in
medical cost projections that occurred during the calendar quarter ended
December 31, 2011 and (ii) up to (x) $500,000 of losses that occurred in the
quarter ended December 31, 2011 and (y) $1,500,000 losses that occurred in the
quarter ended March 31, 2012, in connection with
 

 
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Westmoreland Resources’ business interruption claim and (b) include the
pre-acquisition EBITDA of the mine purchased by Kemmerer in the amount of (x)
$6,500,000 for the quarter ended December 31, 2011, and (y) $4,600,000 for the
quarter ended March 31, 2012.  In addition to the foregoing, solely for purposes
of Consolidated EBITDA for the test period ending December 31, 2012,
Consolidated EBITDA shall (a) exclude up to $1,500,000 of losses in connection
with Westmoreland Resources’ business interruption claim that occurred in the
quarter ended March 31, 2012, and (b) include the pre-acquisition EBITDA of the
mine purchased by Kemmerer in the amount of $4.6 million for the quarter ended
March 31, 2012.
 
14.2           EBITDA.  The Borrowers shall not permit the aggregate
Consolidated EBITDA for the Borrowers to be less than the amounts set forth
below for each period of consecutive quarters set forth below:
 
Period
Consolidated EBITDA
The period of three consecutive fiscal quarters ending September 30, 2012
 
$18,800,000
Each period of four consecutive fiscal quarters ending December 31, 2012 and
March 31, 2013
 
$25,000,000
The period of four consecutive fiscal quarters ending June 30, 2013
 
$35,000,000
Each period of four consecutive fiscal quarters ending September 30, 2013,
December 31, 2013, March 31, 2014, June 30, 2014, September 30, 2014,
December 31, 2014, March 31, 2015, June 30, 2015, September 30, 2015 and
December 31, 2015
 
$50,000,000
Each period of four consecutive fiscal quarters ending (a) on March 31, 2016 and
(b) on each June 30, September 30, December 31 and March 31 thereafter through
the Maturity Date
 
$55,000,000

14.3           Accounting Matters.  If at any time any change in GAAP would
affect the computation of any financial ratio or requirement set forth in any
Loan Document, and either any Borrower or the Lender shall so request, the
Lender and the Borrowers shall negotiate in good faith to amend such ratio or
requirement to preserve the original intent thereof in light of such change in
GAAP; provided that, until so amended, (i) such ratio or requirement shall
continue to be computed in accordance with GAAP prior to such change therein and
(ii) the Borrowers shall provide to the Lender financial statements and other
documents required under this Agreement or as reasonably requested hereunder
setting forth a reconciliation between calculations of such ratio or requirement
made before and after giving effect to such change in GAAP.
 
 
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SECTION 15
 
DEFAULT
 
The occurrence of any one or more of the following events shall constitute an
“Event of Default” by the Borrowers hereunder:
 
15.1           Payment.  The failure of any Borrower to pay within three (3)
days after due or declared due, any of the Obligations constituting principal,
interest or fees; provided, however, that the failure to pay such Obligations on
the Maturity Date shall constitute an immediate Event of Default hereunder.
 
15.2           Breach of this Agreement and the other Loan Documents.  The
failure of any Borrower to perform, keep or observe any of the covenants,
conditions, promises, agreements or obligations of such Borrower under this
Agreement or any of the other Loan Documents (other than breaches described in
Section 15.1); provided that any such failure by any Borrower under
subsections 12.1, 12.2.1, 12.2.3, 12.2.4, 12.2.5, 12.2.6, 12.3 and 12.8 of this
Agreement shall not constitute an Event of Default hereunder until the fifteenth
(15th) day following the earlier of the date on which (i) an executive officer
of any Borrower becoming aware of such default or (ii) notice of such default
has been received by any Borrower from Lender.
 
15.3           Breach of Representations and Warranties.  The making or
furnishing by any Borrower to Lender of any representation, warranty,
certificate, schedule, report or other communication within or in connection
with this Agreement or the other Loan Documents or in connection with any other
agreement between such Borrower and Lender, which is untrue or misleading in any
material respect as of the date made.
 
15.4           Loss of Collateral.  The loss, theft, damage or destruction of
any of the Collateral not covered by insurance in an amount in excess of
$500,000 in the aggregate for all such events during any Fiscal Year as
determined by Lender in its sole discretion in good faith.
 
15.5           Levy, Seizure or Attachment.  The making or any attempt by any
Person to make any levy, seizure or attachment upon any of the Collateral in
excess of $500,000.
 
15.6           Bankruptcy or Similar Proceedings.  The commencement of any
proceedings in bankruptcy by or against any Borrower or for the liquidation or
reorganization of any Borrower, or alleging that such Borrower is insolvent or
unable to pay its debts as they mature, or for the readjustment or arrangement
of any Borrower’s debts, whether under the United States Bankruptcy Code or
under any other law, whether state or federal, now or hereafter existing, for
the relief of debtors, or the commencement of any analogous statutory or
non-statutory proceedings involving any Borrower; provided, however, that if
such commencement of proceedings against such Borrower is involuntary, such
action shall not constitute an Event of Default unless such proceedings are not
dismissed within sixty (60) days after the commencement of such proceedings,
though Lender shall have no obligation to make Loans to or issue, or cause to be
issued, Letters of Credit on behalf of any Borrower during such sixty (60) day
period or, if earlier, until such proceedings are dismissed.
 
 
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15.7           Appointment of Receiver.  The appointment of a receiver or
trustee for any Borrower, for any substantial part of the Collateral or for any
substantial part of any Borrower’s assets or the institution of any proceedings
for the dissolution, or the full or partial liquidation, or the merger or
consolidation, of any Borrower which is a corporation, limited liability company
or a partnership; provided, however, that if such appointment or commencement of
proceedings against such Borrower is involuntary, such action shall not
constitute an Event of Default unless such appointment is not revoked or such
proceedings are not dismissed within sixty (60) days after the commencement of
such proceedings, though Lender shall have no obligation to make Loans to or
issue, or cause to be issued, Letters of Credit on behalf of any Borrower during
such sixty (60) day period or, if earlier, until such appointment is revoked or
such proceedings are dismissed.
 
15.8           Judgment.  The entry of any judgments or orders aggregating in
excess of $500,000 against any Borrower that is not covered by insurance and
that which remains unsatisfied or undischarged and in effect for sixty (60) days
after such entry without a stay of enforcement or execution.
 
15.9           Change of Control.  The failure of (i) Westmoreland Parent to own
and have voting control of one hundred percent (100%) of the issued and
outstanding voting equity interests of each of Westmoreland Energy (except as
described on Schedule 13.4 hereto), Westmoreland Resources, Kemmerer, Coal
Sales, Westmoreland Power or WCC, (ii) Westmoreland Energy or any other Borrower
to own and have direct or indirect voting control of one hundred percent (100%)
of the issued and outstanding equity interests of each of Westmoreland NC, WEI
and Westmoreland Roanoke, (iii) Westmoreland Resources or any other Borrower to
own and have voting control of less than one hundred percent (100%) of the
issued and outstanding equity interests of its Subsidiaries in effect on the
date hereof or (iv) Westmoreland Parent or any other Borrower shall lose
operational control of Absaloka.
 
15.10           Material Adverse Change.  Any material adverse change in the
Collateral, business, property, assets, operations or condition, financial or
otherwise of the Borrowers, taken as a whole, as determined by Lender in its
reasonable credit judgment exercised in good faith or the occurrence of any
event which, in Lender’s reasonable credit judgment exercised in good faith,
could have a Material Adverse Effect.
 
15.11             Subordinated Debt.  Any Borrower defaults in the performance
of any payment or other material obligation in the Second Lien Note Documents
(after any applicable grace or cure period provided for in the Second Lien Note
Documents) or any other “Event of Default” (as defined in the applicable Second
Lien Note Documents) shall occur under any Subordinated Debt Document
(including, but not limited to, the Secured Lien Notes Indenture).
 
15.12           Other Indebtedness.  A failure of any Borrower to pay when due
or within any applicable grace period, whichever is later, any principal or
interest on other Indebtedness or any Contingent Obligations if such failure
would reasonably be expect to have a Material Adverse Effect or (ii) breach of
default of a Borrower of any covenants, conditions, promises, agreements or
obligations of a Borrower under written agreements entered into in connection
with such other Indebtedness or Contingent Obligations, if such breach, default
or occurrence would reasonably be expected to have a Material Adverse Effect.
 
 
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15.13           ERISA.  (i) A contribution failure in excess of $500,000 occurs
with respect to any Pension Plan sufficient to give rise to a Lien under
Section 302 of ERISA or Internal Revenue Code Section 412; or (ii) there shall
occur an ERISA Event that would reasonably be expected to cause any Borrower or
any member of its Controlled Group to incur a liability or obligation to anyone
in excess of $500,000.
 
15.14           Invalidity of Subordination Provisions, etc.  Any subordination
provision in any document or instrument governing Subordinated Debt (including,
but not limited to, the Second Lien Notes Intercreditor Agreement), or any
subordination provision in any subordination agreement that relates to any
Subordinated Debt, or any subordination provision in any guaranty by any
Borrower of any Subordinated Debt, shall cease to be in full force and effect,
or any Borrower or the holder of any applicable Subordinated Debt shall contest
in any manner the validity, binding nature or enforceability of any such
provision.
 
SECTION 16
 
REMEDIES UPON AN EVENT OF DEFAULT
 
16.1           Acceleration. Upon the occurrence and during the continuance of
an Event of Default described in Sections 15.7 or 15.8 hereof, all of the
Obligations shall immediately and automatically become due and payable, without
notice of any kind (provided, however, that notwithstanding the foregoing,
Hedging Obligations shall only terminate in accordance with the terms of the
relevant Hedging Agreement).  Upon the occurrence of any other Event of Default,
the Obligations may, at the option of Lender, in whole or in part at Lender’s
sole discretion, upon notice to the Representative, be declared, and immediately
shall become, due and payable.
 
16.2           Other Remedies.  Upon the occurrence and during the continuance
of an Event of Default, Lender may exercise from time to time any rights and
remedies available to it under the Uniform Commercial Code and any other
applicable law in addition to, and not in lieu of, any rights and remedies
expressly granted in this Agreement or in any of the other Loan Documents and
all of Lender’s rights and remedies shall be cumulative and non-exclusive to the
extent permitted by law.  In particular, but not by way of limitation of the
foregoing, Lender may, without notice, demand or legal process of any kind, take
possession of any or all of the Collateral (in addition to Collateral of which
it already has possession), wherever it may be found, and for that purpose may
pursue the same wherever it may be found, and may enter onto any of the
Borrowers’ premises where any of the Collateral may be, and search for, take
possession of, remove, keep and store any of the Collateral until the same shall
be sold or otherwise disposed of, and Lender shall have the right to store the
same at any of the Borrowers’ premises without cost to Lender.  At Lender’s
request, the Borrowers shall, at the Borrowers’ expense, assemble the Collateral
and make it available to Lender at one or more places to be designated by Lender
and reasonably convenient to Lender and the Borrowers.  Any notification of
intended disposition of any of the Collateral required by law will be deemed to
be a reasonable authenticated notification of disposition if given at least
ten (10) days prior to such disposition and such notice shall (i) describe
Lender and the Borrowers, (ii) describe the Collateral that is the subject of
the intended disposition, (iii) state the method of the intended disposition,
(iv) state that the Borrowers are entitled to an accounting of the Obligations
and state the charge, if any, for an accounting and (v) state the time and place
of any public disposition or
 
 
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the time after which any private sale is to be made.  Lender may disclaim any
warranties that might arise in connection with the sale, lease or other
disposition of the Collateral and has no obligation to provide any warranties at
such time.  Any Proceeds of any disposition by Lender of any of the Collateral
may be applied by Lender to the payment of expenses in connection with the
Collateral, including, without limitation, reasonable legal expenses and
reasonable attorneys’ fees, and any balance of such Proceeds and all other
payments received by Lender during the continuance of an Event of Default may be
applied by Lender toward the payment of such of the Obligations, and in such
order of application as required by the UCC or, if the UCC does not contain such
requirements, as Lender may from time to time elect.
 
SECTION 17
 
CONDITIONS PRECEDENT
 
17.1           Conditions to Initial Loans.  The obligation of Lender to fund
the initial Revolving Loan, and to issue or cause to be issued the initial
Letter of Credit, is subject to the satisfaction or waiver on or before the date
hereof of the following conditions precedent:
 
(a)           Lender shall have received each of the agreements, opinions,
reports, approvals, consents, certificates and other documents set forth on the
closing document list attached hereto as Schedule 17.1 (the “Closing Document
List”) in each case in form and substance satisfactory to Lender;
 
(b)           Since December 31, 2011 no event shall have occurred which has had
or would reasonably be expected to have a Material Adverse Effect, as determined
by Lender in its sole discretion, determined in good faith;
 
(c)           Lender shall have received payment in full of all fees and
expenses payable to it by the Borrowers, or arrangements shall have been make to
pay such fees and expenses from the proceeds of the initial Loan, on or before
disbursement of the initial Loans hereunder;
 
(d)           Lender shall have determined that immediately after giving effect
to (A) the making of the initial Loans requested to be made on the date hereof,
(B) the issuance of the initial Letter of Credit, if any, requested to be made
on such date, (C) the payment of all fees due upon such date and (D) the payment
or reimbursement by the Borrowers of Lender for all closing costs and expenses
incurred in connection with the transactions contemplated hereby, the Borrowers
will have Excess Availability of not less than Five Million Dollars
($5,000,000).
 
(e)           The Lender shall have received a pro forma consolidated balance
sheet of the Borrowers and their Subsidiaries as at the date of the most recent
consolidated balance sheet, adjusted to give effect to the consummation of the
financings contemplated hereby as if such transactions had occurred on such
date, which is consistent in all material respects with the sources and uses of
cash previously provided to Lender and the forecasts previously provided to
Lender.
 
 
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(f)           The Borrowers shall have executed and delivered to Lender all such
other documents, instruments and agreements which Lender determines are
reasonably necessary to consummate the transactions contemplated hereby.
 
17.2           Conditions to All Loans.  Lender shall not be obligated to fund
any Loans, arrange for the issuance of any Letters of Credit or grant any other
accommodation for the benefit of the Borrowers, unless the following conditions
are satisfied:
 
(a)           No Event of Default shall exist at the time of or result from such
funding, issuance or grant;
 
(b)           The representations and warranties of each Borrower in this
Agreement and the other Loan Documents shall be true and correct in all material
respects as of the date, and after giving effect to such funding, issuance or
grant (except for representations and warranties that expressly relate to an
earlier date which must be true and correct in all material respects as of such
earlier date); and
 
(c)           No event shall have occurred or circumstances exist that has had
or would reasonably be expected to have a Material Adverse Effect.
 
Each request (or deemed request) by the Borrowers for funding of a Loan,
issuance of a Letter of Credit or grant of an accommodation shall constitute a
representation by the Borrowers that the foregoing conditions are satisfied on
the date of such request and on the date of such funding, issuance or grant.  As
an additional condition to any funding, issuance or grant, Agent shall have
received such other information, documents, instruments and agreements as it
deems appropriate in connection therewith.
 
SECTION 18
 
MISCELLANEOUS
 
18.1           Assignments; Participations.
 
18.1.1                  Assignments.  (3) Lender may, with the consent of the
Borrowers, which consent shall not be unreasonably withheld or delayed, at any
time assign to one or more Persons (any such Person, an “Assignee”) all or any
portion of its Loans and Revolving Loan Commitment; provided, however, that no
consent of the Borrowers shall be required in connection with (i) any assignment
following the occurrence and during the continuance of an Event of Default or
(ii) any assignment of Lender to any of its Affiliates or (iii) any assignment
to secure obligations of Lender, including any pledge or assignment to secure
obligations to a Federal Reserve Bank or to any trustee for the holders of its
debt or equity interests or (iv) any assignment that is required by the United
States government (whether federal, state, county or otherwise).
 
(b)           From and after the date on which the conditions described above
have been met, (i) such Assignee shall be deemed automatically to have become a
party hereto and, to the extent that rights and obligations hereunder have been
assigned to such Assignee pursuant to an assignment agreement between Lender and
the Assignee, shall have the rights and obligations
 
 
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of Lender hereunder and (ii) Lender, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment Agreement, shall
be released from its rights (other than its indemnification rights) and
obligations hereunder.  Upon the request of the Assignee (and, as applicable,
Lender) pursuant to an effective assignment agreement, the Borrowers shall
execute and deliver to the Assignee (and, as applicable, Lender) a Note in the
principal amount of the Assignee’s pro rata share of the Revolving Loan
Commitment (and, as applicable, a Note in the principal amount of the pro rata
share of the Revolving Loan Commitment retained by Lender).  Each such Note
shall be dated the effective date of such assignment.  Upon receipt by Lender of
such Note, Lender shall return to the Borrowers any prior Note held by it.
 
(c)           Lender may at any time pledge or assign a security interest in all
or any portion of its rights under this Agreement to secure obligations of
Lender, including any pledge or assignment to secure obligations to a Federal
Reserve Bank, and this Section shall not apply to any such pledge or assignment
of a security interest; provided that no such pledge or assignment of a security
interest shall release Lender from any of its obligations hereunder or
substitute any such pledgee or assignee for Lender as a party hereto.
 
18.1.2                  Participations.  Lender may at any time sell to one or
more Persons participating interests in its Loans, Revolving Loan Commitment or
other interests hereunder (any such Person, a “Participant”).  In the event of a
sale by Lender of a participating interest to a Participant, (a) Lender’s
obligations hereunder shall remain unchanged for all purposes, (b) the Borrowers
shall continue to deal solely and directly with Lender in connection with
Lender’s rights and obligations hereunder and (c) all amounts payable by the
Borrowers shall be determined as if Lender had not sold such participation and
shall be paid directly to Lender.  Borrowers agree that if amounts outstanding
under this Agreement are due and payable (as a result of acceleration or
otherwise), each Participant shall be deemed to have the right of set-off in
respect of its participating interest in amounts owing under this Agreement and
with respect to any Letter of Credit to the same extent as if the amount of its
participating interest were owing directly to it as Lender under this Agreement;
provided that such right of set-off shall be subject to the obligation of each
Participant to share with Lender, and Lender agrees to share with each
Participant, on a pro rata basis.  Borrowers also agree that each Participant
shall be entitled to the benefits of Section 4.2 or 4.4 as if it were Lender
(provided that on the date of the participation no Participant shall be entitled
to any greater compensation pursuant to Section 4.2 or 4.4 than would have been
paid to Lender on such date if no participation had been sold).
 
18.2           Customer Identification - USA Patriot Act Notice.  Lender (for
itself and not on behalf of any other party) hereby notifies the Borrowers that,
pursuant to the requirements of the USA Patriot Act, Title III of Pub. L.
107-56, signed into law October 26, 2001 (the “USA Patriot Act”), it is required
to obtain, verify and record information that identifies the Borrowers, which
information includes the name and address of the Borrowers and other information
that will allow Lender, as applicable, to identify the Borrowers in accordance
with the Act.
 
18.3           Indemnification by Borrowers.  IN CONSIDERATION OF THE EXECUTION
AND DELIVERY OF THIS AGREEMENT AND LENDER’S AGREEMENT TO EXTEND THE REVOLVING
LOAN COMMITMENT PROVIDED HEREUNDER, EACH BORROWER
 
 
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HEREBY AGREES TO INDEMNIFY, AND HOLD LENDER AND EACH OF THE OFFICERS, DIRECTORS,
EMPLOYEES, AFFILIATES AND AGENTS OF LENDER (EACH A “LENDER PARTY”) FREE AND
HARMLESS FROM AND AGAINST ANY AND ALL ACTIONS, CAUSES OF ACTION, SUITS, LOSSES,
LIABILITIES, DAMAGES AND EXPENSES, INCLUDING REASONABLE ATTORNEY COSTS
(COLLECTIVELY, THE “INDEMNIFIED LIABILITIES”), INCURRED BY LENDER PARTIES OR ANY
OF THEM AS A RESULT OF, OR ARISING OUT OF, OR RELATING TO (A) ANY TENDER OFFER,
MERGER, PURCHASE OF CAPITAL SECURITIES, PURCHASE OF ASSETS OF ANY BORROWER,
(B) THE USE, HANDLING, RELEASE, EMISSION, DISCHARGE, TRANSPORTATION, STORAGE,
TREATMENT OR DISPOSAL OF ANY HAZARDOUS MATERIAL AT ANY PROPERTY OWNED OR LEASED
BY ANY BORROWER, (C) ANY VIOLATION OF ANY ENVIRONMENTAL LAWS WITH RESPECT TO
CONDITIONS AT ANY PROPERTY OWNED OR LEASED BY ANY BORROWER OR THE OPERATIONS
CONDUCTED THEREON, (D) THE INVESTIGATION, CLEANUP OR REMEDIATION OF OFFSITE
LOCATIONS AT WHICH ANY BORROWER OR THEIR RESPECTIVE PREDECESSORS ARE ALLEGED TO
HAVE DIRECTLY OR INDIRECTLY DISPOSED OF HAZARDOUS MATERIALS OR (E) THE
EXECUTION, DELIVERY, PERFORMANCE OR ENFORCEMENT OF THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT BY ANY LENDER PARTY, EXCEPT FOR ANY SUCH INDEMNIFIED LIABILITIES
ARISING ON ACCOUNT OF THE APPLICABLE LENDER PARTY’S GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT AS DETERMINED BY A FINAL, NONAPPEALABLE JUDGMENT BY A COURT OF
COMPETENT JURISDICTION.  IF AND TO THE EXTENT THAT THE FOREGOING UNDERTAKING MAY
BE UNENFORCEABLE FOR ANY REASON, BORROWERS HEREBY AGREE TO MAKE THE MAXIMUM
CONTRIBUTION TO THE PAYMENT AND SATISFACTION OF EACH OF THE INDEMNIFIED
LIABILITIES WHICH IS PERMISSIBLE UNDER APPLICABLE LAW.  ALL OBLIGATIONS PROVIDED
FOR IN THIS SECTION 18.3 SHALL SURVIVE REPAYMENT OF THE LOANS, CANCELLATION OF
THE NOTES, EXPIRATION OR TERMINATION OF THE LETTERS OF CREDIT, ANY FORECLOSURE
UNDER, OR ANY MODIFICATION, RELEASE OR DISCHARGE OF, ANY OR ALL OF THE
COLLATERAL DOCUMENTS AND TERMINATION OF THIS AGREEMENT.
 
18.4           Notice.  All notices, requests, demands and other communications
provided for hereunder shall be in writing, sent by certified or registered
mail, postage prepaid, return receipt requested, by nationally recognized
overnight courier or delivered in person, and addressed as follows:
 
If to the Borrowers:
Westmoreland Coal Company
9540 S. Maroon Circle
Englewood, CO 80112
Attention:  General Counsel
Telephone:  (303) 922-6463

 
 
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With a copy to:
 
Holland & Hart LLP
555 17th St., Suite 3200
Denver, CO  80202
Attention:  Katherine A. LeVoy
Telephone:  (303) 295-8000
 
If to the Bank:
The PrivateBank and Trust Company
120 South LaSalle Street
Chicago, Illinois  60603
Attention:  Susan Lanz
Telephone:  (312) 564-2145
 
With a copy to:
 
Vedder Price P.C.
222 North LaSalle Street, Suite 2600
Chicago, Illinois 60601
Attention:  Michael A. Nemeroff, Esq.
Telephone:  (312) 609-7500

 
or, as to each party, at such other address as shall be designated by such party
in a written notice to each other party complying as to delivery with the terms
of this subsection.  Notices shall be deemed given on the date of delivery, in
the case of personal delivery, or on the delivery or refusal date, as specified
on the return receipt in the case of certified mail or on the tracking report in
the case of overnight courier.
 
18.5           Modification and Benefit of Agreement.  This Agreement and the
other Loan Documents may not be modified, altered or amended except by an
agreement in writing signed by Lender and the Borrowers or such other Person who
is a party to such other Loan Document.
 
18.6           Headings of Subdivisions.  The headings of subdivisions in this
Agreement are for convenience of reference only, and shall not govern the
interpretation of any of the provisions of this Agreement.
 
18.7           Power of Attorney.  Each Borrower acknowledges and agrees that
its appointment of Lender as its attorney and agent-in-fact for the purposes
specified in this Agreement is an appointment coupled with an interest and shall
be irrevocable until all of the Obligations are satisfied and paid in full and
this Agreement is terminated.
 
18.8           Confidentiality.  Lender hereby agrees to use commercially
reasonable efforts to assure that any and all information relating to the
Borrowers which is (i) furnished by the Borrowers to Lender (or to any affiliate
of Lender); and (ii) described by any Borrower to Lender as non-public,
confidential or proprietary in nature, shall be kept confidential by Lender or
such affiliate in accordance with applicable law; provided, however, that such
information and other

 
 
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credit information relating to the Borrowers may be distributed by Lender or
such affiliate to (a) Lender’s or such affiliate’s directors, managers,
officers, employees, attorneys, affiliates, assignees, participants, auditors,
agents and regulators who have a need-to-know such information in connection
with the transactions contemplated by this Agreement, and (b) upon the order of
a court or other governmental agency having jurisdiction over Lender or such
affiliate, to any other party.  In addition such information and other credit
information may be distributed by Lender to potential participants or assignees
of any portion of the Liabilities, provided, that such potential participant or
assignee agrees to follow the confidentiality requirements set forth
herein.  The Borrowers and Lender further agree that this provision shall
survive the termination of this Agreement.  Notwithstanding the foregoing, the
Borrowers shall have the right to review and approve  any tombstone or similar
advertising material relating to the financing transaction that Lender proposes
to use relating to the financing contemplated by this Agreement that uses the
trademarks, service marks or other mark of any Borrower; provided, that the
Borrowers shall not unreasonably withhold their consent to the use of such
tombstone or advertising material if the Borrowers’ trademarks, service marks or
other marks are used appropriately in such tombstone or advertising material.
 
18.9           Counterparts/Delivery.  This Agreement, any of the other Loan
Documents, and any amendments, waivers, consents or supplements may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which, when so executed and delivered, shall be deemed an
original, but all of which counterparts together shall constitute but one
agreement.  Delivery of an executed counterpart of a signature page of this
Agreement by facsimile or in electronic (i.e., “pdf” or “tif”) format shall be
effective as delivery of a manually executed counterpart of this Agreement.
 
18.10           Electronic Submissions.  Upon not less than thirty (30) days’
prior written notice (the “Approved Electronic Form Notice”), Lender may permit
or require that any of the documents, certificates, forms, deliveries or other
communications, authorized, required or contemplated by this Agreement or the
other Loan Documents, be submitted to Lender in Approved Electronic Form (as
hereafter defined), subject to any reasonable terms, conditions and requirements
in the applicable Approved Electronic Forms Notice.  For purposes hereof
“Electronic Form” means e-mail, e-mail attachments, data submitted on web-based
forms or any other communication method that delivers machine readable data or
information to Lender, and “Approved Electronic Form” means an Electronic Form
that has been approved in writing by Lender (which approval has not been revoked
or modified by Lender) and sent to the Borrowers in an Approved Electronic Form
Notice.  Except as otherwise specifically provided in the applicable Approved
Electronic Form Notice, any submissions made in an applicable Approved
Electronic Form shall have the same force and effect that the same submissions
would have had if they had been submitted in any other applicable form
authorized, required or contemplated by this Agreement or the other Loan
Documents.
 
18.11           Waiver of Jury Trial: Other Waivers.
 
(a)           EACH BORROWER AND LENDER EACH HEREBY WAIVES ALL RIGHTS TO TRIAL BY
JURY IN ANY ACTION OR PROCEEDING WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THIS
AGREEMENT, ANY OF THE OTHER LOAN DOCUMENTS, THE OBLIGATIONS, THE COLLATERAL, ANY
 
 
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ALLEGED TORTIOUS CONDUCT BY BORROWERS OR LENDER OR WHICH, IN ANY WAY, DIRECTLY
OR INDIRECTLY, ARISES OUT OF OR RELATES TO THE RELATIONSHIP AMONG BORROWERS AND
LENDER.  IN NO EVENT SHALL LENDER BE LIABLE FOR LOST PROFITS OR OTHER SPECIAL,
EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES.
 
(b)           The Borrowers hereby waive demand, presentment, protest and notice
of nonpayment, and further waives the benefit of all valuation, appraisal and
exemption laws.
 
(c)           The Borrowers hereby waive the benefit of any law that would
otherwise restrict or limit Lender or any affiliate of Lender in the exercise of
its right, which is hereby acknowledged and agreed to, to set-off against the
Obligations, without notice at any time hereafter, any indebtedness, matured or
unmatured, owing by Lender or such affiliate of Lender to the Borrowers,
including, without limitation any Deposit Account at Lender or such affiliate.
 
(d)           Lender’s failure, at any time or times hereafter, to require
strict performance by the Borrowers of any provision of this Agreement or any of
the other Loan Documents shall not waive, affect or diminish any right of Lender
thereafter to demand strict compliance and performance therewith.  Any
suspension or waiver by Lender of an Event of Default under this Agreement or
any default under any of the other Loan Documents shall not suspend, waive or
affect any other Event of Default under this Agreement or any other default
under any of the other Loan Documents, whether the same is prior or subsequent
thereto and whether of the same or of a different kind or character.  No delay
on the part of Lender in the exercise of any right or remedy under this
Agreement or any other loan Document shall preclude other or further exercise
thereof or the exercise of any right or remedy.  None of the undertakings,
agreements, warranties, covenants and representations of the Borrowers contained
in this Agreement or any of the other Loan Documents and no Event of Default
under this Agreement or default under any of the other Loan Documents shall be
deemed to have been suspended or waived by Lender unless such suspension or
waiver is in writing, signed by a duly authorized officer of Lender and directed
to the Borrowers specifying such suspension or waiver.
 
18.12           Choice of Governing Laws; Construction; Forum Selection.  This
Agreement and the other Loan Documents are submitted by the Borrowers to Lender
for Lender’s acceptance or rejection at Lender’s principal place of business as
an offer by the Borrowers to borrow monies from Lender now and from time to time
hereafter, and shall not be binding upon Lender or become effective until
accepted by Lender, in writing, at said place of business.  If so accepted by
Lender, this Agreement and the other Loan Documents shall be deemed to have been
made at said place of business.  THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
SHALL BE GOVERNED AND CONTROLLED BY THE INTERNAL LAWS OF THE STATE OF ILLINOIS
AS TO INTERPRETATION, ENFORCEMENT, VALIDITY, CONSTRUCTION, EFFECT, AND IN ALL
OTHER RESPECTS, INCLUDING, WITHOUT LIMITATION, THE LEGALITY OF THE INTEREST RATE
AND OTHER CHARGES, BUT EXCLUDING PERFECTION OF THE SECURITY INTERESTS IN
COLLATERAL LOCATED OUTSIDE OF THE STATE OF ILLINOIS, WHICH SHALL BE GOVERNED AND
CONTROLLED BY THE LAWS OF THE RELEVANT JURISDICTION IN WHICH SUCH COLLATERAL IS
LOCATED.  If any provision of this Agreement shall be held to be prohibited by
or invalid under applicable law,
 
 
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such provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or remaining
provisions of this Agreement.
 
Each Borrower and Lender irrevocably agree that ALL ACTIONS OR PROCEEDINGS IN
ANY WAY, MANNER OR RESPECT, ARISING OUT OF OR FROM OR RELATED TO THIS AGREEMENT,
THE OTHER LOAN DOCUMENTS OR THE COLLATERAL MAY BE LITIGATED IN COURTS HAVING
SITUS WITHIN THE CITY OF CHICAGO, STATE OF ILLINOIS.  EACH BORROWER AND LENDER
HEREBY CONSENT AND SUBMIT TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL
COURTS LOCATED WITHIN SAID CITY AND STATE.  EACH LOAN AND LENDER PARTY HEREBY
WAIVE ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION
BROUGHT AGAINST BORROWERS BY LENDER IN ACCORDANCE WITH THIS SECTION.
 
18.13           Revival and Reinstatement of Obligations.  If the incurrence or
payment of the Obligations by any Borrower or the transfer to Lender of any
property should for any reason subsequently be declared to be void or voidable
under any state or federal law relating to creditors’ rights, including
provisions of the Bankruptcy Code relating to fraudulent conveyances,
preferences, or other voidable or recoverable payments of money or transfers of
property (collectively, a “Voidable Transfer”), and if Lender is required to
repay or restore, in whole or in part, any such Voidable Transfer, or elects to
do so upon the reasonable advice of its counsel, then, as to any such Voidable
Transfer, or the amount thereof that Lender is required or elects to repay or
restore, and as to all reasonable costs, expenses, and attorneys fees of Lender,
the Obligations shall automatically shall be revived, reinstated, and restored
and shall exist as though such Voidable Transfer had never been made.
 
18.14           Reimbursement Among the Borrowers.  To the extent that any
Borrower shall be required to pay a portion of the Borrowers’ Obligations which
shall exceed the amount of loans, advances or other extensions of credit
received by any such Borrower and all interest, costs, fees and expenses
attributable to such loans, advances or other extensions of credit, then such
Borrower shall be reimbursed by the other Borrowers for the amount of such
excess pro rata, based on their respective net worth as of the date
hereof.  This Section is intended only to define the relative rights of any
Borrower among the Borrowers and nothing set forth in this Section is intended
to or shall impair the obligations of the Borrowers, jointly and severally, to
pay the Borrowers’ Obligations to Lender as and when the same shall become due
and payable in accordance with the terms hereof.
 
18.15           Guaranty.  The effect of the joint and several obligations of
the Borrowers hereunder is that each Borrower hereby unconditionally and
absolutely guarantees to the Bank, irrespective of the validity, regularity or
enforceability of this Agreement or any other Loan Documents, the full and
prompt payment in full to Lender at maturity of all Borrowers’ Obligations.  The
guaranty set forth in this Section shall in all respects be continuing, absolute
and unconditional, and shall remain in full force and effect until the
Borrowers’ Obligations have been fully repaid.  The guaranty set forth in this
Section is an absolute and unconditional guaranty of payment and not of
collectability.  THE GUARANTY OBLIGATION SET FORTH IN THIS SECTION SHALL IN ALL
RESPECTS BE IN FURTHERANCE, AND SHALL IN
 
 
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NO EVENT BE DEEMED IN LIMITATION, OF THE OBLIGATIONS OF EACH BORROWER UNDER THIS
AGREEMENT.
 
18.16           Joint and Several Liability.  Except as specifically set forth
herein, the liability of each Borrower under this Agreement and the other Loan
Documents in general shall be joint and several, and each reference herein to
the Borrowers shall be deemed to refer to each such Borrower.  In furtherance
and not in limitation of Lender’s rights and remedies hereunder or at law,
Lender may proceed under this Agreement and the other Loan Documents against any
one or more of the Borrowers in its absolute and sole discretion for any of the
Borrowers’ Obligations or any other liability or obligation of any Borrower
arising hereunder.
 
18.17           Representatives.  Lender is authorized to rely on any written,
verbal, electronic, telephonic or telecopy loan requests which Lender believes
in its good faith judgment to emanate from a Representative (as defined below)
of the Borrowers, whether or not that is in fact the case.  Each Borrower hereby
irrevocably confirms, ratifies and approves all such advances by Lender and
shall indemnify Lender against losses and expenses in connection with any
advance made in connection with such reliance by Lender (including court costs,
reasonable attorneys’ and paralegals’ fees) and shall hold Lender harmless with
respect thereto.  Notwithstanding anything contained in this Agreement to the
contrary, each Borrower hereby appoints Westmoreland Parent (the
“Representative”) to each act as its sole and exclusive representatives under
this Agreement for all purposes, including without limitation, to receive
notices and other communications from Lender hereunder, to make requests for
advances of funds hereunder and to amend this Agreement; provided, that the
Company may change it Representatives under this Agreement by giving notice of
such change to Lender.  Lender shall have (i) no obligation to communicate with
any Borrower other than the Representatives concerning this Agreement, any note
or any other matter related to the Obligations and (ii) no responsibility with
respect to the allocation among the Borrowers of the funds advanced hereunder.
 
SECTION 19
 
NONLIABILITY OF LENDER
 
The relationship among the Borrowers on the one hand and Lender on the other
hand shall be solely that of Borrower and lender.  Lender has no fiduciary
relationship with or duty to any Borrower arising out of or in connection with
this Agreement or any of the other Loan Documents, and the relationship between
the Borrowers, on the one hand, and Lender, on the other hand, in connection
herewith or therewith is solely that of debtor and creditor.  Lender undertakes
no responsibility to any Borrower to review or inform any Borrower of any matter
in connection with any phase of any Borrower’s business or operations.  Each
Borrower agrees, on behalf of itself and each other Borrower, that Lender shall
have no liability to any Borrower (whether sounding in tort, contract or
otherwise) for losses suffered by any Borrower in connection with, arising out
of, or in any way related to the transactions contemplated and the relationship
established by the Loan Documents, or any act, omission or event occurring in
connection therewith, unless it is determined in a final non-appealable judgment
by a court of competent jurisdiction that such losses resulted from the gross
negligence or willful misconduct of Lender from which recovery is sought.  NO
BORROWER OR LENDER SHALL BE LIABLE FOR ANY DAMAGES ARISING FROM THE USE BY
OTHERS OF ANY
 
 
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INFORMATION OR OTHER MATERIALS OBTAINED THROUGH INTRALINKS OR OTHER SIMILAR
INFORMATION TRANSMISSION SYSTEMS IN CONNECTION WITH THIS AGREEMENT, NOR SHALL
ANY BORROWER OR LENDER HAVE ANY LIABILITY WITH RESPECT TO, AND EACH BORROWER AND
EACH LENDER PARTY HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE FOR ANY SPECIAL,
PUNITIVE, EXEMPLARY, INDIRECT OR CONSEQUENTIAL DAMAGES RELATING TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ARISING OUT OF ITS ACTIVITIES IN
CONNECTION HEREWITH OR THEREWITH (WHETHER BEFORE OR AFTER THE CLOSING
DATE).  Each Borrower acknowledges that it has been advised by counsel in the
negotiation, execution and delivery of this Agreement and the other Loan
Documents to which it is a party.  No joint venture is created hereby or by the
other Loan Documents or otherwise exists by virtue of the transactions
contemplated hereby among the Borrowers and Lender.
 
(Signature Page Follows)

 
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(Signature Page to Loan and Security Agreement)

The parties hereto have duly executed this Loan and Security Agreement as of the
date first written above.
 
BORROWERS:
WESTMORELAND COAL COMPANY,
a Delaware corporation
 
By: /s/ Jennifer S. Grafton
Jennifer S. Grafton
Secretary
     
WESTMORELAND ENERGY LLC, a
Delaware limited liability company
 
By: /s/ Jennifer S. Grafton
Jennifer S. Grafton
Secretary
     
WESTMORELAND - NORTH
CAROLINA POWER, L.L.C., a Virginia
limited liability company
 
By: /s/ Jennifer S. Grafton
Jennifer S. Grafton
Secretary
     
WEI-ROANOKE VALLEY, INC., a
Delaware corporation
 
By: /s/ Jennifer S. Grafton
Jennifer S. Grafton
Secretary
     
WESTMORELAND - ROANOKE
VALLEY, L.P., a Delaware limited
partnership
 
By:WEI-Roanoke Valley, Inc.
its general partner
 
By: /s/ Jennifer S. Grafton
      Jennifer S. Grafton
      Secretary
   

 
 
 
 

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(Signature Page to Loan and Security Agreement)
 
BORROWERS:
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
       Jennifer S. Grafton
        Secretary
 
By:  Westmoreland-North Carolina Power,   L.L.C.,
        its general partner
 
By: /s/ Jennifer S. Grafton
      Jennifer S. Grafton
      Secretary
     
WESTMORELAND RESOURCES,
 INC., a Delaware corporation
 
By: /s/ Jennifer S. Grafton
Jennifer S. Grafton
Secretary
     
WESTMORELAND KEMMERER,
INC., a Delaware corporation
 
By: /s/ Jennifer S. Grafton
Jennifer S. Grafton
Secretary
     
WESTMORELAND COAL SALES
COMPANY, INC., a Delaware corporation
 
By: /s/ Jennifer S. Grafton
Jennifer S. Grafton
Secretary

 
 

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(Signature Page to Loan and Security Agreement)
 
BORROWERS:
WRI PARTNERS, INC., a Delaware
corporation
 
By: /s/ Jennifer S. Grafton
Jennifer S. Grafton
Secretary
     
WCC LAND HOLDING COMPANY,
INC., a Delaware corporation
 
By: /s/ Jennifer S. Grafton
Jennifer S. Grafton
Secretary

 
 

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(Signature Page to Loan and Security Agreement)
 
LENDER:
THE PRIVATEBANK AND TRUST
COMPANY
 
By: /s/ Susan Lanz
Susan Lanz
Managing Director
   

 
 

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EXHIBIT A—COMPLIANCE CERTIFICATE
 
Attached to and made a part of that certain Loan and Security Agreement, as it
may be amended in accordance with its terms from time to time, including all
exhibits attached thereto (the “Agreement”) of even date herewith among
WESTMORELAND COAL COMPANY, a Delaware corporation (“Westmoreland Parent”),
WESTMORELAND ENERGY LLC, a Delaware limited liability company (“Westmoreland
Energy”), WESTMORELAND - NORTH CAROLINA POWER, L.L.C., a Virginia limited
liability company (“Westmoreland NC”), WEI-ROANOKE VALLEY, INC., a Delaware
corporation (“WEI”), WESTMORELAND – ROANOKE VALLEY, L.P., a Delaware limited
partnership (“Westmoreland Roanoke”), WESTMORELAND PARTNERS, a Virginia general
partnership (“Westmoreland”), WESTMORELAND RESOURCES, INC., a Delaware
corporation (“Westmoreland Resources”), WESTMORELAND KEMMERER, INC., a Delaware
corporation (“Kemmerer”), WESTMORELAND COAL SALES COMPANY, INC., a Delaware
corporation (“Coal Sales”), WRI PARTNERS, INC., a Delaware corporation (“WRI”)
and WCC LAND HOLDING COMPANY, INC., a Delaware corporation (“WCC”; together with
Westmoreland Parent, Westmoreland Energy, Westmoreland NC, WEI, Westmoreland
Roanoke, Westmoreland, Westmoreland Resources, Kemmerer Coal Sales and WRI,
individually a “Borrower” and collectively the “Borrowers”), and THE PRIVATEBANK
AND TRUST COMPANY (“Lender”).
 
This Certificate is submitted pursuant to Section 9.3 of the Agreement.
 
The undersigned hereby certifies to Lender that as of the date of this
Certificate:
 
1.           The undersigned is the _____________________ of Borrowers.
 
2.           There exists no event or circumstance which is or which with the
passage of time, the giving of notice, or both would constitute an Event of
Default, as that term is defined in the Agreement, or, if such an event of
circumstance exists, a writing attached hereto specifies the nature thereof, the
period of existence thereof and the action that Borrowers have taken or proposes
to take with respect thereto.
 
3.           No material adverse change in the business, property, assets,
financial condition or results of operations of Borrowers, taken as a whole, has
occurred since [date of last Compliance Certificate/last financial statements
delivered prior to closing], or, if such a change has occurred, a writing
attached hereto specifies the nature thereof and the action that Borrowers have
taken or proposes to take with respect thereto.
 
4.           Borrowers are in compliance in all material respects with their
warranties and covenants in the Agreement (except to the extent already
qualified by materiality, in which case Borrowers shall comply in all respects),
or, if Borrowers are not in compliance in all material respects with any of such
warranties or covenants in the Agreement, a writing attached hereto specifies
the nature thereof, the period of existence thereof and the action that
Borrowers have taken or proposes to take with respect thereto.
 

Exhibit A
Page 1
 

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5.           The financial statements of each Borrower being concurrently
delivered herewith have been prepared in accordance with GAAP consistently
applied and there have been no material changes in accounting policies or
financial reporting practices of such Borrower since [date of the last
Compliance Certificate/date of last financial statements delivered prior to
closing] or, if any such change has occurred, such changes are set forth in a
writing attached hereto.
 
6.           Attached hereto is a true and correct calculation of the financial
covenants contained in the Agreement.
 
BORROWERS:
WESTMORELAND COAL COMPANY,
a Delaware corporation
 
By:                                                                
Name:                                                              
Title:                                                              
     
WESTMORELAND ENERGY LLC, a
Delaware limited liability company
 
By:                                                                
Name:                                                              
Title:                                                              
     
WESTMORELAND - NORTH
CAROLINA POWER, L.L.C., a
Virginia limited liability company
 
By:                                                                
Name:                                                              
Title:                                                              
     
WEI-ROANOKE VALLEY, INC., a
Delaware corporation
 
By:                                                                
Name:                                                              
Title:                                                              

 
Exhibit A
Page 2
 

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WESTMORELAND - ROANOKE
VALLEY, L.P., a Delaware limited
partnership
 
    By:WEI-Roanoke Valley, Inc.
         its general partner
 
         By:
      Name:
         Title:
     
WESTMORELAND PARTNERS, a
Virginia general partnership
 
    By:Westmoreland-Roanoke Valley,
          L.P., its general partner
 
     By:WEI-Roanoke Valley, Inc.,
     its general partner
 
    By: 
    Name: 
    Title: 
 
    By:Westmoreland-North Carolina
         Power, L.L.C., its general partner
 
    By:                                                    
    Name:
    Title: 
     
WESTMORELAND RESOURCES,
 INC., a Delaware corporation
 
By:                                                                
Name:                                                              
Title:                                                              

 

 
Exhibit A
Page 3
 

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WESTMORELAND KEMMERER,
INC., a Delaware corporation
 
By:                                                                
Name:                                                              
Title:                                                              
     
WESTMORELAND COAL SALES
COMPANY, INC., a Delaware corporation
 
By:                                                                
Name:                                                              
Title:                                                              
     
WRI PARTNERS, INC., a Delaware
corporation
 
By:                                                                
Name:                                                              
Title:                                                              
     
WCC LAND HOLDING COMPANY,
INC., a Delaware corporation
 
By:                                                                
Name:                                                              
Title:                

Exhibit A
Page 4
 

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EXHIBIT B—NOTICE OF BORROWING
 
Date:  ___________, ______
 
This certificate is given by ______________________, an authorized
representative [____________] (the “Representative”), on behalf of itself and
each of WESTMORELAND COAL COMPANY, a Delaware corporation (“Westmoreland
Parent”), WESTMORELAND ENERGY LLC, a Delaware limited liability company
(“Westmoreland Energy”), WESTMORELAND - NORTH CAROLINA POWER, L.L.C., a Virginia
limited liability company (“Westmoreland NC”), WEI-ROANOKE VALLEY, INC., a
Delaware corporation (“WEI”), WESTMORELAND – ROANOKE VALLEY, L.P., a Delaware
limited partnership (“Westmoreland Roanoke”), WESTMORELAND PARTNERS, a Virginia
general partnership (“Westmoreland”), WESTMORELAND RESOURCES, INC., a Delaware
corporation (“Westmoreland Resources”), WESTMORELAND KEMMERER, INC., a Delaware
corporation (“Kemmerer”), WESTMORELAND COAL SALES COMPANY, INC., a Delaware
corporation (“Coal Sales”), WRI PARTNERS, INC., a Delaware corporation (“WRI”)
and WCC LAND HOLDING COMPANY, INC., a Delaware corporation (“WCC”; together with
Westmoreland Parent, Westmoreland Energy, Westmoreland NC, WEI, Westmoreland
Roanoke, Westmoreland, Westmoreland Resources, Kemmerer Coal Sales and WRI,
individually a “Borrower” and collectively the “Borrowers”), pursuant to
Section 2.3.2 of that certain Loan and Security Agreement dated as of June 29,
2012 among Borrowers and THE PRIVATEBANK AND TRUST COMPANY (“Lender”) (as such
agreement may have been amended, restated, supplemented or otherwise modified
from time to time, the “Loan Agreement”).  Capitalized terms used herein without
definition shall have the meanings set forth in the Loan Agreement.
 
The undersigned authorized representative of Borrower hereby gives notice to
Lender of Borrower’s request to on [  date  ] borrow $[__________] of Revolving
Loans.
 
The undersigned authorized representative of Borrower hereby certifies that,
both before and after giving effect to the request above (i) each of the
conditions precedent set forth in Section 17.2 of the Loan Agreement has been
satisfied, (ii) the representations and warranties contained in each of the Loan
Documents are true and correct in all material respects as of the date hereof,
except for any representation or warranty limited by its terms to a specific
date and taking into account any amendments to the Schedules or Exhibits as a
result of any disclosures made by Borrower to Lender after the Closing Date and
approved by Lender and (iii) no Default or Event of Default has occurred and is
continuing on the date hereof.
 
The undersigned authorized Representative has executed and delivered this
certificate this ____ day of ___________, ____.
 
Exhibit B
Page 1
 

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REPRESENTATIVE:
WESTMORELAND COAL COMPANY,
a Delaware corporation
 
By:                                                                
Name:                                                              
Title:                                                              

 

 Exhibit B
Page 2
 

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EXHIBIT C – NOTICE OF CONVERSION/CONTINUATION
 
To:
The PrivateBank and Trust Company, as Lender

 
Please refer to the Loan and Security Agreement dated as of June 29, 2012 (as
amended, restated, supplemented or otherwise modified from time to time, the
“Loan Agreement”) among WESTMORELAND COAL COMPANY, a Delaware corporation
(“Westmoreland Parent”), WESTMORELAND ENERGY LLC, a Delaware limited liability
company (“Westmoreland Energy”), WESTMORELAND - NORTH CAROLINA POWER, L.L.C., a
Virginia limited liability company (“Westmoreland NC”), WEI-ROANOKE VALLEY,
INC., a Delaware corporation (“WEI”), WESTMORELAND – ROANOKE VALLEY, L.P., a
Delaware limited partnership (“Westmoreland Roanoke”), WESTMORELAND PARTNERS, a
Virginia general partnership (“Westmoreland”), WESTMORELAND RESOURCES, INC., a
Delaware corporation (“Westmoreland Resources”), WESTMORELAND KEMMERER, INC., a
Delaware corporation (“Kemmerer”), WESTMORELAND COAL SALES COMPANY, INC., a
Delaware corporation (“Coal Sales”), WRI PARTNERS, INC., a Delaware corporation
(“WRI”) and WCC LAND HOLDING COMPANY, INC., a Delaware corporation (“WCC”;
together with Westmoreland Parent, Westmoreland Energy, Westmoreland NC, WEI,
Westmoreland Roanoke, Westmoreland, Westmoreland Resources, Kemmerer Coal Sales
and WRI, individually a “Borrower” and collectively the “Borrowers”), and THE
PRIVATEBANK AND TRUST COMPANY, as Lender.  Terms used but not otherwise defined
herein are used herein as defined in the Loan Agreement.
 
The undersigned, on behalf of each of Borrower, hereby gives irrevocable notice,
pursuant to Section 2.3.3 of the Loan Agreement, of its request to:
 
(a)           on [  date  ] convert $[________] of the aggregate outstanding
principal amount of the [_______] Loan, bearing interest at the [________] Rate,
into a(n) [________] Loan [and, in the case of a LIBOR Loan, having an Interest
Period of [_____] months];
 
[(b)           on [  date  ] continue $[________] of the aggregate outstanding
principal amount of the [_______] Loan, bearing interest at the LIBOR Rate, as a
LIBOR Loan having an Interest Period of [_____] months].
 
The undersigned hereby represents and warrants that all of the conditions
contained in Section 17.2 of the Loan Agreement have been satisfied on and as of
the date hereof, and will continue to be satisfied on and as of the date of the
conversion/continuation requested hereby, before and after giving effect
thereto.
 
The Representative has caused this Notice of Conversion/Continuation to be
executed and delivered by its officer thereunto duly authorized on ___________,
______.
 
Exhibit C
Page 1
 

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REPRESENTATIVE:
WESTMORELAND COAL COMPANY,
a Delaware corporation
 
By:                                                                
Name:                                                              
Title:                                                              

 
Exhibit C
Page 2