exv10w3









EXHIBIT 10.3




FORM OF




FIXED PAYMENT NOTE




			
	 	 	 
	$27,215,982	 	 
	Denver, Colorado
	 	Executed October 16, 2008






     FOR VALUE RECEIVED, the undersigned, FEEDSTOCK INVESTMENTS IV, LLC, a Delaware limited
liability company (“Investor”), having an address of 82 Devonshire Street, R7E, Boston,
Massachusetts 02109, promises to pay to the order of WESTMORELAND RESOURCES, INC., a Delaware
corporation having an address of Two North Cascade Avenue, Colorado Springs, Colorado 80903
(“WRI”), the amounts described below as set forth herein. Any defined term used herein which is
not defined herein shall have the meaning given such term in the Membership Interest Purchase
Agreement dated effective October 16, 2008 among Investor, WRI, Absaloka Coal, LLC, a Delaware
limited liability company (“Absaloka”) and WRI Partners, Inc., a Delaware corporation (the
“Agreement”), regarding the sale by WRI to Investor of WRI’s membership interest in Absaloka. This
Note is subject to the terms and the obligations of Investor and WRI set forth in the Agreement.



     Maturity/Payment Schedule. Investor shall pay to WRI the amount (the “Fixed Payment”)
of $2,000,000 each calendar quarter, according to the terms and subject to adjustments set forth
herein. Payment for the quarter from the date hereof through December 31, 2008 shall be prorated
based on the number of days in the quarter. The Fixed Payment shall be paid within ten (10)
business days following Investor’s receipt of an invoice from WRI delivered after each completed
calendar quarter, commencing with the invoice pertaining to the calendar quarter ending December
31, 2008, and continuing through and until the earliest of (x) the payment in respect of the
calendar quarter ending December 31, 2012 (the “Maturity Date”) and (y) such date as a total amount
of $27,215,982 (the “Principal Sum”) and all interest accrued thereon has been paid under this Note
and (z) the occurrence of any of the events set forth under “Termination of Note” below. On the
Maturity Date, unless the Note has been earlier terminated, the remaining Principal Sum and all
accrued interest shall be immediately due and payable. In circumstances described (i) in Section 7
of the Agreement upon the occurrence of a Breach Liquidation, and (ii) in Section 8 of the
Agreement upon the withdrawal of Investor from Absaloka, Absaloka may make Fixed Payments to WRI on
behalf
of Investor, which payments shall be applied by WRI to the Fixed Payment Obligations
hereunder.



     No Prepayment. This Note may not be prepaid at the election of Investor.



     Deferral of Fixed Payments. If the Fixed Payment for a given calendar quarter (plus
any deferred Fixed Payment from a prior period) exceeds an amount which is equal to ninety percent
(90%) of Investor’s share of Indian Coal Production Tax Credits available to Absaloka for a given
calendar quarter (the “Maximum Credit”) under the Amended and Restated Limited Liability Company
Agreement of Absaloka dated effective October 16, 2008 (the “Operating Agreement”), Investor shall
have the right to defer the payment of such excess amount until the



 









 







next succeeding calendar
quarter, at which time such excess amount shall be paid, in addition to the $2,000,000 Fixed
Payment, subject to additional deferral in the event the Maximum Credit is exceeded. The deferral
provided for in the preceding sentence shall be subject to adjustment in accordance with the
provisions of Section 14.2 of the Agreement. Investor’s obligation to make Fixed Payments shall in
no event be deferred beyond the payment in respect of the quarter ending December 31, 2012.



     Suspension of Fixed Payments. Notwithstanding the foregoing, Investor may suspend
Fixed Payments upon the occurrence of the following: (i) a Disqualification Event or a
Disallowance Event, as provided under Section 12 of the Agreement; (ii) under the circumstances
specified in Section 12.3(c)(iii) of the Agreement; (iii) the enactment of an amendment in or to
the Internal Revenue Code that eliminates the Indian Coal Production Tax Credits that are available
to Absaloka from the production and sale of coal from the Sublease; or (iv) the failure of Absaloka
to provide tax information to Investor by April 1 of any year. With respect to the Fixed Payments
suspended by reason of the occurrence of the events set forth in clauses (i) and (iii) above, Fixed
Payments shall be resumed at the earlier of (x) Cash Payout (as defined in the Operating Agreement
and in accordance with the terms of Section 12 of the Agreement) or (y) Investor’s notice to
Absaloka and WRI that it is withdrawing from Absaloka. The obligation to make Fixed Payments under
the circumstances described in Section 12.3(c)(iii) shall be dependent on the requirements of such
Section. With respect to the Fixed Payments suspended by reason of the occurrence of the event set
forth in (iv) above, upon the delivery to Investor by Absaloka of tax information, Investor shall
pay to WRI all accrued Fixed Payments, including any Fixed Payments covering periods of suspension.



     Termination of Note. Investor’s obligation to make Fixed Payments in accordance with
the terms of this Note shall terminate if prior to the Maturity Date either of the following events
occurs: (i) the exercise by Investor or WRI of the right to require transfer of Investor’s
membership interest upon the failure of Absaloka to satisfy the Second Payment Conditions, in
accordance with the terms set forth in Section 6 of the Agreement; or (ii) the occurrence of a
Breach Liquidation Event, in accordance with the terms set forth in Section 7 of the Agreement.
Upon the occurrence of either such event, this Note will be deemed terminated, and, in the case of
a Breach Liquidation, all amounts accrued under this Note shall become payable.



     Interest. Interest shall accrue on the outstanding Principal Sum and unpaid interest
thereon at the rate of ten percent (10%) per annum compounded quarterly (the “Interest Rate”). All
payments made hereunder shall be applied first to the payment of accrued interest and then
against the outstanding balance of the Principal Sum. Should Investor fail to timely pay
amounts due hereunder, such overdue payments shall bear interest at the lesser of (i) twelve
percent (12%) per annum, or the maximum rate of interest allowed by applicable law (the “Default
Rate”). All interest hereunder shall be calculated on the basis of a 365-day year, actual days
elapsed.



     Payment Instructions. Investor shall make all payments due under the terms of this
Note to WRI by wire transfer of immediately available funds to an account designated by WRI or at
such other place as may be designated to Investor in writing by WRI, all in accordance with the
provisions set forth in the Agreement, except as follows:



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     (a) Until satisfaction or waiver of the Second Payment Conditions (as defined in the
Agreement), payments due under this Note shall be paid in accordance with the terms of the Approval
Escrow Agreement.



     (b) If at any time after satisfaction or waiver of the Second Payment Conditions, the Manager
of Absaloka notifies Investor and WRI in writing that Absaloka is experiencing a Cash Deficit (as
defined in the Operating Agreement), Investor shall thereafter make the Fixed Payments directly to
Absaloka, by wire transfer of immediately available funds to an account designated by the Manager
of Absaloka, until it is notified by the Manager of Absaloka in writing that Absaloka no longer is
experiencing a Cash Deficit. WRI shall treat such payment to Absaloka as satisfying an equal
amount of any accrued and unpaid obligations under this Fixed Payment Note. Investor shall notify
WRI of the amount and timing of such payments to Absaloka.



     (c) From the Escrow Commencement Date until the Conclusion of a Tax Audit (as such terms are
defined in Section 12 of the Agreement), Fixed Payments under this Note shall be paid in accordance
with the terms of the IRS Audit Escrow Agreement.



     Security; Recourse. This Note shall be a recourse obligation of Investor, secured by
a pledge by Investor to WRI of Investor’s entire membership interest in Absaloka pursuant to a
Pledge Agreement dated as of October 16, 2008.



     Remedies. The remedies provided in this Note shall be cumulative and shall be in
addition to any other rights or remedies now or hereafter provided by law or equity. Whenever WRI
shall sustain or incur any losses or out-of-pocket expenses with respect to this Note in connection
with a failure by Investor to pay all Fixed Payments when due hereunder, Investor shall pay, on
demand, to WRI, in addition to any other penalties or premiums hereunder, an amount sufficient to
compensate WRI for all such losses or out-of-pocket expenses, including, without limitation, all
costs and expenses of a suit or proceeding (or any appeal thereof) brought for recovery of all or
any part of or for protection of the indebtedness evidenced by this Note or to enforce WRI’s rights
hereunder or thereunder, including reasonable attorneys’ fees. No delay, failure or omission by
any holder of this Note, in respect of any default by Investor, to exercise any right or remedy
shall constitute a waiver of the right to exercise the right or remedy upon any such default or
subsequent default.



     Waiver. Investor and any endorser herein waives presentment, demand, notice of
dishonor, notice of acceleration and protest, and assents to any extension of time with respect to
any payment due under this Note, and to the addition or release of any party. No waiver of any
payment or other right under this Note shall operate as a waiver of any other payment or right.



     Amendment. This Note may not be changed orally, but only by an agreement in writing,
signed by the party against whom enforcement of any waiver, change, modification or discharge is
sought.



     Validity. If any of the provisions of this Note shall be held to be invalid or
unenforceable, the determination of invalidity or unenforceability of any such provision shall not
affect the validity or enforceability of any other provision or provisions hereof.



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     Successors and Assigns. This Note shall be binding upon Investor and its successors
and assigns and shall inure to the benefit of and be enforceable by WRI and its successors and
assigns.



     Notices. All notices to Investor expressly required in this Note shall be in writing
and shall be delivered by hand delivery or mailed by certified mail, return receipt requested,
postage prepaid, addressed to Investor at its address set forth above, or at such other address as
Investor shall notify the holder hereof. All such notices or other communications shall be deemed
to be properly given upon receipt of delivery by Investor.



     Conflicts. In the event of a conflict between the provisions of this Note and the
terms of either the Agreement or the Operating Agreement, the terms of the Agreement and the
Operating Agreement will control.



     Governing Law. This Note shall be construed and enforced in accordance with the law
of the State of Delaware.



     IN WITNESS WHEREOF, Investor and WRI have caused this instrument to be executed as of the day
and year first above written.



	 	 	 	 	 	 	 	 	 	 	 
	INVESTOR:	 	 	 	WRI:	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	FEEDSTOCK INVESTMENTS IV, LLC	 	 	 	WESTMORELAND RESOURCES, INC.	 	 
	By its Manager	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	By:	 	 	 	 
	Name:

	 	 

	 	 	 	Name:
	 	 

	 	 
	Title:

	 	 	 	 	 	Title:	 	 	 	 






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