Document:

exv10w1

 

Exhibit 10.1

STANDBY PURCHASE AGREEMENT

     This STANDBY PURCHASE AGREEMENT (this “Agreement”) dated as of May 2, 2007, by and between
Westmoreland Coal Company, a Delaware corporation (the “Company”), and Tontine Capital Partners,
L.P., a Delaware limited partnership (“Standby Purchaser”).

W I T N E S S E T H:

     WHEREAS, the Company proposes, as soon as practicable after the Rights Offering Registration
Statement (as defined herein) becomes effective, to distribute to holders of its common stock (the
“Common Stock”) of record as of the close of business on the record date of the Rights Offering
(the “Record Date”), non-transferable rights (the “Rights”) to subscribe for and purchase
additional shares of Common Stock (the “New Shares”) at a subscription price (the “Subscription
Price”) in accordance with the term sheet attached hereto as Annex A and incorporated herein by
reference (such term sheet, the “Term Sheet” and such offering, the “Rights Offering”); and

     WHEREAS, pursuant to the Rights Offering, stockholders of record will receive a fraction of a
Right, as determined in accordance with the Term Sheet, for each share of Common Stock held by them
as of the Record Date, and each whole Right will entitle the holder to purchase one New Share, at
the Subscription Price (the “Basic Subscription Privilege”) and to purchase New Shares not
subscribed for by other holders of rights; and

     WHEREAS, the Company has requested Standby Purchaser to agree to purchase from the Company
upon expiration of the Rights Offering, and Standby Purchaser is willing to so purchase, New
Shares, at the Subscription Price, to the extent such New Shares are not purchased by stockholders
pursuant to the exercise of Rights; and

     WHEREAS, Standby Purchaser shall have the option to purchase and the Company shall sell to
Standby Purchaser an additional number of shares of Common Stock, at the Subscription Price, up to
such amount that will result in Standby Purchaser owning not more than twenty-five percent (25%) of
the fully diluted outstanding shares of Common Stock (exclusive of stock options and unexchanged
Preferred Stock (as defined herein)) after giving effect to the Rights Offering and the exercise of
such option to purchase additional shares of Common Stock; and

     WHEREAS, in order to further induce Standby Purchaser to enter into this Agreement, the
Company has agreed to grant Standby Purchaser (including any of its permitted assignees)
registration rights with respect to the Securities (as defined herein) purchased by them pursuant
to this Agreement or otherwise owned by them pursuant to a
registration rights agreement substantially in the form attached hereto as Annex B (the
“Registration Rights Agreement”);

     NOW THEREFORE, in consideration of the foregoing and the mutual covenants herein contained,
the parties hereto hereby agree as follows:

 

 

     Section 1. Certain Other Definitions. The following terms used herein shall have the
meanings set forth below:

     “Additional Subscription Shares” shall have the meaning set forth in Section 3 hereof.

     “Affiliate” shall have the meaning set forth in Rule 12b-2 under the Exchange Act.

     “Agreement” shall have the meaning set forth in the preamble hereof.

     “Basic Subscription Privilege” shall have the meaning set forth in the recitals hereof.

     “Board” shall have the meaning set forth in Section 3(b) hereof.

     “Business Day” shall mean any day that is not a Saturday, a Sunday or a day on which banks are
required or permitted to be closed in the State of New York.

     “Certificate of Designation” shall mean the Certificate of Designation governing the Preferred
Stock.

     “Closing” shall mean the closing of the purchases described in Section 2 hereof, which shall
be held at 10:00 a.m. (New York City time) on the Closing Date at the offices of Weil, Gotshal &
Manges LLP located at 767 Fifth Avenue, New York, New York 10153, or such other time and place as
may be agreed to by the parties hereto.

     “Closing Date” shall mean the date that is three (3) Business Days after the Rights Offering
Expiration Date, or such other date as may be agreed to by the parties hereto.

     “Commission” shall mean the United States Securities and Exchange Commission, or any successor
agency thereto.

     “Common Stock” shall have the meaning set forth in the recitals hereof.

     “Company” shall have the meaning set forth in the preamble hereof.

     “Company Indemnified Persons” shall have the meaning set forth in Section 13(b) hereof.

     “Company SEC Documents” shall have the meaning set forth in Section 4(h) hereof.

     “Company Stockholder Approval” shall have the meaning set forth in Section 4(e) hereof.

     “Designee” shall have the meaning set forth in Section 8 hereof.

2

 

     “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated by the Commission thereunder.

     “Exercise Notice” shall have the meaning set forth in Section 3(b) hereof.

     “Expenses” shall have the meaning set forth in Section 7(c) hereof.

     “Indemnified Persons” shall have the meaning set forth in Section 13(b) hereof.

     “Market Adverse Effect” shall have the meaning set forth in Section 9(a)(iv) hereof.

     “Material Adverse Effect” shall mean a material adverse effect on the financial condition, or
on the earnings, financial position, operations, assets, results of operation, business or
prospects of the Company and its subsidiaries taken as a whole.

     “New Shares” shall have the meaning set forth in the recitals hereof.

     “Observer Rights” shall have the meaning set forth in Section 8 hereof.

     “Option” shall have the meaning set forth in Section 3 hereof.

     “Person” shall mean an individual, corporation, partnership, association, joint stock company,
limited liability company, joint venture, trust, governmental entity, unincorporated organization
or other legal entity.

     “Post-Closing Calculation” shall have the meaning set forth in Section 2(c) hereof.

     “Preferred Exchange” shall mean the exchange of the Preferred Stock for Common Stock in
accordance with the Term Sheet.

     “Preferred Exchange Registration Statement” shall mean the Company’s Registration Statement on
Form S-1 under the Securities Act or such other appropriate form under the Securities Act in
connection with the Preferred Exchange.

     “Preferred Stock” shall mean the Company’s Series A Preferred Stock, par value $1.00 per
share.

     “Prospectus” shall mean a prospectus, as defined in Section 2(10) of the Securities Act, that
meets the requirements of Section 10 of the Securities Act and is current with respect to the
securities covered thereby.

     “Proxy Statement” shall mean a definitive proxy statement filed with the Commission relating
to the Rights Offering and the transactions contemplated hereunder, together with all amendments,
supplements and exhibits thereto.

     “Registration Rights Agreement” shall have the meaning set forth in the recitals hereof.

3

 

     “Record Date” shall have the meaning set forth in the recitals hereof.

     “Representative” shall have the meaning set forth in Section 7(b) hereof.

     “Rights” shall have the meaning set forth in the recitals hereof.

     “Rights Offering” shall have the meaning set forth in the recitals hereof.

     “Rights Offering Expiration Date” shall mean the date on which the subscription period under
the Rights Offering expires.

     “Rights Offering Prospectus” shall mean the final Prospectus included in the Rights Offering
Registration Statement for use in connection with the issuance of the Rights.

     “Rights Offering Registration Statement” shall mean the Company’s Registration Statement on
Form S-1 under the Securities Act or such other appropriate form under the Securities Act, pursuant
to which the Rights and underlying shares of Common Stock will be registered pursuant to the
Securities Act.

     “Securities” shall mean those of the New Shares, Unsubscribed Shares and Additional
Subscription Shares that are purchased by Standby Purchaser pursuant to Section 2, 3 or 7(i)
hereof, as the case may be.

     “Securities Act” shall mean the Securities Act of 1933, as amended, and the rules and
regulations promulgated by the Commission thereunder.

     “Standby Indemnified Persons” shall have the meaning set forth in Section 13(a) hereof.

     “Standby Purchaser” shall have the meaning set forth in the preamble hereof.

     “Subscription Agent” shall have the meaning set forth in Section 7(a)(vii) hereof.

     “Subscription Price” shall have the meaning set forth in the recitals hereof.

     “Term Sheet” shall have the meaning set forth in the recitals hereof.

     “Transfer” shall have the meaning set forth in Section 11(a) hereof.

     “Triggering Event” shall have the meaning set forth in Section 3(b) hereof.

     “Unsubscribed Shares” shall have the meaning set forth in Section 2(b) hereof.

4

 

     Section 2. Standby Purchase Commitment.

     (a) Standby Purchaser hereby agrees to purchase from the Company, and the Company hereby
agrees to sell to Standby Purchaser, at the Subscription Price, all of the New Shares that will be
available for purchase by Standby Purchaser pursuant to its Basic Subscription Privilege.

     (b) Standby Purchaser hereby agrees to purchase from the Company, and the Company hereby
agrees to sell to the Standby Purchaser, at the Subscription Price, any and all New Shares if and
to the extent such New Shares are not purchased by the Company’s stockholders, excluding those New
Shares that are purchased pursuant to the oversubscription rights of the Company’s stockholders in
accordance with the Term Sheet (the “Unsubscribed Shares”).

     (c) Notwithstanding anything else contained in this Agreement, Standby Purchaser shall not
acquire Securities hereunder which would result in it or any “group” (within the meaning of Section
13(d)(3) of the Exchange Act) of which it is a member owning more than thirty percent (30%) of the
fully diluted issued and outstanding shares of Common Stock (exclusive of stock options and
unexchanged Preferred Stock) after giving effect to Standby Purchaser’s purchase of New Shares
under its Basic Subscription Privilege and Unsubscribed Shares. If any shares of the Preferred
Stock remain outstanding sixty (60) days after the Closing, Standby Purchaser’s ownership
percentage shall be recalculated and the number of such shares of Preferred Stock, on an as
converted basis, shall be included in the number of outstanding shares of Common Stock when
calculating Standby Purchaser’s ownership percentage (the “Post-Closing Calculation”). If the
number of shares of Common Stock Standby Purchaser purchased hereunder was reduced because it would
have owned more than thirty percent (30%) of the fully diluted shares of Common Stock, as
calculated above, and if the Post-Closing Calculation is performed, Standby Purchaser shall have
the option for the period of ten (10) Business Days following the date of the Post-Closing
Calculation to purchase an additional number of shares of Common Stock, at the Subscription Price,
up to such amount that will result in Standby Purchaser and any “group” (within the meaning of
Section 13(d)(3) of the Exchange Act) of which it is a member owning not more than thirty percent
(30%) of the fully diluted outstanding shares of Common Stock (exclusive of stock options) after
giving effect to Standby Purchaser’s purchase of New Shares under its Basic Subscription Privilege
and Unsubscribed Shares.

     (d) Payment of the Subscription Price for the Securities shall be made, on the Closing Date,
against delivery of certificates evidencing the Securities, in United States dollars by means of
certified or cashier’s checks, bank drafts, money orders or wire transfers.

     Section 3. Option.

     (a) If after giving effect to Standby Purchaser’s purchase of New Shares under its Basic
Subscription Privilege and Unsubscribed Shares, Standby Purchaser owns less than twenty-five
percent (25%) of the fully diluted outstanding shares of Common Stock (exclusive of stock options
and unexchanged Preferred Stock), Standby Purchaser shall have the option (the “Option”) to
purchase an additional number

5

 

of shares of Common Stock (the “Additional Subscription Shares”), at the Subscription Price,
up to such amount that will result in Standby Purchaser and any “group” (within the meaning of
Section 13(d)(3) of the Exchange Act) of which it is a member owning not more than twenty-five
percent (25%) of the fully diluted outstanding shares of Common Stock (exclusive of stock options
and unexchanged Preferred Stock) after giving effect to the Rights Offering and the exercise of the
Option. Standby Purchaser shall have the right to exercise the Option at any time from the Closing
through the tenth (10th) Business Days following the Closing upon delivery of written
notice thereof to the Company. If the Post-Closing Calculation is performed and as a result
thereof Standby Purchaser owns less than twenty-five percent (25%) of the fully diluted outstanding
shares of Common Stock, as calculated above, Standby Purchaser shall have the option for the period
of ten (10) Business Days following the date of the Post-Closing Calculation to purchase an
additional number of shares of Common Stock, at the Subscription Price, up to such amount that will
result in Standby Purchaser and any “group” (within the meaning of Section 13(d)(3) of the Exchange
Act) of which it is a member owning not more than twenty-five percent (25%) of the fully diluted
outstanding shares of Common Stock (exclusive of stock options) after giving effect to Standby
Purchaser’s purchase of New Shares under its Basic Subscription Privilege and Unsubscribed Shares
and any shares of Common Stock purchased pursuant to this Section 3.

     (b) If (i) the board of directors of the Company (the “Board”) does not recommend to the
stockholders of the Company the approval of this Agreement and the transactions contemplated
hereunder (and prompt written notice thereof shall be given to the Standby Purchaser as provided in
Section 7(a)(i)) or does recommend to the stockholders of the Company the approval of this
Agreement and the transactions contemplated hereunder and later changes such recommendation and the
Standby Purchaser subsequently terminates this Agreement pursuant to Section 12(b)(i) or Section
12(b)(ii), or (ii) the Standby Purchaser terminates this Agreement pursuant to Section 12(b)(i)
(any such event, a “Triggering Event”), Standby Purchaser shall have the option to purchase a
number of shares equal to up to 19.9% of the outstanding shares of Common Stock, at the
Subscription Price, but not to exceed that number of shares that would result in Standby Purchaser
and any “group” (within the meaning of Section 13(d)(3) of the Exchange Act) of which it is a
member owning more than twenty-five percent (25%) of the fully diluted outstanding shares of Common
Stock (exclusive of stock options) after giving effect to the exercise of such option. Standby
Purchaser shall have the right to exercise such option for a period of thirty (30) calendar days
following the date of a Triggering Event upon delivery of written notice (the “Exercise Notice”)
thereof to the Company. Prior to the occurrence of such a purchase, the Company shall comply with
Sections 7(d) and 7(f) if it has not previously done so.

     (c) If, at the time of the Triggering Event, the Company has received an Acquisition Proposal,
or an Acquisition Proposal has otherwise been publicly proposed or disclosed, and if the Standby
Purchaser delivers an Exercise Notice, the Company may, in the Company’s discretion, pay Standby
Purchaser a fee of ten million dollars ($10,000,000) in cash within ten (10) calendar days
following the delivery to the Company of the Exercise Notice rather than sell the Standby Purchaser
the shares of Common Stock contemplated by Section 3(b). The term “Acquisition Proposal” means

6

 

any bona fide proposal or offer, whether written or oral, (i) for a merger, consolidation,
dissolution, tender offer for more than fifty percent (50%) of the Company’s equity securities,
recapitalization, share exchange or other business combination involving the Company or any of its
Subsidiaries, (ii) for the issuance by the Company or any of its Subsidiaries of over fifty percent
(50%) of its equity securities or (iii) to acquire in any manner, directly or indirectly, over
thirty-five percent (35%) of the equity securities or consolidated total assets of the Company, in
each case other than the transactions contemplated by this Agreement.

     (d) Notwithstanding anything to the contrary set forth in Section 3(b) or 3(c), the Company is
not required to sell to the Standby Purchaser the shares of Common Stock or pay the cash fee
contemplated by that Section if (i) the Company notifies the Standby Purchaser that the Company
reasonably projects that it will need a liquidity infusion of $5 million or less in order to avoid
significant harm to its business, (ii) within thirty (30) days after the giving of such notice the
Standby Purchaser has not agreed to make an equity infusion or a loan in such amount to the Company
on terms reasonably acceptable to the Company and the Standby Purchaser and (iii) Standby Purchaser
terminates this Agreement pursuant to Section 12 as a result of any action taken by the Company to
satisfy such liquidity need in an amount not to exceed $5,000,000.

     Section 4. Representations and Warranties of the Company. The Company represents and
warrants to Standby Purchaser as follows:

     (a) The Company is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware and has all requisite corporate power and authority to carry on
its business as now conducted and as proposed to be conducted.

     (b) This Agreement has been duly and validly authorized, executed and delivered by the Company
and, subject to approval by the Company’s stockholders, constitutes a binding obligation of the
Company enforceable against it in accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors’
rights and remedies generally, and subject, as to enforceability, to general principles of equity,
including principles of commercial reasonableness, good faith and fair dealing (regardless of
whether enforcement is sought in a proceeding at law or in equity).

     (c) The authorized capital stock of the Company consists of (i) 20,000,000 shares of Common
Stock, of which, (A) 9,070,425 shares are issued and outstanding, as of April 13, 2007, (B)
1,094,001 shares are reserved for issuance upon conversion of the Preferred Stock, as of the date
hereof, (C) 150,000 shares are reserved for issuance upon exercise of the Company’s warrants
issuable if the Company extends its $30,000,000 bridge loan facility from SOF Investments, L.P.,
(D) 527,650 shares are reserved for issuance upon exercise of options and other awards granted
under the Company’s stock option and incentive plans, as of the date hereof, and (E) 560,747 stock
appreciation rights are issued and outstanding under the Company’s incentive plans, as of the date
hereof, and (ii) 5,000,000 shares of Preferred Stock, of which 160,129 shares are

7

 

issued and outstanding, as of the date hereof. The number of shares of Common Stock issuable
upon conversion of the Preferred Stock, upon exercise of the Company’s warrants issuable if the
Company extends its bridge loan facility from SOF Investments, L.P., and upon exercise of options
and other awards granted under the Company’s stock option and incentive plans is subject to
adjustment in the manner specified in the Certificate of Designation, the Note Purchase Agreement
dated June 29, 2006 (and the form of warrant included therein) and the stock option and incentive
plans, respectively. All of the outstanding shares of Common Stock and Preferred Stock have been
duly authorized, are validly issued, fully paid and nonassessable and were offered, sold and issued
in compliance with all applicable federal and state securities laws and without violating any
contractual obligation or any other preemptive or similar rights.

     (d) At the time the Rights Offering Registration Statement becomes effective, the Rights
Offering Registration Statement will comply in all material respects with the requirements of the
Securities Act and will not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements therein not
misleading. The Prospectus, at the time the Rights Offering Registration Statement becomes
effective and at the Closing Date, will not include an untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, however, that
the representations and warranties in this subsection shall not apply to statements in or omissions
from the Rights Offering Registration Statement or the Prospectus made in reliance upon and in
conformity with the information furnished to the Company in writing by Standby Purchaser for use in
the Rights Offering Registration Statement or in the Prospectus.

     (e) The Proxy Statement will not, on the date it is first mailed to stockholders of the
Company, contain any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading and will not, at the time the stockholders
of the Company vote at a meeting of the stockholders of the Company, to approve this Agreement and
the transactions hereunder (“Company Stockholder Approval”) and an amendment to the Company’s
Certificate of Incorporation providing for an increase in the number of authorized shares of Common
Stock to 30,000,000, omit to state any material fact necessary to correct any statement in any
earlier communication from the Company with respect to the solicitation of proxies for the Company
Stockholder Approval which shall have become false or misleading in any material respect. The
Proxy Statement will comply as to form in all material respects with the applicable requirements of
the Exchange Act. Notwithstanding the foregoing, the Company makes no representation or warranty
with respect to information furnished to the Company in writing by Standby Purchaser for inclusion
or incorporation by reference in any of the foregoing documents.

     (f) All of the Securities and New Shares will have been duly authorized for issuance prior to
the Closing (assuming Company Stockholder Approval has been obtained) and the shares issuable upon
exercise of the Option are duly authorized for issuance, and, when issued and distributed as set
forth in the Prospectus, will be validly issued, fully paid and non-assessable; and none of the
Securities or New

8

 

Shares will have been issued in violation of the preemptive rights of any security holders of
the Company arising as a matter of law or under or pursuant to the Company’s Certificate of
Incorporation, as amended, the Company’s bylaws, as amended, or any agreement or instrument to
which the Company is a party or by which it is bound.

     (g) The documents incorporated by reference into the Prospectus pursuant to Item 12 of Form
S-1 under the Securities Act, when they become effective or at the time they are filed with the
Commission, as the case may be, will comply in all material respects with the applicable provisions
of the Exchange Act.

     (h) Since January 1, 2005, the Company has filed with the Commission all forms, reports,
schedules, statements and other documents required to be filed by it through the date hereof under
the Exchange Act, or the Securities Act (all such documents, as supplemented and amended since the
time of filing, collectively, the “Company SEC Documents”). The Company SEC Documents, including
without limitation all financial statements and schedules included in the Company SEC Documents, at
the time filed or, in the case of any Company SEC Document amended or superseded by a filing prior
to the date of this Agreement, then on the date of such amending or superseding filing, and, in the
case of registration statements and proxy statements, on the dates of effectiveness and the dates
of mailing, respectively, (i) did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not misleading, and (ii)
complied in all material respects with the applicable requirements of the Exchange Act and the
Securities Act, as applicable. The audited consolidated financial statements of Company included
in Amendment No. 1 to the Company’s Annual Report on Form 10-K for the fiscal year ended December
31, 2005 and the unaudited consolidated financial statements of the Company included in the
Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006 comply as to form
in all material respects with applicable accounting requirements and with the published rules and
regulations of the Commission with respect thereto, were prepared in accordance with United States
generally accepted accounting principles applied on a consistent basis during the periods involved,
and present fairly in all material respects, the consolidated financial position of the Company and
its consolidated subsidiaries as at the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended.

     (i) Since December 31, 2006, there have not been any events, changes, occurrences or state of
facts that, individually or in the aggregate, have had or would reasonably be expected to have a
Material Adverse Effect, except as disclosed in writing by the Company to Standby Purchaser.

     Section 5. Representations and Warranties of Standby Purchaser. Standby Purchaser
represents and warrants to the Company as follows:

     (a) Standby Purchaser is a partnership duly organized, validly existing and in good standing
under the laws of its state of organization.

     (b) This Agreement has been duly and validly authorized, executed and delivered by Standby
Purchaser and constitutes a binding obligation of Standby

9

 

Purchaser enforceable against it in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors’ rights and remedies generally, and subject, as to enforceability, to general
principles of equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or in equity).

     (c) Standby Purchaser is an “accredited investor” within the meaning of Rule 501(a) under the
Securities Act and is acquiring the Securities for investment for its own account, with no present
intention of dividing its participation with others (other than in accordance with Sections 16
hereof) or reselling or otherwise distributing the same in violation of the Securities Act or any
applicable state securities laws.

     (d) Standby Purchaser understands that: (i) other than pursuant to the Registration Rights
Agreement, the resale of the Securities has not been and is not being registered under the
Securities Act or any applicable state securities laws, and the Securities may not be sold or
otherwise transferred unless (a) the Securities are sold or transferred pursuant to an effective
registration statement under the Securities Act, (b) at the Company’s request, Standby Purchaser
shall have delivered to the Company an opinion of counsel (which opinion shall be in form,
substance and scope reasonably satisfactory to the Company’s counsel) to the effect that the
Securities to be sold or transferred may be sold or transferred pursuant to an exemption from such
registration, or (c) the Securities are sold pursuant to Rule 144 promulgated under the Securities
Act; (ii) any sale of such Securities made in reliance on Rule 144 under the Securities Act may be
made only in accordance with the terms of such Rule; and (iii) except as set forth in the
Registration Rights Agreement, neither the Company nor any other Person is under any obligation to
register such Securities under the Securities Act or any state securities laws or to comply with
the terms and conditions of any exemption thereunder. Standby Purchaser acknowledges that an
appropriate restrictive legend will be placed on the certificate or certificates representing the
Securities that may be issued pursuant to this Agreement.

     Section 6. Deliveries at Closing.

     (a) At the Closing, the Company shall deliver to Standby Purchaser the following:

          (i) A certificate or certificates representing the number of shares of Common Stock issued to
Standby Purchaser pursuant to Section 2 or 3 hereof, as the case may be; and

          (ii) A certificate of an officer of the Company on its behalf to the effect that the
representations and warranties of the Company contained in this Agreement are true and correct in
all material respects on and as of the Closing Date, with the same effect as if made on the Closing
Date.

     (b) At the Closing, Standby Purchaser shall deliver to the Company the following:

10

 

          (i) Payment of the Subscription Price of the Securities purchased by Standby Purchaser, as set
forth in Section 2(d) or 3 hereof, as the case may be; and

          (ii) A certificate of Standby Purchaser to the effect that the representations and warranties
of Standby Purchaser contained in this Agreement are true and correct in all material respects on
and as of the Closing Date with the same effect as if made on the Closing Date.

     Section 7. Covenants.

     (a) Covenants. The Company agrees as follows between the date hereof and the Closing
Date, except as otherwise contemplated hereunder:

          (i) To use its reasonable best efforts to have the Board recommend to the stockholders of the
Company to approve this Agreement and the transactions contemplated hereunder, it being understood
that the Board will make its determination consistent with its fiduciary duties, and prompt written
notice shall be given to the Standby Purchaser of any such determination not to recommend;

          (ii) To as soon as reasonably practicable (A) seek Company Stockholder Approval of the Rights
Offering, the transactions contemplated hereunder and an increase in the number of authorized
shares of the Common Stock to 30,000,000 and (B) file with the Commission the Rights Offering
Registration Statement, the Preferred Exchange Registration Statement and the Proxy Statement;

          (iii) To use reasonable best efforts to cause the Rights Offering Registration Statement, the
Preferred Exchange Registration Statement and any amendments thereto to become effective as
promptly as possible, and to cause the Proxy Statement to be cleared by the Commission as promptly
as practicable;

          (iv) To use reasonable best efforts to effectuate the Rights Offering and the Preferred
Exchange;

          (v) As soon as reasonably practicable after the Company is advised or obtains knowledge
thereof, to advise Standby Purchaser with a confirmation in writing, of (A) the time when the
Rights Offering Registration Statement, the Preferred Exchange Registration Statement or any
amendment thereto has been filed or declared effective or the Prospectus or any amendment or
supplement thereto has been filed, (B) the issuance by the Commission of any stop order, or of the
initiation or threatening of any proceeding, suspending the effectiveness of the Rights Offering
Registration Statement, the Preferred Exchange Registration Statement or any amendment thereto or
any order preventing or suspending the use of any preliminary prospectus or the Prospectus or any
amendment or supplement thereto, (C) the issuance by any state securities commission of any notice
of any proceedings for the suspension of the qualification of the New Shares for offering or sale
in any jurisdiction or of the initiation, or the threatening, of any proceeding for that purpose,
(D) the receipt of any comments from the Commission, and (E) any request by the Commission for any
amendment to the Rights Offering Registration Statement, the Preferred Exchange Registration
Statement

11

 

or any amendment or supplement to the Prospectus or for additional information. The Company
will use its reasonable best efforts to prevent the issuance of any such order or the imposition of
any such suspension and, if any such order is issued or suspension is imposed, to obtain the
withdrawal thereof as promptly as possible;

           (vi) To operate the Company’s business in the ordinary course of business consistent with past
practice;

          (vii) To notify, or to cause the subscription agent for the Rights Offering (the “Subscription
Agent”) to notify Standby Purchaser, on each Friday during the exercise period of the Rights, or
more frequently if reasonably requested by Standby Purchaser, of the aggregate number of Rights
known by the Company or the Subscription Agent to have been exercised pursuant to the Rights
Offering as of the close of business on the preceding Business Day or the most recent practicable
time before such request, as the case may be;

          (viii) Not to issue any shares of capital stock of the Company, or options, warrants, purchase
rights, subscription rights, conversion rights, exchange rights, securities convertible into or
exchangeable for capital stock of the Company, or other agreements or rights to purchase or
otherwise acquire capital stock of the Company, (A) except for shares of Common Stock issuable
pursuant to the Preferred Exchange, (B) except for shares of Common Stock issuable upon exercise of
stock options existing on the date hereof, (C) except for the conversion of Preferred Stock
existing on the date hereof, (D) except for the warrants issuable to SOF Investments, L.P., and the
Common Stock issuable upon exercise of those warrants, (E) except for equity awards to employees
and directors of the Company consistent with past practices and covering not more than 185,000
shares of Common Stock and (F) except for equity awards in connection with the hiring of new
personnel by the Company and covering not more than 100,000 shares of Common Stock;

          (ix) Not to authorize any stock split, stock dividend, stock combination or similar
transaction affecting the number of issued and outstanding shares of Common Stock;

          (x) Not to declare or pay any dividends or repurchase any shares of Common Stock or Preferred
Stock, except pursuant to the Preferred Exchange; and

          (xi) Not to incur any indebtedness or guarantees thereof, other than borrowings in the
ordinary course of business and consistent with past practice.

     (b) No Shop. Between the date hereof and the Closing Date, subject to the fiduciary
duties of the Board, as determined solely by the Board acting in good faith, after receipt of the
advice of the Company’s outside legal counsel, the Company shall not, and shall not permit any of
its Affiliates, directors, officers, employees, representatives or agents of the Company
(collectively, the “Representatives”) to, directly or indirectly, (i) discuss, knowingly encourage,
negotiate, undertake, initiate, authorize, recommend, propose or enter into, any transaction
involving a merger,

12

 

consolidation, business combination, purchase or disposition of any material amount of the
assets or any capital stock of the Company or any of its subsidiaries other than the transactions
contemplated by this Agreement, the Preferred Exchange or the redemption after the Closing of the
shares of Preferred Stock not exchanged pursuant to the Preferred Exchange at the price specified
in the Certificate of Designation, (ii) facilitate, knowingly encourage, solicit or initiate
discussions, negotiations or submissions of proposals or offers in respect of any such alternative
transaction, (iii) furnish or cause to be furnished, to any Person, any information concerning the
business, operations, properties or assets of the Company or any of its subsidiaries in connection
with any such alternative transaction, or (iv) otherwise cooperate in any way with, or assist or
participate in, facilitate or knowingly encourage, any effort or attempt by any other Person to do
or seek any of the foregoing. The Company shall (and shall cause its Representatives to)
immediately cease and cause to be terminated any existing discussions or negotiations with any
Persons conducted heretofore with respect to any such alternative transaction, it being understood
that, following such termination, the Board will act consistently with its fiduciary duties and the
first sentence of this subsection (b).

     (c) Expense Reimbursement. The Company agrees to promptly reimburse Standby Purchaser
for all of its reasonable out-of-pocket costs and expenses and reasonable attorneys’ fees
(collectively, “Expenses”) incurred by Standby Purchaser in connection with this Agreement, its due
diligence investigation of the Company, the drafting and negotiation of documentation in connection
with the transactions contemplated hereunder and all other activities relating to the transactions
contemplated hereunder upon the Company’s receipt of all reasonably requested documentation to
support the incurrence by Standby Purchaser of such Expenses, provided that the Company
shall not be obligated to reimburse Expenses related to due diligence in excess of $400,000.

     (d) Registration Rights Agreement. The Company and Standby Purchaser shall execute
and deliver to each other and any of their permitted assignees on or prior to the Closing Date the
Registration Rights Agreement.

     (e) Public Statements. Neither the Company nor Standby Purchaser shall issue any
public announcement, statement or other disclosure with respect to this Agreement or the
transactions contemplated hereby without the prior consent of the other party hereto, which consent
shall not be unreasonably withheld or delayed, except (i) if such public announcement, statement or
other disclosure is required by applicable law or applicable stock market regulations, in which
case the disclosing party shall consult in advance with respect to such disclosure with the other
parties to the extent reasonably practicable, or (ii) the filing of any Schedule 13D, to which a
copy of this Agreement and the Registration Rights Agreement may be attached as an exhibit thereto.

     (f) Rights Plan. As soon as practicable after the date hereof, the Company shall
amend the Amended and Restated Rights Agreement, dated as of February 7, 2003, between the Company
and EquiServe Trust Company, N.A. to permit the acquisition by Standby Purchaser and its Affiliates
of the shares of Common Stock contemplated by Sections 2 and 3 of this Agreement.

13

 

     (g) Notice of Redemption. On the Closing Date, the Company shall send a notice of
redemption of the Preferred Stock pursuant to Section 3 of the Certificate of Designation.

     (h) Certain Acquisitions and Sales. Between the date hereof and the last date on
which Standby Purchaser may acquire shares of Common Stock from the Company pursuant to Sections 2
and 3 of this Agreement, neither Standby Purchaser nor any of its Affiliates shall acquire any
shares of Common Stock; provided, however, that the foregoing shall not restrict
the acquisition of shares of Common Stock by Standby Purchaser or its Affiliates (i) from the
Company pursuant to Sections 2, 3 and (i)of this Agreement or (ii) from Standby Purchaser or one or
more of its Affiliates. If during such period Standby Purchaser or any of its Affiliates sells or
otherwise disposes of any shares of Common Stock, other than among themselves, the 25% and 30%
maximum percentage calculations in Sections 2(c), 3(a) and 3(b) hereof shall be made as if such
sales or dispositions had not occurred.

     (i) Additional Investment. Subject to the satisfaction of the conditions set forth in
Sections 9(a)(i) — 9(a)(iv), 9(c)(i) and 9(c)(iv) as to such shares of Common Stock issued pursuant
to this Section 7(i) (or the waiver of such conditions by Standby Purchaser), at any time prior to
the Closing, at the request of the Company (which request shall be made pursuant to the adoption of
a resolution by the Board), Standby Purchaser will purchase, at the Subscription Price, shares of
Common Stock for an aggregate purchase price not to exceed $2,000,000. The Company shall use the
proceeds from such purchase by Standby Purchaser for general corporate purposes. Prior to the
occurrence of such purchase, the Company shall comply with Section 7(d) if it has not previously
done so. For purposes of this Section 7(i), any references to Closing Date in Sections 9(a)(i) -
9(a)(iv), 9(c)(i) and 9(c)(iv) shall be deemed to refer to the closing date of such purchase of
shares of Common Stock pursuant to this Section 7(i).

     Section 8. Director and Observer Rights.

     (a) The Company acknowledges and agrees that commencing on the Closing Date and for so long as
Standby Purchaser and/or its Affiliates own at least ten percent (10%) of the outstanding shares of
Common Stock, Standby Purchaser shall have the right to designate two Persons for election to the
Board who shall be reasonably acceptable to the Board and who shall be nominated for election to
the Board. During such time, the Board shall consist of not more than nine (9) members, which
number shall be reduced to seven (7) upon redemption of all of the Preferred Stock not exchanged
pursuant to the Preferred Exchange.

     (b) The Company further acknowledges and agrees that commencing on the Closing Date and for so
long as Standby Purchaser and/or its Affiliates own at least ten percent (10%) of the outstanding
shares of Common Stock, Standby Purchaser shall have the right to designate one Person who is
either an employee of Standby Purchaser or is otherwise reasonably acceptable to the Board (the
“Designee”) to act as an observer to the Board as provided below (“Observer Rights”). During such
time as Standby Purchaser has Observer Rights, the Company shall invite the Designee to attend any
meetings of the Board and any committees thereof (at the same time directors are

14

 

invited thereto) and provide the Designee with such materials (at the same time such materials
are provided to directors) as the Company provides to directors in connection with their service on
the Board and any committees thereof, provided that the Designee need not be permitted to
attend (i) any portion of any such meeting or be provided with any portion of such materials to
the extent that so doing would jeopardize any legal privilege, including the attorney-client
privilege, and to the extent the subject of such meeting or materials is potentially adverse to
Standby Purchaser and (ii) any portion of any such meeting attended only by the members of the
Board in executive session. The exercise by Standby Purchaser of Observer Rights is conditioned
upon the Company’s receipt of a confidentiality agreement executed by Standby Purchaser and the
Designee reasonably satisfactory to the Company providing for Standby Purchaser’s and the
Designee’s preservation of the confidentiality of any materials provided or information received at
any meeting of the Board or any committee thereof. The Company shall promptly reimburse the
Observer for all reasonable expenses incurred in connection with the Observer’s attendance at such
meetings.

     Section 9. Conditions to Closing.

     (a) The obligations of Standby Purchaser to consummate the transactions contemplated hereunder
are subject to the fulfillment, prior to or on the Closing Date, of the following conditions:

          (i) The representations and warranties of the Company in Section 4 shall be true and correct
in all material respects as of the date hereof and at and as of the Closing Date as if made on such
date (except for representations and warranties made as of a specified date, which shall be true
and correct in all material respects as of such specified date);

          (ii) The Company shall have executed and delivered to Standby Purchaser a duly executed copy
of the Registration Rights Agreement;

          (iii) Subsequent to the execution and delivery of this Agreement and prior to the Closing
Date, there shall not have been any Material Adverse Effect and no event shall have occurred or
circumstance shall exist which would reasonably likely result in a Material Adverse Effect;

          (iv) As of the Closing Date, none of the following events shall have occurred and be
continuing: (A) trading in the Common Stock shall have been suspended by the Commission or the
American Stock Exchange or trading in securities generally on the American Stock Exchange, the New
York Stock Exchange or the Nasdaq National Market shall have been suspended or limited or minimum
prices shall have been established on either such exchange or the Nasdaq National Market, (B) a
banking moratorium shall have been declared either by U.S. federal or New York State authorities,
or (C) there shall have occurred any material new outbreak or material escalation of hostilities,
declaration by the United States of a national emergency or war or other calamity or crisis which
has a material adverse effect on the U.S. financial markets (collectively, a “Market Adverse
Effect”);

15

 

          (v) The Company shall have sent a notification of redemption to each holder of unexchanged
shares of Preferred Stock simultaneously with the Closing; and

          (vi) Two (2) nominees of Standby Purchaser reasonably acceptable to the Board shall have been
elected or appointed to the Board, which Board shall consist of not more than nine (9) members
immediately after giving effect to such additional two (2) directors; it being understood that the
Board shall be reduced to seven (7) directors following the redemption of all of the Preferred
Stock not exchanged pursuant to the Preferred Exchange.

     (b) The obligations of the Company to consummate the transactions contemplated hereunder are
subject to the fulfillment, prior to or on the Closing Date, of the following conditions:

          (i) The representations and warranties of Standby Purchaser in Section 5 shall be true and
correct in all material respects as of the date hereof and at and as of the Closing Date as if made
as of such date (except for representations and warranties made as of a specified date, which shall
be true and correct in all material respects as of such specified date); and

          (ii) Standby Purchaser shall have executed and delivered to the Company a duly executed copy
of the Registration Rights Agreement.

     (c) The obligations of each of the Company and Standby Purchaser to consummate the
transactions contemplated hereunder in connection with the Rights Offering are subject to the
fulfillment, prior to or on the Closing Date, of the following conditions:

          (i) No judgment, injunction, decree or other legal restraint shall prohibit, or have the
effect of rendering unachievable, the consummation of the Rights Offering or the transactions
contemplated by this Agreement;

          (ii) The Rights Offering Registration Statement shall have been filed with the Commission and
declared effective; no stop order suspending the effectiveness of the Rights Offering Registration
Statement or any part thereof shall have been issued and no proceeding for that purpose shall have
been initiated or threatened by the Commission; and any request of the Commission for inclusion of
additional information in the Registration Statement or otherwise shall have been complied with;

          (iii) The Rights Offering and the transactions contemplated hereunder shall have been approved
by the affirmative vote of a majority of the shares of the Company’s securities present in person
or by proxy at the meeting of stockholders and entitled to vote on the matter;

          (iv) The New Shares and the Securities shall have been authorized for listing on the American
Stock Exchange; and

16

 

          (v) The Preferred Exchange shall be consummated simultaneously with the Closing or such other
time as mutually agreed by Standby Purchaser and the Company.

     Section 10. Preferred Exchange. The definitive terms of the Preferred Exchange are
still being discussed by the Company and Standby Purchaser as of the date hereof and
notwithstanding the provisions set forth herein and the Term Sheet, the Company and Standby
Purchaser may determine to modify the Preferred Exchange by amending this Agreement, each such
party acting reasonably in connection therewith.

     Section 11. Restrictions on Transfer.

     (a) Standby Purchaser shall not, and shall ensure that its Affiliates do not, purchase, sell,
transfer, assign, convey, gift, mortgage, pledge, encumber, hypothecate or otherwise dispose of,
directly or indirectly (“Transfer”), any Securities; provided, however, that the
foregoing shall not restrict in any manner a Transfer (i) by Standby Purchaser to one or more of
its Affiliates, provided that the transferee in each case agrees to be subject to the terms
of this Section 11, or (ii) to any other person in a private transaction if the Company first shall
have been furnished with an opinion of legal counsel, reasonably satisfactory to the Company, to
the effect that such Transfer is exempt from the registration requirements of the Securities Act or
(iii) made in accordance with Rule 144 under the Securities Act, provided that the Company
shall have the right to receive an opinion of legal counsel for the holder, reasonably satisfactory
to the Company, to the effect that such Transfer is exempt from the registration requirements of
the Securities Act, prior to the removal of the legend subject to Rule 144 or (iv) made pursuant to
a registration statement declared effective by the Commission. Any purported Transfers of
Securities in violation of this Section 11 shall be null and void and no right, title or interest
in or to such Securities shall be Transferred to the purported transferee, buyer, donee, assignee
or encumbrance holder. The Company will not give, and will not permit the Company’s transfer agent
to give, any effect to such purported Transfer in its stock records.

     (b) Restrictive Legends. Standby Purchaser understands and agrees that the Securities
will bear a legend substantially similar to the legend set forth below. The legend may be removed
pursuant to Section 11(a)(iii) and Section 11(a)(iv) as provided above. The legend shall be
removed upon the effectiveness of a registration statement filed pursuant to the Registration
Rights Agreement.

     THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR REGISTERED AND/OR QUALIFIED UNDER ANY STATE SECURITIES LAWS. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED EXCEPT (A) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND REGISTRATION
AND/OR QUALIFICATION UNDER APPLICABLE STATE SECURITIES LAWS, (B) IN A TRANSACTION WHICH IS EXEMPT
FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND REGISTRATION AND/OR
QUALIFICATION UNDER

17

 

APPLICABLE STATE SECURITIES LAWS PROVIDED THAT AT THE ISSUER’S REQUEST, THE TRANSFEROR THEREOF
SHALL HAVE DELIVERED TO THE ISSUER AN OPINION OF COUNSEL (WHICH OPINION SHALL BE IN FORM, SUBSTANCE
AND SCOPE REASONABLY SATISFACTORY TO THE ISSUER) TO THE EFFECT THAT SUCH SECURITIES MAY BE SOLD OR
TRANSFERRED PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION, OR (C) SUCH SECURITIES MAY BE SOLD
PURSUANT TO RULE 144 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

     Section 12. Termination.

     (a) This Agreement may be terminated at any time prior to the Closing Date, by Standby
Purchaser by written notice to the Company if there is a Material Adverse Effect or a Market
Adverse Effect, in either case that is not cured within twenty-one (21) days after the occurrence
thereof (the “Cure Period”), provided that the right to terminate this Agreement after the
occurrence of each Material Adverse Effect or a Market Adverse Effect, which has not been cured
within the Cure Period, shall expire seven (7) days after the expiration of such Cure Period.

     (b) This Agreement may be terminated at any time prior to the Closing Date, by the Company on
one hand or Standby Purchaser on the other hand by written notice to the other party hereto:

          (i) if there is a material breach of this Agreement by the other party that is not cured
within fifteen (15) days after receipt of written notice by such breaching party; or

          (ii) if the Closing has not occurred on or prior to November 15, 2007, for any reason
whatsoever, other than a material breach hereunder by such terminating party or failure of the
closing condition specified in Section 9(a)(iv).

     Section 13. Indemnification and Contribution.

     (a) In the event of any registration of any Securities under the Securities Act pursuant to
this Agreement, the Company shall indemnify and hold harmless Standby Purchaser and each other
Person who participated in the offering of such Securities and each other Person, if any, who
controls Standby Purchaser or such participating Person within the meaning of the Securities Act
(all such Persons being hereinafter referred to, collectively, as the “Standby Indemnified
Persons”), against any losses, claims, damages or liabilities, joint or several, to which any of
the Standby Indemnified Persons may become subject (i) as a result of any breach by the Company of
any of its representations or warranties contained herein or in any certificate delivered hereunder
or (ii) under the Securities Act or any other statute or at common law, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (A)
any alleged untrue statement of any material fact contained, on the effective date thereof, in any
registration statement under which such securities were registered under the Securities Act, any
preliminary prospectus or final prospectus contained therein, or any amendment or supplement
thereto, or (B) any alleged omission to state therein a material fact required to be stated therein
or necessary to make the

18

 

statements therein not misleading, and shall reimburse each such Standby Indemnified Person
for any reasonable legal or any other expenses reasonably incurred by such Standby Indemnified
Person in connection with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the Company shall not be liable in any such case to
any Standby Indemnified Person to the extent that any such loss, claim, damage or liability arises
out of or is based upon any actual or alleged untrue statement or actual or alleged omission made
in such registration statement, preliminary prospectus, prospectus or amendment or supplement in
reliance upon and in conformity with written information furnished to the Company by such Standby
Indemnified Person specifically for use therein. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of such Standby Indemnified Person, and
shall survive the transfer of such Securities or New Shares by such Standby Indemnified Person.

     (b) Standby Purchaser agrees to indemnify and hold harmless the Company, its directors and
officers and each other Person, if any, who controls the Company within the meaning of the
Securities Act (all such Persons being hereinafter referred to, collectively, as the “Company
Indemnified Persons” and together with the Standby Indemnified Persons, the “Indemnified Persons”)
against any losses, claims, damages or liabilities to which any of the Company Indemnified Persons
may become subject (i) as a result of any breach by Standby Purchaser of any of its representations
or warranties contained herein or in any certificate delivered hereunder or (ii) under the
Securities Act or any other statute or at common law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon information provided in
writing to the Company by Standby Purchaser specifically for use in any registration statement
under which Securities are registered under the Securities Act at the request of Standby Purchaser,
any preliminary prospectus or final prospectus contained therein, or any amendment or supplement
thereto.

     (c) Any Person entitled to indemnification hereunder will (i) give prompt written notice to
the indemnifying party of any claim with respect to which it seeks indemnification
(provided that the failure to give such notice shall not limit the rights of such Person,
except to the extent the indemnifying party is actually prejudiced thereby) and (ii) unless in such
indemnified party’s reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such indemnifying party to assume
the defense of such claim with counsel reasonably satisfactory to the indemnified party;
provided, however, that any person entitled to indemnification hereunder shall have
the right to employ separate counsel and to participate in the defense of such claim, but the fees
and expenses of such counsel shall be at the expense of such Person unless (A) the indemnifying
party has agreed to pay such fees or expenses or (B) the indemnifying party shall have failed to
assume the defense of such claim and employ counsel reasonably satisfactory to such Person. If
such defense is not assumed by the indemnifying party as permitted hereunder, the indemnifying
party will not be subject to any liability for any settlement made by the indemnified party without
its consent (but such consent will not be unreasonably withheld or delayed). If such defense is
assumed by the indemnifying party pursuant to the provisions hereof, such indemnifying party shall
not settle or otherwise compromise the applicable claim unless (i) such settlement or compromise
contains a full and

19

 

unconditional release of the indemnified party or (ii) the indemnified party otherwise
consents in writing, which consent shall not be unreasonably withheld or delayed. An indemnifying
party who is not entitled to, or elects not to, assume the defense of a claim will not be obligated
to pay the fees and expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified
party, a conflict of interest may exist between such indemnified party and any other of such
indemnified parties with respect to such claim, in which event the indemnifying party shall be
obligated to pay the reasonable fees and disbursements of such additional counsel or counsels.

     (d) (i) If the indemnification provided for in this Section 13 is unavailable to an
Indemnified Person hereunder in respect of any losses, claims, damages, liabilities or expenses
referred to therein, then the indemnifying party, in lieu of indemnifying such Indemnified Person,
shall contribute to the amount paid or payable by such Indemnified Person as a result of such
losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect
the relative fault of the indemnifying party and Indemnified Person in connection with the actions
which resulted in such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying party and Indemnified
Persons shall be determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission or alleged omission
to state a material fact, has been made by, or relates to information supplied by, the indemnifying
party or the Indemnified Persons, and their relative intent, knowledge, access to information and
opportunity to correct or prevent such action. The amount paid or payable by a party as a result
of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to
include any legal or other fees or expenses reasonably incurred by such party in connection with
any investigation or proceeding.

          (ii) The parties hereto agree that it would not be just and equitable if contribution pursuant
to this Section 13(d) were determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to in the immediately
preceding paragraph. No Person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.

     Section 14. Survival. The representations and warranties of the Company and Standby
Purchaser contained in this Agreement or in any certificate delivered hereunder shall survive the
Closing hereunder.

     Section 15. Notices. All notices, communications and deliveries required or permitted
by this Agreement shall be made in writing signed by the party making the same, shall specify the
Section of this Agreement pursuant to which it is given or being made and shall be deemed given or
made (i) on the date delivered if delivered by telecopy or in person, (ii) on the third
(3rd) Business Day after it is mailed if mailed by registered or certified mail (return
receipt requested) (with postage and other

20

 

fees prepaid) or (iii) on the day after it is delivered, prepaid, to an overnight express
delivery service that confirms to the sender delivery on such day, as follows:

     (a) if to Standby Purchaser, at:

c/o Tontine Capital Management L.L.C.

55 Railroad Avenue

Greenwich, Connecticut 06830

Attention: Joseph V. Lash

Telecopy No.: (203) 769-2010

with a copy to:

Weil, Gotshal & Manges LLP

767 Fifth Avenue

New York, New York 10153

Attention: Ted S. Waksman

Telecopy No.: (212) 310-8007

     (b) if to the Company, at:

Westmoreland Coal Company

2 North Cascade Avenue, 14th Floor

Colorado Springs, Colorado 80903

Attention: Roger Wiegley

Telecopy No.: (719) 448-5824

with a copy to:

WilmerHale

1875 Pennsylvania Avenue, NW

Washington, D.C. 20006

Attention: Michael J. Levitin

Telecopy No.: (202) 663-6363

or to such other representative or at such other address of a party as such party hereto may
furnish to the other parties in writing in accordance with this Section 15. If notice is given
pursuant to this Section 15 of any assignment to a permitted successor or assign of a party hereto,
the notice shall be given as set forth above to such successor or permitted assign of such party.

     Section 16. Assignment. This Agreement will be binding upon, and will inure to the
benefit of and be enforceable by, the parties hereto and their respective successors and assigns,
including any person to whom Securities are transferred in accordance herewith. This Agreement, or
Standby Purchaser’s obligations and rights hereunder, may be assigned, delegated or transferred, in
whole or in part, by Standby Purchaser to any of its Affiliates over which Standby Purchaser or any
of its Affiliates exercises investment authority, including, without limitation, with respect to
voting and dispositive rights, provided that any such assignee assumes the obligations of
Standby

21

 

Purchaser hereunder and agrees to be bound by the terms of this Agreement in the same manner
as Standby Purchaser. Standby Purchaser or any of its Affiliates may assign, delegate or transfer,
in whole or in part, its Basic Subscription Privilege to any other Affiliate or to Standby
Purchaser. Notwithstanding the foregoing or any other provisions herein, no such assignment will
relieve Standby Purchaser of its obligations hereunder if such assignee fails to perform such
obligations. In addition, upon the request of Standby Purchaser, the Company and Standby Purchaser
will negotiate in good faith to add one or more third parties designated by Standby Purchaser as
additional purchasers of Unsubscribed Shares and to provide an option to each such additional
purchaser, comparable to the Option set forth in Section 3(a), to purchase additional shares of
Common Stock in an amount to be mutually agreed upon, at the Subscription Price. To the extent
there are any such additional purchasers, the Company and Standby Purchaser will negotiate in good
faith to amend this Agreement to add any such additional purchasers to this Agreement prior to the
mailing of the Proxy Statement to the stockholders of the Company.

     Section 17. Entire Agreement. This Agreement embodies the entire agreement and
understanding between the parties hereto in respect of the subject matter contained herein. There
are no restrictions, promises, warranties, or undertakings, other than those set forth or referred
to herein, with respect to the standby purchase commitments or the registration rights granted by
the Company with respect to the Securities and the New Shares. This Agreement supersedes all prior
agreements and understandings between the parties with respect to the subject matter of this
Agreement.

     Section 18. Governing Law. This Agreement shall be governed by, construed and
enforced in accordance with the laws of the State of New York, without giving effect to the
conflict of laws provisions thereof.

     Section 19. Severability. If any provision of this Agreement or the application
thereof to any person or circumstances is determined by a court of competent jurisdiction to be
invalid, void or unenforceable, the remaining provisions hereof, or the application of such
provision to persons or circumstances other than those as to which it has been held invalid or
unenforceable, shall remain in full force and effect and shall in no way be affected, impaired or
invalidated thereby, so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner adverse to any party. Upon such determination, the parties
shall negotiate in good faith in an effort to agree upon a suitable and equitable substitute
provision to effect the original intent of the parties.

     Section 20. Extension or Modification of Rights Offering. Without the prior written
consent of Standby Purchaser, the Company may (i) waive irregularities in the manner of exercise of
the Rights, and (ii) waive conditions relating to the method (but not the timing) of the exercise
of the Rights to the extent that such waiver does not materially adversely affect the interests of
Standby Purchaser.

     Section 21. Miscellaneous.

     (a) Subject to the first sentence of Section 7(b) and the Board’s fiduciary duties, the
Company shall not after the date of this Agreement enter into any

22

 

agreement with respect to its securities which is inconsistent with or violates the rights
granted to holders of Securities in this Agreement.

     (b) The headings in this Agreement are for purposes of reference only and shall not limit or
otherwise affect the meaning of this Agreement.

     (c) This Agreement may be executed in any number of counterparts, each of which shall be
deemed to be an original, but all of which, when taken together, shall constitute one and the same
instrument.

[Remainder of this page intentionally left blank.]

23

 

     IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered
as of the date first above written.

	 	 	 	 	 	 	 	 	 
	 	 	WESTMORELAND COAL COMPANY	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	/s/ Robert E. Killen	 	 
	 	 	 	 	 	 	 
	 	 	 	 	Name: Robert E. Killen	 	 
	 	 	 	 	Title: Director	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	TONTINE CAPITAL PARTNERS, L.P.	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	TONTINE CAPITAL MANAGEMENT, L.L.C.,	 	 
	 	 	 	 	its general partner	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:
	 	/s/ Jeffrey L. Gendell	 	 
	 

	 	 	 	 	 	 

Name: Jeffrey L. Gendell
	 	 
	 

	 	 	 	 	 	Title: Managing Member	 	 

24

 

Annex A

WESTMORELAND COAL COMPANY

Term Sheet

	 	 	 
	Issuer:

	 	Westmoreland Coal Company (the “Company”)
	 
	 	 
	Offering Size:

	 	Common equity rights offering of $85 million,
plus the amount necessary to redeem all
unexchanged shares of the Company’s Series A
Preferred Stock (the “Preferred Stock”), plus
the Additional Subscription Privilege, with
the size to be determined by mutual agreement
of Tontine Capital Partners, L.P. (“Tontine”)
and the Company
	 
	 	 
	Authorization:

	 	Prior approval of the Company’s Board of
Directors and subject to shareholder approval
	 
	 	 
	Rights Offering:

	 	The Company will distribute to (i) holders of
its common stock and (ii) if agreed to by the
Company and Tontine, holders of Preferred
Stock, who have elected to exchange their
shares of Preferred Stock for common stock, on
an as exchanged basis (collectively, the
“Eligible Participants”), at no charge, a
fraction of a subscription right for each
share of the Company’s common stock that
Eligible Participants own (including on an as
exchanged basis) as of the Record Date, with
the fraction to be based on the offering size,
the number of shares of common stock
outstanding and the Subscription Price
	 
	 	 
	Basic Subscription
Privilege:

	 	Each subscription right will entitle Eligible
Participants to purchase one share of common
stock, upon payment of the Subscription Price
in cash
	 
	 	 
	Over-subscription
privilege:

	 	Each Eligible Participant who exercises all of
his rights may oversubscribe for up to all of
his pro rata share of unsubscribed rights.
Pro rata share will be based on each Eligible
Participant’s ownership percentage of all
outstanding common stock on an as exchanged
basis
	 
	 	 
	Launch Date:

	 	To be determined
	 
	 	 
	Record Date:

	 	The Record Date is to be the Launch Date at
5:00 p.m. New York City time.
	 
	 	 
	Expiration Date:

	 	The rights would expire no later than 40 days
after the Launch Date. Rights not exercised
by the Expiration Date will be null and void

 

 

	 	 	 
	Subscription Price:

	 	The Subscription Price shall be $18.00 per
share and will be paid in cash. All payments
must be cleared on or before the Expiration
Date
	 
	 	 
	Transferability of Rights:

	 	The subscription rights may not be sold,

transferred or assigned
	 
	 	 
	Subscription Commitment:

	 	Tontine and/or its affiliates will act as a
standby purchaser in the rights offering for
all of the unsubscribed shares, subject to the
maximum ownership percentage described below
	 
	 	 
	Additional Subscription
Privilege:

	 	Tontine shall have the option (the “Additional
Subscription Privilege”) to purchase an
additional number of shares, at the
Subscription Price, up to such amount that
will result in Tontine owning 25% of the fully
diluted shares (exclusive of stock options and
any unexchanged Preferred Stock) after giving
effect to the rights offering and the exercise
of the Additional Subscription Privilege
	 
	 	 
	Use of Proceeds:

	 	Additional liquidity, acquisitions, project
development and general corporate purposes
	 
	 	 
	Maximum Ownership of
Tontine:

	 	Tontine may not acquire shares in the rights
offering that would cause it to own more than
30% of the fully diluted shares (exclusive of
stock options and any unexchanged Preferred
Stock) after giving effect to the rights
offering and the exercise of the Additional
Subscription Privilege

- 2 -

 

	 	 	 
	Preferred Stock Exchange:

	 	The exchange offer of Preferred Stock into
common stock shall be at an exchange ratio to
be determined
	 
	 	 
	 

	 	The exchange offer will expire prior to the
commencement of the rights offering.
Appropriate provisions will be agreed upon by
the Company and Tontine to provide prompt
payment to exchanging holders
	 
	 	 
	 

	 	Unexchanged shares of Preferred Stock will be
redeemed promptly following the consummation
of the rights offering
	 
	 	 
	 

	 	If for any reason the unexchanged shares of
Preferred Stock are not redeemed within 60
days after the closing of the rights offering,
the maximum ownership by Tontine of common
stock set forth above under “Additional
Subscription Privilege” and “Maximum Ownership
of Tontine” shall be increased to reflect such
shares of Preferred Stock that have remained
outstanding on an as converted basis. Tontine
shall have the option to purchase any such
additional shares resulting from such
increase, if any, in the maximum ownership
calculation
	 
	 	 
	Subscription Agent:

	 	To be determined by mutual agreement of
Tontine and the Company
	 
	 	 
	Board of Directors:

	 	In connection with this transaction, it is the
intent of the parties to reconstitute the
Board of Directors to a less costly and more
efficient format at the 2007 Annual Meeting
while continuing its primarily independent
composition. The Board shall consist of not
more than seven members, plus two directors
elected by the holders of Preferred Stock
until such time as the Preferred Stock has
been redeemed. Tontine shall have the right
to designate two of the seven members and to
appoint an observer to the Board so long as it
and its affiliates own 10% or more of the
outstanding common stock of the Company.
Tontine shall also have the right to vote all
of the shares it owns in its sole discretion
on all matters, including the election of
directors

- 3 -

 

	 	 	 
	Registration Rights:

	 	Upon the earlier of (i) such time as the
Company is eligible to register its securities
on Form S-3 and (ii) 13 months following the
closing of the rights offering, Tontine shall
have an evergreen shelf registration
statement. Until such time and thereafter if
the shelf registration is not effective,
Tontine shall have demand registration rights
and piggyback registration rights (other than
piggyback registrations on Form S-8).
Notwithstanding such registration rights,
Tontine may sell Company securities only
during periods when affiliates of the Company
are permitted to sell such securities if
Tontine has its own employees or an
affiliate’s employees serving on the Board or
as an observer
	 
	 	 
	Other Conditions:

	 	Satisfactory completion of due diligence,
negotiation and execution of definitive
documentation, amendment of the Company’s
Shareholder Rights Plan to accommodate
Tontine’s potential pro forma ownership after
giving effect to the rights offering and the
Additional Subscription Privilege, and the
Preferred Stock exchange offer shall have
closed
	 
	 	 
	Expenses:

	 	All of the expenses incurred by Tontine are to
be reimbursed by the Company, subject only to
a maximum of $400,000 for diligence-related
expenses

- 4 -

 

Annex B

REGISTRATION RIGHTS AGREEMENT

     Registration Rights Agreement, dated as of                                          , 2007, by and among Westmoreland Coal
Company, a Delaware corporation (“Company”), and the stockholders signatories hereto.

W I T N E S S E T H :

     WHEREAS, this Agreement is being entered into in connection with the Standby Purchase
Agreement dated as of May 2, 2007 (the “Standby Purchase Agreement”), between the Company
and Tontine Capital Partners, L.P. (“Tontine”);

     NOW, THEREFORE, in consideration of the premises and the covenants hereinafter contained, it
is agreed as follows:

     1. Definitions. Unless otherwise defined herein, capitalized terms used herein and in
the recitals above shall have the following meanings:

     “Additional Holders” shall mean the Permitted Assignees of Registrable Securities who,
from time to time, acquire Registrable Securities from a Holder or Holders and own Registrable
Securities at the relevant time, agree to be bound by the terms hereof and become Holders for
purposes of this Agreement.

     “Affiliate” of a Person shall mean any Person that directly, or indirectly through one
or more intermediaries, controls, or is controlled by, or is under common control with, such other
Person. For purposes of this definition, “control” shall mean the ability of one Person to direct
the management and policies of another Person.

     “Agreement” shall mean this Registration Rights Agreement, including all amendments,
modifications and supplements and any exhibits or schedules to any of the foregoing, and shall
refer to the Agreement as the same may be in effect at the time such reference becomes operative.

     “Business Day” shall mean any day that is not a Saturday, a Sunday or a day on which
banks are required or permitted to be closed in the State of New York.

     “Closing Date” shall have the meaning assigned to such term in the Standby Purchase
Agreement.

     “Commission” shall mean the Securities and Exchange Commission or any other federal
agency then administering the Securities Act and other federal securities laws.

     “Common Stock” shall mean the shares of common stock, $2.50 par value per share, of
Company, as adjusted to reflect any merger, consolidation, recapitalization, reclassification,
split-up, stock dividend, rights offering or reverse stock split made, declared or effected with
respect to the Common Stock.

 

 

     “Company” shall have the meaning assigned to such term in the preamble.

     “Demand Registration” shall have the meaning assigned to such term in Section 2(b)
hereof.

     “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, or any
similar federal statute, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect from time to time.

     “Holder” shall mean (i) any Person who owns Registrable Securities at the relevant
time and is a party to this Agreement or (ii) any Additional Holder.

     “Majority Holders” shall mean Holders holding at the time, shares of Registrable
Securities representing more than 50% of the then outstanding Registrable Securities.

     “Permitted Assignee” shall mean (a) any Affiliate of any Holder who acquires
Registrable Securities from such Holder, or its Affiliates, or (b) any other Person who acquires
any Registrable Securities of any Holder or Holders who is designated as a Permitted Assignee by
such Holder in a written notice to Company; provided, however, that the rights of
any Person designated as a Permitted Assignee referred to in the foregoing clause (b) shall be
limited if, and to the extent, provided in such notice.

     “Person” shall mean any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other entity.

     “Registrable Securities” shall mean the Common Stock of Company owned by the Holders
as of the date hereof or at any time in the future; and, if as a result of any reclassification,
stock dividends or stock splits or in connection with a combination of shares, recapitalization,
merger, consolidation, sale of all or substantially all of the assets of Company or other
reorganization or other transaction or event, any capital stock, evidence of indebtedness,
warrants, options, rights or other securities (collectively “Other Securities”) are issued
or transferred to a Holder in respect of Registrable Securities held by the Holder, references
herein to Registrable Securities shall be deemed to include such Other Securities. Shares of
Common Stock and Other Securities that are Registrable Securities shall cease to be Registrable
Securities at such time as they become eligible for sale pursuant to Rule 144(k) under the
Securities Act.

     “Securities Act” shall mean the Securities Act of 1933, as amended, or any similar
federal statute, and the rules and regulations of the Commission thereunder, all as the same shall
be in effect from time to time.

     “Shelf Registration” means a registration effected pursuant to Section 2(a) hereof.

2

 

     “Shelf Registration Statement” means a “shelf” registration statement of Company
relating to a “shelf” offering in accordance with Rule 415 of the Securities Act, or any similar
rule that may be adopted by the Commission, pursuant to the provisions of Section 2(a) hereof which
covers all of the Registrable Securities held by the Holders, on an appropriate form under the
Securities Act, and all amendments and supplements to such registration statement, including
post-effective amendments, in each case including the prospectus contained therein, all exhibits
thereto and all material incorporated by reference therein.

     “Standby Purchase Agreement” shall have the meaning assigned to such term in the
recitals.

     2. Required Registration.

          (a) Company shall use its reasonable best efforts to cause a Shelf Registration Statement to
be filed and declared effective by the Commission as soon as practicable following the earlier of
(i) such time as the Company is eligible to register its securities on Form S-3 and (ii) thirteen
(13) months following the closing of the Closing Date. Each Holder as to which any Shelf
Registration is being effected agrees to furnish to Company all information with respect to such
Holder necessary to make any information previously furnished to Company by such Holder not
misleading. Company agrees to use its reasonable best efforts to keep the Shelf Registration
Statement continuously effective for as long as any Holder holds Registrable Securities. Company
further agrees, if necessary, to promptly supplement or amend the Shelf Registration Statement, if
required by the rules, regulations or instructions applicable to the registration form used by
Company for such Shelf Registration Statement or by the Securities Act or by any other rules and
regulations thereunder for shelf registrations, and Company agrees to furnish to the Holders of
Registrable Securities copies of any such supplement or amendment promptly after its being used or
filed with the Commission.

          (b) At any time following the Closing Date when the Shelf Registration Statement covering all
Registrable Securities is not effective and after receipt of a written request from the Holders of
Registrable Securities requesting that Company effect a registration under the Securities Act
covering at least 10% of the Registrable Securities outstanding as of the Closing Date (a
“Demand Registration”), and specifying the intended method or methods of disposition
thereof, Company shall promptly notify all Holders in writing of the receipt of such request and
each such Holder, in lieu of exercising its rights under Section 3 may elect (by written notice
sent to Company within 10 Business Days from the date of such Holder’s receipt of the
aforementioned Company’s notice) to have Registrable Securities included in such Demand
Registration thereof pursuant to this Section 2(b). Thereupon Company shall, as expeditiously as
is possible, use its reasonable best efforts to effect the registration under the Securities Act of
all shares of Registrable Securities which Company has been so requested to register by such
Holders for sale, all to the extent required to permit the disposition (in accordance with the
intended method or methods thereof, as aforesaid) of the Registrable Securities so registered;
provided, however, that Company shall not be

3

 

required to effect more than two (2) registrations of any Registrable Securities pursuant to
this Section 2, unless Company shall be eligible at any time to file a registration statement on
Form S-3 (or other comparable short form) under the Securities Act, in which event there shall be
no limit on the number of such registrations pursuant to this Section 2.

          (c) A registration will not count as a Demand Registration until it has become effective
(unless the requesting Holders withdraw all their Registrable Securities and Company has performed
its obligations hereunder in all material respects, in which case such demand will count as a
Demand Registration unless the requesting Holders pay all registration expense in connection with
such withdrawn registration); provided, however, that if, after it has become
effective, an offering of Registrable Securities pursuant to a registration is interfered with by
any stop order, injunction or other order or requirement of the Commission or other governmental
agency or court or is withdrawn because of any development affecting Company, such registration
will be deemed not to have been effected and will not count as a Demand Registration.

          (d) If the managing underwriter of a Demand Registration shall advise Company in writing that,
in its opinion, the distribution of the Registrable Securities requested to be included in the
Demand Registration would materially and adversely affect the distribution of such Registrable
Securities, then all selling Holders shall reduce the amount of Registrable Securities each
intended to distribute through such offering on a pro-rata basis.

     3. Incidental Registration. If Company at any time proposes to file on its behalf
and/or on behalf of any of its security holders (the “demanding security holders”) a registration
statement under the Securities Act on any form (other than a registration statement on Form S-4 or
S-8 or any successor form for securities to be offered in a transaction of the type referred to in
Rule 145 under the Securities Act or to employees of Company pursuant to any employee benefit plan,
respectively) for the general registration of securities, it will give written notice to all
Holders at least 20 days before the initial filing with the Commission of such registration
statement, which notice shall set forth the intended method of disposition of the securities
proposed to be registered by Company. The notice shall offer to include in such filing the
aggregate number of shares of Registrable Securities as such Holders may request.

     Each Holder desiring to have Registrable Securities registered under this Section 3 shall
advise Company in writing within ten (10) Business Days after the date of receipt of such offer
from Company, setting forth the amount of such Registrable Securities for which registration is
requested. Company shall thereupon include in such filing the number of shares of Registrable
Securities for which registration is so requested, subject to the next sentence, and shall use its
reasonable best efforts to effect registration under the Securities Act of such shares. If the
managing underwriter of a proposed public offering shall advise Company in writing that, in its
opinion, the distribution of the Registrable Securities requested to be included in the
registration concurrently with the securities being registered by Company or such demanding
security

4

 

holder would materially and adversely affect the distribution of such securities by Company or
such demanding security holder, then all selling security holders (including the demanding security
holder who initially requested such registration) shall reduce the amount of securities each
intended to distribute through such offering on a pro-rata basis. Except as otherwise provided in
Section 5, all expenses of such registration shall be borne by Company.

     4. Registration Procedures. If Company is required by the provisions of Section 2 or
3 to use its reasonable best efforts to effect the registration of any of its securities under the
Securities Act, Company will, as expeditiously as possible:

          (a) prepare and file with the Commission a registration statement with respect to such
securities and use its reasonable best efforts to cause such registration statement to become and
remain effective for a period of time required for the disposition of such securities by the
holders thereof, but not to exceed one hundred eighty (180) days (other than the Shelf Registration
Statement which shall be kept effective for such period as provided in Section 2(a));

          (b) prepare and file with the Commission such amendments and supplements to such registration
statement and the prospectus used in connection therewith as may be necessary to keep such
registration statement effective and to comply with the provisions of the Securities Act with
respect to the sale or other disposition of all securities covered by such registration statement
until the earlier of such time as all of such securities have been disposed of in a public offering
or the expiration of one hundred eighty (180) days (other than the Shelf Registration Statement
which shall be kept effective for such period as provided in Section 2(a));

          (c) furnish to such selling security holders such number of copies of a summary prospectus or
other prospectus, including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents, as such selling security holders may reasonably request;

          (d) use its reasonable best efforts to register or qualify the securities covered by such
registration statement under such other securities or blue sky laws of such jurisdictions within
the United States as each holder of such securities shall request (provided,
however, that Company shall not be obligated to qualify as a foreign corporation to do
business under the laws of any jurisdiction in which it is not then qualified or to file any
general consent to service of process), and do such other reasonable acts and things as may be
required of it to enable such holder to consummate the disposition in such jurisdiction of the
securities covered by such registration statement;

          (e) promptly notify each Holder whose Registrable Securities are intended to be covered by
such registration statement and each underwriter and, if requested by any such Person, confirm such
notice in writing (i) when a prospectus or any prospectus supplement or post-effective amendment
has been filed and, with respect

5

 

to a registration statement or any post-effective amendment, when the same has become
effective, (ii) of the issuance by any state securities or other regulatory authority of any order
suspending the qualification or exemption from qualification of any of the Registrable Securities
under state securities or “blue sky” laws or the initiation of any proceedings for that purpose,
(iii) any request by the Commission for the amending or supplementing of such registration
statement or prospectus or for additional information; and (iv) of the happening of any event which
makes any statement made in a registration statement or related prospectus untrue or which requires
the making of any changes in such registration statement, prospectus or documents so that they will
not contain any untrue statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein not misleading, and, as promptly as
reasonably practicable thereafter, prepare and file with the Commission and furnish a supplement or
amendment to such prospectus so that, as thereafter deliverable to the purchasers of such
Registrable Securities, such prospectus will not contain any untrue statement of a material fact or
omit a material fact necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and the time period during which such registration statement
is required to remain effective shall be extended for the time period during which such prospectus
is so suspended;

          (f) furnish, at the request of any Holder requesting registration of Registrable Securities
pursuant to Section 2, on the date that such shares of Registrable Securities are delivered to the
underwriters for sale pursuant to such registration or, if such Registrable Securities are not
being sold through underwriters, on the date that the registration statement with respect to such
shares of Registrable Securities becomes effective, (1) an opinion, dated such date, of the
independent counsel representing Company for the purposes of such registration, addressed to the
underwriters, if any, and if such Registrable Securities are not being sold through underwriters,
then to the Holders making such request, in customary form and covering matters of the type
customarily covered in such legal opinions; and (2) a comfort letter dated such date, from the
independent certified public accountants of Company, addressed to the underwriters, if any, and if
such Registrable Securities are not being sold through underwriters, then to the Holder making such
request and, if such accountants refuse to deliver such letter to such Holder, then to Company, in
a customary form and covering matters of the type customarily covered by such comfort letters and
as the underwriters or such Holder shall reasonably request. Such opinion of counsel shall
additionally cover such other legal matters with respect to the registration in respect of which
such opinion is being given as such Holders may reasonably request. Such letter from the
independent certified public accountants shall additionally cover such other financial matters
(including information as to the period ending not more than five (5) Business Days prior to the
date of such letter) with respect to the registration in respect of which such letter is being
given as the Holders of a majority of the Registrable Securities being so registered may reasonably
request;

6

 

          (g) enter into customary agreements (including an underwriting agreement in customary form)
and take such other actions as are reasonably required in order to expedite or facilitate the
disposition of such Registrable Securities; and

          (h) otherwise use its reasonable best efforts to comply with all applicable rules and
regulations of the Commission, and make available to its security holders, as soon as reasonably
practicable, but not later than 18 months after the effective date of the registration statement,
an earnings statement covering the period of at least twelve (12) months beginning with the first
full month of the Company’s fiscal quarter commencing after the effective date of such registration
statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities
Act.

     It shall be a condition precedent to the obligation of Company to take any action pursuant to
this Agreement in respect of the securities which are to be registered at the request of any Holder
that such Holder shall furnish to Company such information regarding the securities held by such
Holder and the intended method of disposition thereof as Company shall reasonably request and as
shall be required in connection with the action taken by Company.

     Each Holder agrees that, upon receipt of any notice from Company of the happening of any event
of the kind described in Section 4(e)(iv), such Holder shall immediately discontinue such Holder’s
disposition of Registrable Securities pursuant to the registration statement relating to such
Registrable Securities until such Holder’s receipt of the copies of the supplemented or amended
prospectus contemplated by Section 4(e)(iv).

     5. Expenses. All expenses incurred in complying with this Agreement, including,
without limitation, all registration and filing fees (including all expenses incident to filing
with any stock exchange), printing expenses, fees and disbursements of counsel for Company, the
reasonable fees and reasonable expenses of one counsel for the selling security holders (selected
by those holding a majority of the shares being registered), expenses of any special audits
incident to or required by any such registration and expenses of complying with the securities or
blue sky laws of any jurisdiction pursuant to Section 4(d), shall be paid by Company, except that:

          (a) all such expenses in connection with any amendment or supplement to the registration
statement or prospectus filed more than one hundred eighty (180) days after the effective date of
such registration statement because any Holder has not effected the disposition of the securities
requested to be registered shall be paid by such Holder, other than with respect to the Shelf
Registration; and

          (b) Company shall not be liable for any fees, discounts or commissions to any underwriter or
any fees or disbursements of counsel for any underwriter in respect of the securities sold by such
Holder.

     6. Indemnification and Contribution.

7

 

          (a) In the event of any registration of any Registrable Securities under the Securities Act
pursuant to this Agreement, Company shall indemnify and hold harmless to the fullest extent
permitted by law the Holder of such Registrable Securities, such Holder’s directors and officers,
and each other person (including each underwriter) who participated in the offering of such
Registrable Securities and each other person, if any, who controls such Holder or such
participating person within the meaning of the Securities Act, against any losses, claims, damages
or liabilities, joint or several, to which such Holder or any such director or officer or
participating person or controlling person may become subject under the Securities Act or any other
statute or at common law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon (i) any alleged untrue statement of any material
fact contained, on the effective date thereof, in any registration statement under which such
securities were registered under the Securities Act, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereto, or (ii) any alleged omission to state
therein a material fact required to be stated therein or necessary to make the statements therein
not misleading, and shall reimburse such Holder or such director, officer or participating person
or controlling person for any legal or any other expenses reasonably incurred by such Holder or
such director, officer or participating person or controlling person in connection with
investigating or defending any such loss, claim, damage, liability or action; provided,
however, that Company shall not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon any actual or alleged untrue
statement or actual or alleged omission made in such registration statement, preliminary
prospectus, prospectus or amendment or supplement in reliance upon and in conformity with written
information furnished to Company by such Holder specifically for use therein or (in the case of any
registration pursuant to Section 2) so furnished for such purposes by any underwriter. Such
indemnity shall remain in full force and effect regardless of any investigation made by or on
behalf of such Holder or such director, officer or participating person or controlling person, and
shall survive the transfer of such securities by such Holder.

          (b) Each Holder, by acceptance hereof, agrees to indemnify and hold harmless to the fullest
extent permitted by law Company, its directors and officers and each other person, if any, who
controls Company within the meaning of the Securities Act against any losses, claims, damages or
liabilities, joint or several, to which Company or any such director or officer or any such person
may become subject under the Securities Act or any other statute or at common law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based
upon information provided in writing to Company by such Holder specifically for use in the
following documents and contained, on the effective date thereof, in any registration statement
under which securities were registered under the Securities Act at the request of such Holder, any
preliminary prospectus or final prospectus contained therein, or any amendment or supplement
thereto. Notwithstanding the provisions of this paragraph (b) or paragraph (d) below, no Holder
shall be required to indemnify any person pursuant to this Section 6 or to contribute pursuant to
paragraph (d) below in an amount in excess of

8

 

the amount of the aggregate net proceeds received by such Holder in connection with any such
registration under the Securities Act.

          (c) Any Person entitled to indemnification hereunder will (i) give prompt written notice to
the indemnifying party of any claim with respect to which it seeks indemnification
(provided that the failure to give such notice shall not limit the rights of such Person,
except to the extent the indemnifying party is actually prejudiced thereby) and (ii) unless in such
indemnified party’s reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such indemnifying party to assume
the defense of such claim with counsel reasonably satisfactory to the indemnified party;
provided, however, that any person entitled to indemnification hereunder shall have
the right to employ separate counsel and to participate in the defense of such claim, but the fees
and expenses of such counsel shall be at the expense of such Person unless (A) the indemnifying
party has agreed to pay such fees or expenses or (B) the indemnifying party shall have failed to
assume the defense of such claim and employ counsel reasonably satisfactory to such Person. If
such defense is not assumed by the indemnifying party as permitted hereunder, the indemnifying
party will not be subject to any liability for any settlement made by the indemnified party without
its consent (but such consent will not be unreasonably withheld or delayed). If such defense is
assumed by the indemnifying party pursuant to the provisions hereof, such indemnifying party shall
not settle or otherwise compromise the applicable claim unless (i) such settlement or compromise
contains a full and unconditional release of the indemnified party or (ii) the indemnified party
otherwise consents in writing, which consent shall not be unreasonably withheld or delayed. An
indemnifying party who is not entitled to, or elects not to, assume the defense of a claim will not
be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by
such indemnifying party with respect to such claim, unless in the reasonable judgment of any
indemnified party, a conflict of interest may exist between such indemnified party and any other of
such indemnified parties with respect to such claim, in which event the indemnifying party shall be
obligated to pay the reasonable fees and disbursements of such additional counsel or counsels.

          (d) If the indemnification provided for in this Section 6 from the indemnifying party is
unavailable to an indemnified party hereunder in respect of any losses, claims, damages,
liabilities or expenses referred to therein, then the indemnifying party, in lieu of indemnifying
such indemnified party, shall contribute to the amount paid or payable by such indemnified party as
a result of such losses, claims, damages, liabilities or expenses in such proportion as is
appropriate to reflect the relative fault of the indemnifying party and indemnified parties in
connection with the actions which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified parties shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact, has been made by, or relates to
information supplied by, such indemnifying party or indemnified parties, and the parties’

9

 

relative intent, knowledge, access to information and opportunity to correct or prevent such
action. The amount paid or payable by a party as a result of the losses, claims, damages,
liabilities and expenses referred to above shall be deemed to include any legal or other fees or
expenses reasonably incurred by such party in connection with any investigation or proceeding.

     The parties hereto agree that it would not be just and equitable if contribution pursuant to
this Section 6(d) were determined by pro-rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to in the immediately preceding
paragraph. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.

     7. Certain Limitations on Registration Rights. Notwithstanding the other provisions
of this Agreement:

          (a) Company shall not be obligated to register the Registrable Securities of any Holder if, in
the opinion of counsel to Company reasonably satisfactory to the Holder and its counsel (or, if the
Holder has engaged an investment banking firm, to such investment banking firm and its counsel),
the sale or other disposition of such Holder’s Registrable Securities, in the manner proposed by
such Holder (or by such investment banking firm), may be effected without registering such
Registrable Securities under the Securities Act.

          (b) Company shall not be obligated to register the Registrable Securities of any Holder
pursuant to Section 2 if Company has had a registration statement, under which such Holder had a
right to have its Registrable Securities included pursuant to Section 2 or 3, declared effective
within six (6) months prior to the date of the request pursuant to Section 2; provided,
however, that if any Holder elected to have shares of its Registrable Securities included
under such registration statement but some or all of such shares were excluded pursuant to the
penultimate sentence of Section 3, then such six (6) month period shall be reduced to three (3)
months.

          (c) Company shall have the right to delay the filing or effectiveness of a registration
statement required pursuant to Section 2 hereof during one or more periods aggregating not more
than ninety (90) days in any twelve (12) month period in the event that (i) Company would, in
accordance with the advice of its counsel, be required to disclose in the prospectus information
not otherwise then required by law to be publicly disclosed and (ii) in the judgment of Company’s
board of directors, there is a reasonable likelihood that such disclosure, or any other action to
be taken in connection with the prospectus, would materially and adversely affect any existing or
prospective material business situation, transaction or negotiation or otherwise materially and
adversely affect Company.

10

 

          (d) In the event that, in the judgment of Company, it is advisable to suspend use of a
prospectus included in a registration statement filed pursuant to this Agreement, due to pending
material developments or other events that have not yet been publicly disclosed and as to which (i)
Company would, in accordance with the advice of its counsel, be required to disclose in the
prospectus information not otherwise then required by law to be publicly disclosed and (ii) in the
judgment of Company’s board of directors, there is a reasonable likelihood that such disclosure
would materially and adversely affect any existing or prospective material business situation,
transaction or negotiation or otherwise materially and adversely affect Company, then Company shall
notify all Holders to such effect, and, upon receipt of such notice, each such Holder shall
immediately discontinue any sales of Registrable Securities pursuant to such registration statement
until such Holder has received copies of a supplemented or amended prospectus or until such Holder
is advised in writing by Company that the then current prospectus may be used and has received
copies of any additional or supplemental filings that are incorporated or deemed incorporated by
reference in such prospectus. Notwithstanding anything to the contrary herein, Company shall not
exercise its rights under this Section 7(d) to suspend sales of Registrable Securities for a period
or periods aggregating more than ninety (90) days in any twelve (12) month period.

          (e) If an employee of Tontine or an employee of an Affiliate of Tontine (other than Company)
serves as a member of, or observer to, Company’s board of directors, Tontine and its Affiliates
shall not be permitted to sell any Registrable Securities during such periods that Company has sent
written notice to Tontine and written or electronic notice to Company’s Affiliates and directors
prohibiting them from selling securities of Company due to material non-public information being
available to such parties. Any registration statement in effect during any such “blackout” period
which was filed pursuant to Section 2 hereof shall be extended for such number of days as Tontine
and its Affiliates are not permitted to sell Registrable Securities pursuant to this Section 7(e).

          (f) If at any time the Commission takes the position that some or all of the Registrable
Securities may not be included in a registration statement because (i) the inclusion of such
Registrable Securities violates the provisions of Rule 415 under the Securities Act as a result of
the number of shares included in such registration statement, (ii) the Registrable Securities
cannot be sold as an “at the market offering,” and/or (iii) the Registrable Securities may not be
sold on a delayed or continuous basis under Rule 415, the Company shall (A) remove from the
registration statement such portion of the Registrable Securities and/or (B) agree to such
restrictions and limitations on the registration and resale of the Registrable Securities as the
Commission may require to assure the Company’s compliance with the requirements of Rule 415.

     8. Selection of Managing Underwriters. The managing underwriter or underwriters for
any offering of Registrable Securities to be registered pursuant to Section 2 shall be selected by
the Holders of a majority of the Registrable Securities being so registered and shall be reasonably
acceptable to Company.

11

 

     9. Interpretive Matters. Unless otherwise expressly provided or the context otherwise
requires, for purposes of this Agreement the following rules of interpretation apply:

          (a) When calculating the period of time before which, within which or following which any act
is to be done or step taken pursuant to this Agreement, the date that is the reference date in
calculating such period is excluded. If the last day of such period is a non-Business Day, the
period in question ends on the next succeeding Business Day.

          (b) Any reference in this Agreement to gender includes all genders, and words imparting the
singular number also include the plural and vice versa.

          (c) All references in this Agreement to any “Article,” or “Section,” are to the corresponding
Article or Section of this Agreement.

          (d) The words “herein,” “hereinafter,” “hereof,” and “hereunder” refer to this Agreement as a
whole and not merely to a subdivision in which such words appear unless the context otherwise
requires.

          (e) The word “including” or any variation thereof means “including, but not limited to,” and
does not limit any general statement that it follows to the specific or similar items or matters
immediately following it.

     10. Miscellaneous.

          (a) No Inconsistent Agreements. Company will not hereafter enter into any agreement
with respect to its securities which is inconsistent with the rights granted to the Holders in this
Agreement.

          (b) Remedies. Each Holder, in addition to being entitled to exercise all rights
granted by law, including recovery of damages, will be entitled to specific performance of its
rights under this Agreement. Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement
and hereby agrees to waive the defense in any action for specific performance that a remedy at law
would be adequate. In any action or proceeding brought to enforce any provision of this Agreement
or where any provision hereof is validly asserted as a defense, the successful party shall be
entitled to recover reasonable attorneys’ fees in addition to any other available remedy.

          (c) Amendments and Waivers. Except as otherwise provided herein, the provisions of
this Agreement may not be amended, modified or supplemented, and waivers or consents to departure
from the provisions hereof may not be given unless Company has obtained the written consent of the
Majority Holders.

12

 

          (d) Notice Generally. All notices, demands, communications and deliveries required or
permitted by this Agreement shall be made in writing signed by the party making the same, shall
specify the Section of this Agreement pursuant to which it is given or being made and shall be
deemed given or made (i) on the date delivered if delivered by telecopy or in person, (ii) on the
third (3rd) Business Day after it is mailed if mailed by registered or certified mail
(return receipt requested) (with postage and other fees prepaid) or (iii) on the day after it is
delivered, prepaid, to an overnight express delivery service that confirms to the sender delivery
on such day, as follows:

          (i) If to any Holder, at its last known address appearing on the books of Company
maintained for such purpose.

          (ii) If to Company, at:

Westmoreland Coal Company

2 North Cascade Avenue, 14th Floor

Colorado Springs, Colorado 80903

Attention: [Roger Wiegley]

Telecopy No.: [(719) 448-5824]

With a copy to:

WilmerHale

1875 Pennsylvania Avenue NW

Washington, DC 20006

Attention: Michael J. Levitin

Telecopy No.: (202) 663-6363

or at such other address as may be substituted by notice given as herein provided. The giving of
any notice required hereunder may be waived in writing by the party entitled to receive such
notice. Every notice, demand, request, consent, approval, declaration, delivery or other
communication hereunder shall be deemed to have been duly given or served on the date on which
personally delivered, with receipt acknowledged, telecopied and confirmed by telecopy answerback or
three Business Days after the same shall have been deposited in the United States mail.

          (e) Rule 144. So long as Company is subject to the reporting requirements under the
Exchange Act, it shall comply with such requirements so as to permit sales of Registrable
Securities by the holders thereof pursuant to Rule 144 under the Securities Act.

          (f) Successors and Assigns. This Agreement shall inure to the benefit of and be
binding upon the successors and permitted assigns of each of the parties hereto including any
person to whom Registrable Securities are transferred and becomes an Additional Holder in
accordance with this Agreement.

13

 

          (g) Headings. The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning hereof.

          (h) Governing Law; Jurisdiction; Jury Waiver. This Agreement shall be governed by,
construed and enforced in accordance with the laws of the State of New York without giving effect
to the conflict of laws provisions thereof. Each of the parties hereby submits to personal
jurisdiction and waives any objection as to venue in the County of New York, State of New York.
Service of process on the parties in any action arising out of or relating to this Agreement shall
be effective if mailed to the parties in accordance with Section 10(d) hereof. The parties hereto
waive all right to trial by jury in any action or proceeding to enforce or defend any rights
hereunder.

          (i) Severability. Wherever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law, but if any provision
of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.

          (j) Entire Agreement. This Agreement represents the complete agreement and
understanding of the parties hereto in respect of the subject matter contained herein and therein.
This Agreement supersedes all prior agreements and understandings between the parties with respect
to the subject matter hereof.

          (k) Counterparts. This Agreement may be executed in any number of counterparts and by
the parties hereto in separate counterparts (including by facsimile), each of which when so
executed shall be deemed to be an original and all of which taken together shall constitute one and
the same agreement.

          (l) Termination. Company’s obligations under this Agreement shall cease with respect
to any Person when such Person ceases to be a Holder. Notwithstanding the foregoing, Company’s
obligations under Section 5 and Section 6 shall survive in accordance with their terms.

14

 

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above
written.

	 	 	 	 	 	 	 
	 	 	WESTMORELAND COAL COMPANY	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 

Signature Page to Registration Rights Agreement

15

 

	 	 	 	 	 	 	 	 	 
	 	 	TONTINE CAPITAL PARTNERS, L.P.	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	TONTINE CAPITAL MANAGEMENT, L.L.C.,	 	 
	 	 	 	 	its general partner	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 
	 

	 	 	 	 	 	 

Name: Jeffrey L. Gendell
	 	 
	 

	 	 	 	 	 	Title: Managing Member	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	[TONTINE PARTNERS, L.P.	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	TONTINE MANAGEMENT, L.L.C.,	 	 
	 	 	 	 	its general partner	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 
	 

	 	 	 	 	 	 

Name: Jeffrey L. Gendell
	 	 
	 

	 	 	 	 	 	Title: Managing Member	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	TONTINE OVERSEAS ASSOCIATES, L.L.C.,	 	 
	 	 	as investment manager to Tontine Overseas Fund, Ltd. and certain

separately managed accounts	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	Name: Jeffrey L. Gendell	 	 
	 	 	 	 	Title: Managing Member	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	TONTINE CAPITAL MANAGEMENT, L.L.C.	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	Tontine Capital Overseas GP, L.L.C.,	 	 
	 	 	 	 	its general partner	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 
	 

	 	 	 	 	 	 

Name: Jeffrey L. Gendell
	 	 
	 

	 	 	 	 	 	Title: Managing Member]	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 
	 	 	Jeffrey L. Gendell, as in individual]	 	 

Signature Page to Registration Rights Agreement

16exv10w2

 

Exhibit 10.2

FORM
OF RESTRICTED STOCK AGREEMENT

(2007 Stock Award and Incentive Plan)

     This RESTRICTED STOCK AGREEMENT, dated as of                      (the “Agreement”), by and between
Apartment Investment and Management Company, a Maryland corporation (the “Company”), and
                     (“Recipient”). Capitalized terms used but not otherwise defined in this Agreement
shall have the respective meanings set forth in the Apartment Investment and Management Company
2007 Stock Award and Incentive Plan (the “Plan”).

     WHEREAS, effective                      (the “Date of Grant”), the Compensation and Human Resources
Committee (the “Committee”) of the Board of Directors (the “Board”) of the Company granted the
Recipient a Restricted Stock Award, pursuant to which the Recipient shall receive shares of the
Company’s Class A Common Stock, par value $0.01 per share (“Common Stock”), pursuant to and subject
to the terms and conditions of the Plan.

     NOW, THEREFORE, in consideration of the Recipient’s services to the Company and for other good
and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:

     1. Number of Shares and Share Price. The Company hereby grants the Recipient a
Restricted Stock Award (the “Stock Award”)
of
                     shares of Common Stock (the “Restricted
Stock”) pursuant to the terms of this Agreement and the provisions of the Plan.

     2. Restrictions and Restricted Period.

          (a) Restrictions. Shares of Restricted Stock granted hereunder may not be sold,
assigned, transferred, pledged, hypothecated or otherwise disposed of and shall be subject to a
risk of forfeiture until the lapse of the Restricted Period (as defined below). The Company shall
not be required (i) to transfer on its books any shares of Restricted Stock which shall have been
sold or transferred in violation of any of the provisions set forth in this Agreement, or (ii) to
treat as owner of such shares or to accord the right to vote as such owner or to pay dividends to
any transferee to whom such shares shall have been so transferred.

          (b) Lapse of Restrictions; Restricted Period. The restrictions set forth above shall
lapse and the Restricted Stock shall become freely transferable (provided, that
such transfer is otherwise in accordance with federal and state securities laws) and
non-forfeitable as follows: as to
                      
percent (    %) of the
Restricted Stock on
                    ;
as to
                      
percent (    %) of the Restricted Stock on                     ; as to                        percent
(    %) of the Restricted Stock on
                    ;
and as to
                      
percent (    %) of the Restricted
Stock on                      (the “Restricted Period”). In order to enforce the foregoing restrictions, the
Board may (i) require that the certificates representing the shares of Restricted Stock remain in
the physical custody of the Company or in book entry until any or all of such restrictions expire
or have been removed, and (ii) may cause a legend or legends to be placed on the certificates which
make appropriate reference to the restrictions imposed under the Plan.

 

 

          (c) Rights of a Stockholder. From and after the Date of Grant and for so long as the
Restricted Stock is held by or for the benefit of the Recipient, the Recipient shall have all the
rights of a stockholder of the Company with respect to the Restricted Stock, including but not
limited to the right to receive dividends and the right to vote such shares, subject to the
provisions of paragraph 2(d) hereof.

          (d) Dividends. Dividends paid on Restricted Stock shall be paid at the dividend
payment date for the Common Stock, or be deferred for payment to such date as determined by the
Committee; provided such deferral is in compliance with Section 409A of the Code, in cash, shares
of Common Stock or other property. Stock distributed in connection with a Common Stock split or
Common Stock dividend, and other property distributed as a dividend (excluding cash), shall be
subject to restrictions and a risk of forfeiture to the same extent as the Restricted Stock with
respect to which such Common Stock or other property has been distributed.

     3. Termination of Employment. In the event that Recipient ceases to be employed by
the Company for any reason prior to the lapse of the Restricted Period, then the Restricted Stock
and any accrued but unpaid dividends that are at that time subject to restrictions set forth
herein, shall be forfeited to the Company without payment of any consideration by the Company, and
neither the Recipient nor any of his or her successors, heirs, assigns or personal representatives
shall thereafter have any further rights or interests in such shares of Restricted Stock or
certificates. In the event that Recipient’s employment with the Company is terminated due to his
death or total and permanent disability then the Restricted Period set forth in Section 2(b) hereof
shall immediately lapse as to all shares of Restricted Stock and the Restricted Stock shall become
immediately fully vested. For purposes of this Section 3, Recipient’s employment will have
terminated by reason of total and permanent disability if, in the reasonable and good faith
judgment of the Company, the Recipient is totally and permanently disabled and is unable to return
to or perform his or her duties on a full-time basis.

     4. Change of Control. All unvested shares of Restricted Stock issued hereunder shall,
in addition to any provisions relating to vesting contained in this Agreement, become immediately
fully vested upon the occurrence of a Change of Control (as defined below).

     For purposes of this Agreement, a “Change in Control” shall mean the occurrence of any
of the following events:

          (a) an acquisition (other than directly from the Company) of any voting securities of the
Company (the “Voting Securities”) by any “person” (as the term “person” is used for purposes of
Section 13(d) or Section 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”)) immediately after which such person has “beneficial ownership” (within the meaning of Rule
13d-3 promulgated under the Exchange Act) (“Beneficial Ownership”) of 50% or more of the combined
voting power of the Company’s then outstanding Voting Securities; provided, however, in determining
whether a Change in Control has occurred, Voting Securities that are acquired in a Non-Control
Acquisition (as hereinafter defined) shall not constitute an acquisition that would cause a Change
in Control. “Non-Control Acquisition” shall mean an acquisition (A) by or
under an employee benefit plan (or a trust forming a part thereof) maintained by (1) the
Company or (2) any corporation, partnership or other person of which a majority of its voting power
or its equity

2

 

securities or equity interest is owned directly or indirectly by the Company or in
which the Company serves as a general partner or manager (a “Subsidiary”), (B) by the Company or
any Subsidiary, or (C) by any person in connection with a Non-Control Transaction (as hereinafter
defined). “Non-Control Transaction” shall mean a merger, consolidation, share exchange or
reorganization involving the Company, in which (1) the stockholders of the Company, immediately
before such merger, consolidation, share exchange or reorganization, own, directly or indirectly
immediately following such merger, consolidation, share exchange or reorganization, at least 50% of
the combined voting power of the outstanding voting securities of the corporation that is the
successor in such merger, consolidation, share exchange or reorganization (the “Surviving Company”)
in substantially the same proportion as their ownership of the Voting Securities immediately before
such merger, consolidation, share exchange or reorganization, and (2) the individuals who were
members of the Board of Directors of the Company immediately prior to the execution of the
agreement providing for such merger, consolidation, share exchange or reorganization constitute at
least 50% of the members of the board of directors of the Surviving Company;

          (b) the individuals who constitute the Board as of the date hereof (the “Incumbent Board”)
cease for any reason to constitute at least 50% of the Board; provided, however, that if the
election, or nomination for election by the Company’s stockholders, of any new director was
approved by a vote of at least two-thirds of the Incumbent Board, such new director shall be
considered as a member of the Incumbent Board; provided, further, that no individual shall be
considered a member of the Incumbent Board if such individual initially assumed office as a result
of either an actual or threatened “election contest” (as described in Rule 14a-11 promulgated under
the Exchange Act) (an “Election Contest”) or other actual or threatened solicitation of proxies or
consents by or on behalf of a person other than the Board of Directors (a “Proxy Contest”)
including by reason of any agreement intended to avoid or settle any Election Contest or Proxy
Contest; or

          (c) the consummation of any of the following: (A) a merger, consolidation, share exchange or
reorganization involving the Company (other than a Non-Control Transaction); (B) a complete
liquidation or dissolution of the Company; or (C) an agreement for the sale or other disposition of
all or substantially all of the assets of the Company to any person (other than a transfer to a
Subsidiary).

     Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because
any person (a “Subject Person”) acquired Beneficial Ownership of more than the permitted amount of
the outstanding Voting Securities as a result of the acquisition of Voting Securities by the
Company that, by reducing the number of Voting Securities outstanding, increases the proportional
number of shares Beneficially Owned by such Subject Person, provided that if a Change in Control
would occur (but for the operation of this sentence) as a result of the acquisition of Voting
Securities by the Company, and after such share acquisition by the Company, such Subject Person
becomes the Beneficial Owner of any additional Voting Securities that increases the percentage of
the then outstanding Voting Securities Beneficially Owned by such Subject Person, then a Change in
Control shall occur.

     5. Tax Withholding; Tax Treatment.

3

 

          (a) Tax Withholding. Notwithstanding anything to the contrary, the release of the
shares of Restricted Stock hereunder shall be conditioned upon the Recipient making adequate
provision for federal, state or other withholding obligations, if any, which may arise upon the
vesting of the Restricted Stock.

          (b) Tax Treatment. Set forth below is a brief summary as of the Date of Grant of
certain United States federal tax consequences of the award of Restricted Stock. THIS SUMMARY DOES
NOT ADDRESS SPECIFIC STATE, LOCAL OR FOREIGN TAX CONSEQUENCES THAT MAY BE APPLICABLE TO THE
RECIPIENT. THE RECIPIENT UNDERSTANDS THAT THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS
AND REGULATIONS ARE SUBJECT TO CHANGE.

TO ENSURE COMPLIANCE WITH TREASURY DEPARTMENT REGULATIONS, WE ADVISE YOU THAT, UNLESS OTHERWISE
EXPRESSLY INDICATED, ANY FEDERAL TAX ADVICE CONTAINED IN THIS AGREEMENT WAS NOT INTENDED OR WRITTEN
TO BE USED, AND CANNOT BE USED, FOR THE PURPOSE OF (I) AVOIDING TAX-RELATED PENALTIES UNDER THE
CODE OR (II) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY TAX-RELATED MATTERS
ADDRESSED HEREIN.

     Unless the Recipient has filed a Section 83(b) election as discussed below, the Recipient
shall recognize ordinary income at the time or times the Restricted Stock vests in an amount equal
to the aggregate Fair Market Value of such shares on each such date.

     The Recipient hereby acknowledges that he or she has been informed that, with respect to the
grant of Restricted Stock, an election may be filed by the Recipient with the Internal Revenue
Service, within 30 days of the Date of Grant, electing pursuant to Section 83(b) of the Internal
Revenue Code of 1986, as amended (the “Code”), to be taxed currently on the aggregate Fair Market
Value of the Restricted Stock as of the Date of Grant.

     THE RECIPIENT ACKNOWLEDGES THAT IT IS THE RECIPIENT’S SOLE RESPONSIBILITY AND NOT THE
COMPANY’S TO FILE TIMELY THE ELECTION UNDER SECTION 83(b) OF THE CODE, EVEN IF THE RECIPIENT
REQUESTS THE COMPANY OR ITS REPRESENTATIVE TO MAKE THIS FILING ON THE RECIPIENT’S BEHALF.

     BY SIGNING THIS AGREEMENT, THE RECIPIENT REPRESENTS THAT HE OR SHE HAS REVIEWED WITH HIS OR
HER OWN TAX ADVISORS THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT AND THAT HE OR SHE IS RELYING SOLELY ON SUCH ADVISORS AND NOT ON ANY
STATEMENTS OR REPRESENTATIONS OF THE COMPANY OR ANY OF ITS AGENTS. THE RECIPIENT UNDERSTANDS AND
AGREES THAT HE OR SHE (AND NOT THE COMPANY) SHALL BE RESPONSIBLE FOR ANY TAX LIABILITY THAT MAY
ARISE AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.

     6. Miscellaneous.

4

 

          (a) Entire Agreement. This Agreement and the Plan contain the entire understanding
and agreement of the Company and the Recipient concerning the subject matter hereof, and supersede
all earlier negotiations and understandings, written or oral, between the parties with respect
thereto.

          (b) Captions. The captions and section numbers appearing in this Agreement are
inserted only as a matter of convenience. They do not define, limit, construe or describe the
scope or intent of the provisions of this Agreement.

          (c) Counterparts. This Agreement may be executed in counterparts, each of which when
signed by the Company or the Recipient will be deemed an original and all of which together will be
deemed the same agreement.

          (d) Notices. Any notice or communication having to do with this Agreement must be
given by personal delivery or by certified mail, return receipt requested, addressed, if to the
Company or the Committee, to the attention of the General Counsel of the Company at the principal
office of the Company and, if to the Recipient, to the Recipient’s last known address contained in
the personnel records of the Company.

          (e) Succession and Transfer. Each and all of the provisions of this Agreement are
binding upon and inure to the benefit of the Company and the Recipient and their permitted
successors, assigns and legal representatives.

          (f) Amendments. Subject to the provisions of the Plan, this Agreement may be amended
or modified at any time by an instrument in writing signed by the parties hereto.

          (g) Governing Law. This Agreement and the rights of all persons claiming hereunder
will be construed and determined in accordance with the laws of the State of Maryland without
giving effect to the choice of law principles thereof.

          (h) Plan Controls. This Agreement is made under and subject to the provisions of the
Plan, and all of the provisions of the Plan are hereby incorporated by reference into this
Agreement. In the event of any conflict between the provisions of this Agreement and the
provisions of the Plan, the provisions of the Plan shall govern. By signing this Agreement, the
Recipient confirms that he or she has received a copy of the Plan and has had an opportunity to
review the contents thereof.

          (i) No Guarantee of Continued Service. The Recipient acknowledges and agrees that
nothing herein, including the opportunity to make an equity investment in the Company, shall be
deemed to create any implication concerning the adequacy of the Recipient’s services to the
Company, any Company Subsidiary or any Partnership or Partnership Subsidiary shall be construed as
an agreement by the Company, any Company Subsidiary or any Partnership or Partnership Subsidiary,
express or implied, to employ the Recipient or contract for the Recipient’s services, to
restrict the right of the Company, any Company Subsidiary or any Partnership or Partnership
Subsidiary, as applicable, to discharge the Recipient or cease contracting for the Recipient’s
services

5

 

or to modify, extend or otherwise affect in any manner whatsoever, the terms of any
employment agreement or contract for services that may exist between the Recipient and the Company,
any Company Subsidiary or any Partnership or Partnership Subsidiary, as applicable.

{Signature page follows}

6

 

     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above
written.

	 	 	 	 	 	 	 
	 	 	APARTMENT INVESTMENT AND

MANAGEMENT COMPANY	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 	 	RECIPIENT:	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 

	 	 	 	 	 	 	 
	 

	 	Address:	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Home Telephone:

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00122-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00122-of-00352.parquet"}]]