| |
(1) | Mr. Lobb was not vested in the pension plan at the time he ceased employment. |
(7)(2) | | SARs; one third vested on 7/1/05 and the balance vested 12/30/05. |
|
(8) | | SARs vested 12/30/05. |
|
(9) | | Vested in two annual increments beginning 11/1/05. |
|
(10) | | SARs; one third vested on 11/1/05 and the balance vested 12/30/05. |
|
(11) | | Vested in two annual increments beginning 3/5/02. |
|
(12) | | SARs vest in 3 equal annual installments, with the first increment vesting on7/1/07. |
|
(13) | | 3,334 options vest on11/1/07. |
Option Exercises and Vested Stock
The following table presents information regarding option exercises during 2006 for our named executive officers. No SARs held by our named executive officers vested during 2006 and no SARs were exercised. There were no restricted stock awards outstanding during 2006.
2006 OPTION EXERCISES AND STOCK VESTED
| | | | | | | | | | | | | | | | |
| | Option Awards | | | Stock Awards | |
| | Number of Shares
| | | Value Realized on
| | | Number of Shares
| | | Value Realized on
| |
| | Acquired on Exercise
| | | Exercise
| | | Acquired on Vesting
| | | Vesting
| |
Name | | (#) | | | ($) | | | (#) | | | ($) | |
|
Christopher K. Seglem | | | 40,000 | | | | 793,200 | | | | — | | | | — | |
David J. Blair | | | — | | | | — | | | | — | | | | — | |
Roger D. Wiegley | | | — | | | | — | | | | — | | | | — | |
Robert W. Holzwarth | | | — | | | | — | | | | — | | | | — | |
John V. O’Laughlin | | | — | | | | — | | | | — | | | | — | |
Pension Benefits
The following table presents pension plan benefits for each of our named executive officers:
2006 PENSION BENEFITS
| | | | | | | | | | | | | | |
| | | | | | | Present Value
| | | | |
| | | | | | | of Accumulated
| | | | |
| | | | | | | Benefit as of
| | | | |
| | | | Number of Years
| | | December 31,
| | | Payments During Last
| |
| | | | Credited Service
| | | 2006(1)
| | | Fiscal Year
| |
Name | | Plan Name | | (#) | | | ($) | | | ($) | |
|
Christopher K. Seglem | | Pension Plan | | | 26.33 | | | | 363,680 | | | | 0 | |
| | SERP(2) | | | 26.33 | | | | 2,255,949 | | | | 0 | |
David J. Blair | | Pension Plan | | | 1.67 | | | | 27,831 | | | | 0 | |
Roger D. Wiegley | | Pension Plan | | | 1.58 | | | | 36,622 | | | | 0 | |
Robert W. Holzwarth | | Pension Plan | | | 2.17 | | | | 54,149 | | | | 0 | |
John V. O’Laughlin | | Pension Plan | | | 4.75 | | | | 88,617 | | | | 0 | |
| | |
(1) | | Pension economic assumptions are consistent with our SFAS 87 financial reporting for fiscal year 2006.2009. Demographic assumptions are also consistent with our pension financial reporting, with the exception that per SEC guidance, pre-retirement decrements are not used. A discount rate of 5.95%6.0% was used for 2006. |
|
(2) | | Supplemental Executive Retirement Plan — see description below.2009. |
Pension Plan
We sponsor a Pension Plan, which we refer
Effective July 1, 2009, the Board froze our pension plan for non-union employees, including our named executive officers, resulting in no future benefits accruing under these plans. Prior to as the Plan, for eligible employees of our company and our subsidiaries to which employees make no contributions. The Plan is a merger of the Westmoreland Pension Plan, and other plans that were in place at subsidiaries at the time of their acquisition. The Plan
51
maintains the formulas for benefit calculations which are associated withJuly 2009, each of the original plans. All employees whose terms and conditions of employment are not subject to collective bargaining and who work 1,000 or more hours per year are eligible for participationnamed executive officers, except Mr. Alessi, participated in the Plan.same defined benefit pension plans offered to other non-union employees. Eligible employees become fully vested after five years of service, or, in any event, upon attaining age 65.
The Plan was adopted effective December 1, 1997 as a qualified replacementpension plan for a previous plan, which was terminated effective November 30, 1996. In general, the Plan provides for payment of annualnormal retirement at 65. Early retirement benefits to eligible employees and also provides for disability benefits and for reduced benefits upon retirement prior to the normal retirementare available at age of 65. For the purpose of benefit calculation under the Plan for Mr. Seglem, credited service under the previous plan is included55 with credited service under the current Plan. The amount of the accrued benefit paid upon termination of the previous plan, calculated as of the termination date of the previous plan, is subtracted to arrive at the benefit amount payable under the Plan. The amounts shown in the table above have been reduced by $174,424, the amount of accrued benefit under the previous plan for Mr. Seglem. Since Messrs. Blair, Wiegley, Holzwarth and O’Laughlin were not employees of our company at the time the previous plan was terminated, they have no accrued benefit under the previous plan but participate in our current pension plan.
Mr. O’Laughlin’s pension benefits are calculated differently than the method for our other named executive officers as he is a participant in the portion of the Plan which is a cash balance plan associated with Western Energy Company. Each year the cash balance account may be credited with three types of credits: basic credit, additional credit and interest credit, based on total points and eligible earnings for the year. Total points are determined by adding attained age and completed10 years of service, however at the beginningreduced benefits. None of the year; eligible earnings include base pay, commissions and the straight time portion of any overtime for the year, subject to IRS limitations.
The current compensation covered by the Plan for any named executive officer is that amount reported in the salary column of the Summary Compensation table, subject to limitations imposed by the Internal Revenue Code. In 2006 that limit was $220,000.
Each of Messrs. Seglem, Blair, Wiegley and Holzwarth areexecutives covered under
this plan are eligible to retire as of December 31, 2009. The executive may choose optional forms of benefit, all reduced to be actuarially equivalent to the
single life annuity benefit. The optional forms available are 50%, 66 2/3% and 100% joint and survivor options, a 10-year certain and life o ption, and a single life annuity.
In addition, to the main Westmoreland Coal Company provisions of the Pension Plan as follows and which also provide for disability benefits and for reduced benefits upon early retirement.
| | |
| • | The benefit equals 1.2% of average earnings plus 0.5% of average earnings in excess of covered compensation times years of service. Covered compensation is a 35 year average of Social Security wage bases at Social Security retirement age. |
|
| • | Normal retirement age is 65. Early retirement benefits are available at age 55 with 10 years of service. Benefits are reduced actuarially for early commencement before age 65. Participants with 20 or more years of service may retire at age 62, instead of 65, with no reduction in benefits. At December 31, 2006, Mr. Seglem had 26 years of service and was eligible to retire with full benefits at age 62. None of the other executives covered under thispension plan, are eligible to retire. |
|
| • | The executive may choose optional forms of benefit, all reduced to be actuarially equivalent to the single life annuity benefit. The optional forms available are 50%, 662/3% and 100% joint and survivor options, a10-year certain and life option, and a single life annuity. |
|
| • | Mr. Seglem is also eligible to benefit under the SERP. This plan has the same plan provisions discussed above, with the exception of the pay considered for the calculation of the benefit formula. Bonuses are included in the definition of compensation. Additionally, the limitations on pay allowed to be considered in qualified pension plans are disregarded. |
Mr. O’Laughlin is covered under plan provisions for two subsidiaries where he has worked. Aspects of each subsidiary’s plan provisions may be more or less attractive than the Western Energy Company benefitplan provisions inapplicable to us. Based on Mr. O’Laughlin’s service and salary, the Pension PlanBeulah and Savage Salaried Employee’s (“BSS”) benefits are the most valuable as follows:
| | |
| • | The benefit value equals a cash balance account increasing with 6% interest annually and credited annually with pay credits of 3% to 12% of pay based on age plus service, plus 1.5% to 6.0% of pay in excess of 50% of the Social Security Wage Base, again based on age plus service. |
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| | |
| • | The account balance is converted to an annuity based on actuarial equivalent conversion factors based on age. |
|
| • | Early retirement benefits are available at age 50 with 5 years of service. Benefits are reduced actuarially for early commencement before age 65, based on the conversion factors discussed above. Mr. O’Laughlin is eligible for early retirement. |
of December 31, 2009. Under the BSS plan, normal retirement age is 65. Early retirement benefits are available at age 55 with 5 years of service, but reduced 3% per year for early commencement before age 62. Mr. O’Laughlin may choose optional forms of benefit, all reduced to be actuarially equivalent to the single life annuity benefit. The optional forms available are a 50%, 66 2/3%, 75% and 100% joint and survivor options, a 10-year certain and life option, and a single life annuity.
Our new employees
Mr. Alessi, and those who are hired on or after July 1, 2006, and who are not subject to collective bargaining and who work 1,000 or more hours per year, are covered under a new benefit plan. There are two components to the new benefit plan design, the first being a defined benefit plan to which employees make no contributions. EligibleAs eligible employees become fully vested after five years of service, or in any event, upon attaining age 65. The second componentMr. Alessi is a defined contribution plan, or 401(k) Plan, in which employees may elect to have a pre-tax deduction from their pay deposited in a 401(k) Plan account. Employees’ contributions are matched by the Company at 50% of the first 6% of compensation the employee contributes. The matching contribution is made in Westmoreland Common Stock and employees become vested in the matching contribution over a two year period. This benefit also providesnot currently eligible for a monthly Special Contribution paid by the Company in Westmoreland Common Stock to employees’ 401(k) plan account equal to 1.5% of their gross pay. Employees are immediately 100% vested in the Special Contribution. The Special Contribution will be made without regard to any contributions the employees make to the Plan. If an employee has not elected to make contributions under the Plan, the Company will create an Account for the employee into which the Special Contribution will be made. None of the named executive officers are participants in the new benefit plan.
Supplemental Executive Retirement Plan
The Internal Revenue Code limits the amount of compensation that may be taken into account for the purpose of determining the retirement benefit payable under retirement plans, such as the Plan, that are qualified under ERISA. The limitation for 2006 is $220,000. So that we may provide retirement income to certain of our senior executives and other key individuals that is commensurate as a percentage of pre-retirement income with that paid to other company employees, we established a nonqualified Supplemental Executive Retirement Plan, or the SERP, effective January 1, 1992. Mr. Seglem, who served as our President and Chief Executive Officer through May 1, 2007, is covered by the SERP.
To become vested in the SERP, a participant must attain age 55 and generally complete 10 years of service. Bonus payments are included in a participant’s compensation under the SERP, although excluded under the Plan. Benefits are payable out of our general assets, and shall commence and be payable at the same time and in the same form as benefits under the Plan.
participation.
53
2009 Pension Benefits Upon Retirement/Termination Disability or Death
Mr. Christopher K. SeglemO’Laughlin and Mr. O’LaughlinMyers are each vested in the pension plan and are entitled to an annual lifetime benefit payable upon retirement, voluntary or involuntary termination, disability or death (paid for the life of the spouse). The following table shows benefitsBenefits shown for Mr. SeglemO’Laughlin and Mr. O’Laughlin assumingMyers assume that the event entitling them to benefits occurred on December 31, 2006:
2006 PENSION BENEFITS UPON RETIREMENT/TERMINATION, DISABILITY OR DEATH
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | Time or Period of
| |
Name | | Type of Termination | | Plan | | Benefit Amount | | | Form of Payment | | | Payment | |
|
Christopher K. Seglem | | Retirement/Termination | | Pension Plan | | $ | 2,579 | | | | Monthly Annuity | | | | Life | |
| | | | SERP | | $ | 15,997 | | | | Monthly Annuity | | | | Life | |
| | Disability | | Pension Plan | | $ | 2,964 | | | | Monthly Annuity | | | | Life | |
| | | | SERP | | $ | 18,388 | | | | Monthly Annuity | | | | Life | |
| | Death | | Pension Plan | | $ | 2,066 | | | | Monthly Annuity | | | | Life of Spouse | |
| | | | SERP | | $ | 12,814 | | | | Monthly Annuity | | | | Life of Spouse | |
John V. O’Laughlin | | Retirement/Termination | | Pension Plan | | $ | 592 | | | | Monthly Annuity | | | | Life | |
| | Disability | | Pension Plan | | $ | 592 | | | | Monthly Annuity | | | | Life | |
| | Death | | Pension Plan | | $ | 283 | | | | Monthly Annuity | | | | Life of Spouse | |
Retiree Medical Benefits
Each of Messrs. Blair, Wiegley and Holzwarth2009. The benefits for Mr. Myers are covered under our broad-based retiree medical plan that providesfirst payable on March 1, 2019. The benefits for continued medical coverage upon retirement at age 62 and with twenty years of service, or age 65 with five years of service. At December 31, 2006, Mr. Seglem was also covered by this broad-based retiree medical plan; following the termination of his employment in May 2007, his medical benefits are provided pursuant to the Executive Policy described below. Mr. O’Laughlin’s retiree medical benefits are different than those for our other named executive officers as he is a participant in the retiree medical plan associated with Western Energy Company. Mr. O’Laughlin would be eligible for benefits at age 50 with five years of service. Both of these plans are closed to individuals hired after Julyfirst payable on January 1, 2006. The Company adopted an alternative, less costly retiree medical plan for new employees hired after July 1, 2006.
Deferred Compensation
The following table presents information regarding deferred compensation during 2006 for our named executive officers:
2006 NONQUALIFIED DEFERRED COMPENSATION
| | | | | | | | | | | | | | | | | | | | |
| | Executive
| | | Registrant
| | | | | | Aggregate
| | | | |
| | Contributions
| | | Contributions in Last
| | | Aggregate Earnings
| | | Withdrawals/
| | | Aggregate Balance at
| |
| | in Last Fiscal Year
| | | Fiscal Year(1)
| | | in Last Fiscal Year(2)
| | | Distributions
| | | Last Fiscal Year-End
| |
Name | | ($) | | | ($) | | | ($) | | | ($) | | | ($) | |
|
Christopher K. Seglem(3) | | | 0 | | | | 346,620 | | | | 95,959 | | | | 735,796 | (4) | | | 852,175 | (5) |
David J. Blair | | | 0 | | | | 68,581 | | | | 0 | | | | 0 | | | | 0 | |
Roger D. Wiegley | | | 0 | | | | 137,051 | | | | 0 | | | | 0 | | | | 0 | |
Robert W. Holzwarth | | | 0 | | | | 100,963 | | | | 0 | | | | 0 | | | | 0 | |
John V. O’Laughlin(6) | | | 0 | | | | 92,531 | | | | 4,025 | | | | 16,902 | (7) | | | 34,787 | (8)) |
| | |
(1) | | Amounts reported in this column represent annual bonus amounts for 2005 performance that would generally have been paid in 2006, but were deferred by the Compensation and Benefits Committee and paid in first quarter 2007. These amounts were reported as “bonus” in the Summary Compensation Table for 2005, except for Mr. Blair who was not included among the top five most highly compensated officers in 2005. |
54
| | |
(2)Name | Type of Termination | Aggregate Earnings represents interest earned on all deferred compensation during 2006. The portion included in this total that is considered at an “above-market” rate is also reported in the 2006 Summary Compensation table above.Plan | Benefit Amount | Form of Payment | Time or Period of Payment |
John V. O’Laughlin | Retirement/Termination | Pension Plan | $2,005 | Monthly Annuity | Life |
(3) | Disability | We deferred payments related to the 2000 award of performance units which vested in 2003 and payments related to the 2001 award of performance units which vested in 2004, the value of which was reported in the Summary Compensation Table for 2003 and 2004, respectively.Pension Plan | $2,005 | Monthly Annuity | Life |
| Death | Pension Plan | $919 | Monthly Annuity | Life of Spouse |
(4)Todd A. Myers | Retirement/Termination | Includes interest of $130,389.Pension Plan | $1,208 | Monthly Annuity | Life |
| Disability | Pension Plan | $2,415 | Monthly Annuity | Life to age 65 |
(5) | Death | Includes $146,207 in accrued interest. |
|
(6)Pension Plan | $1,038 | We deferred payments related to the 2001 awardMonthly Annuity | Life of performance units which vested in 2004. |
|
(7) | | Includes interest of $2,465. |
|
(8) | | Includes $5,912 in accrued interest.Spouse |
We previously had a Deferred Compensation Plan but terminated that plan following a change in applicable regulations. No
Potential Payments upon Termination or Change-in-Control
Our named executive officer deferredofficers are not entitled to any compensation in 2006 under that plan.
Performance Unit Plan Deferral Provision
Underadditional payments or benefits relating to termination of employment other than the 2000 PUP, the Compensation and Benefits Committee has the discretion and authority to defer payment of vested performance units in a lump sum or in installments over any period of time not to exceed ten years. Participantsretirement benefits previously described in the 2000 PUP may not voluntarily defer any payments under this plan.
In 2000, Mr. Seglem was awarded performance units under the 2000 PUP. Each performance unit entitled the recipient to receivepreceding compensation tables and participation in a payment in cash or stock, at the election of the Compensation and Benefits Committee, equal to an amount based on the increase in our common stock over a three year period. Upon vesting in 2003, and as permitted by the 2000 PUP, the Compensation and Benefits Committee elected to pay approximatelyone-fifth of the 2000 awards through a combination of cash and common stock and defer payment of the balance in cash over a period of up to four years.
In 2001, Messrs. Seglem and O’Laughlin were awarded performance units under the 2000 PUP. Each performance unit entitled the recipient to receive a payment in cash or common stock, at the election of the Compensation and Benefits Committee, equal to an amount based upon the total stockholder return percentage on our common stock over a three year period. In 2004, and as permitted by the 2000 PUP, the Compensation and Benefits Committee elected to pay in cash approximatelyone-fifth of the 2001 awards and defer payment of the balance over a period of up to four years.
Interest at the rate of Prime plus 1% is paid on all long-term compensation amounts deferred by the Compensation and Benefits Committee.
In addition, the Annual Incentive Plan payments for performance during 2005 that would normally be paid in 2006 were deferred without interest by the Compensation and Benefits Committee. They were paid in full in the first quarter of 2007.
Severance Benefits
At December 31, 2006, we and our subsidiaries had severance policies, including our Executive Severance Policy, dated December 8, 1993, which is the same as the policy established in 1990 and filed with the Securities and Exchange Commission as an Exhibit to ourForm S-1 on July 28, 2004. We refer to this policy, which covers Mr. Seglem, as the Executive Policy. We also had a Severance Policy dated July 26, 2004, which we refer to as the Employee Policy, which covered all other non-union employees who had six months of service, including Messrs. Blair, Wiegley, Holzwarth and O’Laughlin. On May 21, 2007, we adopted a revised severance policy that appliesis generally available to all active full-time employees other than our interim President and interim Chief Executive Officer.
55
Executive Policy
The Executive Policy provides foremployees. Our severance payments and benefits if a termination occurs for any of the following reasons:
| | |
| • | Unacceptable job performance other than that resulting from gross or willful misconduct, which is defined as an act or acts constituting larceny, fraud, gross negligence, crime or crimes, moral turpitude in the course of employment, or willful and material misrepresentation to our directors or officers, |
|
| • | A significant reduction or increase, without adequate compensation, in the nature or scope of the executive’s authority or duties, |
|
| • | A reduction in base compensation, the aggregate value of employee benefits or cessation of eligibility for incentive bonus payments, or |
|
| • | A change in control of our company. |
Three types of events qualify as changes in control: (1) the acquisition by any person of 20% or more of the combined voting power of our stock, or the acquisition by a person who already owns 20% or more of the combined voting power of our stock of an additional 5% or more of the combined voting power, unless the Board determines that the acquisition was not hostile or adverse, (2) a change in the composition of the Board over two years, so that the directors at the start of that period cease to be a majority of the Board, unless the new directors are nominated by the incumbent directors, and (3) a business combination transaction in which we are not the surviving entity, or the sale of all or substantially all of our assets, or the adoption of a plan of liquidation or dissolution.
The severance and benefits payable in the event of termination include (1) a cash payment, payable over a twenty-four month period, equal to twice the greater of the executive’s annual average cash compensation, defined as the greater of the annualized base salary at the time of severance plus the amount of bonus awarded (including amounts deferred) in that year or the annual average of the executive officer’s most recent five calendar years of base salary and bonus awarded (including amounts deferred), including the year of termination, (2) medical, dental and life insurance coverage for two years, (3) treatment of incentive stock options and SARs in accordance with the provisions of the appropriate incentive plan, (4) financial planning for the year of termination and the following year, (5) outplacement services for up to two years from the termination date, and (6) payment for unused vacation. We are also required to pay any costs and expenses the executive incurs in enforcing this policy. These amounts are subject to reduction in certain circumstances, including if, following a business combination transaction, the executive takes a position with the surviving company.
If a termination under the Executive Policy had occurred on December 31, 2006, and if none of the events occurred that reduced the amounts payable to Mr. Seglem, such as acceptance of a position with a surviving or continuing corporation, then he would have been entitled to receive a cash payment in the range of $1,766,800 to $3,238,392, payable overtwenty-four months. The amount within that range depends on the interpretation applied to the Executive Policy and assumes there was no change of control. In addition, Mr. Seglem would also have been entitled to receive perquisites and other personal benefits with a total cost to the Company of $66,426, of which $32,974 is the premium cost to us of providing medical, dental and life insurance coverage for two years at the level specified by the Executive Policy, assuming that rates in effect at December 31, 2006 remained in effect over the two year period, $19,000 is the approximate cost to us of providing the financial planning and outplacement services over the period required by the Executive Policy, and $18,581 is the value of Mr. Seglem’s unused vacation. The actual cost of providing post-termination medical coverage to Mr. Seglem could be higher than the premium cost because the actual medical expenses covered by the Company under its self-insurance program could exceed its premium cost.
In the alternative, Mr. Seglem could have elected to receive the present value of his total severance discounted at thetwo-year Treasury bill rate, including the present value of the executive benefits listed above, in a lump sum cash distribution at the time of termination.
56
If Mr. Seglem’s employment had been terminated on December 31, 2006, he would also have been entitled to full payout of the 2006 Annual Incentive Plan bonus earned for performance during 2006 in the amount of $225,296, with payment occurring at a time consistent with the payments to other participants in the Annual Incentive Plan. In the event that a change in control occurred that was not hostile or adverse, Mr. Seglem would have been entitled to receive an amount equal to a 100% award under the bonus plan.
If Mr. Seglem’s employment had been terminated on December 31, 2006, he would have retained all SARs that had then vested, which consisted of 63,300 issued in 2004 and 82,100 issued in 2005. In the event of termination within twelve months following a change in control, Mr. Seglem’s 52,700 unvested SARs issued in 2006 would become fully vested, but would represent no additional value because the closing price of our common stock on December 31, 2006 was less than the exercise price of those SARs. For the purposes of this event, “termination” means involuntary dismissal or a material change in the employee’s level of total compensation or a material change in his level of responsibility which, in either such case, causes the employee to voluntarily terminate his employment.
In addition, if Mr. Seglem’s employment had been terminated on December 31, 2006, he would have retained all performance units that had then vested, which consisted of 2,137 issued in 2004 and 2,269 issued in 2005, but would have forfeited all the performance units that had not yet vested. However, the value of those performance units would not be determinable until the completion of the performance periods in 2007 and 2008, respectively, so we would not have been required to make any payment in respect of these units at that time. Mr. Seglem had no unvested stock options at December 31, 2006.
If Mr. Seglem’s employment had terminated on December 31, 2006, he would also have been entitled to receive the pension benefits and deferred compensation described above.
Employee Policy
The Employee Policy provided for severance payments and benefits if an eligible employee is terminated for one of the following reasons:
| | |
| • | Involuntary termination not for cause, where cause is defined as unsatisfactory job performance, or gross or willful misconduct that is injurious to us, |
|
| • | A reduction in work force, or |
|
| • | A liquidation of our company. |
All full-time, non-union employees with six months of service were eligible to receive severance and benefits under this policy. In order to receive severance and benefits under the policy, the employee must sign an employment release and settlement agreement waiving claims against us.
The severance and benefits payable in the event of termination included (1) for officers at or above the level of vice president or general manager, including Messrs. Blair, Wiegley, Holzwarth and O’Laughlin, a severance payment equal to four weeks of base salary for every year of continuous and completed service, subject to a minimum of eight weeks and a maximum of 52 weeks, in equal installments on the normal payroll schedule and net of any tax, medical or other required withholdings, (2) medical, vision and dental benefits for the balance of the month in which discharge occurred, and the three following months and (3) payment for any unused vacation.
If a termination not for cause had occurred on December 31, 2006, then Messrs. Blair, Wiegley, Holzwarth and O’Laughlin would have received, upon execution of the release and settlement agreement described above, severance payments of $39,423, $39,029, $37,217 and $76,171, respectively, in equal installments on the normal payroll schedule and net of any tax, medical or other required withholdings. We estimate that the cost of providing medical, vision and dental benefits to Mr. Blair and Mr. O’Laughlin from January 1, 2007 through March 31, 2007, and the value of their unused vacation at December 31, 2006, to be $15,229 and $20,001, respectively. We estimate that the cost of providing medical, vision and dental benefits to Messrs. Wiegley and Holzwarth from January 1, 2007 through March 31, 2007, and the value of their unused vacation at December 31, 2006, was less than $10,000 each.
57
If the employment of Messrs. Blair, Wiegley, Holzwarth and O’Laughlin had been terminated on December 31, 2006, they would have retained all SARs that had then vested (for Mr. Blair, 29,900 issued in 2005; for Mr. Wiegley, 27,900 issued in 2005; for Mr. Holzwarth, 13,300 issued in 2004 and 17,900 issued in 2005; and for Mr. O’Laughlin, 9,800 issued in 2004 and 14,600 issued in 2005) but would have forfeited all the SARs that had not yet vested except if termination occurs within one year following a change in control in which case SARs issued in 2006 (for Mr. Blair, 8,100; for Mr. Wiegley, 18,400; for Mr. Holzwarth, 12,100; and for Mr. O’Laughlin, 9,900) would become fully vested, but would represent no additional value because the closing price of our common stock on December 31, 2006 was less than the base price of those SARs. For the purposes of this event, “termination” means involuntary dismissal or a material change in the employee’s level of total compensation or a material change in his or her level of responsibility which, in either such case, causes the employee to voluntarily terminate his or her employment. In addition, Mr. Holzwarth had 3,334 unvested options which would vest upon a change in control, but at no additional value because the closing price of our common stock on December 31, 2006 was less than the exercise price of those options.
In addition, if the employment of Messrs. Blair, Wiegley, Holzwarth and O’Laughlin had been terminated on December 31, 2006, they would have retained all performance units that had then vested (for Mr. Blair, 550 issued in 2005; for Mr. Wiegley, 495 issued in 2005; for Mr. Holzwarth, 448 issued in 2004 and 494 issued in 2005; and for Mr. O’Laughlin, 332 issued in 2004 and 404 issued in 2005) but would have forfeited all the performance units that had not yet vested. However, the value of those performance units would not then have been determinable, so we would not have been required to make any payment in respect of these units at that time. If a change in control had occurred on December 31, 2006, and if our existence had ended, then performance units held by Messrs. Blair, Wiegley, Holzwarth and O’Laughlin would have terminated without value. However, if our existence had continued following the change in control, then performance units held by Messrs. Blair, Holzwarth, O’Laughlin and Wiegley would also have continued in existence, without acceleration of vesting, and would have been valued in the course of our business.
If the employment of Messrs. Blair, Holzwarth, O’Laughlin and Wiegley had terminated on December 31, 2006, they would also have received the pension benefits and deferred compensation described above.
Revised Severance Policy
We adopted a revised severance policy on May 21, 2007. This policy covers virtually all our employees, although the amount of the severance benefit depends upon which of the six employee categories an employee is in.tier. The highest category,tier, which includes twelve seniorour named executive officers, provides for severance compensation equal to 12 months of monthly base pay, 129 months of outplacement assistance and 12 months of health benefit continuation. The lowest category includes non-exempt and hourly employees and provides for severance compensation equal to one week’s base pay per year of service, but not less than two weeks and not more than 26 weeks base pay. Severance benefits are payable under the policy only in the following circumstances: involuntary termination that is not for cause; termination due to sale of a facility, division or business segment; or relocation of more than 50 miles that the employee declines. SeveranceOur executives do not have employment con tracts or any benefits triggered by a change-in-control. In addition, our Annual Incentive Program provides that program participants are not payableonly entitled to payment of incentive payouts if they are employed on the employee receives an offerdate of similar employment within 30 days from an affiliatepayment, which typically occurs in March of the Company, or if the employee is terminated duefollowing year. All incentive payouts are forfeited should a named executive officer leave our employment, for any reason, prior to outsourcing, from a company to which the relevant work is outsourced.
such time.
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DIRECTOR COMPENSATION
The following table summarizes the compensation paid in 2006 to the membersrepresents full walk-away amounts for each of our Boardnamed executive officers upon the occurrence of Directors:certain events, assuming in each case that the event in question occurred as of December 31, 2009. The following tables do not include amounts payable upon termination for pension benefits, as those benefits are described above in the “2009 Pension Benefits” tables.
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Name | Type of Compensation | Termination for Cause/ Voluntary Termination | Involuntary Not for Cause | Termination upon Change-in-Control | Retirement | Death |
Keith Alessi | Salary | $0 | $600,000 | $0 | $0 | $0 |
Vested Equity(1)(2) | $0 | $0 | $267,300 | $0 | $267,300 |
Outplacement Services and health benefits | $0 | $23,125 | $0 | $0 | $0 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | Change
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| | | | | | | | | | | | | | in Pension
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| | | | | | | | | | | | | | Value and
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| | | | | | | | | | | | | | Nonqualified
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| | | | | | | | | | | Non-Equity
| | | Deferred
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| | Fees Earned or
| | | Stock
| | | Option
| | | Incentive Plan
| | | Compensation
| | | All Other
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| | Paid in Cash
| | | Awards
| | | Awards(2)
| | | Compensation
| | | Earnings
| | | Compensation
| | | Total
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Name(1) | | ($) | | | ($) | | | ($) | | | ($) | | | ($) | | | ($) | | | ($) | |
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Michael Armstrong | | | 46,000 | | | | — | | | | 3,444 | (3) | | | — | | | | — | | | | — | | | | 49,444 | |
Thomas J. Coffey | | | 52,875 | | | | — | | | | 3,444 | (4) | | | — | | | | — | | | | — | | | | 56,319 | |
Robert E. Killen | | | 53,175 | | | | — | | | | 3,444 | (5) | | | — | | | | — | | | | — | | | | 56,619 | |
Richard M. Klingaman | | | 39,000 | | | | — | | | | 14,793 | (6) | | | — | | | | — | | | | — | | | | 53,793 | |
Thomas W. Ostrander | | | 44,000 | | | | — | | | | 3,444 | (7) | | | — | | | | — | | | | — | | | | 47,444 | |
James W. Sight | | | 29,500 | | | | — | | | | 3,444 | (8) | | | — | | | | — | | | | — | | | | 32,944 | |
William M. Stern | | | 44,000 | | | | — | | | | 3,444 | (9) | | | — | | | | — | | | | — | | | | 47,444 | |
Donald A. Tortorice | | | 48,800 | | | | — | | | | 4,882 | (10) | | | — | | | | — | | | | — | | | | 53,682 | |
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Name | Type of Compensation | Termination for Cause/ Voluntary Termination | Involuntary Not for Cause | Termination upon Change-in-Control | Retirement | Death |
Kevin Paprzycki | Salary | $0 | $207,000 | $0 | $0 | $0 |
Vested Equity(1)(2) | $0 | $0 | $49,896 | $0 | $49,896 |
Outplacement Services and other benefits | $0 | $22,235 | $0 | $0 | $0 |
| | | | | | |
Name | Type of Compensation | Termination for Cause/ Voluntary Termination | Involuntary Not for Cause | Termination upon Change-in-Control | Retirement | Death |
Morris Kegley | Salary | $0 | $207,375 | $0 | $0 | $0 |
Vested Equity(1)(2) | $0 | $0 | $49,896 | $0 | $49,896 |
Outplacement Services and other benefits | $0 | $18,583 | $0 | $0 | $0 |
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Name | Type of Compensation | Termination for Cause/ Voluntary Termination | Involuntary Not for Cause | Termination upon Change-in-Control | Retirement | Death |
Todd Myers | Salary | $0 | $226,633 | $0 | $0 | $0 |
Vested Equity(1)(2) | $0 | $0 | $49,896 | $0 | $49,896 |
Outplacement Services and other benefits | $0 | $23,143 | $0 | $0 | $0 |
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Name | Type of Compensation | Termination for Cause/ Voluntary Termination | Involuntary Not for Cause | Termination upon Change-in-Control | Retirement | Death |
John O’Laughlin | Salary | $0 | $220,007 | $0 | $0 | $0 |
Vested Equity(1)(2) | $0 | $0 | $74,844 | $0 | $74,844 |
Outplacement Services and other benefits | $0 | $17,404 | $0 | $0 | $0 |
| |
(1) | Various unvested options and SARs held by our named executive officers automatically vest upon a change-in-control. However, all outstanding options held by our named executive officers have an exercise price greater than $8.91, the closing price of our stock on December 31, 2009. There is no intrinsic value in any accelerated options or vested stock options because options with an exercise price greater than $8.91 have zero intrinsic value. |
(1)(2) | | Christopher K. Seglem served as our President and Chief Executive Officer until May 2007 and wasWe awarded long-term equity to the named executive officers in the form of restricted stock units with a membergrant date of our Board of Directors until he resignedJuly 1, 2009, vesting in May 2007. Employees, including Mr. Seglem, do not receive additional compensation for servingthirds on an annual basis. Pursuant to the Board. Mr. Seglem’s compensation for 2006 is described above, under “Executive Compensation.” |
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(2) | | The amounts in this column reflectrestricted stock unit agreements, the dollar amount recognized for financial statement reporting purposesunits automatically vest immediately prior to a change-in-control, death, disability or qualified retirement of the stock appreciation rights granted torecipient. No named executive officer met the directors in 2006. The grant date fair valuequalifications for a “qualified retirement” as of these awards, computed in accordance with FAS 123R, was, for Mr. Klingaman, $14.13 per SAR, or $52,763, and for each of Messrs. Armstrong, Coffey, Killen, Ostrander, Sight, Stern, and Tortorice, $14.94 per SAR, or $26,324.December 31, 2009. |
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(3) | | Mr. Armstrong had no stock options and 1,762 SARS outstanding at December 31, 2006. Mr. Armstrong resigned from the Board in July 2007. |
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(4) | | Mr. Coffey had 15,000 stock options and 1,762 SARs outstanding at December 31, 2006. |
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(5) | | Mr. Killen had 7,500 stock options and 1,762 SARs outstanding at December 31, 2006. |
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(6) | | Mr. Klingaman had no stock options and 3,733 SARs outstanding at December 31, 2006. |
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(7) | | Mr. Ostrander had 66,000 stock options and 1,762 SARs outstanding at December 31, 2006. |
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(8) | | Mr. Sight had no stock options and 1,762 SARS outstanding at December 31, 2006. Mr. Sight resigned from the Board in November 2006. |
| | |
(9) | | Mr. Stern had 10,000 stock options and 1,762 SARs outstanding at December 31, 2006. |
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(10) | | Mr. Tortorice had 7,500 stock options and 1,762 SARs outstanding at December 31, 2006. |
Annual Retainer and Meeting FeesContents
In 2006, each non-employee director received an annual retainer of $30,000 paid in quarterly installments. Each non-employee director also received $1,000 per meeting attended of the Board and of each committee of which he was a member. In addition, the Chairman of the Audit Committee received an additional $750 per meeting, the Chairman of the Compensation and Benefits Committee received an
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additional $650 per meeting and all other committee chairmen received an additional $500 per meeting attended and chaired. In December 2006, the Board approved a separate additional retainer effective May 19, 2006 of $15,000 for the Vice Chairman of the Board and $11,000 for the Chairman of the Audit Committee, also paid in quarterly installments and prorated in any quarterly period in which the director is not the Chairman for the entire quarterly period. Beginning in 2007, fees for participation in meetings by telephone, rather than in person, were reduced to $500 per meeting, except in the case where the meeting is scheduled as a telephonic meeting.
We have historically delivered long-term compensation to directors in the form of options or restricted stock. In December 2005, the Board of Directors approved the restated and amended 2000 Director Plan to allow the use of SARs as a form of award in order to conserve shares available for grant. Each non-employee director is entitled to receive, as an initial grant upon his or her first joining the Board, restricted stock, options to purchase a number of shares of common stock, or SARs equal to $60,000 in value. Thereafter, each non-employee director is entitled to receive, upon his or her re-election to the Board, a grant of restricted stock, options or SARs equal to $30,000 in value. In 2006, Mr. Klingaman received an initial grant of SARs equal to $60,000 in value and each other non-employee director received a grant of SARs equal to $30,000 in value. Directors’ fees toemployee-directors were discontinued in 2000, and Mr. Seglem has not received directors’ fees in respect of meetings of the Board of Directors or committees thereof that have taken place after March 2000.
With assistance from Mercer, we use Black-Scholes modeling to determine the number of SARs required to equal the value of the grant made to each director. The base value of the SARs is determined based on the market price, defined by the 2000 Director Plan as average of the high and low trading prices of the common stock on the day of grant. The value shown above under the column “Option Awards” reflects the value of the 2006 SAR grants as determined under FAS 123R. Each grant vests over a period of four years and expires ten years from the grant date.
COMPENSATION AND BENEFITS COMMITTEE REPORT
The Compensation and Benefits Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) ofRegulation S-K with the Company’s management. Based on this review and discussion, the Compensation Committee recommended to the Company’s Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.
Donald A. Tortorice, Chairman
Richard M. Klingaman
CERTAIN TRANSACTIONS
Policies and Procedures for Related Person Transactions
Our Board has adopted written policies and procedures for the review of any transaction, arrangement, or relationship in which Westmoreland Coal Company is a participant, the amount involved exceeds $120,000, and one of our executive officers, directors, director nominees or 5% stockholders (or their immediate family members), each of whom we refer to as a related person, has a direct or indirect material interest.
If a related person proposes to enter into such a transaction, arrangement, or relationship, which we refer to as a related person transaction, the related person must report the proposed related person transaction to our general counsel. The policy calls for the proposed related person transaction to be reviewed and, if deemed appropriate, approved by the Board’sour Audit Committee. Whenever practicable, the reporting, review, and approval will occur prior to entry into the transaction. If advance review and approval is not practicable, the committeeAudit Committee will review, and, in its discretion, may ratify the related person transaction. The policy also permits the Chairman of the committeeAudit Committee to review and, if deemed appropriate, approve proposed related person
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transactions that arise between committee meetings, subject to ratification by the committeeAudit Committee at its next meeting. Any related person transactions that are ongoing in nature will be reviewed annually.
A related person transaction reviewed under As appropriate for the
policycircumstances, the Audit Committee will
be considered approved or ratified if it is authorized by the committee after full disclosure of review and consider:
·
the related person’s interest in the transaction. As appropriate for the circumstances, the committee will review and consider:
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| • | the related person’s interest in the related person transaction; |
|
| • | related person transaction; · the approximate dollar value of the amount involved in the related person transaction; |
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| • | the approximate dollar value of the amount of the related person’s interest in the transaction without regard to the amount of any profit or loss; |
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| • | whether the transaction was undertaken in the ordinary course of our business; |
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| • | whether the terms of the transaction are no less favorable to us than terms that could have been reached with an unrelated third party; |
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| • | the purpose of, and the potential benefits to us of, the transaction; and |
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| • | any other information regarding the related person transaction or the related person in the context of the proposed transaction that would be material to investors in light of the circumstances of the particular transaction. |
The committee may approve or ratify the transaction only if the committee determines that, under all of the circumstances, the transaction is in our best interests. The committee may impose any conditions on the related person
transaction;·
whether the terms of the transaction that it deems appropriate.
In additionare no less favorable to
us than could have been reached with an unrelated third party; and·
the transactions that are excluded bypurpose of, and the instructionspotential benefits to us of, the SEC’s related person transaction disclosure rule, thetransaction.
The Board has determined that the followingcertain transactions do not create a material direct or indirect interest on behalf of related persons and, therefore, are not related person transactions for purposes of this policy:
| | |
| • | interests arising solely from the related person’s positionthe policy, such as an executive officer of another entity (whether or not the person is also a director of such entity), that is a participant in the transaction, where (a) the related person and all other related persons own in the aggregate less than a 10% equity interest in such entity, (b) the related person and his or her immediate family members are not involved in the negotiation of the terms of the transaction and do not receive any special benefits as a result of the transaction, (c) the amount involved in the transaction equals less than the greater of $200,000 or 5% of the annual consolidated gross revenues of the other entity that is a party to the transaction, and (d) the amount involved in the transaction equals less than 2% of our annual consolidated gross revenues; and |
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| • | compensation to an executive officer if the compensation has been approved, or recommended to the Board of Directors for approval by the Compensation and Benefits Committee of the Board or a group of independent directors performing a similar function; or |
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| • | an arrangement that is specifically contemplated by provisions of our certificate of incorporation or bylaws, such as the exculpation, indemnification, and directors’ and officers’ insurance arrangements contemplated by the certificate of incorporation and bylaws. |
The policy provides that transactions involving compensation of executive officers shall be reviewed and approved by the Compensation and Benefits Committee inor an arrangement that is specifically contemplated by provisions of our certificate of incorporation or bylaws, such as the manner specified in its charter.
Standby Purchase Agreement
exculpation, indemnification, and directors’ and officers’ insurance arrangements contemplated by the certificate of incorporation and bylaws.
Certain Relationships and Related Transactions
On May 2, 2007,March 4, 2008, we entered into a Standby Purchase Agreement withcompleted the sale of $15 million of senior secured convertible notes to Tontine Partners, L.P. and Tontine Capital Partners, L.P. under whichpursuant to a Senior Secured Convertible Note Purchase Agreement dated as of March 4, 2008 among us, the Tontine agreed to certain standby commitments with respect to our planned rights offering to holderspartnerships, and Tontine Capital Associates, L.P., as collateral agent. Mr. Jeffrey Gendell, who is either a managing member of, our Common Stock, which we call the Rights Offering. The minimum sizeor a managing member of the Rights Offering is
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$85,000,000. The price at which holders of rights may purchase shares of Common Stock, or Subscription Price, is $18.00 per share. Effective July 3, 2007, we, Tontine, and Silverhawk Capital Partners GP, LLC executed the Amended and Restated First Amendment to Standby Purchase Agreement.
Tontine currently owns 17.0%general partner of, the outstanding Common Stock. Tontine has agreedpartnerships is deemed to subscribe for and purchase its pro rata portion of the shares offered in the Rights Offering. Subject to the limit described below, Tontine has also agreed to act as a “Standby Purchaser” to purchase any shares not subscribed for by other stockholders in the Rights Offering. If, after giving effect to its purchase of common shares not purchased by other stockholders, Tontine owns lessbeneficially own greater than 25% of the fully diluted shares of Common Stock (after giving effect to the shares issued in the Rights Offering but exclusive of stock options and unexchanged shares of Series A Preferred Stock), Tontine will have the option to purchase an additional number of shares of Common Stock at the Subscription Price, up to such amount that will result in Tontine’s owning not more than 25% of the fully diluted shares of Common Stock (after giving effect to the shares issued in the Rights Offering and this option, but exclusive of stock options and unexchanged shares of Series A Preferred Stock). The Standby Purchase Agreement limits the number of shares that Tontine may acquire. Under the Standby Purchase Agreement, Tontine has agreed that it will not purchase shares of Common Stock that would result in it or any “group” (within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934) of which it is a member owning 30% or more of the issued and outstanding shares of Common Stock on a fully diluted basis (after giving effect to the shares issued in the Rights Offering but exclusive of stock options and unexchanged shares of Series A Preferred Stock).
Additional information regarding the Rights Offering is provided above, under “Proposal 3 — Approval of the Rights Offering.”
The value of Tontine’s interest in the Rights Offering cannot be calculated at this time, because we have not determined the size of the Rights Offering and because we do not know (among other things) how many of the shares offered in the Rights Offering will be purchased by stockholders other than Tontine.
The closing of the transactions contemplated by the Standby Purchase Agreement is subject to a number of conditions, including the approval of our stockholders. The closing is also conditioned on the appointment to our Board of two designees of Tontine who are reasonably acceptable to our Board. We and Tontine have not determined these two individuals. In approving the Standby Purchase Agreement, our Board considered, among other things, that Tontine currently owns 17.0%20% of our outstanding
Common Stockcommon stock on an as-converted basis. The senior notes bear interest at a rate of 9% per annum, payable in cash or in kind at our option, and are payable in full on March 4, 2013. In 2009, we paid the Tontine entities $1,469,641 of in kind interest.
AUDITORS
Change in Independent Public Accounting Firm
On January 6, 2009, we notified KPMG LLP that, upon completion of the 2008 audit engagement and the Board representation that Tontine would receive upon the closingfiling of the Rights Offering.
Other Related Person Transactions
Mr. Mark Seglem, the brother of Christopher Seglem, who served as our Chairman of the Board, President, and Chief Executive Officer through May 1, 2007, is the President of Texas Westmoreland Coal Company, an indirect subsidiary of our company. On May 4, 2006, Mr. Mark Seglem was also elected our Vice President, Strategic Planning and Administration by the Board of Directors, in addition to his duties at Texas Westmoreland. In 2006, Mr. Mark Seglem was paid $275,964 in total compensation and granted 7,400 SARs. Mr. Mark Seglem’s total compensation includes an annual incentive bonus for 2006 performance as described in “— Annual Incentive Compensation” above. Scoring for Mr. Mark Seglem’s annual incentive bonus is based equally on the performance of Texas Westmoreland and Westmoreland Coal Company. The SARs vest over a three-year period, have a base value equal to the average of the high and low stock price on the date of grant, $24.41, and may be exercised over a ten-year period. Mr. Mark Seglem was also awarded 952 performance units. The performance units vest in one-third annual increments and are valued according to the terms of the 2006 grants of performance units under the 2000 PUP as described in “— Grants of Plan-Based Awards” above.
On May 1, 2007, in connection with his appointment as interim President and interim Chief Executive Officer, we agreed to pay Mr. Keith E. Alessi $40,000 per month and granted him options to purchase 100,000 shares of Common Stock, one-thirty-sixth of which will vest each monthForm 10-K for the first twelve months, the next third of which will vest on the second anniversary of the date of grant, and the final third of which will vest on the third anniversary of the date of grant. The exercise price for the options is equal to the fair
62
market value of the Common Stock on the date of grant. The options were granted pursuant toyear ending December 31, 2008, it would be dismissed as our 2002 Plan. We also agreed to pay Mr. Alessi’s temporary housing expense and to reimburse him at the normal, commercial coach rate if Mr. Alessi uses his personal airplane for Company business.
AUDIT COMMITTEE REPORT
The Audit Committee of the Westmoreland Coal Company Board of Directors (the “Audit Committee”) is composed of three directors and operates under a written charter first adopted by the Board of Directors on March 10, 2000 and amended most recently on March 8, 2007.
Management is responsible for the Company’s internal controls and financial reporting process. The independent registered public accounting firm is responsiblefirm. The decision to change accounting firms was approved by our Audit Committee. On March 13, 2009, KPMG completed its audit services for performing an independent audit of the Company’s consolidated financial statements in accordance with generally accepted auditing standards and issuing a report thereon. The Audit Committee’s responsibility is to retain the registered public accounting firm, review and monitor the independence and performance of the Company’s registered public accounting firm, monitor the integrity of the Company’s financial reporting process and systems of internal controls regarding finance, accounting and legal compliance and provide an avenue of communication among the registered public accounting firm, management and the Board of Directors.
In this context, the Audit Committee met with management and the registered public accounting firm to review and discuss the Company’s significant accounting policies, systems of internal controls and the audited consolidated financial statements for the year ended December 31, 2006. The Audit Committee also discussed with the registered public accounting firm the matters required to be discussed by the Statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1, AU section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T. The Audit Committee has received the written disclosures and the letter from the Company’s registered public accounting firm required by Independence Standards Board Standard No. 1 (Independence Standards Board Standard No. 1,Independence Discussions with Audit Committees), as adopted by the Public Company Accounting Oversight Board in Rule 3600T, and has discussed with the Company’s registered public accounting firm their independence. The Audit Committee also considered whether the registered public accounting firm’s provision of non-audit related services to the Company is compatible with maintaining such auditor’s independence.
Based on its discussions with management and the registered public accounting firm, and its review of the representations and information provided by management and the registered public accounting firm, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements be included in Westmoreland Coal Company’s Annual Report onForm 10-K for the year ended December 31, 2006 for filing with the Securities and Exchange Commission.
Thomas J. Coffey, Chairman
Thomas W. Ostrander
William M. Stern
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AUDITORS
KPMG LLP served as the independent registered public accounting firm of the Company for the fiscal year ended December 31,
20062008.
During the years ended December 31, 2008 and 2007 and the subsequent period through the date of the filing of the Form 8-K/A on March 23, 2009, we had no: (1) disagreements with KPMG on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements, if not resolved to KPMG’s satisfaction, would have been selectedcaused KPMG to servemake reference in connection with their opinion to the subject matter of the disagreement; or (2) reportable events, except as described below. Our management has authorized KPMG to respond fully to the Company’sinquiries of the new independent registered public accounting firm regarding all matters.
KPMG’s reports on our consolidated financial statements as of and for 2007.the years ended December 31, 2008 and 2007 did not contain any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles, except that the audit report of KPMG on the consolidated financial statements of Westmoreland and subsidiaries for the year ended December 31, 2008 expressed the opinion that various factors raised substantial doubt about our ability to continue as a going concern. The Company expectsaudit reports of KPMG on the effectiveness of internal control over financial reporting as of December 31, 2008 did not contain any adverse opinion or disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit scope, or
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Table of Contents
accounting principles. The audit reports of KPMG on the effectiveness of internal control over financial reporting as of December 31, 2007 did not contain any adverse opinion or disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit scope, or accounting principles, except that KPMG’s report indicated that we did not maintain effective internal control over financial reporting as of December 31, 2007 because of the effect of material weaknesses on the achievement of the objectives of the control criteria and contained an explanatory paragraph that stated that: “Management identified and included in its assessment material weaknesses related to electronic spreadsheets that impact the Company’s financial reporting, census data used to calculate postretirement medical benefit obligations, and the accounting for one of the Company’s stock based compensation plans.”
We requested and obtained from KPMG a representativeletter addressed to the Securities and Exchange Commission stating whether or not it agreed with the above statements. A copy of thatKPMG’s letter, dated March 16, 2009, is filed as Exhibit 16.1 to our Current Report on Form 8-K/A filed March 23, 2009.
Engagement of Ernst & Young LLP
On January 8, 2009, our Audit Committee approved the engagement of Ernst & Young LLP as our new independent registered public accounting firm will be present at the Annual Meeting and will have the opportunity to make a statementbeginning with fiscal year 2009, and to respondperform procedures related to appropriate questions from stockholders.
the financial statements to be included in our quarterly report on Form 10-Q, beginning with, and including, the quarter ending March 31, 2009. We did not consult with Ernst & Young during the fiscal years ended December 31, 2007 and December 31, 2008, or during any subsequent period prior to its appointment as our auditor with respect to any of the matters or events listed in Regulations S-K 304(a)(2)(i) and (ii).
Auditor’s Fees
The following table summarizes the fees of KPMG, LLP, our independent registered public accounting firm for each of the last two fiscal years.year 2008, and Ernst & Young, for fiscal year 2009. For 2006,2009, audit fees include an estimate of amounts approved by the Audit Committee but not yet billed.
| | | | | | | | |
Fee Category | | 2005 | | | 2006 | |
|
Audit Fees(1) | | $ | 1,040,000 | | | $ | 2,167,000 | |
Audit Related Fees(2) | | $ | 19,250 | | | $ | 20,750 | |
Tax Fees(3) | | $ | 19,435 | | | $ | 24,115 | |
All Other Fees | | $ | — | | | $ | — | |
Total Fees | | $ | 1,078,685 | | | $ | 2,211,865 | |
| | | | | |
Fee Category(1) | | | 2009 | | 2008 |
Audit Fees(2) | $ | 856,000 | $ | 1,136,000 |
Total Fees | $ | 856,000 | $ | 1,136,000 |
| |
(1) | We did not pay any “Audit Related Fees,” “Tax Fees” or “All Other Fees” to either KPMG or Ernst & Young in fiscal years 2008 or 2009. |
(1)(2) | | Audit fees consist of fees for the audit of our financial statements, including fees related to the audit of our restated financial statements and that related to acquisition activity, the audit of our internal controls over financial reporting, the review of the interim financial statements included in our quarterly reports onForm 10-Q, and other professional services provided in connection with statutory and regulatory filings. |
|
(2) | | Audit-related fees consist of fees for assurance and related services that are reasonably related to the performance of the audit and the review of our financial statements and which are not reported under “Audit Fees”. These services relate to employee benefit audits. |
|
(3) | | Tax fees consist of fees for tax compliance and tax advice services. Tax compliance services, which relate to preparation of original and amended tax returns, claims for refunds and tax payment-planning services, accounted for none of the total tax fees paid for 2005 and 2006. Tax advice services relate to assistance with tax audits and appeals and employee benefit plans. |
Pre-Approval Policy and Procedures
The Audit Committee has adopted policies and procedures relating to the approval of all audit and non-audit services that are to be performed by the Company’sour registered public accounting firm. This policy generally provides that the Companywe will not engage itsour registered public accounting firm to render audit or non-audit services unless the service is specifically approved in advance by the Audit Committee or the engagement is entered into pursuant to one of the pre-approval procedures described below.
procedures. From time to time,time-to-time, the Audit Committee may pre-approve specified types of services that are expected to be provided to the Companyus by itsour registered public accounting firm during the next 12 months. Any such pre-approval is detailed as to the particular service or type of services to be provided and is also generally subject to a maximum dollar amount.
The Audit Committee has also delegated to the Chairman of the Audit Committee the authority to approve any audit or non-audit services to be provided to the Companyus by itsour registered public accounting firm. Any approval of services by the Chairman of the Audit Committee pursuant to this delegated authority is reported on at the next meeting of the Audit Committee.
All fees ofpaid to KPMG LLP in 20062008 and all fees paid to Ernst & Young in 2009 were pre-approved by the Audit Committee.
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Table of Contents
PROPOSAL 1
PROPOSALSELECTION OF STOCKHOLDERS FOR 2008 ANNUAL MEETING
Any proposal thatDIRECTORS BY THE HOLDERS OF COMMON STOCK
Each of our common stock director nominees is currently a stockholdermember of the Company wishes to be considered for inclusion in the Company’s proxy statement and proxy card for the Company’s 2008 Annual Meeting of Stockholders (the “2008 Annual Meeting”) must be submitted to the Secretary of the Company at its offices, 2 North Cascade Avenue, 14th Floor, Colorado Springs, Colorado 80903, no later than March 21, 2008. In addition, such proposals must comply with the requirements ofRule 14a-8 under the Exchange Act.
If a stockholder of the Company wishes to present a proposal before the 2008 Annual Meeting, but does not wish to have the proposal considered for inclusion in the Company’s proxy statement and proxy card, such stockholder must also give written notice to the Secretary of the CompanyBoard. Each director elected at the address noted above. The Secretary must receive such notice no earlier than April 18, 2008annual meeting shall hold office until the next annual meeting of stockholders, or until his death, resignation, or removal, if earlier. While Tontine Capital Partners, L.P. and no later than May 18, 2008, and the stockholder must comply with the provisions of the Company’s By-Laws.
The Company reservesTontine Partners, L.P. have the right to
reject, rule out of order, or take other appropriate action with respectdesignate two individuals for election to
our Board as common stock directors pursuant to a Secured Convertible Note Purchase Agreement dated March 4, 2008, they have not so designated any
proposal that does not comply with these and other applicable requirements, including conditions established by the SEC. If a stockholder fails to provide timely notice of a proposal to be presenteddirectors at
the 2008 Annual Meeting, the proxies designated by thethis time.
The Board of Directors recommends that holders of Common Stock vote “FOR” the election of the Companyfollowing nominees whose biographical information can be found above on pages 4 and 5:
·
Keith E. Alessi;
·
Thomas J. Coffey;
·
Michael R. D’Appolonia; and
·
Richard M. Klingaman.
PROPOSAL 2
ELECTION OF DIRECTORS BY THE HOLDERS OF SERIES A PREFERRED STOCK
The holders of our Series A Preferred Stock are entitled to elect two members to the Board. Each person elected at the meeting shall hold office until the next annual meeting of stockholders, or until his death, resignation, or removal, if earlier. In addition, if the special voting rights of the Series A Preferred Stock terminate, the terms of office of the directors elected by the holders of the Series A Preferred Stock will immediately terminate.
The Board recommends that holders of Depositary Shares vote “FOR” the election of the following nominees whose biographical information can be found above on page 5:
·
William M. Stern; and
·
Frank T. Vicino, Jr.
PROPOSAL 3
RATIFICATION OF PRINCIPAL INDEPENDENT AUDITOR
The Audit Committee appointed the firm of Ernst & Young LLP as our principal independent auditor for fiscal year 2010. Ernst & Young LLP served as our principal independent auditor in fiscal year 2009. Representatives of Ernst & Young LLP are expected to be present at the annual meeting, will have discretionary authoritythe opportunity to make a statement if they desire to do so and will be available to respond to questions.
The Board recommends that you vote on any such proposal.
* * *
FOR ratifying the appointment of Ernst & Young LLP as principal independent auditor for 2010.
MISCELLANEOUS
Upon the written request of any person who on the record date was a record owner of Companyour stock, or who represents in good faith that he or she was on such date abeneficial owner of such stock entitled to vote at the Annual Meeting, the Company annual meeting, wewill send such person, without charge, a copy of itsour Annual Report onForm 10-K for 2006,2009, as filed with the Securities and Exchange Commission.Requests for this report should be directed to the Vice President-Corporate Relations, Diane S. Jones, atCorporate Secretary, Westmoreland Coal Company, 14th2nd Floor, 2 NorthCascade Avenue, Colorado Springs, Colorado 80903. The Company has adopted a Code of Conduct Policy which is applicable to all employees, including all senior officers and financial personnel. A copy of the Company’s Code of Conduct Policy can be found on the Company’s web site at www.westmoreland.com. The Company will provide any person, without charge, upon request, a copy of its Code of Conduct. Requests for the Code of Conduct should be in writing and should be directed to the attention of the General Counsel of the Company at the preceding address.
OTHER BUSINESS
The Board of Directors has no present intention of bringing any other business before the meeting and has not been informed of any other matters that are to be presented to the meeting. If any other matters properly come before the meeting, however, the persons named in the enclosed proxy will vote in accordance with their best judgment.
Roger D. Wiegley
General Counsel and Secretary
Contents
65
Appendix A
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”).
WITNESSETH:
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 inRule 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.
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“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.
“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 onForm 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.
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“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.
“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 onForm 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.
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
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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 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
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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 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 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
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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 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 ofForm 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
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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 onForm 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 onForm 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 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
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(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:
(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 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
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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, 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 reasonableout-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.
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(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.
(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 Purchaserand/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 Purchaserand/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 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
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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”);
(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.
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(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
(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
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IS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND REGISTRATION AND/OR QUALIFICATION UNDER 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 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
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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 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.
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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 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 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
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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 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.
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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
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WESTMORELAND COAL COMPANY 2 N. CASCADE AVE., 2ND FLOOR COLORADO SPRINGS, CO 80903 ATTN: JENNIFER S. GRAFTON | By: | /s/ Robert E. KillenVOTE BY INTERNET -www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or
VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. |
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Name: Robert E. Killen
Title: Director
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | | M22366-P91502 | | KEEP THIS PORTION FOR YOUR RECORDS |
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| THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. | DETACH AND RETURN THIS PORTION ONLY | |
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| WESTMORELAND COAL COMPANY | | For | Withhold | For All | | To withhold authority to vote for any individual nominee(s), mark “ For All Except ” and write the number(s) of the nominee(s) on the line below. | | | | |
All | All | Except |
| | The Board of Directors recommends that holders of Common Stock vote "FOR" the election of the following nominees. | | | | | | | |
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| | 1. | ELECTION OF DIRECTORS | | | | |
| | | Nominees: | | | | |
| | | 01) | Keith E. Alessi; | | | | |
| | | 02) | Thomas J. Coffey; | | | | |
| | | 03) | Michael R. D’Appolonia; and | | | | |
| | | 04) | Richard M. Klingaman. | | | | |
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| | The Board recommends that you vote FOR ratifying the appointment of Ernst & Young LLP as principal independent auditor for 2010. | | | |
| | | | For | Against | Abstain | |
| | 2. | Ratification of the appointment of Ernst & Young LLP as our principal independent auditor for fiscal year 2010. | 0 | 0 | 0 | |
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| | Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name, by authorized officer | | | | |
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| | Signature [PLEASE SIGN WITHIN BOX] | Date | | | Signature (Joint Owners) | Date | | | |
TONTINE CAPITAL PARTNERS, L.P.Table of Contents
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
Combined Document is available at
www.proxyvote.com.
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| By: | TONTINE CAPITAL MANAGEMENT, L.L.C. |
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| WESTMORELAND COAL COMPANY Annual Meeting of Stockholders May 20, 2010 8:30 AM This proxy is solicited by the Board of Directors | |
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| The undersigned hereby constitutes and appoints Morris W. Kegley and Jennifer S. Grafton and each of them, as true and lawful agents and proxies with power of substitution, to represent the undersigned and to vote all shares of Common Stock held by the undersigned at the Annual Meeting of Stockholders to be held at our corporate offices, 2 N. Cascade Avenue, 2nd Floor, Colorado Springs, CO 80903, on Thursday, May 20, 2010, at 8:30 a.m. (mountain time), and at any adjournments thereof, on all matters coming before said meeting as noted on the reverse side of this card. | |
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| This proxy, when properly executed, will be voted in the manner directed herein. If no directions are given, this proxy will be voted FOR the election of directors and FOR the ratification of auditors. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY POSTPONEMENT OR ADJOURNMENT THEREOF. | |
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| You are encouraged to specify your choices by marking the appropriate boxes, SEE REVERSE SIDE, but you need not mark any boxes if you wish to vote in accordance with the Board of Directors' recommendations. The proxies cannot vote the shares unless you sign and return this card. | |
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| Continued and to be signed on reverse side | |
its general partner
Table of Contents
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WESTMORELAND COAL COMPANY 2 N. CASCADE AVE., 2ND FLOOR COLORADO SPRINGS, CO 80903 ATTN: JENNIFER S. GRAFTON | By: | /s/ Jeffrey L. GendellVOTE BY INTERNET -www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or
VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. |
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Name: Jeffrey L. Gendell
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | | M22368-P91502 | | KEEP THIS PORTION FOR YOUR RECORDS |
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| THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. | DETACH AND RETURN THIS PORTION ONLY | |
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| WESTMORELAND COAL COMPANY | | For | Withhold | For All | | To withhold authority to vote for any individual nominee(s), mark “ For All Except ” and write the number(s) of the nominee(s) on the line below. | | | | |
All | All | Except |
| | The Board recommends that holders of Depository Shares vote "FOR" the election of the following nominees. | | | | | | | |
| | | 0 | 0 | 0 | | | | | |
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| | 1. | ELECTION OF DIRECTORS BY THE HOLDERS OF SERIES A PREFERRED STOCK | | | | |
| | | Nominees: | | | | |
| | | 01) | William M. Stern; and | | | | |
| | | 02) | Frank T. Vicino, Jr. | | | | |
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| | The Board recommends that you vote FOR ratifying the appointment of Ernst & Young LLP as principal independent auditor for 2010. | | | |
| | | | For | Against | Abstain | |
| | 2. | Ratification of the appointment of Ernst & Young LLP as our principal independent auditor for fiscal year 2010. | 0 | 0 | 0 | |
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| | Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name, by authorized officer | | | | |
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| | Signature [PLEASE SIGN WITHIN BOX] | Date | | | Signature (Joint Owners) | Date | | | |
Table of Contents
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
Combined Document is available at
www.proxyvote.com.
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Annex A
WESTMORELAND COAL COMPANY
Term Sheet
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Issuer: | | Westmoreland Coal Company (the “Company”) |
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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 |
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Authorization: | | Prior approvalWESTMORELAND COAL COMPANY Annual Meeting of the Company’s Board of Directors and subject to shareholder approval |
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Rights Offering: | | The Company will distribute to (i) holders of its common stock and (ii) if agreed toStockholdersMay 20, 2010 8:30 AM This proxy is solicited 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 |
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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 |
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Over-subscription privilege: | | Each Eligible Participant who exercises all of his rights mayover-subscribe 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 |
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Launch Date: | | To be determined |
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Record Date: | | The Record Date is to be the Launch Date at 5:00 p.m. New York City time. |
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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 |
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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 |
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Transferability of Rights: | | The subscription rights may not be sold, transferred or assigned |
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Subscription Commitment: | | Tontineand/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 |
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Additional Subscription Privilege: | | Tontine shall have the option (the “Additional Subscription Privilege”) to purchase an additional number of shares, at the |
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| | 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 |
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Use of Proceeds: | | Additional liquidity, acquisitions, project development and general corporate purposes |
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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 |
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Preferred Stock Exchange: | | The exchange offer of Preferred Stock into common stock shall be at an exchange ratio to be determined |
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| | 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 |
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| | Unexchanged shares of Preferred Stock will be redeemed promptly following the consummation of the rights offering |
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| | 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 |
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Subscription Agent: | | To be determined by mutual agreement of Tontine and the Company |
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Board of Directors: | | In connection with this transaction, it is the intent of the parties to reconstitute the Board of Directors | |
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| The undersigned hereby constitutes and appoints Morris W. Kegley and Jennifer S. Grafton and each of them, as true and lawful agents and proxies with power of substitution, to a less costlyrepresent the undersigned 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 shares of Common Stock held by the shares it owns in its sole discretionundersigned at the Annual Meeting of Stockholders to be held at our corporate offices, 2 N. Cascade Avenue, 2nd Floor, Colorado Springs, CO 80903, on Thursday, May 20, 2010, at 8:30 a.m. (mountain time), and at any adjournments thereof, on all matters includingcoming before said meeting as noted on the reverse side of this card. | |
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| This proxy, when properly executed, will be voted in the manner directed herein. If no directions are given, this proxy will be voted FOR the election of directors and FOR the ratification of auditors. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY POSTPONEMENT OR ADJOURNMENT THEREOF. | |
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Registration Rights: | You are encouraged to specify your choices by marking the appropriate boxes, SEE REVERSE SIDE, but you need not mark any boxes if you wish to vote in accordance with the Board of Directors' recommendations. The proxies cannot vote the shares unless you sign and return this card. | Upon the earlier of (i) such time as the Company is eligible |
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| Continued and to register its securitiesbe signed onForm 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 reverse side | |
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| | rights and piggyback registration rights (other than piggyback registrations onForm 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 |
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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 |
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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 |
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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.
WITNESSETH:
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
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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.
“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 onForm 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
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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 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 onForm 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 apro-ratabasis.
3. Incidental Registration. If Company at any time proposes to file on its behalfand/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 onForm S-4 orS-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 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 apro-ratabasis. 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));
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(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 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
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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;
(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.
(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
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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 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
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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’ 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 bypro-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.
(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
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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 Securitiesand/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.
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
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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.
(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.
(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
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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.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
WESTMORELAND COAL COMPANY
Name:
Signature Page to Registration Rights Agreement
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TONTINE CAPITAL PARTNERS, L.P.
| | |
| By: | TONTINE CAPITAL MANAGEMENT, L.L.C., |
its general partner
Name: Jeffrey L. Gendell
[TONTINE PARTNERS, L.P.
| | |
| By: | TONTINE MANAGEMENT, L.L.C., |
its general partner
Name: Jeffrey L. Gendell
TONTINE OVERSEAS ASSOCIATES, L.L.C.,
as investment manager to Tontine Overseas Fund, Ltd. and certain separately managed accounts
Name: Jeffrey L. Gendell
TONTINE CAPITAL MANAGEMENT, L.L.C.
| | |
| By: | Tontine Capital Overseas GP, L.L.C., |
its general partner
Name: Jeffrey L. Gendell
Jeffrey L. Gendell, as in individual]
Signature Page to Registration Rights Agreement
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Appendix B
AMENDED AND RESTATED FIRST AMENDMENT TO STANDBY PURCHASE AGREEMENT
This AMENDED AND RESTATED FIRST AMENDMENT TO STANDBY PURCHASE AGREEMENT (this“Amendment”), dated as of July 3, 2007, by and among Westmoreland Coal Company, a Delaware corporation (the“Company”), Tontine Capital Partners, L.P., a Delaware limited partnership(“Standby Purchaser”), and Silverhawk Capital Partners GP, LLC, a Delaware limited liability company (“Additional Purchaser”), amends that certain Standby Purchase Agreement (the“Original Agreement”), dated as of May 2, 2007, by and between the Company and Standby Purchaser.
W I T N E S S E T H :
WHEREAS, the parties hereto wish to amend the terms of the Original Agreement, as set forth herein;
WHEREAS, this Amended and Restated First Amendment to Standby Purchase Agreement reflects the correct name of the Additional Purchaser;
NOW THEREFORE, in consideration of the premises and mutual covenants contained herein, the parties hereto agree (i) that Additional Purchaser shall be added as a party to the Original Agreement and shall be entitled to the rights under, and bound by the terms of the Original Agreement, as amended by this Amendment, applicable to Additional Purchaser (capitalized terms used herein without definition shall have the respective meaning assigned to such terms in the Original Agreement), and (ii) as follows:
1. Amendment to Certain Other Definition. Section 1 of the Original Agreement is hereby amended as follows:
(a) The following definition will be added to Section 1 of the Original Agreement immediately after the definition of the term “Agreement”:
“‘AP Securities’ shall mean the shares of Common Stock that are to be purchased by Additional Purchaser pursuant to Section 22 hereof.”
“‘Change of Control Transaction’ shall mean any merger, consolidation, recapitalization, stock purchase, share exchange, asset acquisition or other business combination involving the Company or any of its Subsidiaries in one or a series of related events in which the holders of at least a majority of the Company’s Common Stock are entitled to sell or exchange their shares of Common Stock for cash, equity securities of another issuer, any combination thereof or any other consideration.”
“‘Immediate Family Member’ shall have the meaning set forth in Item 404 ofRegulation S-K.”
(b) The term“Closing”is hereby amended to add the words “and Section 22” after the words “Section 2”.
2. New Section 22. The Original Agreement is hereby amended by adding the following immediately after Section 21 of the Original Agreement:
Section 22. Additional Purchaser.
“(a)Purchase of Shares of Common Stock by Additional Purchaser. Subject to the terms and conditions set forth in this Agreement:
(i) If there are any Unsubscribed Shares that Standby Purchaser is not permitted to purchase as a result of the cap set forth in Section 2(c) hereof, then Additional Purchaser shall purchase such Unsubscribed Shares at the Subscription Price;provided,however, that Additional Purchaser shall not purchase any Unsubscribed Shares that would cause Additional Purchaser to pay an aggregate purchase price hereunder in excess of ten million two hundred thousand dollars ($10,200,000).
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(ii) If after giving effect to Additional Purchaser’s purchase of Unsubscribed Shares, if any, Additional Purchaser has not purchased a number of shares of Common Stock equal to a purchase price of ten million two hundred thousand dollars ($10,200,000), Additional Purchaser shall have the option, exercisable in its sole discretion, to purchase at the Closing, at the Subscription Price, a number of shares of Common Stock up to such shortfall.
(iii) Payment of the Subscription Price for the AP Securities shall be made, on the Closing Date, against delivery of certificates evidencing the AP Securities, in United States dollars by means of certified or cashier’s checks, bank drafts, money orders or wire transfers. Additional Purchaser shall be made a party to the Registration Rights Agreement.
(b) Representations and Warranties of the Company.
(i) Subject to the next sentence and to clause (ii) of this sub-section, the Company represents and warrants to Additional Purchaser that the representations and warranties contained in Section 4 of this Agreement are true and correct as of the date of the First Amendment to Standby Purchase Agreement, dated as of July 3, 2007 (the“Amendment Date”), by and among the Company, the Standby Purchaser and Additional Purchaser (the“Amendment”), as if made on the Amendment Date. For purposes of the foregoing, each reference to “Standby Purchaser” in such representations and warranties shall be deemed to be a reference to “Additional Purchaser.” All references to the “Agreement” shall be deemed to refer to this Agreement as amended by the Amendment.
(ii) Section 4(i) of the Original Agreement is hereby amended to read as follows: “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 for matters disclosed prior to the Amendment Date in the Company’s public filings pursuant to the Exchange Act and matters disclosed prior to the Amendment Date in writing by the Company to Standby Purchaser and Additional Purchaser.”
(c) Representations and warranties of Additional Purchaser.
(i) Additional Purchaser represents and warrants to the Company, as of the Amendment Date, that Additional Purchaser is a limited liability company duly organized, validly existing and in good standing under the laws of Delaware.
(ii) Subject to the next sentence, Additional Purchaser hereby makes, with respect to itself as of the Amendment Date, each of the representations and warranties set forth in Sections 5(b), 5(c) and 5(d) of this Agreement to the Company. For purposes of the foregoing, each reference to “Standby Purchaser” and “Securities” in such representations and warranties shall be deemed to be a reference to “Additional Purchaser” and “AP Securities”, respectively.
(iii) Additional Purchaser represents and warrants to the Company that (A) neither it nor any of its Affiliates is an Affiliate of Standby Purchaser, (B) none of it, its Affiliates and any Immediate Family Member of any of its Affiliates is a director, officer, employee, partner (limited or general) or member of Standby Purchaser or, to its knowledge, any Affiliate of Standby Purchaser or any entity of which Standby Purchaser or any Affiliate thereof owns 5% or more, (C) from January 1, 2004 to the present, none of it, its Affiliates, and any Immediate Family Member of any of its Affiliates has accepted any consulting, advisory or other compensatory fee or payment from Standby Purchaser, or, to its knowledge, any Affiliate of Standby Purchaser or any entity of which Standby Purchaser or any Affiliate thereof owns 5% or more, and (D) there are no contracts, arrangements, understandings or relationships (legal or otherwise) between Additional Purchaser and Standby Purchaser with respect to the voting of any shares of Common Stock.
(d) Deliveries at Closing.
(i) At the Closing, the Company shall deliver to Additional Purchaser the following:
(A) A certificate or certificates representing the number of shares of Common Stock issued to Additional Purchaser pursuant to Section 22(a) of this Agreement; and
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(B) 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.
(ii) At the Closing, Additional Purchaser shall deliver to the Company the following:
(A) Payment of the Subscription Price of the AP Securities purchased by Additional Purchaser pursuant to Section 22(a) of this Agreement; and
(B) A certificate of Additional Purchaser to the effect that the representations and warranties of Additional 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.
(e) Conditions to Closing. The obligations of Additional Purchaser to consummate the transactions contemplated hereunder are subject to the fulfillment, or waiver in writing by Additional Purchaser, prior to or on the Closing Date, of the following conditions:
(i) the obligations of Standby Purchaser shall not have been terminated under this Agreement and Standby Purchaserand/or its Affiliates shall have purchased the full number of Securities that it is required to purchase pursuant to Section 2 hereof.
(ii) The representations and warranties of the Company in Section 22(b) of this Agreement 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).
(iii) The Company shall have executed and delivered to Additional Purchaser a duly executed copy of the Registration Rights Agreement.
(iv) The AP Securities shall have been authorized for listing on the American Stock Exchange.
(vi) Each of the conditions set forth in (A) clauses (iii), (iv), and (v) of Section 9(a) of this Agreement, and (B) Sections 9(c)(i) — (iv) of this Agreement shall have been satisfied. Section 9(a)(iii) is hereby amended and restated to read in its entirety as follows:
“Subsequent to the execution and delivery of this Agreement and prior to the Closing Date, and except for matters disclosed prior to the Amendment Date in the Company’s public filings pursuant to the Exchange Act and matters disclosed prior to the Amendment Date in writing by the Company to Standby Purchaser and Additional Purchaser, 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;”
Notwithstanding anything else contained herein, waiver of a closing condition or termination by Additional Purchaser shall not be deemed a waiver or termination by Standby Purchaser or vice versa nor shall any waiver of a closing condition or termination by the Company with respect to its obligations to either Additional Purchaser or Standby Purchaser be deemed a waiver or termination with respect to the other party.
(f) Restrictions on Transfer of AP Securities. Additional Purchaser shall be bound by the terms of Section 11 of the Agreement as if incorporated and made a part of this Section 22(f);provided,however, that for purposes of the foregoing each reference in Section 11 of the Agreement to “Standby Purchaser” and to “Securities” shall be deemed to be a reference to “Additional Purchaser” and “AP Securities”, respectively.
(g) Lock-Up of AP Securities. Notwithstanding anything to the contrary set forth herein or in the Registration Rights Agreement, Additional Purchaser agrees:
(i) provided that the last reported sale price of the Common Stock on the American Stock Exchange on the trading date immediately preceding the date of the Closing is at least $22 per share, that it will not Transfer any AP Securities to any Person until after the first anniversary of the Closing; and
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(ii) if the last reported sale price of the Common Stock on the American Stock Exchange on the trading date immediately preceding the date of the Closing is less than $22 per share, that it will not prior to the date that is six months following the Closing, Transfer any AP Securities to any Person for consideration having a value exceeding $18 per share (subject to appropriate adjustment to reflect any stock split, stock dividend, reverse stock split or like transaction made, declared or effected with respect to the Common Stock);
provided,however, that the forgoing provisions of this Section 22(g) shall not restrict (1) any Transfer by the Additional 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 22(g) and further provided that any Transfers by such transferees shall be aggregated with those of the Additional Purchaser and with those of other such transferees for purposes of determining compliance with clause (5) of this proviso; (2) any Transfer in connection with a tender offer for the Company’s Common Stock, whether initiated by the Company or by a third party; (3) any other transfer to the Company or its Affiliates; (4) any Transfer that is part of a Change of Control Transaction; or (5) a Transfer of a number of AP Securities that, when aggregated with all previous Transfers of AP Securities, does not exceed a percentage of the total AP Securities equal to the SP Transfer Percentage. The“SP Transfer Percentage” shall be calculated from time to time by dividing (A) the aggregate number of shares of Common Stock Transferred by the Standby Purchaser and its Affiliates from and after the Closing Date, other than shares Transferred to any Affiliate of the Standby Purchaser, by (B) the total number of shares of Common Stock held by Standby Purchaser and its Affiliates immediately following the Closing plus, if applicable, the number of Additional Subscription Shares purchased by the Standby Purchaser and its Affiliates. For purposes of calculating the percentages contemplated by clause (5) and the SP Transfer Percentage, appropriate adjustments shall be made to reflect any stock split, stock dividend, reverse stock split or like transaction made, declared or effected with respect to the Common Stock.
(h) Indemnification and Contribution. The Company and Additional Purchaser shall be bound by the terms of Section 13 of this Agreement as if incorporated and made a part of this Section 22(h);provided,however, that for purposes of the foregoing each reference in Section 13 of this Agreement to “Standby Purchaser” and to “Standby Indemnified Persons” shall be deemed to be a reference to “Additional Purchaser” and “Additional Indemnified Persons”, respectively. The obligations of each of the Standby Purchaser under Section 13(b) of this Agreement and the Additional Purchaser under this Section 22(h) to provide indemnification to Company Indemnified Persons with respect to losses, claims, damages or liabilities arising out of or are based upon information provided in writing to the Company by Standby Purchaser or Additional Purchaser, as the case may be, specifically for use in any registration statement under which Securities or AP Securities, as the case may be, are registered under the Securities Act at the request of Standby Purchaser or Additional Purchaser, as the case may be, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereto, shall be subject to the same limitations as are set forth in Section 6(b) of the Registration Rights Agreement as if such limitations were incorporated into and made a part of this Agreement.
(i) Obligations of the Standby Purchaser and Additional Purchaser. The obligations of the Standby Purchaser and Additional Purchaser under this Agreement are several and not joint or joint and several and neither Standby Purchaser nor Additional Purchaser shall be liable for any breach of any of the obligations of the other under this Agreement.
(j) Reimbursement of Expenses of Mr. Gardner. The Company agrees to promptly reimburse Ted Gardner, the Managing Member of the Additional Purchaser, for his reasonable travel and other direct out-of-pocket expenses in meeting with representatives of the Company in connection with his determination whether or not to become a member of the Board. The Company agrees that Mr. Gardner’s reasonable out-of-pocket expenses in connection with his attendance at Board and Board committee meetings shall be reimbursed by the Company consistent with the Company’s policy for reimbursing independent directors for such expenses.”
3. Amendment to Section 4(f). Section 4(f) of the Original Agreement is hereby amended to add the words “, AP Securities” immediately after the word “Securities” in the first line and fifth line thereof.
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4. Amendment to Section 7. Section 7 of the Original Agreement is hereby amended as follows:
(a) The words “and Additional Purchaser” shall be added immediately after the words “Standby Purchaser” in each of clause (i) and clause (v) of Section 7(a) of the Original Agreement.
(b) The words “and Additional Purchaser” shall be added immediately after the words “Standby Purchaser” in the second line of clause (vii) of Section 7(a) of the Original Agreement and the words “or Additional Purchaser” shall be added immediately after the words “Standby Purchaser” in the fourth line of clause (vii) of Section 7(a) of the Original Agreement.
(c) The words “, on the one hand,” shall be added immediately after the words “neither the Company” and the words “or Additional Purchaser, on the other hand” shall be added immediately after the words “nor Standby Purchaser” in Section 7(e) of the Original Agreement.
5. Amendment to Section 9(b). Section 9(b) of the Original Agreement is hereby amended as follows:
(a) The words “and of Additional Purchaser in Section 22(c)” shall be added immediately after the words “Section 5” in clause (i) of Section 9(b) of the Original Agreement.
(b) The words “Each of Additional Purchaser and” shall be added immediately before the words “Standby Purchaser” in clause (ii) of Section 9(b) of the Original Agreement.
6. Amendment to Section 12. Section 12 of the Original Agreement is hereby amended as follows:
(a) Section 12(a) of the Original Agreement is hereby amended and restated to read in its entirety as follows:
“Subject to the provisions of the last paragraph of Section 22(e), Standby Purchaser on one hand may terminate at any time prior to the Closing Date its rights and obligations hereunder and Additional Purchaser on the other hand may terminate at any time prior to the Closing Date its rights and obligations hereunder 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 such termination 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) Section 12(b) of the Original Agreement is hereby amended and restated to read in its entirety as follows:
“(b) Subject to the provisions of the last paragraph of Section 22(e):
(i) if there is a material breach of this Agreement by Standby Purchaser or Additional Purchaser that is not cured within fifteen (15) days after receipt of written notice by such breaching party, the Company may terminate this Agreement with respect to such breaching party by written notice to the other parties hereto;
(ii) if there is a material breach of this Agreement by the Company that is not cured within fifteen (15) days after receipt of written notice by the Company, either Standby Purchaser or Additional Purchaser may terminate its rights and obligations hereunder by written notice to the other parties hereto; or
(iii) the Company may terminate this Agreement on one hand or either Standby Purchaser or Additional Purchaser may terminate its rights and obligations hereunder on the other hand 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).”
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7. Amendment to Section 14. Section 14 of the Original Agreement is hereby amended by adding the words “, Additional Purchaser” immediately after the word “Company”.
8. Amendment to Section 15. Section 15 of the Original Agreement is hereby amended by adding the following after subsection (b):
(c) if to Additional Purchaser, at:
Silverhawk Capital Partners GP, LLC
1901 Roxborough Road
Suite 200
Charlotte, North Carolina 28203
Attn: Ted A. Gardner
Telecopy No.:(704) 366-6666
with a copy to:
Morrison Cohen LLP
909 Third Avenue
New York, New York 10022
Attention: David A. Scherl
Telecopy No.:(212) 735-8708
9. Amendment to Section 16. Section 16 of the Original Agreement is hereby amended and restated in its entirety to read as follows:
“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 or AP Securities are transferred in accordance herewith. The rights and obligations under this Agreement, may be assigned, delegated or transferred, in whole or in part, by Standby Purchaser or Additional Purchaser to any of its Affiliates over which Standby Purchaser or Additional Purchaser, as the case may be, 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 Purchaser or Additional Purchaser, as the case may be, hereunder and agrees to be bound by the terms of this Agreement in the same manner as Standby Purchaser or Additional Purchaser, as the case may be. 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 by Standby Purchaser or Additional Purchaser will relieve Standby Purchaser or Additional Purchaser, as the case may be, or 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.”
10. Amendment to Section 17. Section 17 of the Original Agreement is hereby amended by adding the words “, AP Securities” immediately after the words “Securities”.
11. Amendment to Section 20. Section 20 of the Original Agreement is hereby amended by adding the words “and Additional Purchaser” immediately after the words “Standby Purchaser” in the second line thereof and the words “or Additional Purchaser” immediately after the words “Standby Purchaser” in the fifth line thereof.
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12. Amendment to Section 21. Section 21 of the Original Agreement is hereby amended as follows:
(a) The words “or AP Securities” shall be added immediately after the word “Securities” in Section 21(a) of the Original Agreement.
(b) The following shall be added immediately after Section 21(c):
“(d) Notwithstanding any provision in this Agreement to the contrary:
(i) any amendment, supplement or modification of or to any provision of this Agreement, any waiver of any provision of this Agreement, and any consent to any departure by any party from the terms of any provision of this Agreement, shall be effective (A) only in the specific instance and for the specific purpose for which made or given, and (B) only if it is made or given in writing and signed by the Company and Standby Purchaser,provided,however, that if any such amendment, supplement, modification or waiver materially adversely affects Additional Purchaser, Additional Purchaser shall have the option to terminate its rights and obligations hereunder by sending written notice of such termination to the parties hereto within forty eight (48) hours after Additional Purchaser’s receipt of written notice of such amendment, supplement, modification or waiver, and if Additional Purchaser fails to send such written notice within such forty eight (48) hour period, Additional Purchaser shall be deemed to have consented to such amendment, supplement, modification or waiver; and
(ii) except where notice is specifically required by this Agreement, no notice to or demand on the Company in any case shall entitle the Company to any other or further notice or demand in similar or other circumstances.”
13. Amendment to Annex B of the Original Agreement. Annex B of the Original Agreement is hereby amended as follows:
The words “on apro ratabasis” shall be added after the words “Registrable Securities” in clause (iii)(A) of Section 7(f) of Annex B of the Original Agreement.
14. Ratification of Agreement. Except as amended hereby, the Agreement shall remain in full force and effect and is hereby ratified and confirmed.
15. Counterparts. This Amendment 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.
16. GOVERNING LAW. THIS AMENDMENT 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.
[Remainder of Page Intentionally Left Blank]
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In Witness Whereof, the undersigned have executed this Amended and Restated First Amendment to Standby Purchase Agreement as of the date first written above.
WESTMORELAND COAL COMPANY
Name: David J. Blair
Title: Chief Financial Officer
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
SILVERHAWK CAPITAL PARTNERS GP, LLC
| | |
| By: | /s/ James C. Cook
Name: James C. Cook
Title: Managing Member |
Signature Page to Amended and Restated
First Amendment to Standby Purchase Agreement
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Appendix C
WESTMORELAND COAL COMPANY
2007 EQUITY INCENTIVE PLAN FOR EMPLOYEES AND NON-EMPLOYEE DIRECTORS
1. Purpose
The purpose of this 2007 Equity Incentive Plan for Employees and Non-Employee Directors (the “Plan”) of Westmoreland Coal Company, a Delaware corporation (the “Company”), is to advance the interests of the Company’s stockholders by enhancing the Company’s ability to attract, retain and motivate persons who are expected to make important contributions to the Company and by providing such persons with equity ownership opportunities and performance-based incentives that are intended to better align the interests of such persons with those of the Company’s stockholders. Except where the context otherwise requires, the term “Company” shall include any of the Company’s present or future parent or subsidiary corporations as defined in Sections 424(e) or (f) of the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder (the “Code”) and any other business venture (including, without limitation, joint venture or limited liability company) in which the Company has a controlling interest, as determined by the Board of Directors of the Company (the “Board”).
2. Eligibility
All of the Company’s employees, officers and directors are eligible to be granted options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards (each, an “Award”) under the Plan. Each person who receives an Award under the Plan is deemed a “Participant”.
3. Administration and Delegation
(a) Administration by Board of Directors. The Plan will be administered by the Board. The Board shall have authority to grant Awards and to adopt, amend and repeal such administrative rules, guidelines and practices relating to the Plan as it shall deem advisable. The Board may construe and interpret the terms of the Plan and any Award agreements entered into under the Plan. The Board may correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award in the manner and to the extent it shall deem expedient to carry the Plan into effect and it shall be the sole and final judge of such expediency. All decisions by the Board shall be made in the Board’s sole discretion and shall be final and binding on all persons having or claiming any interest in the Plan or in any Award. No director or person acting pursuant to the authority delegated by the Board shall be liable for any action or determination relating to or under the Plan made in good faith.
(b) Appointment of Committees. To the extent permitted by applicable law, the Board may delegate any or all of its powers under the Plan to one or more committees or subcommittees of the Board (a “Committee”). All references in the Plan to the “Board” shall mean the Board or a Committee of the Board to the extent that the Board’s powers or authority under the Plan have been delegated to such Committee.
4. Stock Available for Awards
(a) Number of Shares. Subject to adjustment under Section 10, Awards may be made under the Plan for up to 700,000 shares of common stock, $2.50 par value per share, of the Company (the “Common Stock”). If any Award expires; is terminated, surrendered or canceled without having been fully exercised; is forfeited in whole or in part (including as the result of shares of Common Stock subject to such Award being repurchased by the Company at the original issuance price pursuant to a contractual repurchase right); is settled in cash or otherwise results in any Common Stock not being issued, the unused Common Stock covered by such Award shall again be available for the grant of Awards under the Plan. Further, shares of Common Stock tendered to the Company by a Participant to exercise an Award shall be added to the number of shares of Common Stock available for the grant of Awards under the Plan. However, in the case of Incentive Stock Options (as hereinafter defined), the foregoing provisions shall be subject to any limitations under the Code. Shares issued under the Plan may consist in whole or in part of authorized but unissued shares or treasury shares.
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(b) Section 162(m) Per-Participant Limit. The maximum number of shares of Common Stock with respect to which Awards may be granted to any Participant under the Plan shall be 200,000 per calendar year. For purposes of the foregoing limit, the combination of an Option in tandem with a SAR (as each is hereafter defined) shall be treated as a single Award. The per-Participant limit described in this Section 4(b) shall be construed and applied consistently with Section 162(m) of the Code or any successor provision thereto, and the regulations thereunder (“Section 162(m)”).
(c) Substitute Awards. In connection with a merger or consolidation of an entity with the Company or the acquisition by the Company of property or stock of an entity, the Board may grant Awards in substitution for any options or other stock or stock-based awards granted by such entity or an affiliate thereof. Substitute Awards may be granted on such terms as the Board deems appropriate in the circumstances, notwithstanding any limitations on Awards contained in the Plan. Substitute Awards shall not count against the overall share limit set forth in Section 4(a), except as may be required by reason of Section 422 and related provisions of the Code.
5. Stock Options
(a) General. The Board may grant options to purchase Common Stock (each, an “Option”) and determine the number of shares of Common Stock to be covered by each Option, the exercise price of each Option and the conditions and limitations applicable to the exercise of each Option, including conditions relating to applicable federal or state securities laws, as it considers necessary or advisable. An Option that is not intended to be an Incentive Stock Option (as hereinafter defined) shall be designated a “Nonstatutory Stock Option.”
(b) Incentive Stock Options. An Option that the Board intends to be an “incentive stock option” as defined in Section 422 of the Code (an “Incentive Stock Option”) shall only be granted to employees of Westmoreland Coal Company, any of Westmoreland Coal Company’s present or future parent or subsidiary corporations as defined in Sections 424(e) or (f) of the Code, and any other entities the employees of which are eligible to receive Incentive Stock Options under the Code, and shall be subject to and shall be construed consistently with the requirements of Section 422 of the Code. The Company shall have no liability to a Participant, or any other party, if an Option (or any part thereof) that is intended to be an Incentive Stock Option is not an Incentive Stock Option or for any action taken by the Board, including without limitation the conversion of an Incentive Stock Option to a Nonstatutory Stock Option.
(c) Exercise Price; Fair Market Value.
(1) The Board shall establish the exercise price of each Option and specify such exercise price in the applicable option agreement. The exercise price shall be not less than 100% of the Fair Market Value (as defined below) of a share of Common Stock on the date the Option is granted; provided that if the Board approves the grant of an Option with an exercise price to be determined on a future date, the exercise price shall be not less than 100% of the Fair Market Value of a share of Common Stock on such future date.
(2) The “Fair Market Value” of a share of Common Stock for purposes of the Plan shall be determined as follows:
(A) if the Common Stock trades on a national securities exchange, the closing sale price (for the primary trading session) in the principal U.S. market for the Common Stock on the date of grant; or
(B) if the Common Stock does not trade on any such exchange, the average of the closing bid and asked prices as reported by an authorized OTCBB market data vendor as listed on the OTCBB website (otcbb.com) on the date of grant; or
(C) if the Common Stock is not publicly traded, the Board will determine the Fair Market Value for purposes of the Plan using any measure of value it determines to be appropriate (including, as it considers appropriate, relying on appraisals) in a manner consistent with the valuation principles under Section 409A of the Code, except as the Board or Committee may expressly determine otherwise; or
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(D) for any date that is not a trading day, the Fair Market Value of a share of Common Stock for such date will be determined by using the closing sale price or average of the closing bid and asked prices, as appropriate, for the immediately preceding trading day and with the timing in the formulas above adjusted accordingly.
The Board may substitute a particular time of day or other measure of “closing sale price” or “closing bid and asked prices” if appropriate because of exchange or market procedures or can, in its sole discretion, use weighted averages either on a daily basis or such longer period as complies with Section 409A of the Code. The Board has sole discretion to determine the Fair Market Value for purposes of this Plan, and all Awards are conditioned on the Participants’ agreement that the Board’s determination is conclusive and binding even though others might make a different determination.
(d) Duration of Options. Each Option shall be exercisable at such times and subject to such terms and conditions as the Board may specify in the applicable option agreement, provided, however, that no Option will be granted for a term in excess of 10 years.
(e) Exercise of Option. Options may be exercised by delivery to the Company of a written notice of exercise signed by the proper person or by any other form of notice (including electronic notice) approved by the Board, together with payment in full as specified in Section 5(f) for the number of shares for which the Option is exercised. Shares of Common Stock subject to the Option will be delivered by the Company following exercise either as soon as practicable or, subject to such conditions as the Board shall specify, on a deferred basis (with the Company’s obligation to be evidenced by an instrument providing for future delivery of the deferred shares at the time or times specified by the Board).
(f) Payment Upon Exercise. Common Stock purchased upon the exercise of an Option granted under the Plan shall be paid for as follows:
(1) in cash or by check, payable to the order of the Company;
(2) except as may otherwise be provided in the applicable option agreement, by (i) delivery of an irrevocable and unconditional undertaking by a creditworthy broker to deliver promptly to the Company sufficient funds to pay the exercise price and any required tax withholding or (ii) delivery by the Participant to the Company of a copy of irrevocable and unconditional instructions to a creditworthy broker to deliver promptly to the Company cash or a check sufficient to pay the exercise price and any required tax withholding;
(3) to the extent provided for in the applicable option agreement or approved by the Board, in its sole discretion, by delivery (either by actual delivery or attestation) of shares of Common Stock owned by the Participant valued at their Fair Market Value, provided (i) such method of payment is then permitted under applicable law, (ii) such Common Stock, if acquired directly from the Company, was owned by the Participant for such minimum period of time, if any, as may be established by the Board in its discretion and (iii) such Common Stock is not subject to any repurchase, forfeiture, unfulfilled vesting or other similar requirements;
(4) payment of such other lawful consideration as the Board may determine; or
(5) by any combination of the above permitted forms of payment.
(g) Limitation on Repricing. Unless such action is approved by the Company’s stockholders: (i) no outstanding Option granted under the Plan may be amended to provide an exercise price per share that is lower than the then-current exercise price per share of such outstanding Option (other than adjustments pursuant to Section 10) and (2) the Board may not cancel any outstanding option (whether or not granted under the Plan) and grant in substitution therefor new Awards under the Plan covering the same or a different number of shares of Common Stock and having an exercise price per share lower than the then-current exercise price per share of the cancelled option.
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6. Director Awards.
(a) Initial Grant. Upon the commencement of service on the Board by any individual who is not then an employee of the Company or any subsidiary of the Company, the Company shall grant to such person an Award with a value determined in a manner deemed appropriate by the Board, which may include a value determined using Black-Scholes modeling, equal to $60,000.
(b) Annual Grant. On the date of each annual meeting of stockholders of the Company, the Company shall grant to each member of the Board of Directors of the Company who is both serving as a director of the Company immediately prior to and immediately following such annual meeting and who is not then an employee of the Company or any of its subsidiaries, an Award with a value determined in a manner deemed appropriate by the Board, which may include a value determined using Black-Scholes modeling, equal to $30,000; provided, however, that a director shall not be eligible to receive an Award under this Section 6(b) until such director has served on the Board for at least seven months.
(c) Grant or Base Price. The grant or base price or exercise price of an Award granted under this Section 6 shall not be less than 100% of the Fair Market Value per share of Common Stock on the date of grant of the Award.
(d) Terms of Director Awards.
(1) Subject to clauses (2) and (3) below, Awards granted under this Section 6 shall vest according to the Schedule specified in the Award.
(2) Upon the occurrence of a Reorganization Event or a Change in Control Event (as such terms are defined below), Awards made to directors shall be treated in accordance with Sections 10(b) and 10(c).
(3) If a Participant’s service as a director terminates for any reason other than a Reorganization Event or a Change in Control Event, and if the Participant has served as a director for three years or more, then such Participant’s Awards shall vest and become fully exercisable on the date such Participant ceases to be a director. If a Participant’s service as a director terminates for any reason other than a Reorganization Event or a Change in Control Event, and such Participant has served as a director for less than three years, then all of the Participant’s unvested Awards shall expire on the date such Participant ceases to be a director; provided, however, that the Board may in its sole discretion provide for the vesting of any unvested Award if the Participant’s service as a director terminates by reason of death or disability.
(4) Awards granted under this Section 6 shall expire at the time specified in the relevant Award, which in the case of Options shall be the earlier of 10 years from the date of grant or three months following cessation of Board service.
(5) Awards shall contain such other terms and conditions as the Board shall determine.
(e) Board Discretion. This Plan is not intended to limit the Board’s ability to revise the incentive compensation payable to the directors, and the Board retains the specific authority to from time to time increase or decrease the dollar values specified in Section 6(a) and Section 6(b) and to amend the terms of director Awards as set forth in Section 6(d).
7. Stock Appreciation Rights.
(a) General. The Board may grant Awards consisting of a stock appreciation right (“SAR”) entitling the holder, upon exercise, to receive an amount of Common Stock or cash or a combination thereof (such form to be determined by the Board) determined in whole or in part by reference to appreciation, from and after the date of grant, in the Fair Market Value of a share of Common Stock. The date as of which such appreciation or other measure is determined shall be the exercise date.
(b) Grants. SARs may be granted in tandem with, or independently of, Options granted under the Plan.
(c) Grant or Base Price. The grant or base price or exercise price of an SAR shall not be less than 100% of the Fair Market Value per share of Common Stock on the date of grant of the SAR; provided that if
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the Board approves the grant of an SAR with an exercise price to be determined on a future date, the exercise price shall be not less than 100% of the Fair Market Value of a share of Common Stock on such future date.
(d) Term. The term of an SAR shall not be more than 10 years from the date of grant.
(e) Exercise. SARs may be exercised by delivery to the Company of a written notice of exercise signed by the proper person or by any other form of notice (including electronic notice) approved by the Board, together with any other documents required by the Board.
8. Restricted Stock; Restricted Stock Units.
(a) General. The Board may grant Awards entitling recipients to acquire shares of Common Stock (“Restricted Stock”), subject to the right of the Company to repurchase all or part of such shares at their issue price or other stated or formula price (or to require forfeiture of such shares if issued at no cost) from the recipient in the event that conditions specified by the Board in the applicable Award are not satisfied prior to the end of the applicable restriction period or periods established by the Board for such Award. Instead of granting Awards for Restricted Stock, the Board may grant Awards entitling the recipient to receive shares of Common Stock to be delivered at the time such shares of Common Stock vest (“Restricted Stock Units”) (Restricted Stock and Restricted Stock Units are each referred to herein as a “Restricted Stock Award”).
(b) Terms and Conditions. The Board shall determine the terms and conditions of a Restricted Stock Award, including the conditions for vesting and repurchase (or forfeiture) and the issue price, if any.
(c) Additional Provisions Relating to Restricted Stock.
(1) Dividends. Participants holding shares of Restricted Stock will be entitled to all ordinary cash dividends paid with respect to such shares, unless otherwise provided by the Board. If any such dividends or distributions are paid in shares, or consist of a dividend or distribution to holders of Common Stock other than an ordinary cash dividend, the shares, cash or other property will be subject to the same restrictions on transferability and forfeitability as the shares of Restricted Stock with respect to which they were paid. Each dividend payment will be made no later than the end of the calendar year in which the dividends are paid to shareholders of that class of stock or, if later, the 15th day of the third month following the date the dividends are paid to shareholders of that class of stock.
(2) Stock Certificates. The Company may require that any stock certificates issued in respect of shares of Restricted Stock shall be deposited in escrow by the Participant, together with a stock power endorsed in blank, with the Company (or its designee). At the expiration of the applicable restriction periods, the Company (or such designee) shall deliver the certificates no longer subject to such restrictions to the Participant or if the Participant has died, to the beneficiary designated, in a manner determined by the Board, by a Participant to receive amounts due or exercise rights of the Participant in the event of the Participant’s death (the “Designated Beneficiary”). In the absence of an effective designation by a Participant, “Designated Beneficiary” shall mean the Participant’s estate.
(d) Additional Provisions Relating to Restricted Stock Units.
(1) Settlement. Upon the vesting ofand/or lapsing of any other restrictions (i.e., settlement) with respect to each Restricted Stock Unit, the Participant shall be entitled to receive from the Company one share of Common Stock or an amount of cash equal to the Fair Market Value of one share of Common Stock, as provided in the applicable Award agreement. The Board may, in its discretion, provide that settlement of Restricted Stock Units shall be deferred, on a mandatory basis or at the election of the Participant.
(2) Voting Rights. A Participant shall have no voting rights with respect to any Restricted Stock Units.
(3) Dividend Equivalents. To the extent provided by the Board, in its sole discretion, a grant of Restricted Stock Units may provide Participants with the right to receive an amount equal to any dividends or other distributions declared and paid on an equal number of outstanding shares of Common Stock (“Dividend Equivalents”). Dividend Equivalents may be paid currently or credited to an account for the Participants, may be settled in cashand/or shares of Common Stock and may be subject to the same restrictions on transfer and forfeitability as the Restricted Stock Units with respect to which paid, as determined by the Board in its sole
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discretion, subject in each case to such terms and conditions as the Board shall establish, in each case to be set forth in the applicable Award agreement.
9. Other Stock-Based Awards.
Other Awards of shares of Common Stock, and other Awards that are valued in whole or in part by reference to, or are otherwise based on, shares of Common Stock or other property, may be granted hereunder to Participants (“Other Stock-Based Awards”), including without limitation Awards entitling recipients to receive shares of Common Stock to be delivered in the future. Such Other Stock-Based Awards shall also be available as a form of payment in the settlement of other Awards granted under the Plan or as payment in lieu of compensation to which a Participant is otherwise entitled. Other Stock-Based Awards may be paid in shares of Common Stock or cash, as the Board shall determine. Subject to the provisions of the Plan, the Board shall determine the terms and conditions of each Other Stock-Based Award, including any purchase price applicable thereto.
10. Adjustments for Changes in Common Stock and Certain Other Events.
(a) Changes in Capitalization. In the event of any stock split, reverse stock split, stock dividend, recapitalization, combination of shares, reclassification of shares, spin-off or other similar change in capitalization or event, or any dividend or distribution to holders of Common Stock other than an ordinary cash dividend, (i) the number and class of securities available under this Plan, (ii) thesub-limit set forth in Section 4(b), (iii) the number and class of securities and exercise price per share of each outstanding Option, (iv) the share- and per-share provisions and the grant or base price of each outstanding SAR, (v) the number of shares subject to and the repurchase price per share subject to each outstanding Restricted Stock Award, (vi) the share- and per-share-related provisions and the purchase price, if any, of each outstanding Other Stock-Based Award, and (vii) the terms and conditions of each Award issuable under Section 6, shall be equitably adjusted by the Company (or substituted Awards may be made, if applicable) in the manner determined by the Board. Without limiting the generality of the foregoing, in the event the Company effects a split of the Common Stock by means of a stock dividend and the exercise price of and the number of shares subject to an outstanding Option are adjusted as of the date of the distribution of the dividend (rather than as of the record date for such dividend), then an optionee who exercises an Option between the record date and the distribution date for such stock dividend shall be entitled to receive, on the distribution date, the stock dividend with respect to the shares of Common Stock acquired upon such Option exercise, notwithstanding the fact that such shares were not outstanding as of the close of business on the record date for such stock dividend.
(b) Reorganization Events.
(1) Definition. A “Reorganization Event” shall mean: (a) any merger or consolidation of the Company with or into another entity as a result of which all of the Common Stock of the Company is converted into or exchanged for the right to receive cash, securities or other property or is cancelled, (b) any exchange of all of the Common Stock of the Company for cash, securities or other property pursuant to a share exchange transaction or (c) any liquidation or dissolution of the Company.
(2) Consequences of a Reorganization Event on Awards Other than Restricted Stock Awards. In connection with a Reorganization Event, the Board may take any one or more of the following actions as to all or any (or any portion of) outstanding Awards other than Restricted Stock Awards on such terms as the Board determines: (i) provide that Awards shall be assumed, or substantially equivalent Awards shall be substituted, by the acquiring or succeeding corporation (or an affiliate thereof), (ii) upon written notice to a Participant, provide that the Participant’s unexercised Options or other unexercised Awards will terminate immediately prior to the consummation of such Reorganization Event unless exercised by the Participant within a specified period following the date of such notice, (iii) provide that outstanding Awards shall become exercisable, realizable, or deliverable, or restrictions applicable to an Award shall lapse, in whole or in part prior to or upon such Reorganization Event, (iv) in the event of a Reorganization Event under the terms of which holders of Common Stock will receive upon consummation thereof a cash payment for each share surrendered in the Reorganization Event (the “Acquisition Price”), make or provide for a cash payment to a
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Participant equal to the excess, if any, of (A) the Acquisition Price times the number of shares of Common Stock subject to the Participant’s Options or other Awards (to the extent the exercise price does not exceed the Acquisition Price) over (B) the aggregate exercise price of all such outstanding Options or other Awards and any applicable tax withholdings, in exchange for the termination of such Options or other Awards, (v) provide that, in connection with a liquidation or dissolution of the Company, Awards shall convert into the right to receive liquidation proceeds (if applicable, net of the exercise price thereof and any applicable tax withholdings) and (vi) any combination of the foregoing. In taking any of the actions permitted under this Section 10(b), the Board shall not be obligated by the Plan to treat all Awards, or all Awards of the same type, identically.
For purposes of clause (i) above, an Option shall be considered assumed if, following consummation of the Reorganization Event, the Option confers the right to purchase, for each share of Common Stock subject to the Option immediately prior to the consummation of the Reorganization Event, the consideration (whether cash, securities or other property) received as a result of the Reorganization Event by holders of Common Stock for each share of Common Stock held immediately prior to the consummation of the Reorganization Event (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares of Common Stock); provided, however, that if the consideration received as a result of the Reorganization Event is not solely common stock of the acquiring or succeeding corporation (or an affiliate thereof), the Company may, with the consent of the acquiring or succeeding corporation, provide for the consideration to be received upon the exercise of Options to consist solely of common stock of the acquiring or succeeding corporation (or an affiliate thereof) equivalent in value (as determined by the Board) to the per share consideration received by holders of outstanding shares of Common Stock as a result of the Reorganization Event.
(3) Consequences of a Reorganization Event on Restricted Stock Awards. Upon the occurrence of a Reorganization Event other than a liquidation or dissolution of the Company, the repurchase and other rights of the Company under each outstanding Restricted Stock Award shall inure to the benefit of the Company’s successor and shall, unless the Board determines otherwise, apply to the cash, securities or other property which the Common Stock was converted into or exchanged for pursuant to such Reorganization Event in the same manner and to the same extent as they applied to the Common Stock subject to such Restricted Stock Award. Upon the occurrence of a Reorganization Event involving the liquidation or dissolution of the Company, except to the extent specifically provided to the contrary in the instrument evidencing any Restricted Stock Award or any other agreement between a Participant and the Company, all restrictions and conditions on all Restricted Stock Awards then outstanding shall automatically be deemed terminated or satisfied.
(c) Change in Control Events.
(1) Definition. A “Change in Control Event” shall mean:
(A) (I) except as provided in clause (A)(II) below, the acquisition by an individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the “Exchange Act”)) (a “Person”) of beneficial ownership of any capital stock of the Company if, after such acquisition, such Person beneficially owns (within the meaning ofRule 13d-3 promulgated under the Exchange Act) 20% or more of either (x) the then-outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (y) the combined voting power of the then-outstanding securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that for purposes of this subsection (A), the following acquisitions shall not constitute a Change in Control Event: (i) any acquisition directly from the Company (excluding an acquisition pursuant to the exercise, conversion or exchange of any security exercisable for, convertible into or exchangeable for common stock or voting securities of the Company, unless the Person exercising, converting or exchanging such security acquired such security directly from the Company or an underwriter or agent of the Company), (ii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (iii) any acquisition by any corporation pursuant to a Business Combination (as defined below) which
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complies with clauses (x) and (y) of subsection (C) of this definition; and provided, further, that if any person beneficially owns 20% or more of the Outstanding Company Common Stock or the Outstanding Company Voting Securities, but notwithstanding such ownership, a Change in Control Event has not occurred because the Person’s acquisition of all or a portion of such Person’s shares is or was an acquisition described in clause (i) of the preceding proviso, then the acquisition by that Person of any additional shares of Common Stock other than pursuant to a stock split, stock dividend, or other similar event shall constitute a Change in Control Event; or
(II) notwithstanding the foregoing clause (A)(I), the acquisition of 20% or more of the Outstanding Company Common Stock or the Outstanding Company Voting Securities shallnot be a Change of Control Event if the Person acquiring such interest in the Company’s outstanding securities does not thereby become an “Acquiring Person” under the terms of the Rights Agreement (defined below) in effect on the date of the shareholder approval of this Plan;provided, however, that if such Person would become an “Acquiring Person” under the terms of the Rights Agreement upon the acquisition of a specified percentage of the Outstanding Company Common Stock or the Outstanding Company Voting Securities greater than 20% (the “Modified Ownership Threshold”), then it shall be a Change of Control Event under this Plan if such Person acquires a beneficial interest in the Outstanding Company Common Stock or the Outstanding Company Voting Securities at or above the Modified Ownership Threshold, thereby making such Person an “Acquiring Person” under the terms of the Rights Agreement. The “Rights Agreement” referred to in this clause (A)(II) means the Amended and Restated Rights Agreement, dated as of February 7, 2003, between the Company and Computershare Trust Company, N.A. (formerly known as EquiServe Trust Company, N.A.), as rights agent, as amended by the First Amendment to the Amended and Restated Rights Agreement, dated as of May 2, 2007.
(B) such time as the Continuing Directors (as defined below) do not constitute a majority of the Board (or, if applicable, the Board of Directors of a successor corporation to the Company), where the term “Continuing Director” means at any date a member of the Board (x) who was a member of the Board on the date of the initial adoption of this Plan by the Board or (y) who was nominated pursuant to the terms of the Standby Purchase Agreement, dated as of May 2, 2007 between the Company and Tontine Capital Partners, L.P. or (z) who was nominated or elected subsequent to such date by at least a majority of the directors who were Continuing Directors at the time of such nomination or election or whose election to the Board was recommended or endorsed by at least a majority of the directors who were Continuing Directors at the time of such nomination or election; provided, however, that there shall be excluded from this clause (y) any individual whose initial assumption of office occurred as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents, by or on behalf of a person other than the Board; or
(C) the consummation of a merger, consolidation, reorganization, recapitalization or share exchange involving the Company or a sale or other disposition of all or substantially all of the assets of the Company (a “Business Combination”), unless, immediately following such Business Combination, each of the following two conditions is satisfied: (x) all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding securities entitled to vote generally in the election of directors, respectively, of the resulting or acquiring corporation in such Business Combination (which shall include, without limitation, a corporation which as a result of such transaction owns the Company or substantially all of the Company’s assets either directly or through one or more subsidiaries) (such resulting or acquiring corporation is referred to herein as the “Acquiring Corporation”) in substantially the same proportions as their ownership of the Outstanding Company Common Stock and Outstanding Company Voting Securities, respectively, immediately prior to such Business Combination and (y) no Person (excluding any employee benefit plan (or related trust) maintained or sponsored by the Company or by the Acquiring Corporation) beneficially owns, directly or indirectly, 20% or more of the then-outstanding shares of common stock of the Acquiring Corporation, or of the combined voting power of the then-outstanding
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securities of such corporation entitled to vote generally in the election of directors (except to the extent that such ownership existed prior to the Business Combination); or
(D) the liquidation or dissolution of the Company.
(2) Effect on Options. Notwithstanding the provisions of Section 10(b) and irrespective of whether such an event is also a Reorganization Event, effective immediately prior to a Change in Control Event, except to the extent specifically provided to the contrary in the instrument evidencing any Option or any other agreement between a Participant and the Company. Upon the occurrence of a Change of Control Event, unless specifically provided to the contrary in the instrument evidencing any Award or any other agreement between a participant and the Company, unvested options granted to an employee or a director of the Company will automatically become vested or exercisable upon a Change of Control Event if such employee is Terminated within 12 months following such Change of Control or the director is removed from the Board within 12 months of the Change of Control, or, if a regular meeting of shareholders occurs within 12 months of the Change of Control, such director is not nominated for re-election at such meeting after he or she expresses a desire to be so nominated. For purposes of the foregoing, “Terminated” means involuntary dismissal or a material change in the employee’s level of total compensation or a material change in his or her level of responsibility which, in either such case, causes the employee to voluntarily terminate his or her employment.
(3) Effect on Restricted Stock Awards. Notwithstanding the provisions of Section 10(b) and irrespective of whether such an event is also a Reorganization Event, effective immediately prior to a Change in Control Event, except to the extent specifically provided to the contrary in the instrument evidencing any Restricted Stock Award or any other agreement between a Participant and the Company, all restrictions and conditions on all Restricted Stock Awards then-outstanding shall automatically be deemed terminated or satisfied.
(4) Effect on SARs and Other Stock-Based Awards. Upon the occurrence of a Change of Control Event, unless specifically provided to the contrary in the instrument evidencing any Award or any other agreement between a participant and the Company, unvested SARs granted to an employee or a director of the Company will automatically become vested or exercisable upon a Change of Control Event if such employee is Terminated within 12 months following such Change of Control or the director is removed from the Board within 12 months of the Change of Control, or, if a regular meeting of shareholders occurs within 12 months of the Change of Control, such director is not nominated for re-election at such meeting after he or she expresses a desire to be so nominated. For purposes of the foregoing, “Terminated” means involuntary dismissal or a material change in the employee’s level of total compensation or a material change in his or her level of responsibility which, in either such case, causes the employee to voluntarily terminate his or her employment.
The Board may specify in an Award at the time of the grant the effect of a Change in Control Event on any Other Stock-Based Award.
11. General Provisions Applicable to Awards
(a) Transferability of Awards. Awards shall not be sold, assigned, transferred, pledged or otherwise encumbered by the person to whom they are granted, either voluntarily or by operation of law, except by will or the laws of descent and distribution or, other than in the case of an Incentive Stock Option, pursuant to a qualified domestic relations order, and, during the life of the Participant, shall be exercisable only by the Participant; provided, however, that the Board may permit or provide in an Award for the gratuitous transfer of the Award by the Participant to or for the benefit of any immediate family member, family trust or other entity established for the benefit of the Participantand/or an immediate family member thereof if, with respect to such proposed transferee, the Company would be eligible to use aForm S-8 for the registration of the sale of the Common Stock subject to such Award under the Securities Act of 1933, as amended; provided, further, that the Company shall not be required to recognize any such transfer until such time as the Participant and such permitted transferee shall, as a condition to such transfer, deliver to the Company a written instrument in form and substance satisfactory to the Company confirming that such transferee shall be bound by all of the terms and conditions of the Award. References to a Participant, to the extent relevant in the context, shall include references to authorized transferees.
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(b) Documentation. Each Award shall be evidenced in such form (written, electronic or otherwise) as the Board shall determine. Such written instrument may be in the form of an agreement signed by the Company and the Participant or a written confirming memorandum to the Participant from the Company. Each Award may contain terms and conditions in addition to those set forth in the Plan.
(c) Board Discretion. Except as otherwise provided by the Plan, each Award may be made alone or in addition or in relation to any other Award. The terms of each Award need not be identical, and the Board need not treat Participants uniformly.
(d) Termination of Status. The Board shall determine the effect on an Award of the disability, death, termination of employment, authorized leave of absence or other change in the employment or other status of a Participant and the extent to which, and the period during which, the Participant, or the Participant’s legal representative, conservator, guardian or Designated Beneficiary, may exercise rights under the Award.
(e) Withholding. The Participant must satisfy all applicable federal, state, and local or other income and employment tax withholding obligations before the Company will deliver stock certificates or otherwise recognize ownership of Common Stock under an Award. The Company may decide to satisfy the withholding obligations through additional withholding on salary or wages. If the Company elects not to or cannot withhold from other compensation, the Participant must pay the Company the full amount, if any, required for withholding or have a broker tender to the Company cash equal to the withholding obligations. Payment of withholding obligations is due before the Company will issue any shares on exercise or release from forfeiture of an Award or, if the Company so requires, at the same time as is payment of the exercise price unless the Company determines otherwise. If provided for in an Award or approved by the Board in its sole discretion, a Participant may satisfy such tax obligations in whole or in part by delivery of shares of Common Stock, including shares retained from the Award creating the tax obligation, valued at their Fair Market Value; provided, however, except as otherwise provided by the Board, that the total tax withholding where stock is being used to satisfy such tax obligations cannot exceed the Company’s minimum statutory withholding obligations (based on minimum statutory withholding rates for federal and state tax purposes, including payroll taxes, that are applicable to such supplemental taxable income). Shares surrendered to satisfy tax withholding requirements cannot be subject to any repurchase, forfeiture, unfulfilled vesting or other similar requirements.
(f) Amendment of Award. Subject to Section 5(g), the Board may amend, modify or terminate any outstanding Award, including but not limited to, substituting therefor another Award of the same or a different type, changing the date of exercise or realization, and converting an Incentive Stock Option to a Nonstatutory Stock Option, provided that the Participant’s consent to such action shall be required unless (i) the Board determines that the action, taking into account any related action, would not materially and adversely affect the Participant’s rights under the Plan or (ii) the change is permitted under Section 10 hereof.
(g) Conditions on Delivery of Stock. The Company will not be obligated to deliver any shares of Common Stock pursuant to the Plan or to remove restrictions from shares previously delivered under the Plan until (i) all conditions of the Award have been met or removed to the satisfaction of the Company, (ii) in the opinion of the Company’s counsel, all other legal matters in connection with the issuance and delivery of such shares have been satisfied, including any applicable securities laws and any applicable stock exchange or stock market rules and regulations, and (iii) the Participant has executed and delivered to the Company such representations or agreements as the Company may consider appropriate to satisfy the requirements of any applicable laws, rules or regulations.
(h) Acceleration. The Board may at any time provide that any Award shall become immediately exercisable in full or in part, free of some or all restrictions or conditions, or otherwise realizable in full or in part, as the case may be.
(i) Performance Awards.
(1) Grants. Restricted Stock Awards and Other Stock-Based Awards under the Plan may be made subject to the achievement of performance goals pursuant to this Section 11(i) (“Performance Awards”), subject to the limit in Section 4(b) on shares covered by such grants.
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(2) Committee. Grants of Performance Awards to any Covered Employee intended to qualify as “performance-based compensation” under Section 162(m) (“Performance-Based Compensation”) shall be made only by a Committee (or subcommittee of a Committee) comprised solely of two or more directors eligible to serve on a committee making Awards qualifying as “performance-based compensation” under Section 162(m). In the case of such Awards granted to Covered Employees, references to the Board or to a Committee shall be deemed to be references to such Committee or subcommittee. “Covered Employee” shall mean any person who is a “covered employee” under Section 162(m)(3) of the Code.
(3) Performance Measures. For any Award that is intended to qualify as Performance-Based Compensation, the Committee shall specify that the degree of granting, vestingand/or payout shall be subject to the achievement of one or more objective performance measures established by the Committee, which shall be based on the relative or absolute attainment of specified levels of one or any combination of the following:
(A) earnings before interest, taxes, depreciationand/or amortization,
(B) earnings before operating income or profit,
(C) operating efficiencies,
(D) return on equity, assets, capital, capital employed, or investment,
(E) after tax operating income,
(F) net income,
(G) earnings or book value per share,
(H) cash flow(s),
(I) total sales or revenues or sales or revenues per employee,
(J) production (separate work units or SWUs),
(K) stock price or total stockholder return,
(L) dividends,
(M) strategic business objectives, consisting of one or more objectives based on meeting specified cost targets, business expansion goals, and goals relating to acquisitions or divestitures, or
(N) except in the case of a Covered Employee, any other performance criteria established by the Committee, and may be absolute in their terms or measured against or in relationship to other companies comparably, similarly or otherwise situated.
Such performance measures may be adjusted to exclude any one or more of (i) extraordinary items, (ii) gains or losses on the dispositions of discontinued operations, (iii) the cumulative effects of changes in accounting principles, (iv) the writedown of any asset, and (v) charges for restructuring and rationalization programs. Such performance measures: (i) may vary by Participant and may be different for different Awards; (ii) may be particular to a Participant or the department, branch, line of business, subsidiary, division, operating unit, or other unit in which the Participant works and may cover such period as may be specified by the Committee; and (iii) shall be set by the Committee within the time period prescribed by, and shall otherwise comply with the requirements of, Section 162(m). Awards that are not intended to qualify as Performance-Based Compensation may be based on these or such other performance measures as the Board may determine.
(4) Adjustments. Notwithstanding any provision of the Plan, with respect to any Performance Award that is intended to qualify as Performance-Based Compensation, the Committee may adjust downwards, but not upwards, the cash or number of Shares payable pursuant to such Award, and the Committee may not waive the achievement of the applicable performance measures except in the case of the death or disability of the Participant or a change in control of the Company.
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(5) Other. The Committee shall have the power to impose such other restrictions on Performance Awards as it may deem necessary or appropriate to ensure that such Awards satisfy all requirements for Performance-Based Compensation.
12. Miscellaneous
(a) No Right To Employment or Other Status. No person shall have any claim or right to be granted an Award, and the grant of an Award shall not be construed as giving a Participant the right to continued employment or any other relationship with the Company. The Company expressly reserves the right at any time to dismiss or otherwise terminate its relationship with a Participant free from any liability or claim under the Plan, except as expressly provided in the applicable Award.
(b) No Rights As Stockholder. Subject to the provisions of the applicable Award, no Participant or Designated Beneficiary shall have any rights as a stockholder with respect to any shares of Common Stock to be distributed with respect to an Award until becoming the record holder of such shares.
(c) Effective Date and Term of Plan. The Plan shall become effective on the date the Plan is approved by the Company’s stockholders (the “Effective Date”). No Awards shall be granted under the Plan after the expiration of 10 years from the Effective Date, but Awards previously granted may extend beyond that date.
(d) Amendment of Plan. The Board may amend, suspend or terminate the Plan or any portion thereof at any time provided that (i) to the extent required by Section 162(m), no Award granted to a Participant that is intended to comply with Section 162(m) after the date of such amendment shall become exercisable, realizable or vested, as applicable to such Award, unless and until such amendment shall have been approved by the Company’s stockholders if required by Section 162(m) (including the vote required under Section 162(m)); (ii) no amendment that would require stockholder approval under the rules of American Stock Exchange (“AMEX”) may be made effective unless and until such amendment shall have been approved by the Company’s stockholders; and (iii) if the AMEX amends its corporate governance rules so that such rules no longer require stockholder approval of “material amendments” to equity compensation plans, then, from and after the effective date of such amendment to the AMEX rules, no amendment to the Plan (A) materially increasing the number of shares authorized under the Plan (other than pursuant to Section 4(c) or 10), (B) expanding the types of Awards that may be granted under the Plan, or (C) materially expanding the class of participants eligible to participate in the Plan shall be effective unless stockholder approval is obtained. In addition, if at any time the approval of the Company’s stockholders is required as to any other modification or amendment under Section 422 of the Code or any successor provision with respect to Incentive Stock Options, the Board may not effect such modification or amendment without such approval. Unless otherwise specified in the amendment, any amendment to the Plan adopted in accordance with this Section 12(d) shall apply to, and be binding on the holders of, all Awards outstanding under the Plan at the time the amendment is adopted, provided the Board determines that such amendment does not materially and adversely affect the rights of Participants under the Plan. No Award shall be made that is conditioned upon stockholder approval of any amendment to the Plan.
(e) Compliance with Code Section 409A. No Award shall provide for deferral of compensation that does not comply with Section 409A of the Code, unless the Board, at the time of grant, specifically provides that the Award is not intended to comply with Section 409A of the Code. The Company shall have no liability to a Participant, or any other party, if an Award that is intended to be exempt from, or compliant with, Section 409A is not so exempt or compliant or for any action taken by the Board.
(f) Governing Law. The provisions of the Plan and all Awards made hereunder shall be governed by and interpreted in accordance with the laws of the State of Delaware, excludingchoice-of-law principles of the law of such state that would require the application of the laws of a jurisdiction other than such state.
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Appendix D
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
WESTMORELAND COAL COMPANY
(Pursuant to Section 242 of the
General Corporation Law of the State of Delaware)
WESTMORELAND COAL COMPANY, a corporation organized and existing under and by virtue of the provisions of the General Corporation Law of the State of Delaware (the “Corporation”),
DOES HEREBY CERTIFY:
1): That the Board of Directors duly adopted resolutions proposing to amend the Certificate of Incorporation of the Corporation, declaring said amendment to be advisable and in the best interests of the Corporation and its stockholders, and authorizing the appropriate officers of the Corporation to solicit the vote of stockholders therefor, which resolution setting forth the proposed amendment is as follows:
RESOLVED, that the first paragraph of Article Fourth of the Certificate of Incorporation of the Corporation be amended in its entirety to read as follows:
FOURTH: The aggregate number of shares of all classes of stock which the corporation has authority to issue is 35,000,000, of which (a) 5,000,000 shall be Preferred Stock of the par value of $1 per share, issuable in series, and (b) 30,000,000 shall be Common Stock of the par value of $2.50 per share.
* * *
2): That the foregoing amendment was approved by the holders of the requisite number of shares of the Corporation in accordance with the Delaware General Corporation Law.
3): That said amendment has been duly adopted in accordance with Section 242 of the Delaware General Corporation Law.
IN WITNESS WHEREOF, this Certificate of Amendment of Certificate of Incorporation has been executed by a duly authorized officer of the Corporation on this day of , 2007.
WESTMORELAND COAL COMPANY
By:
Name:
D-1
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Annual Meeting Proxy Card
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6PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.6
AProposals — The Board of Directors recommends a voteFOR all the nominees listed andFOR Proposals 3, 4, 5 and 6.
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1. Election of Directors by the holders of Common Stock. | | | | | | | | | | | | | | | | | | | + |
| | For | | Withhold | | | | | | For | | Withhold | | | | | | For | | Withhold | | | |
01 - - Keith E. Alessi | | o | | o | | | | 02 - Thomas J. Coffey | | o | | o | | | | 03 - Richard M. Klingaman | | o | | o | | | |
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3. | | Rights Offering. | | o | | o | | o | | |
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4. | | Standby Purchase Agreement and related transactions. | | o | | o | | o | | |
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5. | | 2007 Equity Incentive Plan. | | o | | o | | o | | |
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6. | | Amended Certificate of Incorporation. | | o | | o | | o | | |
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| Comments — Please print your comments below. | Receipt of Notice
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| | Receipt of the Notice of Annual meeting and Proxy Statement dated July 19, 2007 are hereby acknowledged. | o |
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| Change of Address — Please print new address below. | Meeting Attendance
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| | Mark the box to the right if you plan to attend the Annual Meeting. | o |
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| IF VOTING BY MAIL, YOUMUST COMPLETE SECTIONS A - C ON BOTH SIDES OF THIS CARD. |
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n | | | | C 1234567890
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0 1 2 8 8 5 1 | | MR A SAMPLE (THIS AREA IS SET UP TO ACCOMMODATE
140 CHARACTERS) MR A SAMPLE AND MR A SAMPLE AND
MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND
MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND | + |
<STOCK#> 00P38E
6PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.6
Proxy - - Westmoreland Coal Company
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Proxy for COMMON STOCK Only
Solicited on Behalf of the Board of Directors
Annual Meeting — August 16, 2007
The undersigned hereby constitutes and appoints Robert E. Killen, Morris W. Kegley, and Diane S. Jones and each of them, as true and lawful agents and proxies with power of substitution, to represent the undersigned and to vote all shares of Common Stock held by the undersigned at the Annual Meeting of Stockholders to be held at the Corporate Headquarters, 2 North Cascade Avenue, 14th Floor, Colorado Springs, CO 80903, on Thursday, August 16, 2007, at 8:30 a.m. (mountain time), and at any adjournments thereof, on all matters coming before said meeting as noted on the reverse side of this card.
This proxy, when properly executed, will be voted in the manner directed herein. If no directions are given, this proxy will be voted FOR the election of directors and FOR each of proposals 3 through 6. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY POSTPONEMENT OR ADJOURNMENT THEREOF.
You are encouraged to specify your choices by marking the appropriate boxes, SEE REVERSE SIDE, but you need not mark any boxes if you wish to vote in accordance with the Board of Directors’ recommendations. The proxies cannot vote your shares unless you sign and return this card.
PLEASE VOTE, DATE AND SIGN THIS PROXY ON THE OTHER SIDE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
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| CAuthorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below | |
| | | |
| NOTE: Please sign this proxy exactly as your name appears on hereon. When shares are held by joint tenants, both should sign. When signing as attorney, administrator, trustee or guardian please give your full title as such. |
|
| Date (mm/dd/yyyy) — Please print date below. | | Signature 1 — Please keep signature within the box. | | Signature 2 — Please keep signature within the box. | |
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| / | | / | | | | | |
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| IF VOTING BY MAIL, YOUMUST COMPLETE SECTIONS A - C ON BOTH SIDES OF THIS CARD. |
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Annual Meeting Proxy Card
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6PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.6
AProposals — The Board of Directors recommends a voteFOR all the nominees listed andFOR Proposals 3, 4, 5 and 6.
| | | | | | | | | | | | | | | | | | | | | | | | |
1. Election of Directors by the holders of Common Stock. | | | | | | | | | | | | | | | | | | | + |
| | For | | Withhold | | | | | | For | | Withhold | | | | | | For | | Withhold | | | |
01 - - Keith E. Alessi | | o | | o | | | | 02 - Thomas J. Coffey | | o | | o | | | | 03 - Richard M. Klingaman | | o | | o | | | |
| | | | | | | | | | |
| | | | For | | Against | | Abstain | | |
3. | | Rights Offering. | | o | | o | | o | | |
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| |
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4. | | Standby Purchase Agreement and related transactions. | | o | | o | | o | | |
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| |
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| | | | | | | | | | |
5. | | 2007 Equity Incentive Plan. | | o | | o | | o | | |
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| |
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| | | | | | | | | | |
6. | | Amended Certificate of Incorporation. | | o | | o | | o | | |
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| Comments — Please print your comments below. | Receipt of Notice
| |
| | Receipt of the Notice of Annual meeting and Proxy Statement dated July 19, 2007 are hereby acknowledged. | o |
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| Change of Address — Please print new address below. | Meeting Attendance
| |
| | Mark the box to the right if you plan to attend the Annual Meeting. | o |
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| IF VOTING BY MAIL, YOUMUST COMPLETE SECTIONS A - C ON BOTH SIDES OF THIS CARD. |
| | | | | | | | | |
n | | | | C 1234567890
1 U P X | | J N T
0 1 2 8 8 5 2 | | MR A SAMPLE (THIS AREA IS SET UP TO ACCOMMODATE
140 CHARACTERS) MR A SAMPLE AND MR A SAMPLE AND
MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND
MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND | + |
<STOCK#> 00P4DE
6PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.6
Proxy — Westmoreland Coal Company
| 401 - - K PLAN COMMON STOCK
| + |
Proxy for 401 - K PLAN COMMON STOCK Only
Solicited on Behalf of the Board of Directors
Annual Meeting - August 16, 2007
The undersigned hereby constitutes and appoints Robert E. Killen, Morris W. Kegley, and Diane S. Jones and each of them, as true and lawful agents and proxies with power of substitution, to represent the undersigned and to vote all shares of Common Stock held by the undersigned at the Annual Meeting of Stockholders to be held at the Corporate Headquarters, 2 North Cascade Avenue, 14th Floor, Colorado Springs, CO 80903, on Thursday, August 16, 2007, at 8:30 a.m. (mountain time), and at any adjournments thereof, on all matters coming before said meeting as noted on the reverse side of this card.
This proxy, when properly executed, will be voted in the manner directed herein. If no directions are given, this proxy will be voted FOR the election of directors and FOR each of proposals 3 through 6. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY POSTPONEMENT OR ADJOURNMENT THEREOF.
You are encouraged to specify your choices by marking the appropriate boxes, SEE REVERSE SIDE, but you need not mark any boxes if you wish to vote in accordance with the Board of Directors’ recommendations.
PLEASE VOTE, DATE AND SIGN THIS PROXY ON THE OTHER SIDE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
| | | | | | | | |
| CAuthorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below | |
| | | |
| NOTE: Please sign this proxy exactly as your name appears on hereon. When shares are held by joint tenants, both should sign. When signing as attorney, administrator, trustee or guardian please give your full title as such. |
|
| Date (mm/dd/yyyy) — Please print date below. | | Signature 1 — Please keep signature within the box. | | Signature 2 — Please keep signature within the box. | |
| | | | | | |
| / | | / | | | | | |
| | | | | | |
| | | | | | | | | |
| IF VOTING BY MAIL, YOUMUST COMPLETE SECTIONS A - C ON BOTH SIDES OF THIS CARD. |
| | | | | | | | | | | | |
| |
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Using ablack ink pen, mark your votes with an Xas shown in this example. Please do not write outside the designated areas.
| | X | | | | | | |
| | | | | | | | |
|
Annual Meeting Proxy Card
| | | | | | | | |
| | | | | | | | |
|
6PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.6
AProposals — The Board of Directors recommends a voteFOR the listed nominees andFOR Proposals 3, 4, 5 and 6.
| | | | | | | | | | | | | | | | | | | | | | | | |
2. Election of Directors by the holders of Depositary Shares. | | | | | | | | | | | | | | | | | | | + |
| | For | | Withhold | | | | | | For | | Withhold | | | | | | | | | | | |
01 - - Robert E. Killen | | | | o | | | | 02 - William M. Stern | | o | | o | | | | | | | | | | | |
| | | | | | | | | | |
| | | | For | | Against | | Abstain | | |
3. | | Rights Offering. | | o | | o | | o | | |
| | | | | | | | | | |
| |
| | | | | | | | | | |
| | | | | | | | | | |
4. | | Standby Purchase Agreement and related transactions. | | o | | o | | o | | |
| | | | | | | | | | |
| |
| | | | | | | | | | |
| | | | | | | | | | |
5. | | 2007 Equity Incentive Plan. | | o | | o | | o | | |
| | | | | | | | | | |
| |
| | | | | | | | | | |
| | | | | | | | | | |
6. | | Amended Certificate of Incorporation. | | o | | o | | o | | |
| | | | | | | | | | |
| |
| | | | | | | | |
| BAuthorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below | |
| | | |
| NOTE: Please sign this proxy exactly as your name appears on hereon. When shares are held by joint tenants, both should sign. When signing as attorney, administrator, trustee or guardian please give your full title as such. |
|
| Date (mm/dd/yyyy) — Please print date below. | | Signature 1 — Please keep signature within the box. | | Signature 2 — Please keep signature within the box. | |
| | | | | | |
| / | | / | | | | | |
| | | | | | |
| | | | | | | | | |
n | | | | C 1234567890
1 U P X | | J N T
0 1 2 8 8 5 3 | | MR A SAMPLE (THIS AREA IS SET UP TO ACCOMMODATE
140 CHARACTERS) MR A SAMPLE AND MR A SAMPLE AND
MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND
MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND | + |
<STOCK#> 00P4EE
6PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.6
Proxy — Westmoreland Coal Company
| 401-K PLAN DEPOSITARY SHARES
| |
Proxy for 401-K PLAN DEPOSITARY SHARES Only
Solicited on Behalf of the Board of Directors
Annual Meeting - August 16, 2007
The undersigned hereby constitutes and appoints Robert E. Killen, Morris W. Kegley, and Diane S. Jones and each of them, as true and lawful agents and proxies with power of substitution, to represent the undersigned and to vote all Depositary Shares of stock held by the undersigned at the Annual Meeting of Stockholders to be held at the Corporate Headquarters, 2 North Cascade Avenue, 14th Floor, Colorado Springs, CO 80903, on Thursday, August 16, 2007, at 8:30 a.m. (mountain time), and at any adjournments thereof, on all matters coming before said meeting as noted on the reverse side of this card.
This proxy, when properly executed, will be voted in the manner directed herein. If no directions are given, this proxy will be voted FOR the election of directors and FOR each of proposals 3 through 6. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY POSTPONEMENT OR ADJOURNMENT THEREOF.
You are encouraged to specify your choices by marking the appropriate boxes, SEE REVERSE SIDE, but you need not mark any boxes if you wish to vote in accordance with the Board of Directors’ recommendations.
PLEASE VOTE, DATE AND SIGN THIS PROXY ON THE OTHER SIDE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
| | | | | | | | | | | | |
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| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Using ablack ink pen, mark your votes with an Xas shown in this example. Please do not write outside the designated areas.
| | X | | | | | | |
| | | | | | | | |
|
Annual Meeting Proxy Card
| | | | | | | | |
| | | | | | | | |
|
6PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.6
AProposals — The Board of Directors recommends a voteFORthe listednominees andFOR Proposals 3, 4, 5 and 6.
| | | | | | | | | | | | | | | | | | | | | | | | |
2. Election of Directors by the holders of Depositary Shares. | | | | | | | | | | | | | | | | | | | + |
| | For | | Withhold | | | | | | For | | Withhold | | | | | | | | | | | |
01 - - Robert E. Killen | | o | | o | | | | 02 - William M. Stern | | o | | o | | | | | | | | | | | |
| | | | | | | | | | |
| | | | For | | Against | | Abstain | | |
3. | | Rights Offering. | | o | | o | | o | | |
| | | | | | | | | | |
| |
| | | | | | | | | | |
| | | | | | | | | | |
4. | | Standby Purchase Agreement and related transactions. | | o | | o | | o | | |
| | | | | | | | | | |
| |
| | | | | | | | | | |
| | | | | | | | | | |
5. | | 2007 Equity Incentive Plan. | | o | | o | | o | | |
| | | | | | | | | | |
| |
| | | | | | | | | | |
| | | | | | | | | | |
6. | | Amended Certificate of Incorporation. | | o | | o | | o | | |
| | | | | | | | | | |
| |
| | | | | | | | |
| BAuthorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below | |
| | | |
| NOTE: Please sign this proxy exactly as your name appears on hereon. When shares are held by joint tenants, both should sign. When signing as attorney, administrator, trustee or guardian please give your full title as such. |
|
| Date (mm/dd/yyyy) — Please print date below. | | Signature 1 — Please keep signature within the box. | | Signature 2 — Please keep signature within the box. | |
| | | | | | |
| / | | / | | | | | |
| | | | | | |
| | | | | | | | | |
n | | | | C 1234567890
1 U P X | | J N T
0 1 2 8 8 5 4 | | MR A SAMPLE (THIS AREA IS SET UP TO ACCOMMODATE
140 CHARACTERS) MR A SAMPLE AND MR A SAMPLE AND
MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND
MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND | + |
<STOCK#> 00P4FE
6PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.6
Proxy — Westmoreland Coal Company
| DEPOSITARY SHARES
| |
Proxy for DEPOSITARY SHARES Only
Solicited on Behalf of the Board of Directors
Annual Meeting - August 16, 2007
The undersigned hereby constitutes and appoints Robert E. Killen, Morris W. Kegley, and Diane S. Jones and each of them, as true and lawful agents and proxies with power of substitution, to represent the undersigned and to vote all Depositary shares of stock held by the undersigned at the Annual Meeting of Stockholders to be held at the Corporate Headquarters, 2 North Cascade Avenue, 14th Floor, Colorado Springs, CO 80903, on Thursday, August 16, 2007, at 8:30 a.m. (mountain time), and at any adjournments thereof, on all matters coming before said meeting as noted on the reverse side of this card.
This proxy, when properly executed, will be voted in the manner directed herein. If no directions are given, this proxy will be voted FOR the election of directors and FOR each of proposals 3 through 6. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY POSTPONEMENT OR ADJOURNMENT THEREOF.
You are encouraged to specify your choices by marking the appropriate boxes, SEE REVERSE SIDE, but you need not mark any boxes if you wish to vote in accordance with the Board of Directors’ recommendations. The proxies cannot vote your shares unless you sign and return this card.
PLEASE VOTE, DATE AND SIGN THIS PROXY ON THE OTHER SIDE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.