Form 8-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report(Date of earliest event reported):
January 29, 1999
WESTMORELAND COAL COMPANY
-------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 0-752 23-1128670
-------- ----- ----------
(State or other jurisdiction (Commission File (I.R.S. Employer
of incorporation or organization) Number) Identification No.)
2 North Cascade Avenue, 14th Floor, Colorado Springs, Colorado 80903
- ------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code: 719-442-2600
Item 5. Other Events
On February 2, 1999, Westmoreland Coal Company announced that it had
successfully emerged from bankruptcy. The U.S. Bankruptcy Court for the District
of Colorado dismissed the Company's Chapter 11 case on December 23, 1998. As
required by the Federal Rules of Bankruptcy Procedure, the dismissal was stayed
for 10 calendar days. The dismissal became effective January 4, 1999. As a
precondition to their support of the Company's motion to dismiss, the United
Mine Workers of America ("UMWA"), several UMWA related retiree benefit funds,
and the Official Committee of Equity Security Holders ("Equity Committee")
required the Company's agreement on a number of contested items. The settlement
agreement, which was executed on January 29, 1999, is based upon the term sheet
read into the record of the Bankruptcy Court on October 15, 1998, and is
summarized below:
o The Funds, the UMWA, and the Equity Committee withdrew their objections to
the Company's Motion to Dismiss the Company's Chapter 11 case and joined in
the entry of stipulated judgments and the execution of a Master Agreement
which preserves the Company as an ongoing enterprise with undiluted
ownership vested in its existing shareholders.
o The Company agreed that it will not file, institute nor support any action
under state or federal liquidation, insolvency or reorganization statutes
for a period of five years.
o The Company agreed to pay in full, with interest, all undisputed creditor
claims and satisfy all other ongoing obligations. Pursuant to this
commitment, the Company paid approximately $5.7 million to holders of
undisputed claims in early January, 1999.
o The Company agreed to pay in full all arrearages, with interest, under the
Coal Industry Retirement Health Benefit Act of 1992 ("Coal Act"). Pursuant
to this commitment, the Company paid approximately $18.1 million to the
UMWA 1992 Benefit Plan ("1992 Plan") and approximately $19.4 million to the
UMWA Combined Fund ("Combined Fund," and together with the 1992 Plan, the
"Funds") in early January, 1999.
o The Company agreed to pay $4 million to the Funds in full satisfaction of
all other asserted claims for damages, liquidated damages, penalties,
charges, fees and costs. The Company made this payment on February 1, 1999.
o The Company agreed to reinstate its Individual Employer Plan for 1992 Plan
retirees.
o The Company agreed to pay its future obligations to the Funds as and when
due.
o The UMWA 1974 Pension Trust ("1974 Plan") had asserted a claim for
withdrawal liability in the amount of approximately $13.8 million against
the Company to which the Company objects. The Company and the 1974 Plan
agreed to resolve this dispute through arbitration, as provided by law.
o As required under the Coal Act, the Company agreed to secure its obligation
to provide retiree health benefits under the 1992 Plan by posting a bond,
letter of credit, or cash collateral in the amount of three years benefits
(or $20.8 million). The Company has 60 days from January 4, 1999 to provide
this security.
o In addition, the Company agreed to secure its obligations to the Funds by
providing the Funds with a Contingent Promissory Note ("Note"). The
original principal amount of the Note is $12 million; the principal amount
of the Note decreases to $6 million in 2002. The Note is payable only in
the event the Company does not meet its Coal Act obligations, fails to meet
certain ongoing financial tests specified in the Note, fails to maintain
the required balance in the escrow account established under the Escrow
Agreement, or fails to comply with certain covenants set forth in the
Security Agreement. (These covenants require the Company to give the Funds
access to the books and records of Westmoreland Energy, Inc. ("WEI") and
certain of its subsidiaries, to execute and deliver a financing statement
noting the security interest created by the Security Agreement, and to
deliver to the Funds financial reports concerning WEI and certain of its
subsidiaries.) To secure its obligations to the Funds under the Note, the
Company entered into a Security Agreement and an Escrow Agreement. In the
Security Agreement, the Company pledged the annual cash flow to which it is
entitled from the Roanoke Valley I project. Pursuant to the Escrow
Agreement, the Company placed $6 million into an escrow account. In the
year 2002, when the amount of the Note is reduced to $6 million, the amount
in the escrow account may be adjusted so that the amount in escrow will be
$8 million minus the amount of Westmoreland`s cash flow from the Roanoke
Valley I project in the preceding year. In no event will the amount of the
required balance in the escrow account be more than $6 million or less than
zero. If the Company is not required to make payment under the Note, the
Security Agreement and the Escrow Agreement terminate upon the termination
of the Note. The Company executed and delivered the Note, the Security
Agreement, and the Escrow Agreement to the Funds on January 29, 1999.
o The Company agreed not to initiate further litigation to challenge the Coal
Act or seek to initiate legislation to amend or reject the Coal Act.
o The Company agreed to maintain its individual employer plan for retiree
health benefits under the 1993 UMWA Wage Agreement for eligible retirees
and beneficiaries for a period of five years.
o The Company agreed to hold a meeting of shareholders by March 31, 1999, at
which shareholders could nominate and elect directors and bring other
matters before the shareholders if a tender offer was not completed by
early April. The Company presently anticipates that the shareholders'
meeting will take place by May 11, 1999.
o The Equity Committee will dissolve on February 3, 1999.
o Provided that the pending sale of the Company's remaining interest in the
Rensselaer project occurs, the Company agreed to implement a public tender
for 1,052,631 depositary shares, each representing one quarter of a share
of the Company's outstanding Series A Convertible Exchangeable Preferred
Stock, at $19 per depositary share. Assuming 1,052,631 depositary shares
are tendered in the offer, the Company would be required to pay $20 million
in consideration for these shares. The tender shall occur in the first
quarter of 1999, or as soon thereafter as is practicable, following the
date of the asset sale.
o Except for the payment to preferred shareholders in the tender offer, the
Company agreed not to make any other cash distribution to preferred or
common shareholders for any purpose prior to June 30, 1999.
The significant documents relating to the settlement agreement are included
as exhibits. Any discrepancy between the description included herein and the
documents included as exhibits shall be determined by the documents included as
exhibits.
Item 7. Financial Statements and Exhibits
(c) Exhibits
No. Description
99.1 Press Release dated February 2, 1999
99.2 Master Agreement
99.3 Contingent Promissory Note
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
WESTMORELAND COAL COMPANY
Date: February 4, 1999 By: /s/ Robert J. Jaeger
--------------------------------------
Robert J. Jaeger
Senior Vice President-Finance
and Treasurer
<PAGE>
EXHIBIT 99.1
-------------------------
Westmoreland Successfully
Emerges from Bankruptcy
-------------------------
Colorado Springs, CO -- February 2, 1999 -- Westmoreland Coal Company, the
oldest independent coal company in the United States, (OTC Bulletin Board:
WMCL*) announced today that it had successfully emerged from bankruptcy
following finalization of its dismissal from Chapter 11 on January 4th and the
execution last week of an underlying settlement agreement with the United Mine
Workers of America ("UMWA"), several UMWA related retiree benefit funds, and the
Official Committee of Equity Security Holders ("Equity Committee"). Westmoreland
had sought protection under Chapter 11 of the U.S. Bankruptcy Code in December,
1996, after negotiations for a consensual arrangement with the UMWA Health and
Benefit Funds ("Funds") collapsed. Westmoreland had proposed to the Funds that
it be allowed to temporarily defer payments for certain UMWA retiree health
benefit obligations in order to give the Company time to complete implementation
of a business plan that it had begun in late 1992 to restructure the Company for
the long term benefit of shareholders and retirees. The events underlying
today's announcement came as a result of continued improvement in the Company's
financial condition while in Chapter 11.
Christopher K. Seglem, Chairman, President and CEO said: "The wisdom of our
strategy and the loyalty and capabilities of our directors and employees is
self-evident. We are gratified that through their efforts Westmoreland will
continue as a viable and, we hope, even more valuable enterprise. While
resorting to the bankruptcy court was unpleasant, its protection was certainly
vindicated here. Very few reorganizations are as successful as this one. It gave
the Company time to bring its operations to new levels of profitability and to
achieve the critical mass needed to propel Westmoreland into a long and bright
future. While most companies leave Chapter 11, if at all, with the ability to
pay creditors only cents on the dollar and then only after eliminating their
shareholders' interests, Westmoreland has successfully emerged paying all
creditors in full with interest, delivering 100% of the equity to its existing
shareholders, and continuing to provide full and generous benefits to its
retirees. We are grateful to the many customers, suppliers, retirees,
shareholders, advisers, employees and friends who remained steadfast in their
support for Westmoreland during this challenging period. We look forward now to
building an even longer and brighter future for this great Company."
The settlement agreement, key terms of which are listed below, reflects the
balanced approach advocated by the Company with respect to the application of
its substantially improved financial strength for the benefit of competing
constituencies. Over the course of the Chapter 11 proceedings the Funds proposed
a plan of reorganization which would have transferred ownership of the Company
to a trust controlled by them. For its part, the Equity Committee filed a motion
to convert the cases to Chapter 7 in hopes of terminating retiree health benefit
obligations through dissolution of the Company and then distributing to
preferred shareholders (pursuant to their liquidation preference) the cash
accumulated by the Company during bankruptcy and the proceeds from selling the
Company's businesses, with the residual value, if any, going to common
shareholders. Each of these one-sided strategies would have sacrificed the
interest of all other groups for the benefit of their own. The Company pressed
for a more equitable and constructive approach which allocates value in
appropriate proportions to creditors, retirees and all classes of shareholders
while offering the potential for development of additional value to their
respective, future advantages.
Included among key elements of the settlement are:
o Withdrawal by the Funds, the UMWA, and the Equity Committee of their
objections to the Company's Motion to Dismiss and joinder in the entry
of stipulated judgments, and execution of a Master Agreement which
preserves the Company as an ongoing enterprise with undiluted ownership
vested in its existing shareholders.
o Agreement that the Company will not file, institute nor support any
action under state or federal liquidation, insolvency or reorganization
statutes for a period of five years.
o Payment in full of all undisputed creditor claims, in cash, with
interest, and continued satisfaction of all other ongoing obligations.
o Payment in full of all Coal Act arrearages, with interest.
o Payment of $4 million to the Funds in full satisfaction of all other
asserted claims for damages, liquidated damages, penalties, charges,
fees and costs.
o Reinstatement by the Company of its Individual Employer Plan for 1992
UMWA Benefit Plan ("1992 Plan") retirees.
o Agreement by the Company to pay its future 1992 Plan and UMWA Combined
Benefit Fund ("Combined Fund") obligations as and when due.
o Resolution of withdrawal obligations to the UMWA 1974 Pension Trust
through arbitration as provided by law.
o Posting by the Company of security for three years of health benefits
to the 1992 Plan as required under the Coal Act, and in addition,
provision of a 6 year declining balance $12 million secured contingency
note for the benefit of the 1992 Plan and the Combined Fund payable
only in the event the Company does not meet its Coal Act obligations,
or fails to meet certain ongoing financial tests.
o Agreement by the Company to not initiate further litigation to
challenge the Coal Act or seek to initiate legislation to amend or
reject the Coal Act.
o Agreement by the Company to maintain its individual employer plan for
retiree health benefits under the 1993 UMWA Wage Agreement for eligible
retirees and beneficiaries for a period of five years.
o Convocation of an annual meeting of shareholders, presently anticipated
to take place on May 11, 1999.
o Dissolution of the Equity Committee on February 3, 1999.
o Provided that the pending sale of Westmoreland's remaining interest
in the Rensselaer project occurs, implementation of a public tender for
1,052,631 million shares of the Company's outstanding preferred stock,
at $19 per share for a total consideration of $20 million. The tender
shall occur in the first quarter of 1999, or as soon thereafter as is
practicable, following the date of the asset sale.
o Prohibition from making any other cash distribution to preferred or
common shareholders for any purpose prior to June 30, 1999.
In order to facilitate implementation of the tender offer at the earliest
possible date the Company anticipates accelerating the filing of its annual Form
10-K, and now estimates this filing will take place on or about February 19,
1999. Unaudited summary results for 1998 may be announced in advance of that
date. The Company also anticipates applying to relist its securities on one of
the major stock exchanges in the near term.
Westmoreland Coal Company, headquartered in Colorado Springs, CO is currently
engaged in Powder River Basin coal mining, independent power and coal shipping
and terminal facility operations.
*NOTE: The Company's common stock trading symbol has changed to OTC Bulletin
Board: WMCL and the preferred stock symbol to OTC Bulletin Board: WMCLP to
reflect that the Company is no longer in Chapter 11.
#
For further information contact Diane Jones (719)
<PAGE>
EXHIBIT 99.2
MASTER AGREEMENT
1. Parties. The parties to this Master Agreement, dated as of January
4, 1999 (the "Master Agreement") are Westmoreland Coal Company ("Westmoreland
Coal"), Westmoreland Resources, Inc., Westmoreland Energy, Inc. ("WEI"),
Westmoreland Terminal Company, and Westmoreland Coal Sales Company
(collectively, "Westmoreland" or the "Debtors"), the UMWA 1992 Benefit Plan and
its Trustees (the "1992 Plan"), the UMWA Combined Benefit Fund and its Trustees
(the "Combined Fund") (and collectively with the 1992 Plan, the "Funds"), the
UMWA 1974 Pension Trust and its Trustees (the "1974 Trust"), the United Mine
Workers of America (the "UMWA"), and the Official Committee of Equity Security
Holders in the chapter 11 case of Westmoreland Coal and its official members
(the "Equity Committee").
2. Recitals.
2.1. The Debtors were the debtors and debtors in possession in
chapter 11 cases (the "Chapter 11 Cases") in the United States Bankruptcy Court
for the District of Colorado (the "Bankruptcy Court"), which were commenced by
the filing of voluntary petitions on December 23, 1996 (the "Petition Date"). No
trustee was appointed in any of the Chapter 11 Cases. The Chapter 11 Cases were
dismissed on December 23, 1998.
<PAGE>
2.2. The 1974 Trust asserts that it holds a claim against each
of the Debtors for withdrawal liability under the Employee Retirement Income
Security Act of 1974 ("ERISA"), and a claim against Westmoreland Coal for
delinquent contributions under the 1993 Westmoreland Wage Agreement with the
UMWA (the "1993 Wage Agreement"). The Debtors dispute the asserted withdrawal
liability claim and the claim for delinquent contributions, except to the extent
it relates to the claim for $960.61 for December 1996 contributions. The
Debtors' objection to the 1974 Trust's withdrawal liability claim has been
dismissed without prejudice. In addition, the 1974 Trust has commenced a civil
action against Corona Acquisition, Inc. ("CAI"), seeking payment of interim
withdrawal liability payments. CAI and the Debtors contend that CAI is not
liable for any sums that may be due to the 1974 Trust.
2.3. The 1992 Plan and the Combined Fund assert that they hold
claims under the Coal Industry Retiree Health Benefit Act of 1992 (the "Coal
Act") for premiums incurred prior to the Petition Date and for premiums incurred
during the pendency of the Chapter 11 Cases. The amounts and priority of these
claims are in dispute, and were the subjects of litigation pending between the
Debtors and the 1992 Plan, and between the Debtors and the Combined Fund. In
view of recent binding authority from the United States Court of Appeals for the
Tenth Circuit, the Debtors acknowledge that claims for premiums incurred during
the pendency of the Chapter 11 Cases are entitled to priority as expenses of
administration of the Chapter 11 Cases to the extent allowed, and that the
Debtors will continue to incur liability for premiums assessed by the 1992 Plan
and the Combined Fund pursuant to the Coal Act after the conclusion of the
Chapter 11 Cases.
2.4. In addition, the 1992 Plan contends that Westmoreland
Coal is obligated by Section 9711 of the Coal Act to reinstate an Individual
Employer Plan ("IEP") to provide benefits to certain Westmoreland Coal retirees
and their dependents, and is obligated under Section 9712(d)(1)(C) of the Coal
Act to post security in the amount of $20.8 million. Westmoreland disputes that
it is required to reinstate an IEP.
<PAGE>
2.5. The UMWA also asserts a claim against each of the Debtors
for retiree health benefits under the 1993 Wage Agreement. That claim is
disputed and subject to a pending adversary proceeding assigned to Judge
Brumbaugh in the United States Bankruptcy Court for the District of Colorado.
2.6. The Debtors had sufficient cash on hand to pay all
allowed administrative expenses of the Chapter 11 Cases and to pay all other
allowed claims against the Debtors in full, with interest. Based on the
foregoing, and the substantial improvement in the Debtors' financial condition,
the Debtors filed a Motion to Dismiss Chapter 11 Cases (the "Dismissal Motion").
The Dismissal Motion was granted on December 23, 1998.
2.7. The Equity Committee objected to dismissal of the Chapter
11 Cases because it contended that Westmoreland Coal's shareholders would
receive greater value in a liquidation than under a dismissal, based on the
legal contention (disputed by the Funds) that obligations under the Coal Act
terminate upon dissolution of Westmoreland. Accordingly, the Equity Committee
filed a motion to convert the Chapter 11 Cases to chapter 7 (the "Conversion
Motion"). The Debtors, the Funds, and the 1974 Trust opposed the Conversion
Motion. The Conversion Motion and the Equity Committee's opposition to the
Dismissal Motion were deemed withdrawn when the judgments referenced in
Paragraphs 3.1 and 3.2 were entered on December 23, 1998.
2.8. The Funds and the 1974 Trust objected to the dismissal of
the Chapter 11 Cases, contending that it would be more appropriate to conclude
the Chapter 11 Cases by way of a plan of reorganization, which they contended
might provide them with additional protections. This objection was deemed
withdrawn when the judgments referenced in Paragraphs 3.1 and 3.2 were entered
on December 23, 1998.
<PAGE>
2.9. The UMWA objected to the Dismissal Motion because it
contended that the interests of Westmoreland Coal's non-Coal Act retirees would
be inadequately protected following dismissal unless the pending adversary
proceeding between the Debtors and the UMWA were dismissed without prejudice and
all litigation between the UMWA and the Debtors were stayed or concluded. This
objection was deemed withdrawn when the judgments referenced in Paragraphs 3.1
and 3.2 were entered on December 23, 1998.
2.10. On October 15, 1998, the parties read into the
Bankruptcy Court's record the salient terms of an agreement regarding settlement
of the matters in dispute. On that date, and at a status conference held on
November 10, 1998, the Bankruptcy Court instructed the parties that if the
Bankruptcy Court entered an unconditional order dismissing the Chapter 11 Cases,
the parties could elect to implement their settlement through a contractual
agreement, and in addition could submit stipulated judgments resolving the
matters in dispute that are within the jurisdiction of the Court. In furtherance
of the parties' agreement and the Court's instruction, on November 25, 1998, the
Debtors filed motions pursuant to Federal Rule of Bankruptcy Procedure 9019 (the
"Compromise Motions") to resolve the pending adversary proceeding with the 1992
Plan and each contested matter with the Combined Fund through the entry of the
Judgments referenced in Paragraphs 3.1 and 3.2 (the "Bankruptcy Judgments").
This Master Agreement sets forth the terms of the parties' agreement.
2.11. In consideration of the foregoing, and the
representations, warranties, covenants, and agreements herein set forth, the
parties hereto agree as follows:
<PAGE>
3. Stipulation To The Entry Of Judgment In Favor Of The 1992 Plan
And The Combined Fund.
3.1. The parties requested entry of, and agree to be bound by
the terms of, that "Stipulated Judgment Resolving Adversary Proceeding,
" a true and correct copy of which is attached hereto as Exhibit "A" and
incorporated herein by this reference, in the adversary proceeding currently
pending in the Bankruptcy Court between the 1992 Plan and the Debtors
(Adv. Pro. No. 97-1058-MSK). This stipulated judgment was entered on
December 23, 1998.
3.2. The parties requested entry of, and agree to be bound by
the terms of, that "Stipulated Judgment Resolving Combined Fund Contested
Matters," a true and correct copy of which is attached hereto as Exhibit "B" and
incorporated herein by this reference in the contested matters currently pending
before the Bankruptcy Court between the Combined Fund and the Debtors with
respect to the amount and priority of the Combined Fund's claims. This
stipulated judgment was entered on December 23, 1998.
3.3. The Debtors, the 1992 Plan, and the Combined Fund agree
to the following: (a) the Combined Fund will consent to joinder as a plaintiff
in the civil action pending between the Debtors and the 1992 Plan in the Western
District of Virginia, No. 96-0187-A (the "Virginia Action"); and (b) the 1992
Plan, the Combined Fund, and the Debtors will move jointly for the entry of a
Judgment in the form attached hereto as Exhibit "C" in the Virginia Action.
<PAGE>
3.4. The parties shall be bound by the terms of Exhibits "A,"
"B," and "C," regardless of the form or provisions of any judgment or order
entered in the Virginia Action. Accordingly, if the court in the Virginia Action
modifies the terms of the judgment submitted by the parties pursuant to
Paragraph 3.3: (a) the parties nevertheless shall be bound under this Master
Agreement by the terms of Exhibit "C;" (b) the parties shall not seek to enforce
any provision in any such judgment that is inconsistent with or in addition to
the provisions of Exhibit "C;" and (c) no party shall be obligated to violate
any provision of any such judgment.
<PAGE>
4. Resolution Of The 1974 Trust's Withdrawal Liability Claim.
4.1. The 1974 Trust's claim filed in the approximate amount of
$13.8 million shall be resolved pursuant to the Multiemployer Pension Plan
Amendments Act of 1980 ("MPPAA"). In order to comply with MPPAA's interim
payment requirements, on January 4, 1999 Westmoreland Coal paid to the 1974
Trust $1,207,514 (reflecting monthly payments through and including October 10,
1998) and $172,502 (plus interest at the rate established under MPPAA) per month
for each month after October 1998 through the Effective Date. Westmoreland Coal
shall continue to make interim withdrawal liability payments on the tenth day of
each month from and after the Effective Date in the amount of $172,502 each
month (including interest on each such interim withdrawal liability payment at
the rate established under MPPAA) up to the full amount of the 1974 Plan's
asserted withdrawal liability claim while it is pursuing its rights in
accordance with MPPAA. The 1974 Trust shall comply with the provisions of 29
U.S.C. ss. 1401(d) (and regulations under that statutory provision) concerning
treatment and refund of interim withdrawal liability payments. Specifically, the
1974 Trust acknowledges that, if it is determined by a final non-appealable
order that Westmoreland's total withdrawal liability to the 1974 Trust is less
than the total amount of interim withdrawal liability payments Westmoreland has
paid to the 1974 Trust as of that date, then the 1974 Trust will be required to
refund the amount in excess of Westmoreland's total withdrawal liability, plus
interest as provided under MPPAA.
4.2. Within thirty (30) days after the Effective Date,
Westmoreland Coal and the 1974 Trust shall jointly request that the American
Arbitration Association terminate its stay of the arbitration commenced by
Westmoreland Coal under 29 U.S.C. ss. 1401 (the "Arbitration").
4.3. The 1974 Plan shall dismiss its pending action against
CAI. In addition, provided that Westmoreland Coal timely performs its
obligations under ERISA and MPPAA as specified in Paragraph 4.1, and performs
its obligations under Paragraph 4.2, the 1974 Trust shall not pursue any action
against any third party including (without limitation) CAI, on account of the
alleged Westmoreland Coal withdrawal liability.
4.4. The 1974 Trust and Westmoreland reserve all of their
rights concerning the 1974 Trust's claim for delinquent contributions.
5. Resolution Of The Remaining Claims Of The Funds.
5.1. On January 4, 1999, the Debtors paid the claims of the
Combined Fund and the 1992 Plan in the amounts stipulated as allowed in Exhibits
"A" and "B."
<PAGE>
5.2. In full satisfaction of all other asserted claims of the
Funds that arose prior to the Effective Date, including without limitation
claims for damages, liquidated damages, penalties, charges, and fees and costs,
the Debtors shall, on the first business day after all parties have executed
this Master Agreement: (a) pay to the Funds $4 million, without interest; and
(b) execute and deliver to the 1992 Plan and the Combined Fund the "Contingent
Note," the "Escrow Agreement For Contingent Note," and the "Security Agreement
For Contingent Note" in the forms attached hereto as Exhibits "D," "E," and "F,"
respectively and incorporated herein by this reference; and (c) wire transfer $6
million to fund the escrow under the Escrow Agreement.
5.3. After the Debtors post the required $20.8 million in
security required under Paragraph 2 of Exhibit "A," and provided that the
Debtors make the payments required under Paragraphs 5.1 and 5.2, the Combined
Fund and the 1992 Plan shall relinquish the liens, security interests, and other
similar arrangements granted pursuant to the Pledge Agreement dated August 21,
1996 and any other prepetition agreement or order, and shall release and return
to the Debtors the collateral granted pursuant to such Pledge Agreement.
6. Reinstatement Of Individual Employer Plan And Payment Of Health
Claims Incurred Prior To November 30, 1996.
6.1. As provided in Paragraph 1 of Exhibit "A," Westmoreland
Coal shall reinstate an Individual Employer Plan (the "Statutory IEP") pursuant
to which it shall provide health care benefits for those former employees and
dependents entitled to such benefits under Section 9711 of the Coal Act. The
list of beneficiaries for whom Westmoreland shall reinstate coverage (subject to
periodic review and procedures for verification of eligibility after the
Statutory IEP is reinstated) is attached as Exhibit "A" to Exhibit "A" and
incorporated herein by this reference. As provided under Exhibit "A,"
Westmoreland shall pay all monthly per beneficiary premiums assessed by the 1992
Plan on account of the individuals listed in Exhibit "A" to Exhibit "A" for time
periods prior to reinstatement of the Statutory IEP.
<PAGE>
6.2. After the Statutory IEP is reinstated, the 1992 Plan
shall compare the cost of all claims for health benefits incurred subsequent to
the Effective Date that are submitted by the beneficiaries listed on Exhibit "A"
to Exhibit "A" from the Effective Date to the date the Statutory IEP is
reinstated (the "Claim Total") to the total amount of monthly per beneficiary
premiums paid by Westmoreland on account of the beneficiaries listed on Exhibit
"A" to Exhibit "A" for the time periods from the Effective Date to the date the
Statutory IEP is reinstated (the "Premium Total"). If the Claim Total exceeds
the Premium Total, then Westmoreland shall pay to the 1992 Plan the difference
between the Claim Total and the Premium Total no later than the later of: (i)
the due date of the next-due annual prefunding premium following delivery of a
request for such payment from the 1992 Plan; and (ii) thirty (30) days following
delivery of a request for such payment from the 1992 Plan. If the Premium Total
exceeds the Claim Total, then the 1992 Plan shall notify Westmoreland as soon as
reasonably possible and Westmoreland shall be entitled to a credit against the
next-due annual prefunding premium in an amount equal to the difference between
the Premium Total and the Claim Total. Until the 1992 Plan performs the
comparison described in the first sentence of this Paragraph, the 1992 Plan
shall furnish Westmoreland with information generated in the ordinary course of
the administration of the 1992 Plan concerning the cost of claims for health
benefits incurred subsequent to the Effective Date that are submitted by the
beneficiaries listed on Exhibit "A" to Exhibit "A" from the Effective Date to
the date the Statutory IEP is reinstated.
<PAGE>
6.3. Westmoreland has paid the 1992 Plan for $159,118.62 paid
by the 1992 Plan on account of claims for health benefits incurred prior to
November 30, 1996, by any beneficiary entitled to health benefits from
Westmoreland under Section 9711 of the Coal Act. In addition, Westmoreland shall
assume liability for, and shall indemnify the 1992 Plan against, unpaid claims
for health benefits incurred prior to November 30, 1996, by any beneficiary
entitled to health benefits from Westmoreland under Section 9711 of the Coal
Act. The 1992 Plan shall cooperate with Westmoreland concerning investigation
and processing of unpaid claims for health benefits incurred prior to November
30, 1996, by any beneficiary claiming entitlement to health benefits from
Westmoreland under Section 9711 of the Coal Act, and shall furnish to
Westmoreland (upon request) all information in its possession necessary to
investigate and process all such claims.
7. Release. Except as provided in Exhibits "A" and "B," provided the
Debtors comply with Paragraphs 5.1, 5.2, and 6.1, such performance shall satisfy
conclusively all of the Debtors' obligations to the Funds as of the Effective
Date.
8. Dismissal Of The Chapter 11 Cases.
8.1. The Equity Committee, the 1992 Plan, the Combined Fund,
the 1974 Trust, and the UMWA each: (a) shall not oppose the entry of the
Bankruptcy Judgments; (b) is deemed to have withdrawn its objections to the
Dismissal Motion; and (c) shall take all steps reasonably necessary or
appropriate to implement the Dismissal Order and consummate the dismissal of the
Chapter 11 Cases.
1.1.
<PAGE>
8.2. Promptly after the Effective Date, the Debtors shall, in
connection with the Dismissal Motion, offer to pay in full all other general
unsecured claims that are not currently subject to a bona fide dispute, in cash,
together with interest thereon at the rate of at least 5.45% per annum from the
later of: (a) the Petition Date, and (b) the date the creditor's claim became
non-contingent, liquidated and matured (e.g., the date a surety actually
advanced funds). Nothing in this Agreement shall alter the rights of any holder
of any claim (other than the parties to this Agreement) under applicable law.
The Debtors have the exclusive right to determine whether a claim is subject to
a bona fide dispute for purposes of this Paragraph.
9. Management Incentives. Westmoreland Coal shall not pay bonuses to
senior management unless it is first in full compliance with the Coal Act and
reasonably projects that it will be able to comply with all of its obligations
under the Coal Act through the end of the next calendar year.
10. Prohibition On Initiation of Legislation. The Debtors shall not
initiate or lobby in support of any legislative initiative to amend or repeal
the Coal Act. Notwithstanding the foregoing, the Debtors may give fact-based
testimony or provide fact-based information in response to a request from a
member or committee of Congress, on no less than five (5) business days' advance
written notice to the Funds (or, if Westmoreland receives such a request less
than six (6) business days before the testimony or information is to be given or
provided, on written notice to the Funds within twenty-four (24) hours after
Westmoreland receives the request).
<PAGE>
11. Bar on Refiling. The Debtors shall not file a voluntary petition
under title 11 of the U.S. Code, or institute or support an action under any
other state or federal liquidation, insolvency, or reorganization statute, for
five (5) years from the Effective Date. As soon as practicable after the
Effective Date, the Debtors shall take all steps reasonably necessary to amend
the by-laws of each of the Debtors to prohibit the filing of a voluntary
petition under title 11 of the U.S. Code, and to prohibit the institution of an
action under any other state or federal liquidation, insolvency, or
reorganization statute, for five (5) years from the Effective Date.
12. Resolution Of Shareholder Concerns.
12.1. Westmoreland Coal shall hold a meeting of Westmoreland
Coal's shareholders for matters including the election of directors (the
"Meeting"), no later than March 31, 1999, unless it has commenced the offer
required by Paragraph 12.4 (the "Tender Offer") and the Tender Offer provides
for accepting and paying for shares no later than April 6, 1999. If Westmoreland
Coal commences the Tender Offer as provided in the preceding sentence,
Westmoreland Coal shall hold the Meeting no later than the first business day
that is at least 35 days after Westmoreland Coal has accepted and paid for
shares purchased in the Tender Offer. Shareholders shall be invited to submit
nominees for the board of directors and proposals for consideration at the
meeting.
12.2. Until the Meeting is concluded, Westmoreland Coal's
board of directors shall not: (a) amend Westmoreland Coal's rights plan; (b)
undertake any extraordinary purchases, mergers, acquisitions, recapitalizations,
or restructurings (other than asset dispositions or transactions to preserve the
value of existing assets); or (c) borrow money outside of the ordinary course of
business or pledge material assets to secure debt (other than any bonding
requirements under applicable law, including workers' compensation laws or
environmental laws, or any requirement under this Master Agreement and Exhibits
hereto).
<PAGE>
12.3. Westmoreland Coal's board of directors shall not take
any action that could interfere with the exercise of shareholder rights at the
meeting, including, but not limited to, amending its by-laws: (a) to create or
implement a staggered board; (b) to require that removal of directors be for
cause only; (c) to impose additional time periods or qualification requirements
to make the nomination of board members more difficult; or (d) to increase the
number of directors on the board.
12.4. Provided that the pending sale of Westmoreland Energy,
Inc.'s partnership's remaining interest in the Rensselaer project (the
"Rensselaer Sale") occurs, Westmoreland Coal shall make a public tender offer
for 1,052,631 depository shares of its outstanding preferred stock (and
representing one-quarter of a share of Series A Convertible Exchangeable
Preferred Stock, par value $1.00 per share), at a price of $19 per share for
total consideration of $20 million. This amount shall be paid in full
satisfaction of the rights of all shares purchased and paid for. The tender
shall commence in the first quarter of 1999, or as soon thereafter as is
practicable following the date of the Rensselaer Sale. Westmoreland Coal shall
use its best efforts to close the Rensselaer Sale as soon as practicable.
Westmoreland Coal may not redeem any equity security for cash or make any cash
distributions to preferred or common shareholders for any purpose prior to June
30, 1999, except as set forth herein.
12.5. The Funds agree that the purchaser in the Rensselaer
Sale as currently contemplated shall not be deemed a "successor" or "successor
in interest" under the Coal Act.
<PAGE>
12.6. The Equity Committee shall continue in existence for
thirty (30) days after the Effective Date, and shall be authorized to continue
to employ its present professionals in that regard, subject to the Debtors'
rights under Paragraph 15.2. Thereafter, the Equity Committee and its members
and professionals shall be fully discharged from any further duties or
responsibilities in connection with the Chapter 11 Cases.
<PAGE>
12.7. Each of the Debtors, for themselves and on behalf of
each of their officers, directors, representatives, and successors
(collectively, the "Debtor Releasing Parties") hereby release, acquit, covenant
not to sue, and forever discharge the Equity Committee, each of the official
members of the Equity Committee, Putnam Hayes & Bartlett, Andrews & Kurth,
L.P.P., and all of their agents, representatives, partners, officers, directors,
and successors (collectively, the "Committee Released Parties") from all claims,
suits, demands, and causes of action any of the Debtor Releasing Parties may
hold against any of the Committee Released Parties, whether known or unknown and
whether now existing or hereafter arising, arising from or relating to acts or
omissions occurring prior to the execution of this Master Agreement in
connection with the negotiation, execution, and delivery of this Master
Agreement and the duties and responsibilities of the Committee Released Parties
under title 11 of the United States Code. Except as set forth in Section 15.1,
the Equity Committee and each of the official members of the Equity Committee,
for themselves and for each of their officers, directors, and representatives,
and successors (collectively, the "Committee Releasing Parties") hereby release,
acquit, covenant not to sue, and forever discharge each of the Debtors, and all
of their agents, representatives, partners, officers, directors, and successors
(collectively, the "Debtor Released Parties") from all claims, suits, demands,
and causes of action any of the Committee Releasing Parties may hold against any
of the Debtor Released Parties, whether known or unknown and whether now
existing or hereafter arising, arising from or relating to acts or omissions
occurring prior to the execution of this Master Agreement in connection with the
negotiation, execution, and delivery of this Master Agreement and the duties and
responsibilities of the Debtor Released Parties under title 11 of the United
States Code. Nothing contained herein shall waive any defenses the Debtors have
to the requests of the Equity Committee or its professionals for compensation or
reimbursement of expenses as provided in Paragraph 15.2.
12.8. The Debtors and the Equity Committee may modify any of
the provisions of Paragraphs 12.1, 12.2, 12.3, 12.4, 12.6, or 12.7 by mutual
written agreement, without the consent of the other parties to this Master
Agreement; provided, however, the restriction requiring the closing of the
Rensselaer Sale prior to the acceptance and payment for shares under Paragraph
12.4 cannot be modified without the express written consent of all parties to
this Master Agreement. The Debtors may modify those same provisions after the
Equity Committee has dissolved pursuant to Paragraph 12.6 upon receipt of the
express written consent of at least four former members of the Equity Committee,
or, if former members of the Equity Committee have sold all of their
Westmoreland Coal stock, the majority in number of the former members of the
Equity Committee that are still Westmoreland Coal shareholders. If all the
former members of the Equity Committee have sold all of their Westmoreland Coal
stock, then the provisions of Paragraphs 12.1, 12.2, 12.3, 12.4, 12.6, or 12.7
of this Master Agreement may be amended by majority vote of Westmoreland Coal's
shareholders.
12.9. The Equity Committee and its two co-chairmen represent
and warrant that the members of the Equity Committee as of the Effective Date
are Lonestar Partners, L.P., Frank E. Williams, Jr., Alvin Hoffman c/o Burt
Hoffman, Offutt Securities, Inc., Wynnefield Capital, Inc., and Ryback
Management Corporation.
<PAGE>
13. Provisions Regarding The Claims Of The UMWA Concerning Certain
Non-Coal Act Retirees.
13.1. Westmoreland Coal shall continue to maintain the
individual employer plan established under the 1993 Wage Agreement (the
"Contractual IEP") for retirees and other beneficiaries eligible for benefits
under the terms of the Contractual IEP and shall provide benefits according to
the terms of the Contractual IEP to such retirees and other beneficiaries for
a period of five years from the Effective Date, irrespective of whether such
retirees and other beneficiaries first received or became eligible to receive
benefits before or after August 1, 1998.
13.2. Westmoreland Coal agrees not to initiate any litigation
against the UMWA or the beneficiaries described in Paragraph 13.1 contesting its
obligation to maintain the Contractual IEP or to provide benefits as set forth
in the Contractual IEP during the five year period from the Effective Date.
13.3. At the expiration of said five-year period, Westmoreland
Coal shall be free to initiate litigation contesting its obligation to continue
to maintain the Contractual IEP. Westmoreland Coal shall continue to provide
such benefits after the expiration of the five-year period until it obtains a
ruling from a court that it is not obligated to maintain the Contractual IEP.
<PAGE>
13.4. The UMWA shall not use this Master Agreement, the
maintenance of the Contractual IEP, or the provision of benefits as provided in
this Master Agreement, or dismissal of the adversary proceeding as any evidence
that Westmoreland Coal acknowledges any obligation to maintain the Contractual
IEP, or provide any specific level of benefits and shall not assert as a defense
any statute of limitations, laches, estoppel, or other equitable defenses based
on delay or actions taken pursuant to this agreement, in any litigation
initiated after the five-year period.
13.5. Any dispute over the individual eligibility of any
applicant for benefits under the terms of the individual employer plan shall be
resolved by the Trustees of the UMWA Health and Retirement Funds as provided in
the 1993 Wage Agreement in a fair and equitable manner.
13.6. The UMWA and the Debtors shall file a joint motion
requesting that the adversary proceeding filed by Westmoreland Coal against the
UMWA pending before Judge Brumbaugh be dismissed without prejudice, with each
party to bear its own costs and attorneys' fees in connection therewith.
13.7. Neither the UMWA nor the Debtors shall use the existence
or performance under this Master Agreement for any purpose in any proceeding
other than in an action to enforce this Master Agreement.
14. Effective Date. The Effective Date of this Master Agreement is
January 4, 1999.
15. Additional Provisions.
15.1. This Master Agreement and its Exhibits resolve or, in
certain instances expressly provide for the later resolution of, all existing
disputes between the Debtors, on the one hand, and the Funds, the 1974 Trust,
the UMWA and the Equity Committee, on the other hand. This Master Agreement and
Exhibits shall not be deemed to constitute an admission by any party with
respect to the merits of the claims or defenses asserted by any other party.
<PAGE>
15.2. Except as expressly provided in this Master Agreement or
in any of the Exhibits hereto, all future expenses, attorneys' fees and other
professional fees and expenses incurred by the parties in connection with any
matter arising under or relating to this Master Agreement, the Debtors' Chapter
11 cases, the implementation of this Master Agreement, the entry or effectuation
of the Dismissal Order or the Bankruptcy Judgments, the preparation of
appropriate documents related to implementation of this Master Agreement, or any
other matters relating directly or indirectly to the Chapter 11 Cases, any
adversary proceedings or contested matters therein or the Virginia Action, shall
be paid by the party incurring those fees or expenses, with no right of
reimbursement or indemnification. Notwithstanding the foregoing:
(i) the reasonable and necessary professional fees and
expenses of the Equity Committee professionals,
Andrews & Kurth, L.L.P. and Putnam Hayes & Bartlett,
for services rendered in connection with the Chapter
11 Cases through the 30th day after the Effective
Date, and
(ii) the reasonable and necessary expenses of members of
the Equity Committee, incurred during the Chapter 11
Cases through the 30th day after the Effective Date
<PAGE>
shall be paid by the Debtors, (a) in accordance with the Bankruptcy Court's
existing procedures for interim approval and payment of professional fees and
expenses, for fees and expenses invoiced prior to the Effective Date, and (b)
promptly after invoiced, with respect to fees and expenses invoiced after the
Effective Date or balances remaining unpaid from interim submissions and
payments made prior to that date. Nothing herein shall waive the Debtors' right
to object to any fees or expenses on any available ground, including without
limitation that the services rendered or charges incurred were not reasonable
and necessary within the meaning of title 11 of the United States Code. Any such
fee request and any such objection shall be governed by title 11 of the United
States Code. If there is an unresolved dispute over fees or costs charged by the
Equity Committee's professionals or members, it shall be determined by a court
of competent jurisdiction in Denver, Colorado.
15.3. The parties agree that should a court be called upon to
interpret any provision of this Master Agreement or any Exhibit hereto, previous
drafts shall not be used by any party in any manner to support its
interpretation. Each party and its counsel has reviewed it and has participated
in its drafting and, accordingly, no party shall attempt to invoke the normal
rule of construction to the effect that ambiguities are to be resolved against
the drafting party in any interpretation of this Master Agreement and Exhibits
thereto.
15.4. Each party warrants and represents that it has received
independent legal advice from its attorneys regarding its decision with respect
to the advisability of making and entering into this Master Agreement and
Exhibits hereto.
15.5. The Co-Chairmen of the Equity Committee represent and
warrant that they have the authority to sign this Master Agreement and Exhibits
hereto on behalf of, and in representation of the assent of, the Equity
Committee and each person who is (or was at any time on or after October 15,
1998) an official member of the Equity Committee.
<PAGE>
15.6. Each of the parties hereto warrants that the person
signing this Master Agreement and Exhibits hereto on behalf of such party has
authority to do so, and that the signature of that person is legally binding on
such party. In addition, each of the boards of directors of the Debtors has
approved this Master Agreement and Exhibits hereto.
15.7. This Master Agreement and any Exhibit hereto may be
executed in two or more counterparts, and each of them, when so executed and
delivered, shall be an original, but such counterparts together shall constitute
one and the same instrument. Furthermore, the parties agree that this Master
Agreement and any Exhibit hereto may be executed by telecopying a copy of the
signed signature page to each of the parties hereto at their respective
facsimile numbers.
15.8. This Master Agreement, Exhibits hereto, and any other
duly executed writing that references this Master Agreement collectively express
the entire agreement of the parties relative to the subject matter hereof. No
covenants, agreements, representations, or warranties of any kind whatsoever
have been made by any party hereto, except as specifically set forth in this
Master Agreement and the Exhibits hereto, or as specifically set forth in any
other duly executed writing that references this Master Agreement. All prior
discussions and negotiations have been and are merged and integrated into, and
are superseded by, this Master Agreement and Exhibits hereto.
<PAGE>
15.9. Except as provided in Paragraph 15.2, and except to the
extent governed by federal law (including without limitation the Coal Act,
ERISA, the Bankruptcy Code, federal labor law, and federal securities law), this
Master Agreement and Exhibits hereto shall be governed by and construed in
accordance with the internal laws of the State of New York, except that any of
New York's conflict of law provisions that would serve to apply law of a state
other than New York shall not apply. Any judicial proceeding brought under this
Master Agreement or any Exhibit hereto by and among Westmoreland and the
Combined Fund or the 1992 Plan shall be brought in any court of competent
jurisdiction in the District of Columbia, and the parties accept unconditionally
and irrevocably the jurisdiction of such courts and any related appellate court
and irrevocably waive any objection that they now have or may hereafter have
that such court is an inconvenient forum.
<PAGE>
15.10. For purposes of this Master Agreement and Exhibits
hereto, (i) defined terms shall apply equally to both the singular and plural
forms of the terms defined; (ii) whenever the context may require, any pronoun
shall include the corresponding masculine, feminine and neuter forms; (iii) the
words "include", "includes" and "including" shall be deemed to be followed by
the phrase "without limitation;" (iv) references to documents, contracts or
agreements shall include any and all supplements and amendments thereto; (v)
"Person" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust company, trust, unincorporated
organization of government or any agency or political subdivision thereof, and
references to a specific Person shall include the successor and assigns of such
Person; (vi) references to "applicable laws" shall include statutes, ordinances,
rules, regulations, court and administrative decisions and conditions,
restrictions and limitation in licenses, permits, approvals and authorization
issued or granted by governmental bodies and agencies; and (vii) "business day"
shall mean each Monday, Tuesday, Wednesday, Thursday and Friday that is not a
legal holiday for banking institutions under applicable law; (viii) unless
otherwise specified, in the computation of a period of time from a specified
date to a later specified date, the word "from" means "from and including", and
the words "to" and "until" each mean "to but excluding."
15.11. If any provision of this Master Agreement or any
Exhibit hereto shall be invalid, inoperative or unenforceable as applied in any
particular case in any jurisdiction or jurisdictions or in all jurisdictions, or
in all cases because it conflicts with any other provision or provisions hereof
or any constitution or statute or rule of public policy, or for any other
reason, such circumstances shall not have the effect of rendering the provision
in question inoperative or unenforceable in any other case or circumstance, or
of rendering any other provision or provisions herein contained invalid,
inoperative, or unenforceable to any extent whatever. The invalidity of any one
or more phrases, sentences, clauses, Sections or Articles in this Master
Agreement or any Exhibit hereto shall not affect the remaining provisions of
this Master Agreement or any Exhibit hereto, or any part thereof.
15.12. Section and Paragraph headings used in this Master
Agreement and Exhibits hereto are for convenience of reference only and are not
to affect the construction of this Master Agreement or any Exhibit hereto or be
taken into consideration in the interpretation of this Master Agreement or any
Exhibit hereto.
15.13. No party shall by any act (except by a written
instrument), delay, indulgence, or omission be deemed to have waived any right
or remedy under this Master Agreement and Exhibits hereto or to have acquiesced
in any breach of any of the terms and conditions of this Master Agreement and
Exhibits hereto
15.14. This Master Agreement and Exhibits hereto shall be
binding upon, and shall inure to the benefit of, the successors and assigns of
the respective parties.
<PAGE>
15.15. The words "herein," "hereof," "hereto," "hereunder,"
and others of similar import refer to the Master Agreement as a whole and not to
any particular Section, sentence or clause contained in this Master Agreement.
WESTMORELAND COAL COMPANY
DATED: January __, 1999 By________________________________
CHRISTOPHER K. SEGLEM
Its President
WESTMORELAND ENERGY, INC.
DATED: January __, 1999 By________________________________
Its ______________________________
WESTMORELAND RESOURCES, INC.
DATED: January __, 1999 By________________________________
Its ______________________________
WESTMORELAND TERMINAL COMPANY
DATED: January __, 1999 By________________________________
Its ______________________________
<PAGE>
WESTMORELAND COAL SALES COMPANY
DATED: January __, 1999 By________________________________
Its ______________________________
THE UMWA 1992 BENEFIT PLAN
DATED: January __, 1999 By________________________________
Its ______________________________
THE UMWA COMBINED BENEFIT FUND
DATED: January __, 1999 By________________________________
Its ______________________________
THE UMWA 1974 PENSION TRUST
DATED: January __, 1999 By________________________________
Its ______________________________
THE UNITED MINE WORKERS OF AMERICA
DATED: January __, 1999 By________________________________
Its ______________________________
<PAGE>
THE OFFICIAL COMMITTEE OF EQUITY
SECURITY HOLDERS
DATED: January __, 1999 By________________________________
JEROME SIMON, Co-Chairman
and
DATED: January __, 1999 By________________________________
FRANK WILLIAMS, Co-Chairman
<PAGE>
EXHIBIT 99.3
CONTINGENT PROMISSORY NOTE
$12,000,000 January 4, 1999
1. Amount of the Contingent Liability
The undersigned, Westmoreland Coal Company ("Westmoreland Coal"),
Westmoreland Resources, Inc., Westmoreland Energy, Inc. ("WEI"), Westmoreland
Coal Sales Company, and Westmoreland Terminal Company (collectively,
"Westmoreland") hereby jointly and severally agree to pay the UMWA Combined
Benefit Fund and the UMWA 1992 Benefit Plan (collectively, the "Funds") the
amount (without interest except as specified in Section 4 below) of: (i)
$12 million, if and only if an Event of Default, as defined below, occurs on or
before January 1, 2002; or (ii) $6 million if and only if no Event of Default
occurs on or before January 1, 2002 but an Event of Default does occur on or
before this Contingent Note terminates under Paragraph 6. If no Event of Default
occurs on or before this Contingent Note terminates under Paragraph 6, this
Contingent Promissory Note shall be canceled and null and void and the Funds
shall not be entitled to any sum hereunder. This Contingent Promissory Note is
secured pursuant to a Security Agreement for Contingent Note of even date
herewith.
2. Events of Default.
Each of the defaults described in Paragraphs 2.A. through 2.I. below,
after the passage of any applicable cure period without timely cure, constitutes
an Event of Default under this Contingent Promissory Note. If an Event of
Default occurs after the passage of a cure period, the Event of Default shall be
deemed to occur on the date the default occurred. Except for an Event of Default
under Paragraph 2.I. below, upon the occurrence of any Event of Default, the
entire amount of the contingent liability under this Contingent Promissory Note
as of the time the Event of Default occurs shall be due and payable immediately.
<PAGE>
A. Failure to pay premiums as and when due, under the Coal
Industry Retiree Health Benefit Act of 1992 (the "Coal
Act") and failure to cure that default within three (3)
business days after receipt of written notice thereof
from the Funds. For purposes of this Paragraph 2.A.,
"cure" means payment of: (1) the premium amount
assessed, (2) an amount equal to five percent (5%) of
the premium assessment, and (3) all other applicable
interest and penalties under the Coal Act.
<PAGE>
B. Failure to establish an individual employer plan (the
"IEP") to provide health benefits coverage to
individuals eligible for such coverage from
Westmoreland under Section 9711 of the Coal Act no
later than the first day of a calendar month that is at
least sixty (60) days after the Effective Date of the
Master Agreement (the "Establishment Deadline"). For
purposes of this Paragraph 2.B., "to establish an
individual employer plan" means that: (1) Westmoreland
has retained a third party administrator for the
purpose of processing claims for health benefits under
Section 9711 of the Coal Act (the "TPA"); (2) the TPA
is contractually obligated to process claims for health
benefits to all of the beneficiaries listed on Exhibit
"G" to the Master Agreement; (3) Westmoreland is in
compliance with all of its contractual obligations to
the TPA; and (4) Westmoreland has caused to be sent to
substantially all of the beneficiaries listed on
Exhibit "G," no less than five days prior to the
Establishment Deadline, a benefits card evidencing the
beneficiaries' coverage under the IEP.
C. The termination or suspension of health benefits
coverage to substantially all of the beneficiaries of
the IEP.
D. Any failure to maintain and to pay any cost of health
benefits coverage to any individual eligible for such
coverage from Westmoreland under Section 9711 of the
Coal Act within thirty (30) days after written notice
that the 1992 Plan intends to provide health benefits
coverage to that beneficiary.
E. Any violation of the Coal Act that does not give rise
to an Event of Default under Paragraph 2.A., 2.B., or
2.C., and the failure to cure any such default within
thirty (30) days after receipt of written notice
thereof from the Funds.
F. The voluntary commencement of any case under Title 11
of the U.S. Code in which any of the Companies is a
debtor, or the commencement of any other state or
federal liquidation, reorganization, or insolvency
proceeding, or the filing of an involuntary case under
Title 11 of the U.S. Code, unless that involuntary case
is dismissed within 90 days after the involuntary
petition is filed.
<PAGE>
G. Failure to comply with any of the financial ratios
described below, and failure to cure any default in
those ratios in accordance with Paragraph 3. Each ratio
shall be measured as of the end of each calendar
quarter beginning with the quarter ending March 31,
1999. Any default in compliance with any ratio shall be
deemed to occur on the date it is measured. The ratios
are as follows:
<PAGE>
(1) Westmoreland's consolidated current assets divided by
its consolidated current liabilities, as determined
under generally accepted accounting principles, must
equal or exceed 1.5 during 1999 and 2000; 1.4 during
2001 and 2002; and 1.3 thereafter. Notwithstanding the
foregoing, the ratio as of March 31, 1999 must equal or
exceed 1.0 (and not 1.5) if and only if a sale of
Westmoreland-LG&E's interest in the Rensselaer
Independent Power Project has not been consummated
prior to March 31, 1999. If such a sale has been
consummated on or before March 31, 1999, the ratio must
equal or exceed 1.5. For purposes of the calculation of
the ratio described in this Paragraph 2.G.(1): (i)
assets required to be held in debt service accounts for
WEI's independent power projects ($8 million) shall be
included in current assets; (ii) the assets in the
escrow to secure this Contingent Note shall be included
in current assets; (iii) any asset pledged to secure
the $20.8 million bond for the benefit of the 1992 Plan
and any workers compensation bonds or reclamation bonds
shall be included in current assets if it would have
been included in Westmoreland's current assets under
generally accepted accounting principles if it had not
been pledged; (iv) any liability to the UMWA 1974
Pension Trust that is included in current liabilities
on Westmoreland's financial statements prepared in
accordance with generally accepted accounting
principles shall be reduced, by reducing each payment
pro rata, to the extent the total liability to the UMWA
1974 Pension Trust exceeds $6.9 million; and (v) any
liability for future health benefit obligations under
the 1993 Westmoreland Wage Agreement (the "1993 Wage
Agreement") that is included in current liabilities on
the Companies' financial statements prepared in
accordance with generally accepted accounting
principles shall be excluded.
<PAGE>
(2) Westmoreland's "net cash flow from operating
activities" (as reflected on Westmoreland's
Consolidated Statement of Cash Flows prepared in
accordance with Statement of Financial Accounting
Standards No. 95 and adjusted as provided below),
excluding payments made pursuant to the Master
Agreement and the Exhibits thereto, including without
limitation under Paragraph 8.2 of the Master Agreement,
must be greater than zero, on a cumulative basis, for
the four consecutive calendar quarters ending with the
quarter in which this ratio is measured.
Notwithstanding the foregoing reference to "four
consecutive calendar quarters," this ratio shall be
measured as of March 31, 1999 for the first quarter of
1999, as of June 30, 1999 for the first two quarters of
1999 (on a cumulative basis), and on September 30, 1999
for the first three quarters of 1999 (on a cumulative
basis). For purposes of this calculation, "Heritage
Costs" shall include and be limited to the costs
included in the outflow line item entitled "Heritage
Costs" in the financial statements attached hereto as
Exhibit 1. In adjusting "cash flow from operations" to
derive the cash flow for purposes of the calculation
under this Paragraph 2.G.(2)., the cash actually spent
on health benefits under the 1993 Wage Agreement during
the measurement period shall be added back to arrive at
adjusted "net cash flow from operating activities."
<PAGE>
(3) Westmoreland's operating income (as reflected in
Westmoreland's quarterly consolidated Statement of
Income), plus depreciation and amortization (all as
reflected on the Companies' quarterly consolidated
Statement of Cash Flows), plus the expense related to
the accruals for health benefit obligations under the
1993 Wage Agreement, minus the cash actually spent on
account of health benefit obligations under the 1993
Wage Agreement, minus capital expenditures, in the
consecutive four calendar quarters ending with the
quarter in which this ratio is measured (on a
cumulative basis), must be greater than the average
annual scheduled principal maturities of
interest-bearing debt over the next twelve calendar
quarters. H. Failure to comply with Paragraphs 2.02(a),
(c), or (d) of the Escrow Agreement Securing Contingent
Note or Paragraphs 3.c., 3.d., or 3.e. of the Security
Agreement for Contingent Note and, if an applicable
cure period is provided in such documents, to cure that
failure within the applicable time period. I. If
Westmoreland has posted substitute collateral under
Paragraph 2.c. of the Security Agreement for Contingent
Note by way of letter of credit, failure to renew or
replace such letter of credit at least ten (10)
business days prior to its termination. If an Event of
Default occurs under this Paragraph 2.I., then only
that portion of the total contingent liability under
this Contingent Note as of the time of the Event of
Default equal to the face value of the expiring letter
of credit shall become due and payable immediately, and
the remainder, if any, of that contingent liability
shall remain contingent.
<PAGE>
3. Cure Rights Relating To Financial Ratios
A. On no more than two occasions, Westmoreland may cure
one or more defaults occurring in a calendar quarter
with respect to the financial ratios set forth in
Paragraph 2.G.
without triggering an Event of Default.
B. In addition, Westmoreland may cure one financial
ratio default without using one of the two
opportunities for cure set forth in the preceding
Paragraph 3.A., and without triggering an Event of
Default, if: (i) the default that is cured is merely
a failure to comply with the ratio described in
Paragraph 2.G.(1). above; and (ii) the default occurs
during calendar year 1999. The cure provision set
forth in this Paragraph 3.B. does not apply to Events
of Default under Paragraphs 2.G.(2) or (3).
C. A "cure" occurs under this Paragraph 3 if, following
a quarter in which Westmoreland defaults and is out
of compliance with one or more ratios (as described
above), Westmoreland is in compliance on the last day
of the immediately succeeding quarter.
4. Payment and Interest
If an Event of Default occurs, the amount due as a result of
the Event of Default (as provided in Paragraph 2) shall be payable immediately,
with simple interest on such balance at the annual rate of twelve percent (12%),
from the date of such Event of Default to the date of payment. Before an Event
of Default, this Contingent Note shall not bear interest.
<PAGE>
5. Payment Location
If the foregoing contingencies occur, this Contingent
Promissory Note shall become payable in United States dollars at the address set
forth below:
Carl Tennille, Controller
UMWA Health and Retirement Funds
4455 Connecticut Avenue, N.W.
Washington, DC 20005
6. Termination
This Contingent Note shall terminate, and shall become null
and void, on the latest of the following: (a) January 1, 2005; (b) payment of
the amount due as a result of any Event of Default; and (c) if an event has
occurred prior to January 1, 2005 that could constitute an Event of Default
under Paragraph 2 (except for Paragraphs 2.G.(2) and (3)), and if Westmoreland
has a right to prevent the occurrence of the Event of Default through cure, the
expiration of the applicable cure period or such earlier date as the cure
occurs.
<PAGE>
7. Venue and Choice of Law
This Contingent Promissory Note shall be governed by and
construed in accordance with the internal laws of the State of New York, except
that any of New York's conflict of law provisions that would serve to apply law
of a state other than New York shall not apply. Any judicial proceeding brought
under this Contingent Promissory Note shall be brought in any court of competent
jurisdiction in the District of Columbia, and the parties accept unconditionally
and irrevocably the jurisdiction of such courts and any related appellate court
and irrevocably waives any objection that they now have or may hereafter have
that such court is an inconvenient forum.
8. No Waiver; Cumulative Remedies
Neither the Westmoreland nor the Funds shall by any act
(except by a written instrument), delay, indulgence, omission or otherwise be
deemed to have waived any right or remedy hereunder or to have acquiesced in any
breach of any of the terms and conditions hereof. No failure to exercise, nor
any delay in exercising any right, power or privilege hereunder shall operate as
a waiver thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. A waiver by Westmoreland or the Funds of
any right or remedy hereunder on any one occasion shall not be construed as a
bar to any right or remedy which Westmoreland or the Funds would otherwise have
on any future occasion. The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of any rights or
remedies provided by law. Nothing contained in this Contingent Promissory Note
shall be deemed to compromise any obligation or liability of Westmoreland
hereunder, and no performance by Westmoreland of any of its undertakings herein
contained shall be deemed to be a substitute for or an accord and satisfaction
in respect of, any of the duties, obligations and responsibilities of
Westmoreland under the Coal Act or otherwise imposed upon Westmoreland at law or
in equity.
<PAGE>
9. Waiver of Common Law Rights
Presentment for payment, demand, protest, dishonor, and notice of
dishonor are hereby waived by Westmoreland.
WESTMORELAND COAL COMPANY
DATED: January __, 1999 By________________________________
CHRISTOPHER SEGLEM
Its President
WESTMORELAND ENERGY, INC.
DATED: January __, 1999 By________________________________
Its ______________________________
WESTMORELAND RESOURCES, INC.
DATED: January __, 1999 By________________________________
Its ______________________________
WESTMORELAND TERMINAL COMPANY
DATED: January __, 1999 By________________________________
Its ______________________________
<PAGE>
WESTMORELAND COAL SALES COMPANY
DATED: January __, 1999 By________________________________
Its ______________________________
