Exhibit 10.1




Exhibit 10.1




	 	 	 	 	 
	

WESTMORELAND COAL COMPANY

Manual of Policies:
	 	Number: GP- 33



Revision Date: January 1, 2009

Supersedes: Previously Issued Letters & Memos 

Approved Issuing Officer:



Original signed as Policy # GP-33 on file in Corporate Office

Name: Keith Alessi 

Title: Chairman of the Board, President & CEO
	 	 
	 	 	 
	COMPENSATION
Title:

ANNUAL INCENTIVE PLAN (AIP)

	 	 	 







	1.	 	POLICY STATEMENT






Westmoreland Coal Company’s Annual Incentive Program (AIP) is designed to compensate
designated employees with annual financial incentives for the accomplishment of key
strategic goals and objectives intended to promote financial performance, productivity and
safety.




	2.	 	ELIGIBILITY






You are an “Eligible Employee” if:




	 	•	 	You are an employee designated by Westmoreland Coal Company to be eligible






	 	•	 	You are an active full-time employee of the Company, scheduled to work at least 40 hours per week






	3.	 	DETERMINATION AND PAYMENT OF AIP PAYMENTS






The Company measures the accomplishments of our employees based on financial, safety and
individual components. The “Targeted Amount” of the incentive is based on a percentage of
the employee’s base salary relative to the employee’s position within Westmoreland.




	 	•	 	Financial Goals — are based on Westmoreland attaining or exceeding its
budgeted operating income goals. Financial Goals have a threshold, target, and
double target.






	 	•	 	Safety Goals — are based on the actual Mine Safety & Health
Administration (MSHA) Reportable Incident Rate (RIR) for the coal industry (strip
mines, preparation plants and independent shops/yards). Safety Goals have a
threshold, target, and double target.






	 	•	 	Individual Goals — are based on achievement of individual objectives.






The components of Westmoreland’s Annual Incentive Plan (Financial Goals, Safety Goals, and
Individual Goals) have different weight and emphasis depending on whether the employee is in
Operations or Corporate. Employees have the opportunity to earn more than 100% of their
individual goals, based on exemplary performance.




3.1 OPERATIONS MANAGEMENT




For those eligible employees in Operations, the following guidelines will apply relative to
their Annual Incentive Plan:




	 	•	 	Financial Goals: The Financial Goal is 40% of Targeted Amount based on
the Mine’s/Division’s budgeted Operating Income.






	 	•	 	Financial Threshold: Financial Threshold is defined as meeting the annual
budgeted Operating Income. 50% of the Financial Goal will be paid upon
achieving Financial Threshold. Under no circumstances will a payout of the
Financial Goal be made if Financial Threshold is not achieved.






	 	•	 	Financial Target: Financial Target is defined as exceeding Financial
Threshold by 7.5%. 100% of the Financial Goal will be paid upon meeting
Financial Target. Results that fall between Financial Threshold and
Financial Target will result in a prorated calculation between 50% and 100%.
	 
	 	 	 	Financial Double Target: Financial Double Target is defined as exceeding
Financial Threshold by 15%. 200% of the Financial Goal will be paid upon
achieving Financial Double Target. Results that fall between Financial Target
and Financial Double Target will result in a prorated calculation between 100%
and 200%. 200% is the maximum payout of the Financial Goal even if Financial
Double Target is exceeded.




 


 









 







	 	 	 	 	 	 	 	 	 
	Title: 

ANNUAL INCENTIVE PLAN (AIP)

	 	No. 

GP – 33
	 	Date Issued:

12/1/08
	 	Supersedes

issued letters
	 	Page 2 of 4







	 	•	 	Safety Goals: 30% of Targeted Amount will be based upon achieving the
following Safety Goals for each mine.






	 	•	 	Safety Threshold: Safety Threshold is defined as meeting the annual
National Mine Safety & Health Administration (MSHA) average for Reportable
Incident Rate (RIR) for the coal industry (strip mines, preparation plants,
and independent shops/yards). 50% of the Safety Goal will be paid upon
achieving Safety Threshold. Under no circumstances will a payout of the
Safety Goal be made if Safety Threshold is not met.






	 	•	 	Safety Target: Safety Target is defined as safety experience 25% better
than Safety Threshold. 100% of the Safety Goal will be paid upon achieving
Safety Target. Results falling between Safety Threshold and Safety Target
will result in a prorated calculation between 50% and 100%.






	 	•	 	Safety Double Target: Safety Double Target is defined as safety experience
50% better than Safety Threshold. 200% of the Safety Goal will be paid upon
achieving Safety Double Target. Results falling between Safety Target and
Safety Double Target will result in a prorated calculation between 100% and
200%. 200% is the maximum payout of the Safety Goal, even if Safety Double
Target is exceeded.






	 	•	 	Individual Goals: The Individual Goal is 30% of Targeted Amount and will
be based on achievement of certain individual goals.






	 	•	 	The percentage payout will be evaluated on achievement of certain
individual goals established between the employee and his/her manager and
will be based on the employee’s overall performance evaluation. For the
Individual Goal, employees and their manager will select two goals for the
purpose of the AIP. These goals should be defined no later than March 31 of
each applicable year (or on the employee’s date of hire if later than March
31). All goals should be “SMART” goals in that they are Specific,
Measurable, Aligned, Realistic, and Time-bound. The individual goals will
require approval by the Westmoreland President/CEO and VP of Human Resources
and Administration.






	 	•	 	The individual goals cannot be related to safety or financial performance.
Further, there will be no payout for individual goals if a person is deemed
responsible for a material deficiency relative to the Sarbanes-Oxley Act
(SOX).






3.2 CORPORATE MANAGEMENT




If an employee is considered to be an eligible corporate employee, the following guidelines
will apply relative to their Annual Incentive Plan:




	 	•	 	Financial Goals: The Financial Goal is 55% of Targeted Amount based on
the corporate’s budgeted Operating Income.






	 	•	 	Threshold: Threshold is defined as meeting the annual budgeted Operating
Income. 50% of the Financial Goal will be paid upon achieving Threshold.
Under no circumstances will a payout of the Financial Goal be made if
Threshold is not achieved.






	 	•	 	Target: Target is defined as exceeding Threshold by 7.5%. 100% of the
Financial Goal will be paid upon meeting Target. Results that fall between
Threshold and Target will result in a prorated calculation between 50% and
100%.






	 	•	 	Double Target: Double Target is defined as exceeding Threshold by 15%.
200% of the Financial Goal will be paid upon achieving Double Target.
Results that fall between Target and Double Target will result in a prorated
calculation between 100% and 200%. 200% is the maximum payout of the
Financial Goal even if Double Target is exceeded.






	 	•	 	Individual Goals: The Individual Goal is 45% of Targeted Amount and will
be based on achievement of certain individual goals.






	 	•	 	The percentage payout will be evaluated on achievement of certain
individual goals established between the employee and his/her manager and
will be based on the employee’s overall performance evaluation. For the
Individual Goal, employees and their manager will select two goals for the
purpose of the AIP. These goals should be defined no later than March 31 of
each applicable year (or on the employee’s date of hire if later than March
31). All goals should be “SMART” goals in that they are Specific,
Measurable,
Aligned, Realistic, and Time-bound. The individual goals will require
approval by the Westmoreland President/CEO and VP of Human Resources and
Administration.






	 	•	 	The individual goals cannot be related to financial performance. Further,
there will be no payout for individual goals if a person is deemed
responsible for a material deficiency relative to the Sarbanes-Oxley Act
(SOX).




 


 









 





Page 3 of 4




	4.	 	Important Plan Terms and Conditions:






	 	•	 	Any incentive or bonus award may be adjusted either up or down at the
sole discretion of the Westmoreland Coal Company’s CEO, based upon individual
performance and/or other factors regardless of whether it is earned in accordance
with this and/or any other document.






	 	•	 	Awards are capped at two times target for each Financial and Safety
goals.






	 	•	 	All incentive awards granted will be calculated based upon the
participant’s base salary earned during the twelve months ending on December
31st of the applicable year.






	 	•	 	A participant must be employed by Westmoreland Coal Company or its
subsidiaries on the date the incentive payments are distributed in order to receive
any payment under the Plan.






	 	•	 	Incentive award checks will be distributed following completion of
Westmoreland Coal Company’s annual audit and approval of Westmoreland Coal
Company’s Compensation & Benefits Committee, typically at the end of the first
quarter of the subsequent year.






	 	•	 	Taxes, deferrals (401(k)) and distributions that are required to be
withheld by federal, state or local or other governmental authority shall be
deducted from all payments.






	 	•	 	Any incentive award for a newly hired or promoted participant will be
based upon the base salary earned from their date of hire to December
31st.






	 	•	 	No member of the Board of Directors or the Compensation and Benefits
Committee shall be liable for any action taken or determination made in good faith
with respect to AIP.






	 	•	 	Receipt of any portion of the incentive award is subject to all terms and
conditions described in this document.






	 	•	 	Participation in this Plan is neither a contract nor a guarantee of continuing employment.






	 	•	 	This Plan may be modified, suspended or terminated at any time by Westmoreland Coal Company.




 


 









 





Page 4 of 4



ADDENDUM

WESTMORELAND COAL COMPANY ANNUAL INCENTIVE PLAN FOR NON-UNION EMPLOYEES




	 	 	 	 	 	 	 
	Level	 	Position or Classification*	 	AIP %	 
	1
	 	• President/CEO	 	 	70	%
	 
	 	 	 	 	 	 
	2
	 	• Chief Financial Officer	 	 	45	%
	 
	 	• VP, Coal Operations	 	 	 	 
	 
	 	 	 	 	 	 
	3
	 	• General Counsel	 	 	40	%
	 
	 	• Controller	 	 	 	 
	 
	 	• Vice Presidents of a Functional Area	 	 	 	 
	 
	 	• Mine Managers	 	 	 	 
	 
	 	 	 	 	 	 
	4
	 	• Directors of a Functional Area	 	 	30	%
	 
	 	• Assistant General Counsel	 	 	 	 
	 
	 	 	 	 	 	 
	5
	 	• Managers of a Functional Area	 	 	20	%
	 
	 	 	 	 	 	 
	6
	 	• Superintendents	 	 	15	%
	 
	 	• Supervisors	 	 	 	 
	 
	 	• Other exempt salary personnel who are individual contributors