10-Q

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(X)   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2006

OR

(   )   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to ___________

Commission File Number
001-11155

WESTMORELAND COAL COMPANY
(Exact name of registrant as specified in its charter)

DELAWARE	23-1128670
(State or other jurisdiction	(I.R.S. Employer
of incorporation or organization)	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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   X      No  ___

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one)

Large accelerated filer _____ Accelerated Filer  X  Non-accelerated filer _____

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ___     No   X 

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of October 1, 2006: Common stock, $2.50 par value: 8,959,543 shares

1

PART I — FINANCIAL INFORMATION

ITEM 1
FINANCIAL STATEMENTS

Westmoreland Coal Company and Subsidiaries
Consolidated Balance Sheets
		(Unaudited)
		June 30,		December 31,
		2006		2005
		(In thousands)
Assets
Current assets:
Cash and cash equivalents	$	33,183	$	11,216
Receivables, net:
Trade		43,677		29,138
Other		9,430		7,330
		53,108		36,468
Inventories		21,148		17,576
Deferred overburden removal costs		-		14,090
Other current assets		6,600		4,816
Total current assets		114,039		84,166
Property, plant and equipment:
Land and mineral rights		78,748		77,591
Capitalized asset retirement cost		122,119		122,561
Plant and equipment		339,417		127,063
		540,284		327,215
Less accumulated depreciation, depletion and amortization		127,549		116,058
Net property, plant and equipment		412,735		211,157
Investment in independent power projects		-		50,869
Excess of trust assets over pneumoconiosis benefit obligation		7,633		7,463
Restricted cash and bond collateral		65,668		34,563
Advanced coal royalties		3,885		3,874
Deferred overburden removal costs		-		2,717
Reclamation deposits		60,629		58,823
Contractual third party reclamation obligations		32,804		31,615
Intangible assets		14,266		-
Other assets		12,852		10,624
Total Assets	$	724,511	$	495,871

See accompanying Notes to Consolidated Financial Statements.

2

Westmoreland Coal Company and Subsidiaries
Consolidated Balance Sheets (Continued)
		(Unaudited)
		June 30,		December 31,
		2006		2005
		(In thousands)
Liabilities and Shareholders' Deficit
Current liabilities:
Current installments of long-term debt	$	74,327	$	12,437
Accounts payable and accrued expenses:
Trade		39,448		33,307
Deferred revenue – current		871		583
Income taxes		2,261		2,293
Interest		1,793		-
Production taxes		19,689		19,609
Workers' compensation		1,017		949
Postretirement medical costs		18,267		17,160
Other current liabilities		1,191		-
Asset retirement obligations		13,685		17,890
Total current liabilities		172,549		104,228
Long-term debt, less current installments		238,103		94,306
Revolving lines of credit		12,500		5,500
Workers' compensation, less current portion		8,084		8,394
Postretirement medical costs, less current portion		127,224		124,746
Pension and SERP obligations		18,274		16,171
Deferred revenue – less current portion		1,103		1,251
Asset retirement obligations, less current portion		143,498		140,517
Other liabilities		19,630		6,810
Minority interest		4,871		4,140
Commitments and contingent liabilities
Shareholders' deficit:
Preferred stock of $1.00 par value
Authorized 5,000,000 shares;
Issued and outstanding 175,388 shares at June 30, 2006
and 205,083 at December 31, 2005		175		205
Common stock of $2.50 par value
Authorized 20,000,000 shares;
Issued and outstanding 8,832,565 shares at June 30, 2006
and 8,413,312 shares at December 31, 2005		22,081		21,033
Other paid-in capital		77,966		75,344
Accumulated other comprehensive loss		(11,341	)	(11,409	)
Accumulated deficit		(110,207	)	(95,365	)
Total shareholders' deficit		(21,326	)	(10,192	)
Total Liabilities and Shareholders' Deficit	$	724,511	$	495,871

See accompanying Notes to Consolidated Financial Statements.

3

Westmoreland Coal Company and Subsidiaries Consolidated Statements of Operations
	(Unaudited)
	Three months ended				Six months ended
	June 30,				June 30,
	2006		2005		2006		2005
	(In thousands, except per share data)
Revenues:
Coal	$	91,618	$	85,464	$	186,252	$	171,327
Independent power projects — equity in earnings		3,003		3,459		7,461		8,628
		94,621		88,923		193,713		179,955
Costs and expenses:
Cost of sales — coal		72,351		71,350		146,216		139,108
Depreciation, depletion and amortization		5,913		5,473		11,833		10,938
Selling and administrative		9,854		8,531		19,280		14,865
Heritage health benefit expenses		7,076		7,810		14,100		15,582
Loss (gain) on sales of assets		70		200		(4,946)		179
		95,264		93,364		186,483		180,672
Operating income (loss)		(643)		(4,441)		7,230		(717)
Other income (expense):
Interest expense		(2,810)		(2,833)		(5,464)		(5,637)
Interest income		1,080		909		2,213		1,632
Minority interest		(726)		(267)		(1,209)		(559)
Other		452		469		649		640
		(2,004)		(1,722)		(3,811)		(3,924)
Income (loss) before cumulative effect of change in accounting principle		(2,647)		(6,163)		3,419		(4,641)
Income tax expense		(243)		(136)		(520)		(1,628)
Income (loss) before cumulative effect of change in accounting principle		(2,890)		(6,299)		2,899		(6,269)
Cumulative effect of change in accounting principle		-		-		-		2,662
Net income (loss)		(2,890)		(6,299)		2,899		(3,607)
Less preferred stock dividend requirements		388		436		824		872
Less premium on exchange of preferred stock for common stock		549		-		549		-
Net income (loss) applicable to common shareholders	$	(3,827)	$	(6,735)	$	1,526	$	(4,479)
Net income (loss) per share applicable to common shareholders before the cumulative effect of change in accounting principle:
Basic	$	(0.44)	$	(0.81)	$	0.18	$	(0.87)
Diluted	$	(0.44)	$	(0.81)	$	0.17	$	(0.87)
Net income per share applicable to common shareholders from cumulative effect of change in accounting principle:
Basic	$	-	$	-	$	-	$	0.32
Diluted	$	-	$	-	$	-	$	0.30
Net income (loss) per share applicable to common shareholders:
Basic	$	(0.44)	$	(0.81)	$	0.18	$	(0.54)
Diluted	$	(0.44)	$	(0.81)	$	0.17	$	(0.54)
Weighted average number of common shares outstanding:
Basic		8,629		8,269		8,530		8,231
Diluted		9,145		8,738		9,041		8,797

See accompanying Notes to Consolidated Financial Statements.

4

Westmoreland Coal Company and Subsidiaries Consolidated Statement of Shareholders' Deficit and Comprehensive Income Six Months Ended June 30, 2006 (Unaudited)
	Class A Convertible Exchangeable Preferred Stock		Common Stock		Other Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit (Restated)		Total Shareholders' Equity
		(In thousands except share data)
Balance at December 31, 2004 (205,083 preferred and 8,168,601 common shares outstanding)	$	205	$	20,421	$	73,143	$	(8,529)	$	(88,611)	$	(3,371)
Common stock issued as compensation (72,863 shares)		-		183		1,536		-		-		1,719
Common stock options		-		429		665		-		-		1,094
Dividends declared		-		-		-		-		(820)		(820)
Net loss		-		-		-		-		(5,934)		(5,934)
Minimum pension liability		-		-		-		(3,388)		-		(3,388)
Change in unrealized gain on interest rate swap agreement		-		-		-		508		-		508
Comprehensive loss total												(8,814)
Balance at December 31, 2005 (205,083 preferred shares and 8,413,312 common shares outstanding)		205		21,033		75,344		(11,409)		(95,365)		(10,192)
Cumulative effect of change in accounting for deferred overburden removal costs		-		-		-		-		(16,805)		(16,805)
Common stock issued as compensation (45,006 shares)		-		112		1,051		-		-		1,163
Common stock options exercised (152,232 shares)		-		381		541		-		-		922
Adjustment for stock appreciation rights previously classed as a liability upon adoption of FAS 123(R)		-		-		1,006		-		-		1,006
Dividends declared		-		-		-		-		(387)		(387)
Exchange of preferred shares for common stock		(30)		555		24		-		(549)		-
Net income		-		-		-		-		2,899		2,899
Change in unrealized gain on interest rate swap		-		-		-		68		-		68
Comprehensive income total												2,967
Balance at June 30, 2006 (175,388 preferred shares and 8,832,565 common shares outstanding)	$	175	$	22,081	$	77,966	$	(11,341)	$	(110,207)	$	(21,326)

See accompanying Notes to Consolidated Financial Statements.

5

Westmoreland Coal Company and Subsidiaries Consolidated Statements of Cash Flows
	(Unaudited)
Six Months Ended June 30,	2006		2005
	(In thousands)
Cash flows from operating activities:
Net income (loss)	$	2,899	$	(3,607)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Equity in earnings from independent power projects		(7,461)		(8,628)
Cash distributions from independent power projects		1,086		4,814
Depreciation, depletion and amortization		11,833		10,938
Stock compensation expense		1,164		952
Loss (gain) on sales of assets		(4,946)		179
Minority interest		1,209		559
Net change in operating assets and liabilities		479		2,271
Net cash provided by operating activities		6,263		7,478
Cash flows from investing activities:
Additions to property, plant and equipment		(8,357)		(12,315)
Change in restricted cash and bond collateral and reclamation deposits		(9,685)		(2,329)
ROVA acquisition, net of cash resulting from the ROVA consolidation of    $21.9 million		(7,714)		-
Net proceeds from sales of assets		5,064		569
Net cash used in investing activities		(20,692)		(14,075)
Cash flows from financing activities:
Proceeds from long-term debt		873		-
Repayment of long-term debt		(6,147)		(4,718)
Net borrowings on lines of credit		41,615		9,500
Exercise of stock options		922		562
Dividends paid to minority interest		(480)		(320)
Dividends paid on preferred stock		(387)		(410)
Net cash provided by financing activities		36,396		4,614
Net increase (decrease) in cash and cash equivalents		21,967		(1,983)
Cash and cash equivalents, beginning of period		11,216		11,125
Cash and cash equivalents, end of period	$	33,183	$	9,142
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	4,878	$	4,932
Income taxes	$	46	$	199

See accompanying Notes to Consolidated Financial Statements.

6

WESTMORELAND COAL COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

               These quarterly consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in Amendment No. 1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2005. The accounting principles followed by the Company are set forth in the Notes to the Company’s consolidated financial statements in that Annual Report. Most of these accounting principles and other footnote disclosures previously made have been omitted in this report so long as the interim information presented is not misleading.

               The consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles and require use of management’s estimates. The financial information contained in this Form 10-Q is unaudited but reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of the financial information for the periods shown. Such adjustments are of a normal recurring nature. The results of operations for such interim periods are not necessarily indicative of results to be expected for the full year. Certain prior year amounts have been reclassified to conform to the current year presentation.

1. NATURE OF OPERATIONS AND LIQUIDITY

               The Company’s current principal activities, all conducted within the United States, are: (i) the production and sale of coal from Montana, North Dakota and Texas; and (ii) the development, ownership and management of interests in cogeneration and other non-regulated independent power plants. The Company’s activities are conducted through wholly-owned or majority owned subsidiaries which generally have obtained separate financing.

               Credit facilities of certain subsidiaries contain restrictions on the distribution of cash to the parent company as dividends, loans or advances (see note 5). The Company believes that the parent company has sufficient cash resources and committed financing to provide it with adequate liquidity through early 2007. The Company believes that it should be able to address the liquidity needs of the parent company through additional borrowings, the restructuring of current debt obligations, the sale of non-strategic assets, and the issuance of additional equity. The Company has taken specific actions, including discussions with potential lenders, investors and asset purchasers regarding potential transactions that the Company believes can be completed. There can be no assurance that the Company can complete any transaction on terms acceptable to the Company.

2. ROVA ACQUISITION

               On June 29, 2006, the Company acquired a 50 percent partnership interest in the 230 MW Roanoke Valley (“ROVA”) power plant located in Weldon, North Carolina from a subsidiary of E.ON U.S. LLC – formerly LG&E Energy LLC. The acquisition increases the Company’s ownership interest in ROVA to 100 percent. As part of the same transaction, the Company acquired certain additional assets from LG&E Power Services LLC, a subsidiary of E.ON U.S. LLC, consisting primarily of five contracts under which two subsidiaries of the Company will now operate ROVA and four power plants in Virginia owned by Dominion North Carolina Power.

               The Company paid $27.5 million in cash at closing for the 50% interest in ROVA and other assets acquired. The Company also assumed E.ON U.S.‘s share of non-recourse project debt in the amount of $85.5 million. In conjunction with the acquisition of ROVA, the Company paid a $2.5 million fee to Dominion North Carolina Power in exchange for its agreement to waive the right of first refusal which it claimed to have in connection with the transaction. The total purchase price of $30.3 million also includes $0.3 million in transaction costs. The Company was also required to deposit an additional $5.0 million into ROVA’s debt protection account as a result of the acquisition.

               The Company financed the acquisition and debt protection account deposit with a $30 million bridge loan facility from SOF Investments, LP (“SOF”), a $5 million term loan with First Interstate Bank, and with corporate funds.

               The SOF bridge loan has a one-year term extendable to four years at the option of the Company. The loan has an interest rate of LIBOR plus 4% (currently 9.6% per annum). The Company also paid SOF a 1% closing fee. If the Company elects to extend the loan beyond its initial one-year term, it will be required to issue warrants to purchase 150,000 shares of the Company’s common stock to SOF at a premium of 15% to the then current stock price. These warrants would be exercisable for a three-year period from the date of issuance. The loan is secured by a pledge of the semi-annual cash distributions from ROVA commencing in January 2007 as well as by pledges from the Company’s subsidiaries that directly or indirectly acquired the operating agreements.

7

               The $5 million term loan with First Interstate Bank has a one-year term expiring June 29, 2007. Interest is payable at the Bank’s prime rate (currently 8.25% per annum).

               As a result of the acquisition, the accounts of ROVA have been included in the consolidated balance sheet as of June 30, 2006. For financial reporting purposes, the acquisition is deemed to have occurred on June 30, 2006, and ROVA’s results of operations will be consolidated with the Company’s beginning July 1, 2006. The purchase price has been allocated based upon a preliminary appraised fair value of the identifiable assets acquired. The excess of fair value of net identifiable assets over the purchase price was allocated as a pro rata reduction of the amounts that otherwise would have been assigned to property, plant, and equipment and intangible assets. The $30.3 million purchase price was allocated as follows (in thousands):

Assets:
Cash	$	10,951
Accounts receivable		9,113
Inventory		570
Property, plant, and equipment		91,441
Restricted assets		11,613
Intangible assets		14,266
Other assets		276
Total assets		138,230
Liabilities:
Accounts payable		2,298
Accrued interest		896
Debt		90,660
Other liabilities		14,054
Total liabilities		107,908
Total purchase price	$	30,322

               Restricted assets represent restricted cash deposits required to be maintained under ROVA’s debt agreement. The intangible assets relate to power sales and coal supply agreements acquired and are being amortized over the remaining life of those contracts. Debt consists of term loans and bank borrowings which were used primarily to fund the construction of the facility and qualified expenditures.

8

               The accounts of ROVA, including the effects of the purchase price adjustments attributable to the acquisition, that have been included in the Company’s consolidated balance sheet of June 30, 2006 are as follows (in thousands):

Assets:
Cash	$	21,901
Accounts receivable		10,794
Inventory		1,157
Property, plant, and equipment		205,720
Restricted assets		28,226
Intangible assets		14,266
Other assets		3,261
Total assets		285,325
Liabilities:
Accounts payable		5,368
Accrued interest		1,793
Debt		205,986
Other liabilities		14,856
Total liabilities		228,003
Elimination of equity method investment in ROVA	$	57,322

               The following table summarizes the pro forma results of operation for the three and six months ended June 30, 2006 had the ROVA acquisition taken place at the beginning of each of those periods:

	Three months ended June 30, 2006			Six months ended June 30, 2006
	(In thousands, except per share amounts)
Revenues	$	111,461		$	227,851
Income (loss) from operations		(1,703	)		6,235
Net loss		(8,630	)		(6,910	)
Earnings per share
Basic:		(1.00	)		(0.81	)
Diluted:		(1.00	)		(0.81	)

               ROVA’s historical accounting policy for revenue recognition has been to record revenue as amounts were invoiced pursuant to the provisions of the power sales agreements. The power sales agreements were entered into prior to the effective date of EITF 91-06 “Revenue Recognition of Long-Term Power Sales Contracts”. Accordingly, the agreements were not subject to the accounting requirements of that consensus. The agreements also were entered into prior to the effective date of the consensus of EITF 01-08 “Determining Whether an Arrangement Contains a Lease”, and accordingly were not subject to the accounting requirement of that consensus.

               Upon the Company’s acquisition of the remaining 50% interest in ROVA, the power sales agreements are considered to be within the scope of EITF 01-08. Under the provisions of EITF 01-08 the power sales arrangements are considered to contain a lease within the scope of SFAS No. 13, “Accounting for Leases”. The lease is classified as an operating lease, and as a result, the Company will recognize revenue for future capacity payments on a straight-line basis over the remaining term of the power sales agreements. The capacity payments that ROVA receives are higher in the first 15 years of the power sales agreements, but decrease for the remaining 10 years of the agreements. As a result of this change in revenue recognition, adjustments were included in the pro forma statements of operation to reduce revenue in the three and six months ended June 30, 2006 by $7.0 million and $14.1 million, respectively.

9

               The pro forma statements of operations also include adjustments for the amortization of intangible assets, fair market value adjustments to property, plant, and equipment and debt, and interest expense on the acquisition debt.

3. CHANGES IN ACCOUNTING PRINCIPLES

DEFERRED OVERBURDEN REMOVAL COSTS

               In June 2005, the FASB ratified a modification to the consensus reached by the Emerging Issues Task Force (“EITF”) in EITF 04-06 “Accounting for Stripping Costs Incurred during Production in the Mining Industry.” The EITF clarified that stripping costs incurred during the production phase of a mine are variable production costs that should be included in the costs of the inventory produced during the period that the stripping costs are incurred. The effect of initially applying this consensus is accounted for in a manner similar to a cumulative effect adjustment with the adjustment recognized in the opening balance of retained earnings in the year of adoption. The Company adopted EITF 04-6 effective January 1, 2006. The adjustment to eliminate deferred stripping costs, previously recorded on the balance sheet as deferred overburden removal costs, was recorded as a $16.8 million cumulative effect adjustment to the beginning accumulated deficit as of January 1, 2006. During the six months ended June 30, 2006, net loss was $0.2 million higher than it would have been under the Company’s previous methodology of accounting for deferred stripping costs, an impact of $0.04 per fully diluted share.

               Before adopting EITF 04-06, the Company expensed these costs using methods and estimates consistent with those used to account for preproduction stripping costs. All stripping costs incurred during the production phase subsequent to January 1, 2006 are considered production costs of inventory and recognized as a component of cost of sales-coal when the coal is sold.

SHARE-BASED PAYMENTS

               In December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based Payment,” or SFAS 123(R), which replaces SFAS No. 123 and supersedes APB Opinion No. 25. SFAS No. 123(R) requires all share-based payments to employees and directors, including grants of stock options, be recognized in the financial statements based on their fair values.

               The Company adopted SFAS No. 123(R) on January 1, 2006, as prescribed, using the modified prospective method. Accordingly, compensation expense is recognized for all newly granted awards and awards modified, repurchased, or cancelled after January 1, 2006 ratably over the vesting period based on the fair value of the awards at the date of grant. Compensation expense for the unvested portion of stock option awards that were outstanding as of January 1, 2006 is being recognized ratably over the remaining vesting period, based on the fair value of the awards at date of grant as calculated for the pro forma disclosure under SFAS No. 123. See Note 9 “Capital Stock”.

               There was no cumulative effect adjustment for the change in accounting for share based payments.

10

4. RECENT ACCOUNTING PRONOUNCEMENTS

INVENTORY COSTS

               In November 2004, the FASB issued SFAS No. 151, “Inventory Costs: An Amendment of ARB 43, Chapter 4.” This statement clarifies the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). It requires that amounts be recognized as current period charges. In addition, this statement requires that allocation of fixed production overheads to the costs of inventory be based on the normal capacity of the production facilities. The Company adopted SFAS No. 151 on January 1, 2006, as prescribed. The adoption of SFAS No. 151 did not have a material impact on the Company’s consolidated results of operations or financial condition.

ACCOUNTING CHANGES

               In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections,” which primarily changes the requirements for the accounting for and reporting of a change in accounting principle for all voluntary changes or when an accounting pronouncement does not include specific transition provisions. This applies to any future accounting changes beginning in fiscal years beginning after December 31, 2005.

PENSION AND OTHER POSTRETIREMENT PLANS

               In September 2006, the FASB issued Statement of Financial Accounting Standards No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans—an amendment of FASB Statements No. 87, 88, 106 and 132(R)” (SFAS 158). This statement requires balance sheet recognition of the overfunded or underfunded status of pension and postretirement benefit plans. Under SFAS 158, actuarial gains and losses, prior service costs or credits, and any remaining transition assets or obligations that have not been recognized under previous accounting standards must be recognized as assets or liabilities with a corresponding adjustment to accumulated other comprehensive income, net of tax effects, until they are amortized as a component of net periodic benefit cost. SFAS 158 is effective for publicly-held companies for fiscal years ending after December 15, 2006. Based on our unfunded obligations as of December 31, 2005, had the adoption of SFAS 158 been effective on that date, the result would have been to increase the Company’s total liabilities by approximately $144 million and to reduce total shareholders’ equity by approximately $144 million. The adoption of SFAS 158 will not affect our future pension and postretirement medical benefit expenses, as determined by SFAS 106 and SFAS 87. By the time of adoption at December 31, 2006, changes resulting from returns on assets invested in the pension funds as well as any changes in yearend actuarial assumptions could have a significant impact on the actual amounts recorded.

5. SIGNIFICANT TRANSACTIONS

GAIN ON DISPOSAL OF ASSETS

               In February 2006, a wholly-owned subsidiary of the Company sold its undivided mineral interests in two leases in southern Colorado for net proceeds of $5.1 million and recognized a $5.1 million gain on the sale.

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6. LINES OF CREDIT AND LONG-TERM DEBT

               The current portions and total amounts outstanding under the Company’s lines of credit and long-term debt at June 30, 2006 and December 31, 2005 were:

	Current Portions of Debt				Total Debt Outstanding
	June 30, 2006		December 31, 2005		June 30, 2006		December 31, 2005
	(In thousands)
Corporate revolving line of credit	$	-	$	-	$	5,000	$	5,500
WML revolving line of credit		-		-		7,500		-
WML term debt:
Series B Notes		11,475		11,300		62,250		67,900
Series C Notes		-		-		20,375		20,375
Series D Notes		-		-		14,625		14,625
ROVA acquisition bridge loan		30,000		-		30,000		-
ROVA acquisition term loan		4,975		-		4,975		-
ROVA term debt		26,498		-		175,986		-
Other term debt		1,379		1,137		4,219		3,843
Total debt outstanding	$	74,327	$	12,437	$	324,930	$	112,243

               The maturities of all long-term debt and the revolving credit facilities outstanding at June 30, 2006 are:

	(In thousands)
2006	$           19,051
2007	88,428
2008	77,880
2009	43,503
2010	27,232
Thereafter	68,836
	$         324,930

               The Company obtained waivers from its lenders for its delay in filing financial statements for the first and second quarters of 2006 in the required timeframe.

WESTMORELAND COAL COMPANY

               The Company financed the ROVA acquisition and debt protection account deposit with a $30 million bridge loan facility from SOF Investments, LP (“SOF”), a $5 million term loan with First Interstate Bank, and with corporate funds.

               The SOF bridge loan has a one-year term extendable to four years at the option of the Company. The loan has an interest rate of London Interbank Offering Rate (“LIBOR”) plus 4% (currently 9.6% per annum). The Company also paid SOF a 1% closing fee. If the Company elects to extend the loan beyond its initial one-year term, it will be required to issue warrants to purchase 150,000 shares of the Company’s common stock to SOF at a premium of 15% to the then current stock price. These warrants would be exercisable for a three-year period from the date of issuance. The loan is secured by a pledge of the semi-annual cash distributions from ROVA commencing in January 2007 as well as pledges from the Company’s subsidiaries that directly or indirectly acquired the operating agreements.

12

               The $5 million term loan with First Interstate Bank has a one-year term expiring June 29, 2007. Interest is payable at the Bank’s prime rate (currently 8.25% per annum).

               The Company has a $14 million revolving credit facility with First Interstate Bank. Interest is payable monthly at the Bank’s prime rate (currently 8.25% per annum). The Company is required to maintain certain financial ratios. The revolving credit facility is collateralized by the Company’s stock in Westmoreland Resources Inc. (“WRI”), 100% of the common stock of New Horizon Company and the dragline located at WRI’s Absaloka Mine in Big Horn County, Montana. In June 2006, the expiration date of this facility was extended to June 30, 2008.

               At June 30, 2006, the Company had approximately $110.5 million of net assets at our subsidiaries that were not available to be transferred to the Company in the form of dividends, loans, or advances due to restrictions contained in the credit facilities of these subsidiaries.

WESTMORELAND MINING LLC

               Westmoreland Mining LLC (“WML”) has a $20 million revolving credit facility (the “Facility”) with PNC Bank National, Association (“PNC”) which expires on April 27, 2008. The interest rate is either PNC’s Base Rate plus 1%, or a Euro-Rate plus 3%, at WML’s option. WML is currently paying interest at a 9.25% annual rate under the Facility. In addition, a commitment fee of ½ of 1% of the average unused portion of the available credit is payable quarterly. The amount available under the Facility is based upon, and any outstanding amounts are secured by, eligible accounts receivable.

               WML has a term loan agreement with $62.2 million in Series B Notes, $20.4 million in Series C Notes and $14.6 million in Series D Notes outstanding as of June 30, 2006. The Series B Notes bear interest at a fixed interest rate of 9.39% per annum, Series C Notes at a fixed rate of 6.85% per annum, and the Series D Notes have a variable rate based upon LIBOR plus 2.90% (currently 8.40% per annum). All of the Notes are secured by assets of WML and the term loan agreement requires the Company to comply with certain covenants and minimum financial ratio requirements.

               Pursuant to the WML term loan agreement, WML is required to maintain debt service reserve and prepayment accounts. As of June 30, 2006, there was a total of $10.0 million in the debt service reserve account and $15.0 million in the prepayment account, which account is to be used to fund a $30.0 million payment due December 31, 2008 for the Series B Notes. The debt service reserve account and the prepayment account have been classified as restricted cash in non-current assets on the consolidated balance sheet.

ROVA

               On December 18, 1991, ROVA entered into the Credit Agreement (“Tranche A”) with a consortium of banks (the “Banks”) and an institutional lender for the financing and construction of the first ROVA facility. On December 1, 1993, the Credit Agreement was amended and restated (“Tranche B”) to allow for the financing and construction of the second ROVA facility. Under the terms of the Credit Agreement, ROVA was permitted to borrow up to $229.9 million from the Banks (“Bank Borrowings”), $120.0 million from an institutional lender, and $36.8 million in tax-exempt facility revenue bonds (“Bond Borrowings”) under two Indenture Agreements with the Halifax County, North Carolina, Industrial Facilities and Pollution Control Financing Authority (“Financing Authority”). The borrowings are evidenced by promissory notes and are secured by land, the facilities, ROVA’s equipment, inventory, accounts receivable, certain other assets and the assignment of all material contracts. Bank Borrowings amounted to $62.1 million at June 30, 2006 and mature in 2008. The Credit Agreement requires interest on the Bank Borrowings at rates set at varying margins in excess of the Banks’ base rate, LIBOR or certificate of deposit rate, for various terms from one day to one year in length, each selected by ROVA when amounts are borrowed. The weighted average interest rate at June 30, 2006 was 6.6%.

13

               Under the terms of the Credit Agreement, interest on the Tranche A institutional borrowings is fixed at 10.42% and interest on the Tranche B institutional borrowings is fixed at 8.33%. The Credit Agreement requires repayment of the Tranche A institutional borrowings in 38 semiannual installments ranging from $0.9 million to $4.3 million. Payment of the Tranche A institutional borrowings commenced in 1996 and is currently scheduled to be completed in 2014. The Credit Agreement requires repayment of the Tranche B institutional borrowings in 40 semiannual installments ranging from $0.3 million to $6.5 million. Payment of the Tranche B institutional borrowings commenced in 1996 and is currently scheduled to be completed in 2015.

               In accordance with the Indenture Agreements, the Financing Authority issued $29.5 million of 1991 Variable Rate Demand Exempt Facility Revenue Bonds (“1991 Bond Borrowings”) and $7.2 million of 1993 Variable Rate Demand Exempt Facility Revenue Bonds (“1993 Bond Borrowings”). The 1991 Bond Borrowings and the 1993 Bond Borrowings are secured by irrevocable letters of credit in the amounts of $30.1 million and $7.4 million, respectively, which were issued by the Banks. The interest rate at June 30, 2006 was 3.81%. The 1991 Bond Indenture Agreement requires repayment of the 1991 Bond Borrowings in four semi-annual installments of $1.2 million, $1.2 million, $14.8 million, and $12.4 million. The first installment of the 1991 Bond Borrowings is due in January 2008. The 1993 Indenture Agreement requires repayment of the 1993 Bond Borrowings in three semi-annual installments of $1.6 million, $1.8 million and $3.8 million. The first installment is due in July 2009.

               Irrevocable letters of credit in the amounts of $4.5 million and $1.5 million were issued to ROVA’s customer by the Banks on behalf of ROVA for ROVA I and ROVA II, respectively, to ensure performance under their respective power sales agreements.

               The debt agreements contain various restrictive covenants primarily related to construction of the facilities, maintenance of the property, and required insurance. Additionally, the financial covenants include restrictions on incurring additional indebtedness and property liens, paying cash distributions to the partners, and incurring various commitments without lender approval. At June 30, 2006, ROVA was in compliance with the various covenants.

               Pursuant to the terms of the Credit Agreement, ROVA must maintain a debt protection account (“DPA”). At June 30, 2006, the DPA was funded with $27.3 million which is included in restricted cash. Additional funding of the DPA of $1.1 million per year is required through 2008. The required funding level is reduced by $6.7 million in 2009 and by $3.0 million in 2010. Under the agreement, the Company can select from several investment options for the debt protection account funds and benefits from the investment returns on these deposits.

               The Credit Agreement requires ROVA to fund a repairs and maintenance account and an ash reserve totaling $3.6 million between January 31, 2004 through January 31, 2010, after which date the funding requirement reduces to $3.2 million. At June 30, 2006, these accounts were funded with $0.9 million in cash, which is included in restricted cash in the accompanying consolidated balance sheet.

7. DERIVATIVE INSTRUMENTS

               During the first quarter of 2006, the Company entered into two derivative contracts to manage a portion of its exposure to the price volatility of diesel fuel used in its operations. In a typical commodity swap agreement, the Company receives the difference between a fixed price per gallon of diesel fuel and a price based on an agreed upon published, third-party index if the index price is greater than the fixed price. If the index price is lower, the Company pays the difference. By entering into swap agreements, the Company effectively fixes the price it will pay in the future for the quantity of diesel fuel subject to the swap agreement.

14

               These contracts cover approximately 4 million gallons of diesel fuel which represent an estimated two-thirds of the annual consumption at the Jewett mine, at a weighted average fixed price of $2.01 per gallon. These contracts settle monthly from February to December, 2006. The Company accounts for these derivative instruments on a mark-to-market basis through earnings. The consolidated financial statements as of June 30, 2006 reflect unrealized gains on these contracts of $0.4 million, which is recorded in other receivables and as cost of sales—coal. During the three and six months ended June 30, 2006, the Company settled a portion of these contracts covering approximately 1.2 million and 1.7 million gallons of fuel, respectively, which resulted in gains of approximately $0.1 million and $0.2 million, respectively.

8. BENEFIT PROGRAMS

HERITAGE HEALTH BENEFIT EXPENSES

               The caption “Heritage health benefit expenses” used in the Consolidated Statements of Operations refers to costs of benefits the Company provides as required by government regulations and programs, principally the Coal Industry Retiree Health Benefit Act of 1992 (“Coal Act”), contractually agreed benefits, past and current, and standard benefits provided voluntarily to attract and retain employees. The components of these expenses are:

	Three Months Ended June 30,				Six Months Ended June 30,
	2006		2005		2006		2005
	(In thousands)
Health care benefits	$	6,013	$	5,759	$	11,961	$	11,500
Combined benefit fund		995		1,189		1,990		2,377
Workers’ compensation		73		173		370		470
Black lung benefits (credit)		(5	)	689		(221	)	1,235
Total	$	7,076	$	7,810	$	14,100	$	15,582

PENSION AND POSTRETIREMENT MEDICAL BENEFITS

               The Company provides pension and postretirement medical benefits to qualified full-time employees and retired employees and their dependents, the majority of which benefits are mandated by the Coal Act. The Company incurred costs of providing these benefits during the three-month and six-month periods ended June 30, 2006 and 2005 as follows:

	Pension Benefits Three months ended June 30,				Postretirement Medical Benefits Three months ended June 30,
	2006		2005		2006		2005
		(In thousands)
Service cost	$	800	$	672	$	158	$	129
Interest cost		1,053		902		3,700		3,638
Expected return on plan assets		(931)		(850)		-		-
Amortization of deferred items		351		247		2,417		2,286
Net periodic cost	$	1,273	$	971	$	6,275	$	6,053

15

	Pension Benefits Six months ended June 30,				Postretirement Medical Benefits Six months ended June 30,
	2006		2005		2006		2005
		(In thousands)
Service cost	$	1,600	$	1,344	$	316	$	258
Interest cost		2,106		1,804		7,400		7,277
Expected return on plan assets		(1,862)		(1,700)		-		-
Amortization of deferred items		705		495		4,890		4,572
Net periodic cost	$	2,549	$	1,943	$	12,606	$	12,107

               The Company expects to contribute approximately $1.4 million to its pension plans during 2006. Of that amount, $0.3 million was contributed in the second quarter and $0.5 million has been contributed during the first six months of 2006. The Company expects to pay approximately $19 to $20 million for postretirement medical benefits during 2006. A total of $4.4 million was paid in the second quarter of 2006 and $9.8 million during the first six months of 2006.

9. CAPITAL STOCK

               The Company has two classes of capital stock outstanding, common stock, par value $2.50 per share, and Series A Convertible Exchangeable Preferred Stock, par value $1.00 per share (“Series A Preferred Stock”). Each share of Series A Preferred Stock is represented by four Depositary Shares. The full amount of the quarterly dividend on the Series A Preferred Stock is $2.125 per preferred share or $0.53 per Depositary Share. Partial dividends have been declared and paid since October 1, 2002, including a dividend of $0.25 per Depositary Share paid on July 1, 2006. The quarterly dividends which are accumulated but unpaid through and including July 1, 2006 amount to $15.3 million in the aggregate ($87.28 per preferred share or $21.82 per Depositary Share). Common stock dividends may not be declared until the preferred stock dividends that are accumulated but unpaid are made current. Upon completion of the restatement of its prior period financial statements, as described in Amendment No. 1 to its Annual Report on Form 10-K, the Company is currently reporting a deficit in shareholders’ equity. As a result, the Company is prohibited from paying preferred stock dividends in the future because of the statutory restrictions limiting the payment of preferred stock dividends under Delaware law, the state in which the Company is incorporated. Under Delaware law, the Company is permitted to pay preferred stock dividends only to the extent that shareholders’ equity exceeds the par value of the preferred stock ($175,000 at June 30, 2006).

               During the second quarter, the Company exchanged a total of 118,783 Depositary Shares at an exchange ratio of 1.8691 shares of Common Stock for each Depositary Share, compared to the conversion ratio of 1.708 provided for under the terms of Certificate of Designation governing the preferred stock. As a result of these preferred stock exchanges, $0.5 million of premium on the exchange of preferred stock for common stock was recorded in the second quarter as a reduction of income (loss) attributable to common shareholders. This premium on the exchange of preferred stock for common stock represents the excess of the fair value of consideration transferred to the preferred stock holders over the value of consideration that would have been issued under the original conversion terms. While the Company can redeem preferred shares at any time for the redemption value of $25 plus dividend arrearages paid in cash, the Company has agreed to the negotiated exchanges as a cash conservation measure and because they reduce the number of outstanding Depositary Shares, thereby eliminating $2.5 million of preferred dividend arrearages and associated future dividend requirements.

INCENTIVE STOCK OPTIONS AND STOCK APPRECIATION RIGHTS

               As of June 30, 2006, the Company had stock options and stock appreciation rights (“SARs”) outstanding from three shareholder-approved Stock Plans for employees and three Stock Incentive Plans for directors.

16

               The employee plans provide for the grant of incentive stock options (“ISOs”), non-qualified options under certain circumstances, SARs and restricted stock. ISOs and SARs generally vest over two or three years, expire ten years from the date of grant, and may not have an option or base price that is less than the market value of the stock on the date of grant. The maximum number of shares that could be issued or granted under the employee plans is 1,150,000, and as of June 30, 2006, a total of 210,819 shares are available for future issue or grant.

               The non-employee director plans generally provide for the grant of options for 20,000 shares when elected or appointed, and options for 10,000 shares after each annual meeting. Beginning in 2003, rather than the annual grant of 10,000 options, each non-employee director was granted common shares with a market value of $30,000. The shares are restricted for one year from the date of grant. Additionally, each non-employee director is entitled to receive, as an individual grant upon first joining the Board, restricted common stock valued at $60,000. Beginning in 2006, directors were granted SARs as a form of award. The maximum number of shares that could be issued or granted under the director plans is 900,000, and as of June 30, 2006, 19,176 shares were available for future issue or grant.

               On December 30, 2005 the Company accelerated the vesting of all unvested SARs, resulting in additional compensation expense of $0.5 million. The Company elected to accelerate the vesting of the SARs because doing so reduced the expense that the Company would be required to recognize in the future under SFAS No. 123(R). The Company granted 5,500 SARs under an employee plan during the second quarter of 2006 which vest over a three year period. The Company granted 12,334 SARs under a non-employee director plan in the second quarter of 2006 and 16,067 SARs in the first six months of 2006 which also vest over a three year period. The base price of each SAR was equal to the fair value of a share of the Company’s common stock on the date of the grant. At June 30, 2006, the total intrinsic value of all SARs granted during 2006 was less than $0.1 million. Upon vesting, the holders may exercise the SARs and receive an amount equal to the increase in the value of the common stock between the grant date and the exercise date in shares of common stock.

               Compensation cost arising from share-based payment arrangements was $0.8 million in the quarter ended June 30, 2006 and $1.2 million during the first six months of 2006. The intrinsic value of options and SARs exercised during the second quarter of 2006 and the first six months of 2006 were $2.5 million and $3.3 million, respectively. Based on the market value of the Company’s common stock as of June 30, 2006, the intrinsic value of vested SARs was approximately $1.3 million, or the equivalent of approximately 56,100 shares.

               The fair value of SARs granted is estimated on the date of grant using the Black-Scholes pricing model with the following weighted average assumptions for the six months ended June 30, 2006 and 2005:

SARS Granted	Number of SARs Granted	Dividend Yield	Volatility	Risk-Free Rate	Expected Life
2006	21,567	None	52%	4.68%	6.5 years
2005	246,100	None	48%	3.85%	5.2 years

               No stock options were granted during 2005 or 2006. The weighted-average fair value of each SAR granted in 2006 and 2005 was $25.42 and $20.82 respectively. There will be no future compensation expense arising from the SARs granted prior to 2006 because of the accelerated vesting discussed above. The unamortized compensation expense for outstanding SARS at June 30, 2006 was $0.3 million.

17

               Information for the first six months of 2006 with respect to both the employee and director stock options is as follows:

	Exercise Price Range	Stock Option Shares	Weighted- Average Exercise Price
Outstanding at December 31, 2005	$  2.81-22.86	717,950	$   10.20
Granted in 2006	-	-	-
Exercised in 2006	2.81-18.19	(153,232)	6.09
Expired or forfeited in 2006	17.80-18.08	(1,068)	17.94
Outstanding at June 30, 2006	$  2.81-22.86	563,650	$   11.30

               Information about stock options outstanding as of June 30, 2006 is as follows:

Range of Exercise Price	Number Outstanding	Weighted- Average Remaining Contractual Life (Years)	Weighted- Average Exercise Price	Options Vested	Weighted- Average Exercise Price
$      2.81-5.00	209,650	3.2	$   2.93	209,650	$   2.93
5.01-10.00	-	-	-	-	-
10.01-15.00	95,835	5.8	12.38	93,935	11.62
15.01-22.86	258,165	6.4	17.70	225,879	17.55
Total   $    2.81-22.86	563,650	5.1	$ 11.30	529,464	$  10.87

               Information for the first six months of 2006 with respect to both the employee and director SARs is as follows:

	Base Price Range	Stock Appreciation Rights	Weighted- Average Base Price
Outstanding at December 31, 2005	$  18.04-24.73	401,194	$   20.37
Granted in 2006	23.99-29.48	21,567	25.42
Exercised in 2006	19.37-24.73	(10,334)	20.71
Expired or forfeited in 2006	-	-	-
Outstanding at June 30, 2006	$  18.04-29.48	412,427	$   20.63

18

               Information about SARs outstanding as of June 30, 2006 is as follows:

Range of Base Price	Number Outstanding	Weighted- Average Remaining Contractual Life (Years)	Weighted- Average Base Price	SARs Vested	Weighted- Average Base Price
$    18.04-29.48	412,427	8.9	$  20.63	390,860	$  20.37

               Prior to January 1, 2006, the Company applied the intrinsic-value-based method of accounting prescribed by Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees”, and related interpretations, to account for its fixed-plan stock options. Under this method, compensation expense was recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price. SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”), established accounting and disclosure requirements using a fair-value-based method of accounting for stock-based employee compensation plans. As allowed under SFAS No. 123, the Company had elected to continue to apply the intrinsic-value-based method of accounting described above, and adopted only the disclosure requirements of SFAS No. 123, prior to the adoption of SFAS 123(R) effective January 1, 2006. The following table illustrates the pro forma effect on net loss and net loss per share in 2005 as if the compensation cost for the Company’s fixed-plan stock options had been determined based on fair value at their grant dates consistent with SFAS No. 123:

		Three Months Ended 6/30/05			Six Months Ended 6/30/05
		(In thousands)
Net loss applicable to common shareholders, as reported		$	(6,735)	$	(4,479)
Less:	Total stock-based employee compensation expense determined under fair value based method for all awards		57		169
Net loss applicable to common shareholders		$	(6,792)	$	(4,648)
Net loss per share applicable to common shareholders:
Basic – as reported		$	(0.81)	$	(0.54)
Basic – pro forma		$	(0.82)	$	(0.56)
Diluted – as reported		$	(0.81)	$	(0.54)
Diluted – pro forma		$	(0.82)	$	(0.56)

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10. EARNINGS PER SHARE

               The following table provides a reconciliation of the number of shares used to calculate basic and diluted earnings per share (EPS):

	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2006	2005	2006	2005
	(In thousands of shares)
Number of shares of common stock:
Basic	8,629	8,269	8,530	8,231
Effect of dilutive SARs & stock options	516	469	511	566
Diluted	9,145	8,738	9,041	8,797
Number of shares not included in diluted EPS that would have been antidilutive because exercise price of SARs and options was greater than the average market price of the common shares	-	11	-	1

11. INCOME TAXES

               Income tax expense attributable to income before income taxes consists of:

	Three Months Ended				Six Months Ended
	June 30,		June 30,		June 30,		June 30,
	2006		2005		2006		2005
		(In thousands)				(In thousands)
Current:
Federal	$	-	$	-	$	25	$	168
State		243		136		495		1,460
		243		136		520		1,628
Deferred:
Federal		-		-		-		-
State		-		-		-		-
		-		-		-		-
Income tax expense	$	243	$	136	$	520	$	1,628

12. BUSINESS SEGMENT INFORMATION

               The Company’s operations have been classified into two segments: coal and independent power. The coal segment includes the production and sale of coal from Montana, North Dakota and Texas. The independent power operations include the ownership of interests in cogeneration and other non-regulated independent power plants, and business development expenses. The “Corporate” classification noted in the tables represents all costs not otherwise classified, including corporate office charges and heritage health benefit expenses. Summarized financial information by segment for the quarters and six month periods ended June 30, 2006 and 2005 is as follows:

20 Quarter ended June 30, 2006
(Unaudited)

		Coal		Independent Power		Corporate		Total
		(In thousands)
Revenues:
Coal	$	91,618	$	-	$	-	$	91,618
Equity in earnings		-		3,003		-		3,003
		91,618		3,003		-		94,621
Costs and expenses:
Cost of sales		72,351		-		-		72,351
Depreciation, depletion and amortization		5,774		57		82		5,913
Selling and administrative		5,410		1,176		3,268		9,854
Heritage health benefit expenses		-		-		7,076		7,076
Loss (gain) on sales of assets		70		-		-		70
Operating income (loss)	$	8,013	$	1,770	$	(10,426)	$	(643)
Capital expenditures	$	5,412	$	14	$	124	$	5,550
Total assets	$	416,159	$	291,756	$	16,596	$	724,511

Quarter ended June 30, 2005
(Unaudited)

		Coal		Independent Power		Corporate		Total
		(In thousands)
Revenues:
Coal	$	85,464	$	-	$	-	$	85,464
Equity in earnings		-		3,459		-		3,459
		85,464		3,459		-		88,923
Costs and expenses:
Cost of sales		71,350		-		-		71,350
Depreciation, depletion and amortization		5,418		6		49		5,473
Selling and administrative		6,639		710		1,182		8,531
Heritage health benefit expenses		-		-		7,810		7,810
Loss (gain) on sales of assets		282		-		(82)		200
Operating income (loss)	$	1,775	$	2,743	$	(8,959)	$	(4,441)
Capital expenditures	$	7,328	$	10	$	277	$	7,615
Total assets	$	403,065	$	53,888	$	22,240	$	479,193

Six Months ended June 30, 2006
(Unaudited)

		Coal		Independent Power		Corporate		Total
		(In thousands)
Revenues:
Coal	$	186,252	$	-	$	-	$	186,252
Equity in earnings		-		7,461		-		7,461
		186,252		7,461		-		193,713
Costs and expenses:
Cost of sales		146,216		-		-		146,216
Depreciation, depletion and amortization		11,605		65		163		11,833
Selling and administrative		10,834		2,030		6,416		19,280
Heritage health benefit expenses		-		-		14,100		14,100
Loss (gain) on sales of assets		114		-		(5,060)		(4,946)
Operating income (loss)	$	17,483	$	5,366	$	(15,619)	$	7,230
Capital expenditures	$	7,838	$	14	$	505	$	8,357
Total assets	$	416,159	$	291,756	$	16,596	$	724,511

Six Months ended June 30, 2005
(Unaudited)

		Coal		Independent Power		Corporate		Total
		(In thousands)
Revenues:
Coal	$	171,327	$	-	$	-	$	171,327
Equity in earnings		-		8,628		-		8,628
		171,327		8,628		-		179,955
Costs and expenses:
Cost of sales		139,108		-		-		139,108
Depreciation, depletion and amortization		10,842		10		86		10,938
Selling and administrative		11,685		1,036		2,144		14,865
Heritage health benefit expenses		-		-		15,582		15,582
Loss (gain) on sales of assets		261		-		(82)		179
Operating income (loss)	$	9,431	$	7,582	$	(17,730)	$	(717)
Capital expenditures	$	11,172	$	18	$	1,125	$	12,315
Total assets	$	403,065	$	53,888	$	22,240	$	479,193

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13. COMMITMENTS AND CONTINGENCIES

Asset Retirement Obligation, Reclamation, Reclamation Deposits and Contractual Third Party Reclamation Obligations

               As of June 30, 2006 the Company has reclamation bonds in place for its active mines in Montana, North Dakota and Texas. The Company also has reclamation bonds in place for inactive mining sites in Virginia and Colorado, which are now awaiting final bond release. These government-required bonds assure that coal mining operations comply with applicable Federal and State regulations relating to the performance and completion of final reclamation activities. The Company currently estimates that the cost of final reclamation for its mines when they are closed at some point in the future will total approximately $396.1 million (on an undiscounted basis), or $157.2 million expressed on a present value basis. The Company’s customers and the contract operator of the Absaloka Mine are responsible for $200.9 million of these reclamation costs (on an undiscounted basis) and have secured a portion of these obligations by providing a $50 million corporate guarantee to assure performance of such final reclamation and by funding reclamation escrow accounts in the amount of approximately $60.6 million as of June 30, 2006. The reclamation escrow accounts are restricted funds and have been classified as Reclamation Deposits on the Consolidated Balance Sheets. In addition, the Absaloka contract mine operator is funding a separate reclamation escrow account that is approximately $5.6 million as of June 30, 2006. The present value of obligations of certain other customers and the Absaloka contract mine operator has been classified as contractual third party reclamation obligations on the Consolidated Balance Sheets. The Company’s estimated obligation for final reclamation that is not the contractual responsibility of others is $195.2 million (on an undiscounted basis) at June 30, 2006.

               The ROVA project’s asset retirement obligation at June 30, 2006 was $0.4 million.

               Changes in the Company’s asset retirement obligations from January 1, 2006 to June 30, 2006 (in thousands) were:

Asset retirement obligation — beginning of year	$ 158,407
Accretion	5,064
ROVA asset retirement obligation acquired	414
Settlements (final reclamation performed)	(6,702)
Asset retirement obligation — June 30, 2006	$ 157,183

Royalty Claims

               The Company acquired Western Energy Company (“WECO”) from Montana Power Company in 2001. WECO produces coal from the Rosebud Mine, which includes federal leases, a state lease and some privately owned leases near Colstrip, Montana. The Rosebud Mine supplies coal to the four units of the adjacent Colstrip Power Plant. In the late 1970‘s, a consortium of six utilities, including Montana Power, entered into negotiations with WECO for the long-term supply of coal to Units 3 and 4 of the Colstrip Plant, which would not be operational until 1984 and 1985, respectively. The parties could not reach agreement on all the relevant terms of the coal price and arbitration was commenced. The arbitration panel issued its opinion in 1980. As a result of the arbitration order, WECO and the Colstrip owners entered into a Coal Supply Agreement and a separate Coal Transportation Agreement. Under the Coal Supply Agreement, the Colstrip Units 3&4 owners pay a price for the coal F.O.B. mine. Under the Coal Transportation Agreement, the Colstrip Units 3&4 owners pay a separate fee for the transportation of the coal from the mine to Colstrip Units 3&4 on a conveyor belt that was designed and constructed by WECO and has been continuously operated and maintained by WECO.

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               In 2002, the State of Montana, as agent for the Minerals Management Service (“MMS”) of the U.S. Department of the Interior, conducted an audit of the royalty payments made by WECO on the production of coal from the federal leases. The audit covered two periods: October 1991 through December 1995, and January 1996 through 2001. Based on these audits, the Office of Minerals Revenue Management (“MRM”) of the Department of the Interior issued orders directing WECO to pay royalties in the amount of $7.0 million on the proceeds received from the Colstrip owners under the Coal Transportation Agreement during the two audit periods. Both held that the payments for transportation were payments for the production of coal. The Company believes that only the costs paid for coal production are subject to the federal royalty, not payments for transportation.

               WECO appealed the orders of the MRM to the Directors of MMS. On March 28, 2005, the MMS issued a decision stating that payments to WECO for transportation across the conveyor belt were part of the purchase price of the coal and therefore subject to the royalty charged by the federal government under the federal leases. However, the MMS dismissed the royalty claims for periods more than seven years before the date of the order on the basis that the statute of limitations had expired.

               On June 17, 2005, WECO appealed the decision of the MMS on the transportation charges to the United States Department of the Interior, Office of Hearings and Appeals, Interior Board of Land Appeals (“IBLA”). On September 6, 2005, the MMS filed its answer to WECO’s appeal. This matter is still pending before the IBLA.

               The total amount of the MMS royalty claims including interest through the end of 2003 was approximately $5.0 million. This amount, if payable, is subject to interest through the date of payment, and as discussed above, the audit only covered the period through 2001.

               In 2003, the State of Montana Department of Revenue (“DOR”) assessed state taxes for years 1997 and 1998 on the transportation charges collected by WECO from the Colstrip Units 3&4 owners. The taxes are payable only if the transportation charges are considered payments for the production of coal. The DOR is relying upon the same arguments used by the MMS in its royalty claims. WECO has disputed the state tax claims. It is anticipated that the state tax claims will be resolved following the outcome of WECO’s appeal of the MMS royalty claims or subsequent proceedings in federal court. The total of the state tax claims through the end of 1998, including interest through the end of 2003, was approximately $3.6 million. If this amount is payable it is subject to interest from the time the tax payment was due until it is paid.

               The MMS has asserted two other royalty claims against WECO. In 2002, the MMS held that “take or pay” payments received by WECO during the period from October 1, 1991 to December 31, 1995 from two Colstrip Units 3&4 owners were subject to the federal royalty. The MMS is claiming that these “take or pay” payments are payments for the production of coal, notwithstanding that no coal was produced. WECO filed a notice of appeal with MMS on October 22, 2002, disputing this royalty demand. No ruling has yet been issued by MMS. The total amount of the royalty demand, including interest through August 2003, is approximately $2.7 million.

               In 2004, the MMS issued a demand for a royalty payment in connection with a settlement agreement dated February 21, 1997 between WECO and one of the Colstrip owners, Puget Sound Energy. This settlement agreement reduced the coal price payable by Puget Sound as a result of certain “inequities” caused by the fact that the mine owner at the time, Montana Power, was also one of the Colstrip customers. The MMS has claimed that the coal price reduction is subject to the federal royalty. WECO has appealed this demand to the MMS, which has not yet ruled on the appeal. The amount of the royalty demand, with interest through mid-2003, is approximately $1.3 million.

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               Finally, in May 2005 the State of Montana asserted a demand for unpaid royalties on the state lease for the period from January 1, 1996 through December 31, 2001. This demand, which was for $0.6 million, is based on the same arguments as those used by the MMS in its claim for payment of royalties on transportation charges and the 1997 retroactive “inequities” adjustment of the coal price payable by Puget Sound.

               Neither the MMS nor the DOR has made royalty or tax demands for all periods during which WECO has received payments for transportation of coal. Presumably, the royalty and tax demands for periods after the years in dispute—generally, 1997 to 2001—and future years will be determined by the outcome of the pending proceedings. However, if the MMS and DOR were to make demands for all periods through the present, including interest, the total amount claimed against WECO, including the pending claims and interest thereon through June 30, 2006, could exceed $40 million.

               The Company believes that WECO has meritorious defenses against the royalty and tax demands made by the MMS and the DOR. The Company expects a favorable ruling from the IBLA, although it could be a year or more before the IBLA issues its decision. If the outcome is not favorable to WECO, the Company plans to seek relief in Federal district court.

               Moreover, in the event of a final adverse outcome with DOR and MMS, the Company believes that certain of the Company’s customers are contractually obligated to reimburse the Company for any royalties and taxes imposed on the Company for the production of coal sold to the Colstrip owners, plus the Company’s legal expenses. Consequently, the Company has not recorded any provisions for these matters. Legal expenses associated with these matters are expensed as incurred. WECO may be able to recover these expenses from the Colstrip owners upon the final determination of these claims.

Halifax County Property Tax

               ROVA is located in Halifax County, North Carolina and is the County’s largest taxpayer. During the second quarter of 2006, ROVA settled all outstanding personal property assessments for years 2000 to 2005, including interest and penalties, for approximately $3.7 million. Because ROVA had previously accrued for the assessments in its financial statements, there was no material impact on the Company’s financial statements in the second quarter as a result of the settlement.

Rensselaer Tax Assessment

               Niagara Mohawk Power Corporation (“NIMO”) was party to power purchase agreements with independent power producers, including the Rensselaer project, in which we owned an interest. In 1997, the New York Public Service Commission approved NIMO’s plan to terminate or restructure 29 power purchase contracts. The Rensselaer project agreed to terminate its Power Purchase and Supply Agreement after NIMO threatened to seize the project under its power of eminent domain. NIMO and the Rensselaer project executed a settlement agreement in 1998 with a payment to the project. On February 11, 2003, the North Carolina Department of Revenue notified us that it had disallowed the exclusion of gain as non-business income from the settlement agreement between NIMO and the Rensselaer project. The State of North Carolina assessed a current tax of $3.5 million, interest of $1.3 million (through 2004), and a penalty of $0.9 million. We consequently filed a protest. The North Carolina Department of Revenue held a hearing on May 28, 2003. In November 2003, we submitted further documentation to the State to support our position. On January 14, 2005, the North Carolina Department of Revenue concluded that the additional assessment is statutorily correct. On July 27, 2005, the Company responded to the North Carolina Department of Revenue providing additional information. Unless an acceptable settlement can be reached, the Company may pursue a formal hearing with the Department of Revenue and/or appeal the Department’s assessment to the Superior Court of North Carolina. The Company has accrued a reserve of $2.1 million, which is the amount at which the Company believes a settlement of this tax claim is likely.

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Other Contingencies

               1992 UMWA Benefit Plan Surety Bond

               On May 11, 2005, XL Specialty Insurance Company and XL Reinsurance America, Inc. (together, “XL”), filed in the U.S. District Court, Southern District of New York, a Complaint for Declaratory Judgment against Westmoreland Coal Company and named Westmoreland Mining LLC as a co-defendant. The Complaint asks the court to confirm XL’s right to cancel a $21.3 million bond that secures Westmoreland’s obligation to pay premiums to the UMWA 1992 Plan, and also asks the court to direct Westmoreland to pay $21.3 million to XL to reimburse XL for the $21.3 million that would be drawn under the bond by the 1992 Plan Trustees upon cancellation of the bond.

               At a hearing held on January 31, 2006, the judge changed the venue to the United States District Court for New Jersey.

               The Company believes that it has no obligation to reimburse XL for draws under the bond unless the draw is the result of a default by the Company under its obligations to the UMWA 1992 Plan. No default has occurred. If XL prevails on its claim, the Company will be required to provide cash collateral of $21.3 million for its obligations to the 1992 Plan or, alternatively, provide a letter of credit.

               Combined Benefit Fund

               Under the Coal Act, we are required to provide postretirement medical benefits for certain UMWA miners and their dependents by making payments into certain benefit plans, one of which is the CBF.

               The Coal Act merged the UMWA 1950 and 1974 Benefit Plans into the CBF, and beneficiaries of the CBF were assigned to coal companies across the country. Congress authorized the Department of Health & Human Services (“HHS”) to calculate the amount of the premium to be paid by each coal company to whom beneficiaries were assigned. Under the statute, the premium was to be based on the aggregate amount of health care payments made by the 1950 and 1974 Plans in the plan year beginning July 1, 1991, less reimbursements, divided by the number of individuals covered. That amount is increased each year by a cost of living factor.

               Prior to the creation of the CBF, the UMWA 1950 and 1974 Plans had an arrangement with HHS pursuant to which they would pay the health care costs of retirees entitled to Medicare, and would then seek reimbursement for the Medicare-covered portion of the costs from HHS. The parties had numerous disputes over the years concerning the amount to be reimbursed, which led them to enter into a capitation agreement in which they agreed that HHS would pay the Plans a specified per-capita reimbursement amount for each beneficiary each year, rather than trying to ascertain each year the actual amount to be reimbursed. The capitation agreement was in effect for the plan year beginning July 1, 1991, the year specified by the Coal Act as the baseline for the calculation of Coal Act premiums.

               On August 12, 2005, the United States District Court for the District of Maryland issued a decision in a case filed by a large group of coal operators (including the Company) against the Commissioner of the Social Security Administration (“Social Security”), successor to HHS in this matter, and the Trustees of the UMWA Combined Benefit Fund (the “Trustees”). The case concerns the calculation of premiums payable to the CBF pursuant to the Coal Act. The dispute involves the proper definition of the term “reimbursements” as used in the statutory provision describing how premiums are to be calculated. The position of the coal operators is that “reimbursements” means actual reimbursements received by the CBF pursuant to the capitation agreement, whereas the Trustees have assessed the premiums based on the HHS calculation using the amounts of Medicare-covered expenses, i.e., the amounts that would be reimbursed to the CBF if the published reimbursement schedule for Medicare-covered expenses were being applied. The method of assessing “reimbursements” used by Social Security and the Trustees resulted in higher premiums for coal operators than would have been the case if the actual reimbursements received by the CBF had been used in the calculation of premiums.

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               This issue has been in litigation for over ten years and in two different United States Circuit Courts of Appeals. In 1995, the Court of Appeals for the Eleventh Circuit ruled, in a victory for coal companies, that the meaning of the statute was clear, i.e., that “reimbursements” meant the actual amount by which the CBF was reimbursed, regardless of the amount of the CBF’s Medicare-covered expenditures. In 2002, the Court of Appeals for the District of Columbia Circuit ruled that the statute was ambiguous, and remanded the case to the Commissioner of Social Security for an explanation of its interpretation so that the court could evaluate whether the interpretation was reasonable. In the August 2005 decision, the United States District Court for the District of Maryland agreed with the Eleventh Circuit that the term “reimbursements” unambiguously means the actual amount by which the CBF was reimbursed, and the Court granted summary judgment to the coal operators.

               The difference in premium payments for Westmoreland is substantial. Pursuant to the holdings of the Eleventh Circuit and the Federal District Court of Maryland, Westmoreland has overpaid and expensed premiums by more than $6 million for the period from 1993 through 2005.

               On August 25, 2005, the Trustees filed a motion with the Maryland District Court asking the court to clarify its order or grant a stay to prevent the coal operators from claiming a refund or applying the overpayment against current premiums pending appeal of the court’s order. No decision has been issued on this motion. We expect it to be denied. Subsequently, the Commissioner of Social Security and the Trustees appealed the decision of the Maryland District Court to the United States Court of Appeals for the Fourth Circuit. We believe that the decision of the District Court will not be overturned on appeal.

               Oral arguments before the Fourth Circuit Court of Appeals were held on September 21, 2006.

               On December 2, 2005, the Maryland federal district court judge who granted summary judgment in favor of the coal companies on the premium calculation issue, held a hearing on the motion the CBF filed in August seeking an order barring the coal companies from offsetting their plan year 2006 premiums by the amount of the premium overpayments at issue in the case while the case is on appeal. The judge ruled that until the case is final, the CBF can retain the premium overpayments. However, the judge applied the new premium calculation prospectively.

               The Company now pays premiums to the CBF of approximately $332,000 per month, compared to $396,000 per month prior to the Maryland District Court decision.

               Landowner Claim

               In 1998, Basin Resources Inc., a subsidiary of the Company, paid a landowner $48,000 to settle a claim that Basin’s operations had caused subsidence that damaged his home. On March 22, 2001, the landowner filed a second claim in Las Animas County Court, Colorado, again alleging that Basin’s operations had caused subsidence that damaged his home. Basin contested this claim. In December 2002, a judge of that court determined that subsidence had occurred and awarded the landowner damages of $622,000 plus attorney’s fees. Based on the court decision, the Company recorded a reserve for the amount of the award. The Company believes that this award was excessive, in part because the landowner’s own expert placed the cost of repair at less than $100,000. The Company also believes the settlement in the first case bars the second claim. The Company appealed to the Colorado Intermediate Court of Appeals, which affirmed the lower court’s decision on November 17, 2005. The Company’ motion for reconsideration, filed on December 1, 2005, was denied. We filed a Petition for Writ of Certiorari with the Colorado Supreme Court on March 27, 2006.

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               Derivative Action Brought by Washington Group International, Inc., in Connection With Sales
                Agency Agreement

               On February 17, 2006, we were served with a complaint filed by Washington Group International, Inc. (“WGI”) in Colorado District Court, City and County of Denver. The defendants in this legal action were Westmoreland Coal Company, Westmoreland Coal Sales Company (“WCSC”), Westmoreland Resources, Inc. (“WRI”), and certain directors and officers of WRI. WGI owns a 20% interest in WRI and the Company owns the remaining 80%. This litigation related to a coal sales agency agreement between WRI and WCSC, a wholly owned subsidiary of the Company, which was entered into in January of 2002. Under this coal sales agency agreement, WCSC agreed to act as agent for WRI in marketing and selling WRI’s produced coal in exchange for an agency fee per ton sold. WGI objected to this fee and claimed in its complaint that the directors of WRI and its President breached their fiduciary duty by granting an over-market agency fee to an affiliated company. WGI’s share of the amount in dispute, if the fee was to be rescinded retroactively to 2002 and the fee then in effect applied, is approximately $0.6 million. The Company believes that the sales agency fee reflects a fair rate for marketing and selling coal since 2002 and further believes that WCSC provides service to WRI for which it should be compensated at a fair rate. The Company has not reserved any amount in the financial statements for this claim.

               On April 3, 2006, WGI and the Company agreed to submit the determination of the coal sales agency fee to binding arbitration if the dispute cannot be resolved through negotiations and mediation. Pursuant to this agreement, the litigation described above was dismissed with prejudice.

               West Virginia Flood Litigation

               From late 2001 to early 2003, the Company was named as a defendant in two civil actions filed in Boone County, West Virginia, in which the plaintiffs claimed to represent a class of people adversely affected by a large flood that occurred in southern West Virginia in early July 2001. Under a local court rule for “mass litigation,” those civil actions were referred to the West Virginia Circuit Court for Raleigh County, West Virginia, where the Company was joined in a consolidated proceeding with approximately 200 defendants named by more than 2,000 plaintiffs in thirty-five civil actions filed originally in eight counties in southern West Virginia. The Complaints were similar in that they alleged that the defendants were engaged in activities that altered the landscape causing excess amounts of surface water to flow upon plaintiffs’ lands, thereby causing damage to their property. The causes of action pleaded included strict liability, negligence, nuisance, trespass, and gross negligence or recklessness. All of the Complaints sought punitive damages. The Company responded to the complaints by denying liability. We were able to negotiate from plaintiffs’ counsel an informal dismissal of the Company without prejudice. However, when new Plaintiffs asserted claims in an Amended Complaint that was filed in the consolidated cases on September 30, 2005 in the West Virginia Circuit Court for Raleigh County, the Company was again included as a defendant, perhaps because the Company’s name appeared on pleadings filed early in this litigation. With the filing and service of amended complaints, the number of Plaintiffs now exceeds 4,000.

               On December 2, 2005, we responded to the Amended Complaint with a motion to dismiss the Company based on the expiration of the statute of limitations and other procedural grounds. The trial is scheduled to occur in stages, with each stage focusing on one or more particular watershed areas in southern West Virginia because each watershed has unique facts that are relevant to the issues of liability and damages. The first series of trials (organized by watershed then further by subwatershed) is underway in Raleigh County. That trial does not involve the Company, except to the extent that precedent-setting trial procedures and legal rulings are being set and made. In what could be called a “test case,” plaintiffs are proceeding generally only against the landowners that allowed mining and timbering on their properties, arguing that the combined effects of the extraction they allowed exacerbated flooding and that they should have foreseen that result.

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               At the appropriate time, we will attempt to obtain from plaintiffs’ counsel a voluntary dismissal of the Company based on the fact that it was not, at the time the flooding occurred, operating any mines in West Virginia, all active operations having ceased around 1995. If we are not successful in having the Company dismissed as a defendant, we will vigorously contest liability because we believe strongly that the Company’s mining operations prior to 1995 had no impact on the flood damage that occurred in 2001. The Company has not reserved any amount in the financial statements for this claim.

               Global Warming Class Action

               On April 26, 2006, we learned of a class action complaint filed in the United States District Court in the Southern District of Mississippi in which we are named as a defendant. The case, entitled Comer, et al. v Nationwide Insurance Company, et al. case No. 1: 05-cv-00436-RHW, has 14 named individuals as plaintiffs who filed the complaint on behalf of themselves and all others similarly situated. The defendants are: 7 large oil companies; the American Petroleum Institute; 1 to 100 unnamed oil and refining companies; 21 power generation companies; and 10 coal mining and/or coal leasing companies, including us. With respect to the coal companies, the complaint alleges that the defendants produced hydrocarbons that, when used in the production of electricity, caused the emission of “greenhouse gases”, which allegedly caused global warming, which allegedly caused, or added to, the destructiveness of Hurricane Katrina, which allegedly caused damage to the plaintiffs. The plaintiffs are seeking compensatory and punitive damages as well as expenses and legal costs.

               The Company believes there is no more than a remote possibility that it has any liability in this matter. The Company has not reserved any amount in the financial statements for this claim.

               ROVA Acquisition

               On June 29, 2006, the Company acquired a 50 percent partnership interest in the 230 MW Roanoke Valley (“ROVA”) power project located in Weldon, North Carolina from a subsidiary of E.ON U.S. LLC – formerly LG&E Energy LLC. The acquired 50 percent interest, together with the 50 percent interest which the Company owned prior to this acquisition, brings the Company’s ownership interest in ROVA to 100 percent. As part of the same transaction, the Company acquired certain additional assets from LG&E Power Services LLC, a subsidiary of E.ON U.S., consisting primarily of contracts under which the Company will now operate and provide maintenance services to ROVA and four power plants in Virginia.

               As a result of the ROVA acquisition, our contractual obligations and commitments increased. The information below supplements and should be read in conjunction with the information presented in the Amendment No. 1 to the 2005 Form 10-K under the caption, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Contractual Obligations and Commitments.” We discuss these contractual obligations and commitments elsewhere in this Form 10-Q, including in Notes 2 and 6 to our Consolidated Financial Statements.

               Westmoreland Partners, which owns ROVA, is required to make principal payments on its indebtedness of $12.6 million in the last six months of 2006, principal payments of $27.7 million, $33.6 million, $32.9 million, and $12.3 million in 2007, 2008, 2009, 2010, and aggregate principal payments of $51.5 million after 2010.

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               Westmoreland Partners is also obligated to purchase at least 512,500 tons of coal each year from TECO until its agreements with TECO terminate in 2014 and 2015. Westmoreland Partners is currently paying TECO $49.99 per ton (including transportation cost), which is subject to annual increases based on indices. If there were no increases in the cost of coal, and if Westmoreland Partners purchased only 512,500 tons of coal each year and did not extend its coal supply agreements, then the minimum purchase obligation would be $12.8 million in the last six months of 2006, $25.6 million in each of 2007, 2008, 2009, and 2010, and an aggregate of $107.6 million after 2010.

               Westmoreland Energy LLC incurred $30 million of indebtedness to finance the ROVA acquisition. The entire principal amount of that indebtedness is scheduled to be paid in 2007. Westmoreland Energy LLC may extend that indebtedness, subject to the conditions described in Note 2. The Company also borrowed $5 million from First Interstate to finance the ROVA acquisition. The entire principal amount of that indebtedness is scheduled to be paid in 2007.

               At the closing of this transaction on June 29, 2006, the litigation brought on March 24, 2005 by Virginia Electric and Power Company, doing business in North Carolina as Dominion North Carolina Power, in the Circuit Court of the City of Richmond seeking a declaratory judgment, was dismissed with prejudice by agreement of the parties.

29 ITEM 2
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

Material Changes in Financial Condition from December 31, 2005 to June 30, 2006

Forward-Looking Disclaimer

               Throughout this Form 10-Q, we make statements which are not historical facts or information and that may be deemed “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements include, but are not limited to, the information set forth in Management’s Discussion and Analysis of Financial Condition and Results of Operations. For example, words such as “may,” “will,” “should,” “estimates,” “predicts,” “potential,” “continue,” “strategy,” “believes,” “anticipates,” “plans,” “expects,” “intends,” and similar expressions are intended to identify forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, levels of activity, performance or achievements, or industry results, to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: general economic and business conditions; the material weaknesses in the Company’s internal controls over financial reporting identified in Amendment No. 1 to the Annual Report on Form 10-K for the year ended December 31, 2005 (Amendment No. 1 to our 2005 Form 10-K), the associated ineffectiveness of the Company’s disclosure controls; health care cost trends; the cost and capacity of the surety bond market; the Company’s ability to manage growth and significantly expanded operations; the ability of the Company to implement its growth and development strategy; the Company’s ability to pay the preferred stock dividends that are accumulated but unpaid; the Company’s ability to retain key senior management; the Company’s access to financing; the Company’s ability to maintain compliance with debt covenant requirements or obtain waivers from its lenders in cases of non-compliance; the Company’s ability to achieve anticipated cost savings and profitability targets; the Company’s ability to successfully identify new business opportunities; the Company’s ability to negotiate profitable coal contracts, price reopeners and extensions; the Company’s ability to predict or anticipate commodity price changes; the Company’s ability to maintain satisfactory labor relations; changes in the industry; competition; the Company’s ability to utilize its deferred income tax assets; the ability to reinvest cash, including cash that has been deposited in reclamation accounts, at an acceptable rate of return; weather conditions; the availability of transportation; price of alternative fuels; costs of coal produced by other countries; the demand for electricity; the performance of ROVA and the structure of ROVA’s contracts with its lenders and Dominion Virginia Power; the effect of regulatory and legal proceedings; environmental issues, including the cost of compliance with existing and future environmental requirements; the contingencies of the Company discussed in Note 13 to the Consolidated Financial Statements; the risk factors set forth below; and the other factors discussed in Items 1, 2, 3 and 7 of the Company’s Amendment No. 1 to the 2005 Form 10-K filed with the Securities and Exchange Commission. As a result of the foregoing and other factors, no assurance can be given as to the future results and achievement of the Company’s goals. The Company disclaims any duty to update these statements, even if subsequent events cause its views to change.

               References in this document to www.westmoreland.com, any variations of the foregoing, or any other uniform resource locator, or URL, are inactive textual references only. The information on our Web site or any other Web site is not incorporated by reference into this document and should not be considered to be a part of this document.

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Overview

               We are an energy company. We mine coal, which is used to produce electric power, and we own complete or partial interests in power-generating plants. All of our five mines supply baseloaded power plants. Several of these power plants are located adjacent to our mines and we sell virtually all our coal under long-term contracts. Consequently, our mines enjoy relatively stable demand and pricing compared to competitors who sell more of their production on the spot market.

               On June 29, 2006, we purchased the remaining 50% ownership interest in the ROVA coal-fired plants, and we now own 100% of these plants, which have a total generating capacity of 230 MW. ROVA is baseloaded and supplies power pursuant to long-term contracts. We also own a 4.49% interest in the gas-fired Fort Lupton project, which has a generating capacity of 290 MW and provides peaking power to the local utility in Colorado.

Challenges

               We believe that our principal challenges today include the following:

• Integrating the newly acquired ROVA business;

• renegotiating sales contracts to reflect significantly higher coal market prices and higher commodity and production costs;

• reducing high heritage health benefit expenses which continue to be adversely affected by inflation in medical costs, potentially longer life expectancies for retirees and active employees and the failure of the UMWA retirement fund trustees to manage medical costs;

• maintaining and collateralizing, where necessary, our Coal Act obligations and reclamation bonds;

• funding required contributions to pension plans that are underfunded;

• obtaining adequate capital for on-going operations and our growth initiatives;

• new environmental regulations, which have the potential to significantly reduce sales from our mines; and

• claims for potential taxes and royalties asserted by various governmental entities.

               We discuss these issues, as well as the other challenges we face, elsewhere in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, and under “Risk Factors.”

Critical Accounting Estimates and Related Matters

               Our discussion and analysis of financial condition, results of operations, liquidity and capital resources is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. Generally accepted accounting principles require that we make estimates and judgments. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. Actual results may differ materially from these estimates.

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               We have made significant judgments and estimates in connection with the following accounting matters. Our senior management has discussed the development, selection and disclosure of the accounting estimates in the section below with the Audit Committee of our Board of Directors.

               In connection with our discussion of these critical accounting matters, and in order to reduce repetition, we also use this section to present information related to these judgments and estimates.

               Postretirement Benefits and Pension Obligations

               Our most significant long-term obligations are the obligations to provide postretirement medical benefits, pension benefits, workers’ compensation and pneumoconiosis (black lung) benefits. We provide these benefits to our current and former employees and their dependents. See Notes 6, 7, 8, 9 and 10 to the Consolidated Financial Statements in our Amendment No. 1 to the 2005 Form 10-K for more information about these assumptions, estimates, and obligations.

               We estimate the total amount of these obligations with the help of third party professionals using actuarial assumptions and information. Our estimates are sensitive to judgments we make about the discount rate, about the rate of inflation in medical costs, about mortality rates, and about the effect of the Medicare Prescription Drug Improvement and Modernization Act of 2003 or Medicare Reform Act on the benefits payable. We review these estimates and obligations at least annually.

               Actuarial valuations project that our retiree health benefit costs for current employees and retirees will continue at the current level in the near term and then decline to zero over the next approximately sixty years as the number of eligible beneficiaries declines. Beginning in 2006, we receive Medicare Part D prescription drug reimbursements. We expect that these reimbursements will reduce our cash costs by approximately $1.8 million in 2006.

               We expect to incur lower cash payments for workers’ compensation benefits in 2006 than in 2005 and expect that amount to decline over time. We anticipate that these payments will decline because we are no longer self-insured for workers’ compensation benefits and have had no new claimants since 1995.

               We do not pay pension or black lung benefits directly. These benefits are paid from trusts that we established and fund. As of June 30, 2006, our pension trusts were underfunded, and we expect to contribute approximately $1.4 million to these trusts in 2006. As of June 30, 2006, our black lung trust was overfunded by $7.6 million, and we do not expect to be required to make additional contributions to this trust.

               Asset Retirement Obligations, Reclamation Costs and Reserve Estimates

               Asset retirement obligations primarily relate to the closure of mines and the reclamation of land upon cessation of mining. We account for reclamation costs, along with other costs related to mine closure, in accordance with SFAS No. 143 – Asset Retirement Obligations or SFAS No. 143, which we adopted on January 1, 2003. This statement requires us to recognize the fair value of an asset retirement obligation in the period in which we incur that obligation. We capitalize the present value of our estimated asset retirement costs as part of the carrying amount of our long-lived assets.

               Certain of the Company’s customers have either agreed to reimburse the Company for reclamation expenditures as they are incurred or have pre-funded a portion of the expected reclamation costs. These funds will serve as sources for use in final reclamation activities.

               The liability “Asset retirement obligations” on our consolidated balance sheets represents our estimate of the present value of the cost of closing our mines and reclaiming land that has been disturbed by mining. This liability increases as land is mined and decreases as reclamation work is performed and cash expended. The asset, “Property, plant and equipment – capitalized asset retirement costs,” remains constant until new liabilities are incurred or old liabilities are re-estimated. We estimate the future costs of reclamation using standards for mine reclamation that have been established by the government agencies that regulate our operations as well as our own experience in performing reclamation activities. These estimates can and do change. Developments in our mining program also affect this estimate by influencing the timing of reclamation expenditures.

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               We amortize our acquisition costs, development costs, capitalized asset retirement costs and some plant and equipment using the units-of-production method and estimates of recoverable proven and probable reserves. We review these estimates on a regular basis and adjust them to reflect our current mining plans. The rate at which we record depletion also depends on the estimates of our reserves. If the estimates of recoverable proven and probable reserves decline, the rate at which we record depletion increases. Such a decline in reserves may result from geological conditions, coal quality, effects of governmental, environmental and tax regulations, and assumptions about future prices and future operating costs.

Liquidity and Capital Resources

               Cash provided by operating activities was $6.3 million for the six months ended June 30, 2006, compared with $7.5 million for the six months ended June 30, 2005. Cash from operations in 2006 compared to 2005 decreased primarily because of a decrease in distributions from our power projects and increases in accounts receivable as a result of coal shipments late in the quarter and inventories due to increases in our spare tire inventories. Our working capital deficit was $58.5 million at June 30, 2006 compared to $20.1 million at December 31, 2005. The decrease in working capital resulted primarily from the short-term ROVA bridge financing and elimination of deferred overburden removal costs as the result of a change in accounting principle discussed in Note 3 to our consolidated financial statements. This accounting adjustment had no effect on cash flows.

               We used $20.7 million of cash in investing activities in the six months ended June 30, 2006 compared to $14.1 million in the six months ended June 30, 2005. Cash provided by investing activities in 2006 included $5.1 million received from the sale of mineral interests. Cash used in investing activities in 2006 included $8.4 million of additions to property, plant and equipment for mine equipment. Cash flows from investing activities in 2006 also included $7.7 million for our ROVA acquisition (net of cash acquired) and $9.7 million related to an increase in our restricted cash accounts, pursuant to Westmoreland Mining’s term loan agreement and as collateral for our surety bonds. Additions to property, mine equipment, development projects and investment in a new company-wide software system in the first six months of 2005 totaled $12.3 million. Decreases in restricted cash accounts were $2.3 million in the first six months of 2005.

               We received $36.4 million of cash from our financing activities in the six months ended June 30, 2006, primarily because we borrowed $35 million to finance the ROVA acquisition and $7.0 million from our revolving lines of credit. During the period we repaid $6.1 million of our long-term debt. Cash provided by financing activities of $4.6 million in the first six months of 2005 was primarily the result of $9.5 million in borrowings under revolving lines of credit offset by $4.7 million used for the repayment of long-term debt.

               Consolidated cash and cash equivalents at June 30, 2006 totaled $33.2 million, including $21.9 million at ROVA, $0.7 million at Westmoreland Mining, $6.8 million at Westmoreland Resources and $3.8 million at our captive insurance subsidiary. Consolidated cash and cash equivalents at December 31, 2005 totaled $11.2 million, including $3.0 million at Westmoreland Mining, $4.2 million at Westmoreland Resources, and $3.4 million at the captive insurance subsidiary. The cash at Westmoreland Mining is available to us through quarterly distributions, as described below. The cash at our captive insurance subsidiary and Westmoreland Resources is available to us through dividends. The cash at ROVA is available to us through semi-annual distributions after debt and debt reserve account requirements are met.

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               We had restricted cash and bond collateral, which were not classified as cash or cash equivalents, of $65.7 million at June 30, 2006 and $34.6 million at December 31, 2005. The restricted cash at June 30, 2006 included $28.2 million at ROVA in interest bearing debt service accounts and prepayment accounts and $25.0 million in Westmoreland Mining’s debt service reserve and long-term prepayment accounts. At June 30, 2006, our reclamation, workers’ compensation and postretirement medical cost obligation bonds were collateralized by interest-bearing cash deposits of $12.4 million, which amounts we have classified as non-current assets. In addition, we had accumulated reclamation deposits of $60.6 million at June 30, 2006, which we received from customers of the Rosebud Mine to pay for reclamation.

               Westmoreland Mining’s term loan agreement restricts Westmoreland Mining’s ability to make distributions to Westmoreland Coal Company from ongoing operations. Until Westmoreland Mining has fully paid the original acquisition debt, which is scheduled for December 31, 2008, Westmoreland Mining may only pay Westmoreland Coal Company a management fee and distribute to Westmoreland Coal Company 75% of Westmoreland Mining’s surplus cash flow. Westmoreland Mining is depositing the remaining 25% into an account that will fund the $30 million balloon payment due December 31, 2008. The agreement restricts distributions to the extent funds are needed to maintain a debt service reserve equal to the next six months principal and interest payments.

               Westmoreland Mining has a $20 million revolving credit facility which expires in April 2008. As of June 30, 2006, $7.5 million was borrowed. In addition, a letter of credit for $1.9 million was supported by the facility with the remainder of the facility available to borrow.

               As of June 30, 2006, Westmoreland Coal Company had $9 million of its $14 million revolving line of credit available to borrow.

               During the second quarter, the Company exchanged a total of 118,783 Depositary Shares at an exchange ratio of 1.8691 shares of Common Stock for each Depositary Share, compared to the conversion ratio of 1.708 provided for under the terms of Certificate of Designation governing the preferred stock. As a result of these preferred stock exchanges, $0.5 million of premium on the exchange of preferred stock for common stock was recorded in the second quarter statement of operations. This $0.5 million premium on the exchange of preferred stock for common stock represents the excess of the fair value of consideration transferred to the preferred stock holders over the value of consideration that would have been issued under the original conversion terms. While the Company can redeem preferred shares at any time for the redemption value of $25 plus dividend arrearages paid in cash, the Company has agreed to the negotiated exchanges as a cash conservation measure and because they reduce the number of outstanding Depositary Shares, thereby eliminating $2.5 million of preferred dividend arrearages and associated future dividend requirements.

               The changes in the Company’s current installments of long-term debt, trade accounts payable, interest payable, long-term debt, and revolving lines of credit are primarily attributable to the assets acquired and the liabilities incurred and assumed as part of the ROVA acquisition.

Financial Implications of the ROVA Acquisition

               In June 2006, we acquired the 50% interest in the ROVA project that we did not previously own. As part of that transaction, we also acquired five contracts from LG&E Power Services. Pursuant to these contracts two new subsidiaries of the Company, Westmoreland Power Operations and Westmoreland Utility Operations, will now operate the ROVA project and four other power plants.

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               ROVA sells electric power under two power sales agreements, one that expires in 2019 and one that expires in 2020. Under these agreements, payments to ROVA include a fixed capacity charge which accounted for approximately 50% of ROVA’s revenues in 2005 and in the first six months of 2006.

               Fixed capacity charges are calculated based on a rate for each MW-hour of electricity produced. The ROVA I hourly rate for these fixed capacity charges is fixed from 2006 through 2008 and then steps down to a new lower rate in May 2009 through the end of the power sales agreement in 2019. The ROVA II hourly rate for these fixed capacity charges is fixed from 2006 through 2009 and then steps down to a new lower rate in June 2010 through the end of the power sales agreement in 2020. ROVA’s indebtedness was structured so that ROVA’s principal and interest payments are relatively higher through 2009 and relatively lower thereafter. ROVA’s power sales agreements are structured to provide ROVA sufficient cash to repay its lenders and thus are relatively higher through 2009 and relatively lower thereafter.

               ROVA’s historical accounting policy for revenue recognition of these fixed capacity charges has been to record them as revenue as amounts were invoiced pursuant to the provisions of the power sales agreements. Revenue recognition rules now require the Company to record these fixed capacity charges on a straight-line basis over the remaining term of the power sales agreements, irrespective of when the amounts are billed and collected. This change, while having no effect on cash flow or total revenue recognized over the remaining term of the power sales agreements, will have a significant impact on the timing of the recognition of revenue and income at ROVA over the remaining term of the power sales.

               These two power sales agreements were entered into prior to the effective date of EITF 91-06, “Revenue Recognition of Long-Term Power Sales Contracts” and EITF 01-08, “Determining Whether an Arrangement Contains a Lease”. Accordingly, ROVA’s power sales agreements were not subject to the accounting requirements of these pronouncements. The completion of the ROVA acquisition triggered the two power sales agreements to be within the scope of EITF 01-08. Under EITF 01-08, each of the power sales agreements is considered to contain a lease within the scope of SFAS No. 13, “Accounting for Leases”. Each such lease is classified as an operating lease. As a result, the Company must recognize revenue for future fixed capacity charges on a straight-line basis over the remaining term of the power sales agreements.

               In our historical financial statements, earnings from our original 50% interest in ROVA appeared as “equity in earnings—independent power” because ROVA was an equity method affiliate. Because we now own 100% of ROVA, it is now fully consolidated in our financial statements. The pro-forma impact of our ownership of 100% of ROVA is shown in our Form 8-K/A filed contemporaneously with this Form 10-Q. On a pro-forma basis, if the ROVA transaction had occurred on January 1, 2005, the net loss attributable to common stockholders for the year ended December 31, 2005 would have increased to approximately $26.7M compared to the amount reported in the historical financial statements of $7.7M. If the ROVA transaction had occurred on January 1, 2006, the net loss applicable to common shareholders for the six months ended June 30, 2006 would have been $6.9 million compared to the net income applicable to common shareholders of $1.5 million reported in the historical financial statements. The pro forma financial statements include pro forma adjustments to reflect revenue under the power sales agreements on a straight line basis, adjustments to reflect interest expense on debt incurred to finance the acquisition, and adjustments to reflect depreciation and amortization on the adjusted basis in the asset and liabilities acquired. For more information, please see our Form 8-K/A.

               Substantial debt was incurred to finance ROVA’s development. Westmoreland Partners, which owns ROVA, is required to make principal payments on its indebtedness of $12.6 million in the last six months of 2006, $27.7 million in 2007, $33.6 million in 2008, $32.9 million in 2009, $12.3 million in 2010, and $51.5 million from 2011 through 2015, when ROVA’s project debt is completely repaid.

               We incurred $35 million of indebtedness to fund the acquisition. For more information about this indebtedness, see Notes 2 and 6 to our consolidated financial statements.

Liquidity Outlook

               The major factors impacting the Company’s liquidity outlook are its significant heritage health benefit costs, its acquisition debt and add-on debt repayment obligations for WML, its recent acquisition debt and existing project debt obligations for ROVA, and its ongoing business and future growth requirements. The Company’s principal sources of cash flow are dividends from WRI and WRM, distributions from ROVA and from WML subject to the provisions in their respective debt agreements, and dividends from the subsidiaries that operate power plants.

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               The Company’s heritage health benefit costs consist primarily of payments for post-retirement medical and workers’ compensation benefits. The Company also is obligated for employee pension and pneumoconiosis benefits. It is important to note that retiree health benefit costs are directly affected by increases in medical service and prescription drug costs. The most recent actuarial valuations of the Company’s post-retirement medical obligations indicated that the Company’s 2006 retiree health benefit expenses would be comparable in amount to the 2005 expenses and then decline to zero over the next approximately sixty years as the number of eligible beneficiaries declines. The Company incurred cash costs of $20 million for heritage health benefit costs in 2005 and expects to incur $19 to $20 million (net of the receipt of approximately $1.8 million in Medicare D subsidies) for these costs in 2006.

               The Company’s WML acquisitions in 2001 greatly increased revenues and operating cash flow. The financing obtained to make those acquisitions requires quarterly interest and principal payments of approximately $4 million. This debt financing also requires that 25% of excess cash flow, as defined, be set aside to fund the $30 million debt payment due in 2008. Therefore, only 75% of WML’s excess cash flow is available to the Company until the debt is paid off in 2008. WML also entered into the add-on debt facility in 2004 which requires the use of approximately $1 million of cash each quarter for debt service.

               In addition to the WML acquisitions, in June 2006, the Company acquired the 50% interest in ROVA that it did not previously own, which is expected to increase revenues and operating cash flow. This acquisition was funded with $35 million in debt as described in Note 2 to the financial statements. ROVA also has project-level debt which funded the original development of the power plants. The project-level debt requires semi-annual principal payments as described in Note 6 to the financial statements as well as ongoing interest payments. The acquisition debt requires approximately $0.8 million each quarter for interest in addition to semi-annual principal payments of approximately $4.3 million. During the term of this acquisition debt, the Company expects that substantially all of the cash distributions generated by ROVA will be used to make these interest and principal payments.

               The Company’s ongoing and future business needs may also affect liquidity. The Company does not anticipate that either its coal or its power production revenues will diminish materially as a result of any future downturn in economic conditions because the independent power projects in which the Company owns interests and the power plants that purchase coal mined by the Company produce relatively low-cost, baseload power. In addition, most of the Company’s coal and power production is sold under long-term contracts, which help insulate the Company from unfavorable market developments. However, contract price reopeners, contract expirations or terminations, and market competition could affect future coal revenues.

               The Company currently has sufficient cash resources and committed financing arrangements to provide adequate liquidity through early 2007. The Company believes it should be able to address its future liquidity needs through additional financing activities and/or by selling assets. Sources of additional liquidity may include additional borrowings, the restructuring of current debt obligations, the sale of non-strategic assets, and the issuance of additional equity. The Company has taken specific actions, including discussions with potential lenders, investors and asset purchasers regarding potential transactions that the Company believes can be completed. There can be no assurance that the Company can complete any transaction on terms acceptable to the Company.

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Growth and Development

               We describe in Note 2 of the Consolidated Financial Statements of this Form 10-Q our June 29, 2006 acquisition of the ROVA interest from E.ON US LLC. In addition, we discuss other growth and development opportunities in Amendment No. 1 to our 2005 Form 10-K. Please review these disclosures for more information.

Off-Balance Sheet Arrangements

               We do not have any off-balance sheet arrangements within the meaning of the rules of the Securities and Exchange Commission.

Contractual Commitments

               As a result of the ROVA acquisition, our contractual obligations and commitments increased materially. We describe these additional contractual obligations and commitments in Note 13 to our unaudited consolidated financial statements, under “Other Contingencies – ROVA Acquisition.”

37 RESULTS OF OPERATIONS

Quarter Ended June 30, 2006 Compared to Quarter Ended June 30, 2005.

Coal Operations. Coal tons sold were approximately 8% lower in the quarter ended June 30, 2006 compared to the same quarter in 2005, with decreases at Beulah and Rosebud partially offset by increases at Jewett , Absaloka, and Savage. The decreases at Beulah and Rosebud were primarily the result of planned equipment maintenance and customer outages. Our overall revenue has increased due to higher contract prices at all mines. Most of the Company’s coal sales contracts generally protect our operations against cost inflation, including increasing costs for commodities, either through direct pass-through or through index adjustments. During the second quarter of 2006, coal revenues increased at the Absaloka Mine compared to 2005 as a result of increased prices to its core customers and because of increased tons sold. At Jewett, increased revenue in the second quarter of 2006 reflected the interim supply agreement negotiated in 2005 as well as an increase in tons sold. Cost of sales increased for the second quarter of 2006 compared to the comparable period in 2005 primarily as a result of increased commodity prices at all mines and increased operating costs, including the cost of electricity at one of the mines.

               The following table shows comparative coal revenues, sales volumes, cost of sales and percentage changes between the periods:

	Quarter Ended June 30,
		2006		2005	Change
Revenues – thousands	$	91,618	$	85,464	7%
Volumes – millions of equivalent coal tons		6.646		7.252	(8%)
Cost of sales – thousands	$	72,351	$	71,350	1%

               The Company’s business is subject to the effects of weather and some seasonality. The power-generating plants that we supply typically schedule their regular maintenance for the spring and fall seasons.

Independent Power. Our equity in earnings from independent power operations decreased to $3.0 million in the second quarter 2006 from $3.5 million in the quarter ended June 30, 2005 primarily due to increased maintenance costs as a result of a routine 5 year maintenance program as well as unplanned maintenance tasks for boiler and tube repairs. For the quarters ended June 30, 2006 and 2005, the ROVA project produced 380,000 and 369,000 megawatt hours, respectively, and achieved average capacity factors of 83% and 81%, respectively.

Costs and Expenses. Depreciation, depletion and amortization increased to $5.9 million in the second quarter of 2006 compared to $5.5 million in 2005‘s second quarter. The increase is primarily related to increased capital expenditures at the mines for both continued mine development and the replacement of mining equipment and increased amortization of capitalized asset retirement costs.

               Selling and administrative expenses increased to $9.9 million in the quarter ended June 30, 2006 compared to $8.5 million in the quarter ended June 30, 2005. Approximately $1.0 million of the increase is a result of increased long-term incentive compensation accruals in the second quarter of 2006 compared to the three months ended June 30, 2005 because the price of the Company’s stock increased in the second quarter of 2006 compared to certain stock indices. In general, this expense increases or decreases as the market price of the Company’s common stock increases or decreases. The other significant contributors to the quarter-over-quarter increase were consulting fees related to the restatement of our 2005 financial statements as well as personnel and related costs incurred as part of our investment in development activities.

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               Heritage health benefit costs decreased slightly to $7.1 million in the second quarter of 2006 from $7.8 million in the second quarter of 2005 due primarily to lower Combined Benefit Fund premiums and an increase in the amount by which the black lung trust is over-funded as a result of increased interest rates that decreased the black lung liabilities.

               Interest expense was $2.8 million for both the three months ended June 30, 2006 and 2005. Interest income increased in 2006 due to higher short-term investments earning interest and because there were larger restricted cash and surety bond collateral balances that are invested.

               Income tax expense was $0.2 million and $0.1 million for the three months ended June 30, 2006 and 2005, respectively. Deferred tax expense (benefit) accrued on income (loss) before tax was offset by a change in the valuation allowance. Income tax expense includes state income taxes payable in certain states and alternative minimum taxes payable.

Six months Ended June 30, 2006 Compared to Six months Ended June 30, 2005.

Coal Operations. Coal tons sold were approximately 5% lower in the first six months ended June 30, 2006 compared to the first six months in 2005, with decreases at Beulah and Rosebud, partially offset by an increase at Jewett and Savage. The decreases at Beulah and Rosebud were primarily the result of planned equipment maintenance and customer outages. Our overall revenue increased due to higher contract prices at all mines. Most of the Company’s coal sales contracts generally protect our operations against cost inflation, including increasing costs for commodities, either through direct pass-through or through index adjustments. During the first six months of 2006, coal revenues increased at the Absaloka Mine compared to 2005 as a result of increased prices to its core customers. At Jewett, increased revenue in the first six months of 2006 reflected the interim supply agreement negotiated in 2005, including a small amount of above-contract tonnage sold at above-contract rates, whereas revenue in the first six months of 2005 included a one-time $2.4 million “catch-up” payment to recover portions of prior year cost increases for commodities. Cost of sales increased for the first six months of 2006 compared to the comparable period in 2005 primarily as a result of increased commodity prices at all mines and increased operating costs, including the cost of electricity at one of the mines. During the first six months of 2006, the Rosebud mine signed a new 3-year labor agreement with the union which represents the mine’s operating personnel.

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               The following table shows comparative coal revenues, sales volumes, cost of sales and percentage changes between the periods:

	Six Months Ended June 30,
		2006		2005	Change
Revenues – thousands	$	186,252	$	171,327	9%
Volumes – millions of equivalent coal tons		13.967		14.699	(5%)
Cost of sales – thousands	$	146,216	$	139,108	5%

               The Company’s business is subject to the effects of weather and some seasonality. The power-generating plants that we supply typically schedule their regular maintenance for the spring and fall seasons.

Independent Power. Our equity in earnings from independent power operations decreased to $7.5 million in the first six months of 2006 from $8.6 million in the six months ended June 30, 2005 due to decreased generation resulting from a planned shutdown for maintenance and unscheduled outages in 2006 caused by boiler and economizer tube leaks and lightning strikes. For the six months ended June 30, 2006 and 2005, ROVA produced 806,000 and 811,000 megawatt hours, respectively, and achieved average capacity factors of 88% and 89%, respectively. We also recognized $241,000 in equity earnings in the first six months of 2006, compared to $225,000 in the six months ended June 30, 2005, from our 4.49% interest in the Ft. Lupton project.

Costs and Expenses. Depreciation, depletion and amortization increased to $11.8 million in the first six months of 2006 compared to $10.9 million in 2005‘s first six months. The increase is primarily related to increased capital expenditures at the mines for both continued mine development and the replacement of mining equipment and increased amortization of capitalized asset retirement costs.

               Selling and administrative expenses increased to $19.3 million in the six months ended June 30, 2006 compared to $14.9 million in the six months ended June 30, 2005. Approximately $2.3 million of the increase is a result of increased long-term incentive compensation accruals in the first six months of 2006 compared to the six months ended June 30, 2005 because the price of the Company’s stock increased in the first six months of 2006 compared to certain stock indices. In general, this expense increases or decreases as the market price of the Company’s common stock increases or decreases. The other significant contributors to the first six months-over-first six months increase were approximately $1.2 million of costs related to consulting fees for the restatement of our 2005 financial statements and personnel and related costs incurred as part of our investment in development activities.

               Heritage health benefit costs decreased to $14.1 million in the first six months of 2006 from $15.6 million in the first six months of 2005 due primarily to lower Combined Benefit Fund premiums and an increase in the amount by which the black lung trust is over-funded as a result of increased interest rates that decreased the black lung liabilities.

               Interest expense was $5.5 million and $5.6 million for the six months ended June 30, 2006 and 2005, respectively. Interest income increased in 2006 due to higher short-term investments earning interest and because there were larger restricted cash and surety bond collateral balances that are invested.

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               Income tax expense was $0.5 million and $1.6 million for the six months ended June 30, 2006 and 2005, respectively. Deferred tax expense (benefit) accrued on income (loss) before tax was offset by a change in the valuation allowance. Income tax expense includes state income taxes payable in certain states and alternative minimum taxes payable.

41 ITEM 3
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

               The Company is exposed to market risk, including the effects of changes in commodity prices and interest rates as discussed below.

Commodity Price Risk

               The Company produces and sells commodities – principally coal and electric power – and also purchases commodities – principally diesel fuel, steel and electricity.

               The Company produces and sells coal through its subsidiaries, Westmoreland Resources, Inc. and Westmoreland Mining LLC, and the Company produces and sells electricity and steam through its subsidiary Westmoreland Energy LLC. Nearly all of the Company’s coal production and all of its electricity and steam production are sold through long-term contracts with customers. These long-term contracts reduce the Company’s exposure to changes in commodity prices. These contracts typically contain price escalation and adjustment provisions, pursuant to which the price for our coal may be periodically revised. The price may be adjusted in accordance with changes in broad economic indicators, such as the consumer price index; commodity-specific indices, such as the PPR-light fuel oils index; and/or changes in our actual costs. Contracts may also contain periodic price reopeners or renewal provisions, which give us the opportunity to adjust the price of our coal to reflect developments in the marketplace.

               The Company also purchases commodities. The Company manages some of the risk associated with the costs of these commodities by entering into contracts for the sale of its products with the adjustment features discussed above. In addition, during the first quarter of 2006, Westmoreland Mining LLC entered into derivative contracts to establish a fixed price for approximately 65% of the estimated diesel fuel needs at the Jewett Mine. These contracts settle monthly through the end of 2006 and cover approximately 4.0 million gallons of diesel fuel at an average price of $2.01 per gallon. The Company accounts for these derivative instruments on a mark-to-market basis through earnings. The consolidated financial statements as of June 30, 2006 reflect unrealized gains on these contracts of $0.4 million, which is recorded in other receivables with a corresponding adjustment to cost of sales.

Interest Rate Risk

               The Company and its subsidiaries are subject to interest rate risk on its debt obligations. The Company’s revolving lines of credit have a variable rate of interest indexed to either the prime rate or LIBOR. Based on balances outstanding on the lines of credit as of June 30, 2006, a one percent change in the prime interest rate or LIBOR would increase or decrease interest expenses by $475,000 on an annual basis. Westmoreland Mining’s Series D Notes under its term loan agreement have a variable interest rate based on LIBOR. A one percent change in the LIBOR would increase or decrease interest expense on the Series D Notes by $146,000 on an annual basis. A portion of ROVA’s debt under its Credit Agreement also has a variable interest rate based on LIBOR. A one percent change in the LIBOR would increase or decrease interest expense on ROVA’s debt by $1.0 million on an annual basis. The Company’s acquisition term loan also has a variable interest rate based on LIBOR. A one percent change in the LIBOR would increase or decrease interest expense on the acquisition term loan by $0.4 million on an annual basis.

               The Company’s heritage health benefit expenses are also impacted by interest rate changes because its workers compensation, pension, pneumoconiosis, and post-retirement medical benefit obligations are recorded on a discounted basis.

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               The carrying value and estimated fair value of the Company’s long-term debt with fixed interest rates at June 30, 2006 were $159.7 million and $169.8 million, respectively.

43 ITEM 4
CONTROLS AND PROCEDURES

               The Company’s management, with the participation of the Company’s chief executive officer and chief financial officer, evaluated the effectiveness of the Company’s disclosure controls and procedures as of June 30, 2006. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

               As disclosed in Amendment No. 1 to the Company’s Annual Report on Form 10-K, the Company has restated its previously issued consolidated financial statements as of December 31, 2005 and 2004 and for the years ended December 31, 2005, 2004 and 2003, and selected financial information for the years 2001 to 2005. The consolidated balance sheets and statements of operations have been restated to correct errors in the Company’s accounting for income taxes, its accounting for asset retirement obligations, and the classification of restricted cash. The restatement adjustments had no effect on the cash flows of the Company for any of the periods presented.

               As a result of the need to restate its previously issued financial statements, the Company’s chief executive officer and chief financial officer concluded that, as of June 30, 2006, the Company’s disclosure controls and procedures were not effective. No change in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended June 30, 2006 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting, except for changes made which were designed to remediate the two material weaknesses identified in the Company’s original Annual Report on Form 10-K for the year ended December 31, 2005.

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PART II — OTHER INFORMATION

ITEM 1
LEGAL PROCEEDINGS

               The Company is party to litigation described in the Company’s Annual Report on Amendment No. 1 to Form 10-K for the year ended December 31, 2005 under “Item 3 — Legal Proceedings,” and in this Form 10-Q in Note 13 to our Consolidated Financial Statements.

Litigation against Washington Group International, Inc.

               On October 16, 2006, Westmoreland Resources, Inc. (“WRI”) brought a lawsuit against Washington Group International, Inc. (“WGI”) in the United States District Court for the District of Montana. The Company owns 80% of WRI and WGI owns the remaining 20%. WGI also conducts all mining at the WRI Absaloka Mine under a long-term contract with WRI. The complaint filed by WRI alleges that WGI failed to meet its obligations under the mining contract and asks the court to affirm the right of WRI to terminate the mining contract with WGI. The complaint also seeks unspecified damages from WGI, which includes the incremental cost to WRI of purchasing approximately 300,000 tons of coal from Western Energy Company, a subsidiary of the Company, to meet delivery requirements of WRI customers.

ITEM 1A
RISK FACTORS

               In addition to the trends and uncertainties described elsewhere in Management’s Discussion and Analysis of Financial Condition and Results of Operations, we are subject to the risks set forth below.

Our coal mining operations are inherently subject to conditions that could affect levels of production and production costs at particular mines for varying lengths of time and could reduce our profitability.

               Our coal mining operations are all surface mines. These mines are subject to conditions or events beyond our control that could disrupt operations, affect production and increase the cost of mining at particular mines for varying lengths of time and negatively affect our profitability. These conditions or events include:

• unplanned equipment failures, which could interrupt production and require us to expend significant sums to repair our capital equipment, including our draglines, the large machines we use to remove the soil that overlies coal deposits;

• geological conditions, such as variations in the quality of the coal produced from a particular seam, variations in the thickness of coal seams and variations in the amounts of rock and other natural materials that overlie the coal that we are mining; and

• weather conditions.

Examples of recent conditions or events of these types include the following:

• During the first quarter of 2006, the dragline at the Absaloka Mine was unable to operate for almost one-half of the quarter due to repairs to a broken walking shoe and to its electrical systems.

• In the second quarter of 2005, our Beulah Mine experienced unusually heavy rainfall including record rainfall in June that adversely impacted overburden stability and resulted in highwall and spoil sloughage, a condition in which the side of the pit partially collapses and must be stabilized before mining can continue. Unstable conditions in the pits impacted dragline operations at that mine for a period of time. This resulted in a reduction in coal production during the quarter and caused inventory to fall which negatively affected third and fourth quarter results.

45

Our revenues and profitability could suffer if our customers reduce or suspend their coal purchases.

               In 2005, we sold approximately 99% of our coal under long-term contracts and about three-fourths of our coal under contracts that obligate our customers to purchase all or almost all of their coal requirements from us, or which give us the right to supply all of the plant’s coal, lignite or fuel requirements. Three of our contracts, with the owners of the Limestone Generating Station, Colstrip Units 3&4 and Colstrip Units 1&2, accounted for 31%, 21% and 11%, respectively, of our coal revenues for 2005. Interruption in the purchases by or operations of our principal customers could significantly affect our revenues and profitability. Unscheduled maintenance outages at our customers’ power plants and unseasonably moderate weather are examples of conditions that might cause our customers to reduce their purchases. Four of our five mines are dedicated to supplying customers located adjacent to or near the mines, and these mines may have difficulty identifying alternative purchasers of their coal if their existing customers suspend or terminate their purchases.

Disputes relating to our coal supply agreements could harm our financial results.

               From time to time, we may have disputes with customers under our coal supply agreements. These disputes could be associated with claims by our customers that may affect our revenue and profitability. Any dispute that resulted in litigation could cause us to pay significant legal fees, which could also affect our profitability.

We are a party to numerous legal proceedings, some of which, if determined unfavorably to us, could result in significant monetary damages.

               We are a party to several legal proceedings which are described more fully in Note 13 (“Commitments and Contingencies”) to our Consolidated Financial Statements. Adverse outcomes in some or all of the pending cases could result in substantial damages against us or harm our business.

We may not be able to manage our expanding operations effectively, which could impair our profitability.

               At the end of 2000, we owned one mine and employed 31 people.  In the spring of 2001, we acquired the Rosebud, Jewett, Beulah and Savage Mines from Entech and Knife River Corporation, and at the end of 2005, we employed 1,052 people, including employees at subsidiaries.  In June 2006, we acquired ROVA and the operating agreements, and at June 30, we employed 1,326 people, including employees at subsidiaries. This growth has placed significant demands on our management as well as our resources and systems. One of the principal challenges associated with our growth has been, and we believe will continue to be, our need to attract and retain highly skilled employees and managers. In the second quarter of 2005, we hired a new Chief Financial Officer and new General Counsel. Ten of the thirteen professional positions in our corporate-level finance and accounting department and three of the positions in our legal department are filled by individuals who have joined the Company since the beginning of 2005. To manage our financial, accounting and legal matters effectively, these individuals must absorb considerable, necessary background information on the Company and we must successfully integrate them into our ongoing activities.  In the second quarter of 2005, we began to implement a new company-wide computer system.  The start-up of this new system has imposed increased demands on employees, particularly our finance and accounting staff.  If we are unable to attract and retain the personnel we need to manage our increasingly large and complex operations, if we are unable to integrate successfully our new officers and employees, and if we are unable to complete successfully the implementation of our new computer system, our ability to manage our operations effectively and to pursue our business strategy could be compromised.

The implementation of a new company-wide computer system could disrupt our internal operations.

               We are in the process of implementing a new company-wide computer system to replace the various systems that have been in place at our corporate offices, at the operations we owned in 2001, and at the operations we acquired in 2001 and in 2006. Once implemented, we expect this system to help establish standard, uniform, best practices and reporting in a number of areas, increase productivity and efficiency, and enhance management of our business.  Certain aspects of our information technology infrastructure and operational activities have and may continue to experience difficulties in connection with this transition and implementation.  Such difficulties can cause delay, be time consuming and more resource intensive than planned, and cost more than we anticipated.   There can be no assurance that we will achieve the cost savings and return on investment intended from this project.

46

Our growth and development strategy could require significant resources and may not be successful.

               We regularly seek opportunities to make additional strategic acquisitions, to expand existing businesses, to develop new operations and to enter related businesses. We may not be able to identify suitable acquisition candidates or development opportunities, or complete any acquisition or project, on terms that are favorable to us. Acquisitions, investments and other growth projects involve risks that could harm our operating results, including difficulties in integrating acquired and new operations, diversions of management resources, debt incurred in financing such activities and unanticipated problems and liabilities. We anticipate that we would finance acquisitions and development activities by using our existing capital resources, borrowing under existing bank credit facilities, issuing equity securities or incurring additional indebtedness. We may not have sufficient available capital resources or access to additional capital to execute potential acquisitions or take advantage of development opportunities.

Our expenditures for postretirement medical and life insurance benefits could be materially higher than we have predicted if our underlying assumptions prove to be incorrect.

               We provide various postretirement medical and life insurance benefits to current and former employees and their dependents. We estimate the amounts of these obligations based on assumptions described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Estimates and Related Matters” herein. See Note 8 to the Consolidated Financial Statements for more detail. We accrue amounts for these obligations, which are unfunded, and we pay as costs are incurred. If our assumptions change, the amount of our obligations could increase, and if our assumptions are inaccurate, we could be required to expend greater amounts than we anticipate. We regularly revise our estimates, and the amount of our accrued obligations is subject to change.

We have a significant amount of debt, which imposes restrictions on us and may limit our flexibility, and a decline in our operating performance may materially affect our ability to meet our future financial commitments and liquidity needs.

               As of June 30, 2006, our total gross indebtedness was approximately $325.0 million. We may incur additional indebtedness in the future, including indebtedness under our two existing revolving credit facilities.

               Westmoreland Mining’s term loan agreement restricts its ability to distribute cash to Westmoreland Coal Company through 2011 and limits the types of transactions that Westmoreland Mining and its subsidiaries can engage in with Westmoreland Coal Company and our other subsidiaries. Westmoreland Mining executed the term loan agreement in 2001 and used the proceeds to finance its acquisition of the Rosebud, Jewett, Beulah and Savage Mines. The final payment on this indebtedness, which we call Westmoreland Mining’s acquisition debt, is in the amount of $30 million and is due on December 31, 2008. After payment of principal and interest, 25% of Westmoreland Mining’s surplus cash flow is dedicated to an account that is expected to fund this final payment. The $35 million add-on facility is scheduled to be paid-down from 2009 through 2011. Westmoreland Mining has pledged or mortgaged substantially all of its assets and the assets of the Rosebud, Jewett, Beulah and Savage Mines, and we have pledged all of our interests in Westmoreland Mining as security for Westmoreland Mining’s indebtedness. In addition, Westmoreland Mining must comply with financial ratios and other covenants specified in the agreements with its lenders. Failure to comply with these ratios and covenants or to make regular payments of principal and interest could result in an event of default.

47

               A substantial portion of our cash flow must be used to pay principal and interest on our indebtedness and is not available to fund working capital, capital expenditures or other general corporate uses. In addition, the degree to which we are leveraged could have other important consequences, including:

• increasing our vulnerability to general adverse economic and industry conditions;

• limiting our ability to obtain additional financing to fund future working capital, capital expenditures or other general corporate requirements; and

• limiting our flexibility in planning for, or reacting to, changes in our business and in the industry.

               If our or Westmoreland Mining’s operating performance declines, or if we or Westmoreland Mining do not have sufficient cash flows and capital resources to meet our debt service obligations, we or Westmoreland Mining may be forced to sell assets, seek additional capital or seek to restructure or refinance our indebtedness. If Westmoreland Mining were to default on its debt service obligations, a note holder may be able to foreclose on assets that are important to our business.

               ROVA’s credit agreement restricts its ability to distribute cash, contains financial ratios and other covenants, and is secured by a pledge of the project and substantially all of the project’s assets. If ROVA fails to comply with these ratios and covenants or fails to make regular payments of principal and interest, an event of default could occur. A substantial portion of ROVA’s cash flow must be used to pay principal and interest on its indebtedness and is not available to us. If ROVA were to default on its debt service obligations, a creditor may be able to foreclose on assets that are important to our business.

If the cost of obtaining new reclamation bonds and renewing existing reclamation bonds continues to increase, our profitability could be reduced.

               Federal and state laws require that we provide bonds to secure our obligations to reclaim lands used for mining. We must post a bond before we obtain a permit to mine any new area. These bonds are typically renewable on a yearly basis and have become increasingly expensive. Bonding companies are requiring that applicants collateralize a portion of their obligations to the bonding company. In 2005, we paid approximately $2.3 million in premiums for reclamation bonds. As we permit additional areas for our mines in 2006 and 2007, the bonding requirements are expected to increase significantly and the collateral posted is expected to increase as well. Any capital that we provide to collateralize our obligations to our bonding companies is not available to support our other business activities. If the cost of our reclamation bonds continues to increase, our profitability could be reduced.

Our financial position could be adversely affected if we fail to maintain our Coal Act bonds.

               The Coal Act established the 1992 UMWA Benefit Plan, or 1992 Plan. We are required to secure three years of our obligations to that plan by posting a surety bond or a letter of credit or collateralizing our obligations with cash. We presently secure these obligations with two bonds, one in an amount of approximately $21.3 million with XL Specialty Insurance Company (“XL”) and an affiliate and one in an amount of approximately $5.0 million. In December 2003, XL indicated a desire to exit the business of bonding Coal Act obligations. In February 2004, XL renewed our Coal Act bond. Although we believe that XL must continue to renew the bond so long as we do not default on our obligations to the 1992 Plan, XL filed a Complaint for Declaratory Judgment on May 11, 2005 to force our payment of $21.3 million and to cancel the bond. If either of the companies that issue our Coal Act bonds were to cancel or fail to renew our bonds, we may be required to post another bond or secure our obligations with a letter of credit or cash. At this time, we are not aware of any other company that would provide a surety bond to secure obligations under the Coal Act. We do not believe that we could now obtain a letter of credit without collateralizing that letter of credit in full with cash. The Company does not currently have $21.3 million in cash available.

48

We face competition for sales to new and existing customers, and the loss of sales or a reduction in the prices we receive under new or renewed contracts would lower our revenues and could reduce our profitability.

               Approximately one-third of the coal tonnage that we will produce in 2006 will be sold under long-term contracts to power plants that take delivery of our coal from common carrier railroads. Most of the Absaloka Mine’s sales are delivered by rail (with 6% by truck starting in 2006) and about 20% of the Rosebud Mine’s and Beulah Mine’s sales are delivered by rail. Contracts covering 80% of those rail tons are scheduled to expire between December 2006 and December 2008. As a general matter, plants that take coal by rail can buy their coal from many different suppliers. We will face significant competition, primarily from mines in the Southern Powder River Basin of Wyoming, to renew our long-term contracts with our rail-served customers, and for contracts with new rail-served customers. Many of our competitors are larger and better capitalized than we are and have coal with a lower sulfur and ash content than our coal. As a result, our competitors may be able to adopt more aggressive pricing policies for their coal supply contracts than we can. If our existing customers fail to renew their existing contracts with us on terms that are at least equivalent to those in effect today, or if we are unable to replace our existing contracts with contracts of equal size and profitability from new customers, our revenues and profitability would be reduced.

               Approximately two-thirds of the coal tonnage that we will sell in 2006 will be delivered under long-term contracts to power plants located adjacent to our mines. We will face somewhat less competition to renew these contracts upon their expiration, both because of the transportation advantage we enjoy by being located adjacent to these customers and because most of these customers would be required to invest additional capital to obtain rail access to alternative sources of coal. Our Jewett Mine is an exception because our customer has already built rail unloading and associated facilities that are being used to take coal from the Southern Powder River Basin as permitted under our contract with that customer.

Stricter environmental regulations, including regulations recently adopted by the EPA, could reduce the demand for coal as a fuel source and cause the volume of our sales to decline.

               Coal contains impurities, including sulfur, mercury, nitrogen and other elements or compounds, many of which are released into the air when coal is burned. Stricter environmental regulation of emissions from coal-fired electric generating plants could increase the costs of using coal, thereby reducing demand for coal as a fuel source generally, and could make coal a less attractive fuel alternative in the planning and building of utility power plants in the future. The U.S. Environmental Protection Agency, or EPA, adopted regulations in March 2005, that could increase the costs of operating coal-fired power plants, including ROVA. Congress has considered legislation that would have this same effect. At this time, we are unable to predict the impact of these new regulations on our business. However, we expect that the new regulations may alter the relative competitiveness among coal suppliers and coal types. The new regulations could also disadvantage some or all of our mines, and notwithstanding our coal supply contracts we could lose all or a portion of our sales volumes and face increased pressure to reduce the price for our coal, thereby reducing our revenues, our profitability and the value of our coal reserves.

49

               In March 2005, the EPA issued the Clean Air Interstate Rule (“CAIR”) and Clean Air Mercury Rule (“CAMR”). The CAIR will reduce emissions of sulfur dioxide and nitrogen oxide in 28 eastern States and the District of Columbia. Texas and Minnesota, in which customers of the Jewett and Absaloka mines are located, and North Carolina, where ROVA is located, are subject to the CAIR. The CAIR requires these States to achieve required reductions in emissions from electric generating units, or EGUs, in one of two ways: (1) through participation in an EPA-administered, interstate “cap and trade” system that caps emissions in two stages, or (2) through measures of the State’s choice. Under the cap and trade system, the EPA will allocate emission “allowances” for nitrogen oxide to each State. The 28 States will distribute those allowances to EGUs, which can trade them. To control sulfur dioxide, the EPA will reduce the existing allowance allocations for sulfur dioxide that are currently provided under the acid rain program established pursuant to Title IV of the Clean Air Act Amendments. EGUs may choose among compliance alternatives, including installing pollution control equipment, switching fuels, or buying excess allowances from other EGUs that have reduced their emissions. Aggregate sulfur dioxide emissions are to be reduced from 2003 levels in two stages, a 45% reduction by 2010 and a 57% reduction by 2015. Aggregate nitrogen oxide emissions are also to be reduced from 2003 levels in two stages, a 53% reduction by 2009 and a 61% reduction by 2015.

               The CAMR applies to all States. The CAMR establishes a two-stage, nationwide cap on mercury emissions from coal-fired EGUs. Aggregate mercury emissions are to be reduced from 1999 levels in two stages, a 20% reduction by 2010 and a 70% reduction by 2018. The EPA expects that, in the first stage, emissions of mercury will be reduced in conjunction with the reductions of sulfur dioxide and nitrogen oxide under the CAIR. The EPA has assigned each State an emissions “budget” for mercury, and each state must submit a State Plan detailing how it will meet its budget for reducing mercury from coal-fired EGUs. Again, States may participate in an interstate “cap and trade” system or achieve reductions through measures of the States’ choice. The CAMR also establishes mercury emissions limits for new coal-fired EGUs (new EGUs are power plants for which construction, modification, or reconstruction commenced after January 30, 2004).

               These new rules are likely to affect the market for coal for at least three reasons:

               Different types of coal vary in their chemical composition and combustion characteristics. For example, the lignite from our Jewett and Beulah mines is inherently higher in mercury than bituminous and sub-bituminous coal, and sub-bituminous coal from different seams can differ significantly.

               Different EGUs have different levels of emissions control technology. For example, ROVA has “state of the art” emissions control technology that reduces its emissions of sulfur dioxide, nitrogen oxide and, collaterally, mercury.

               The CAIR is likely to affect the existing national market for sulfur dioxide emissions allowances, thereby indirectly affecting coal producers and consumers that are not directly subject to the CAIR.

               For all the foregoing reasons, and because it is unclear how States will allocate their emissions budgets, we are unable to predict at this time how these new rules will affect the Company.

               The Company’s contracts protect our sales positions, including volumes and prices, to varying degrees. However, we could face disadvantages under the new regulations that could result in our inability to renew some or all of our contracts as they expire or reach scheduled price reopeners or that could result in relatively lower prices upon renewal, thereby reducing our relative revenue, profitability, and/or the value of our coal reserves.

50

New legislation or regulations in the United States aimed at limiting emissions of greenhouse gases could increase the cost of using coal or restrict the use of coal, which could reduce demand for our coal, cause our profitability to suffer and reduce the value of our assets.

               A variety of international and domestic environmental initiatives are currently aimed at reducing emissions of greenhouse gases, such as carbon dioxide, which is emitted when coal is burned. If these initiatives were to be successful, the cost to our customers of using coal could increase, or the use of coal could be restricted. This could cause the demand for our coal to decrease or the price we receive for our coal to fall, and the demand for coal generally might diminish. Restrictions on the use of coal or increases in the cost of burning coal could cause us to lose sales and revenues, cause our profitability to decline or reduce the value of our coal reserves.

Demand for our coal could also be reduced by environmental regulations at the state level.

               Environmental regulations by the states in which our mines are located, or in which the generating plants they supply operate, may negatively affect demand for coal in general or for our coal in particular. For example, Texas passed regulations requiring all fossil fuel-fired generating facilities in the state to reduce nitrogen oxide emissions beginning in May 2003. In January 2004, we entered into a supplemental settlement agreement with NRGT pursuant to which the Limestone Station must purchase a specified volume of lignite from the Jewett Mine. In order to burn this lignite without violating the Texas nitrogen oxide regulations, the Limestone Station is blending our lignite with coal produced by others in the Southern Powder River Basin, and using emissions credits. Considerations involving the Texas nitrogen oxide regulations might affect the demand for lignite from the Jewett Mine in the period after 2007, which is the last year covered by the four- year fixed price agreement. Not- withstanding our contractual right to deliver approximately 6.5 million tons per year, NRGT might claim that it is less expensive for the Limestone Station to comply with the Texas nitrogen oxide regulations by switching to a blend that contains relatively more coal from the Southern Powder River Basin and relatively less of our lignite. Other states are evaluating various legislative and regulatory strategies for improving air quality and reducing emissions from electric generating units. Passage of other state-specific environmental laws could reduce the demand for our coal.

We have significant reclamation and mine closure obligations. If the assumptions underlying our accruals are materially inaccurate, or if we are required to honor reclamation obligations that have been assumed by our customers or contractors, we could be required to expend greater amounts than we currently anticipate, which could affect our profitability in future periods.

               We are responsible under federal and state regulations for the ultimate reclamation of the mines we operate. In some cases, our customers and contractors have assumed these liabilities by contract and have posted bonds or have funded escrows to secure their obligations. We estimate our future liabilities for reclamation and other mine-closing costs from time to time based on a variety of assumptions. If our assumptions are incorrect, we could be required in future periods to spend more on reclamation and mine-closing activities than we currently estimate, which could harm our profitability. Likewise, if our customers or contractors default on the unfunded portion of their contractual obligations to pay for reclamation, we could be forced to make these expenditures ourselves and the cost of reclamation could exceed any amount we might recover in litigation, which would also increase our costs and reduce our profitability.

               We estimate that our gross reclamation and mine-closing liabilities, which are based upon permit requirements and our experience, were $396.1 million (with a present value of $158.4. million) at December 31, 2005. Of these liabilities, our customers have assumed a gross aggregate of $200.9 million and have secured a portion of these obligations by posting bonds in the amount of $50 million and funding reclamation escrow accounts that currently hold approximately $58.8 million, in each case at December 31, 2005. We estimate that our gross obligation for final reclamation that is not the contractual responsibility of others was $195.2 million at December 31, 2005. ROVA’s asset retirement obligation at June 30, 2006 was $0.4 million.

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Our profitability could be affected by unscheduled outages at the power plants we supply or own or if the scheduled maintenance outages at the power plants we supply or own last longer than anticipated.

               Scheduled and unscheduled outages at the power plants that we supply could reduce our coal sales and revenues, because any such plant would not use coal while it was undergoing maintenance. We cannot anticipate if or when unscheduled outages may occur.

               Our profitability could be affected by unscheduled outages at ROVA or if scheduled outages at ROVA last longer than we anticipate.

Increases in the cost of the fuel, electricity and materials and the availability of tires we use in the operation of our mines could affect our profitability.

               Under several of our existing coal supply agreements, our mines bear the cost of the diesel fuel, lubricants and other petroleum products, electricity, and other materials and supplies necessary to operate their draglines and other mobile equipment. In particular, the cost of tires for our heavy equipment at the mines increased drastically in 2005 and 2006 as the supply tightened due to world-wide demand, which impacts productivity and could even reduce production if replacement tires are not available. The prices of many of these commodities have increased significantly in the last year, and continued escalation of these costs would hurt our profitability or threaten the financial condition of certain operations in the absence of corresponding increases in revenue.

If we experience unanticipated increases in the capital expenditures we expect to make over the next several years, our liquidity and/or profitability could suffer.

               Certain of our contracts provide for our customers to reimburse us for our capital expenditures on a depreciation and amortization basis, plus in some instances, a stated return-on-investment. Certain contracts provide reimbursement of capital expenditures in full as such expenditures are incurred. Other contracts feature set prices that adjust only for changes in a general inflation index. When we spend capital at our operations, it affects our near term liquidity in most instances and if capital is spent where the customer is not specifically obligated to reimburse us, that capital could be at risk if market conditions and contract duration do not match up to the investment.

Our ability to operate effectively and achieve our strategic goals could be impaired if we lose key personnel.

               Our future success is substantially dependent upon the continued service of our key senior management personnel, particularly Christopher K. Seglem, our Chairman of the Board, President and Chief Executive Officer. We do not have key-person life insurance policies on Mr. Seglem or any other employees. The loss of the services of any of our executive officers or other key employees could make it more difficult for us to pursue our business goals.

Provisions of our certificate of incorporation, bylaws and Delaware law, and our stockholder rights plan, may have anti-takeover effects that could prevent a change of control of our company that you may consider favorable, and the market price of our common stock may be lower as a result.

               Provisions in our certificate of incorporation and bylaws and Delaware law could make it more difficult for a third party to acquire us, even if doing so might be beneficial to our stockholders. Provisions of our bylaws impose various procedural and other requirements that could make it more difficult for stockholders to bring about some types of corporate actions. In addition, a change of control of our Company may be delayed or deterred as a result of our stockholder rights plan, which was initially adopted by our Board of Directors in early 1993 and amended and restated in February 2003. Our ability to issue preferred stock in the future may influence the willingness of an investor to seek to acquire our company. These provisions could limit the price that some investors might be willing to pay in the future for shares of our common stock and may have the effect of delaying or preventing a change in control of Westmoreland.

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Our ability to operate effectively and achieve our strategic goals depends on maintaining satisfactory labor relations.

               A significant portion of the workforce at each of the Company-operated mines, except Jewett, is represented by labor unions. While we believe that our relationships with our employees at the mines are satisfactory, the nature of collective bargaining is such that there is a risk of a disruption in operations when any collective bargaining agreement reaches its expiration dates unless a renewal or extension has been accepted by the employees who are covered by the agreement. While labor strikes are generally a force majeure event in long-term coal supply agreements, thereby exempting the mine from its delivery obligations, the loss of revenue for even a short period of time could have a material adverse effect on the Company’s financial results.

We have had material weaknesses in internal control over financial reporting in the past and cannot assure that additional material weaknesses will not be identified in the future. Our failure to maintain effective internal control over financial reporting could result in material misstatements in our financial statements which could require us to restate financial statements, cause investors to lose confidence in our reported financial information and have a negative effect on our stock price.

               During the past year, the Company identified five material weaknesses in internal controls over financial reporting as defined in the Public Company Accounting Oversight Board’s Auditing Standard No. 2. The material weaknesses in our internal control over financial reporting are described in the Amendment No. 1 to the 2005 Form 10-K under “Item 9A – Controls and Procedures”.

               We cannot assure that additional significant deficiencies or material weaknesses in our internal control over financial reporting will not be identified in the future. Any failure to maintain or implement new or improved controls, or any difficulties we encounter in their implementation, could result in additional significant deficiencies or material weaknesses, and cause us to fail to meet our periodic reporting obligations or result in material misstatements in our financial statements. Any such failure could also adversely affect the results of periodic management evaluations and annual auditor attestation reports regarding the effectiveness of our internal control over financial reporting required under Section 404 of the Sarbanes-Oxley Act of 2002 and the rules promulgated under Section 404. The existence of a material weakness could result in errors in our financial statements that could result in a restatement of financial statements, cause us to fail to meet our reporting obligations and cause investors to lose confidence in our reported financial information, leading to a decline in our stock price.

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We may face risks related to an SEC investigation and securities litigation in connection with the restatement of our financial statements.

               We are not aware that the Securities and Exchange Commission (“SEC”) has begun any formal or informal investigation in connection with accounting errors requiring restatement of 2005 and prior years’ financial statements including 2004 and 2005 quarterly financial statements, or that any laws have been violated. However, if the SEC makes a determination that the Company has violated Federal securities laws, the Company may face sanctions, including, but not limited to, monetary penalties and injunctive relief, which could adversely affect our business. In addition, the Company or its officers and directors could be named defendants in civil proceedings arising from the restatement. We are unable to estimate what our liability in either event might be.

54 ITEM 3
DEFAULTS UPON SENIOR SECURITIES

               Through and including October 1, 2006, the accumulated and unpaid dividends on the outstanding Series A Preferred Stock totaled $14.0 million ($21.83 per Depositary Share).

               See  Note 9 “Capital Stock” to our Consolidated Financial Statements, which is incorporated by reference herein.

ITEM 4
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

               An Annual Meeting of Shareholders was held on May 18, 2006. Proxies for the meeting were solicited pursuant to Section 14(a) of the Securities Exchange Act of 1934. Two proposals were voted upon at the meeting.

               The first proposal was the election by the holders of Common Stock of seven members of the Board of Directors. The tabulation of the votes cast with respect to each of the nominees for election as a Director is set forth as follows:

Name	Votes For	Votes Withheld
Thomas J. Coffey	7,597,893		201,496
Robert E. Killen	7,741,553		57,836
Richard Klingaman	7,742,099		57,209
Thomas W. Ostrander	7,683,253		116,136
Christopher K. Seglem	7,739,136		60,253
James W. Sight	7,741,647		57,742
Donald A. Tortorice	7,715,102		84,287

               Messrs. Coffey, Killen, Klingaman, Ostrander, Seglem, Sight and Tortorice were elected.

               There were no abstentions or broker non-votes.

               The second proposal was the election by the holders of Depositary Shares of two members of the Board of Directors. Each Depositary Share represents one-quarter of a share of the Company’s Series A Convertible Exchangeable Preferred Stock (“Series A Preferred Stock”), the terms of which entitle the holders to elect two directors if six or more Preferred Stock dividends have accumulated. The tabulation of the votes cast with respect to each of the nominees for election as a Director, expressed in terms of the number of Depositary Shares, is as follows:

Name	Votes For	Votes Withheld
Michael Armstrong	791,615		2,300
William M. Stern	791,615		2,300

               Messrs. Armstrong and Stern were elected.

               There were no abstentions or broker non-votes.

55 ITEM 5
OTHER INFORMATION

               The description of the Company’s annual incentive compensation for each of the Company’s executive officers and key managers awarded for 2005 is incorporated by reference to Westmoreland’s definitive proxy statement filed in accordance with Regulation 14A on April 17, 2006.

               In addition, the Compensation and Benefits Committee has established a similar set of weighted performance objectives for the 2006 award. The award will be determined based upon the Company’s financial performance during 2006 and awarded in 2007.

               The Company has accumulated but unpaid quarterly preferred dividends through and including July 1, 2006 amount to $15.3 million in the aggregate ($87.28 per preferred share or $21.82 per Depositary Share). As a result of its restatement, the Company is prohibited from paying preferred stock dividends because there are statutory restrictions limiting the payment of preferred stock dividends under Delaware law, the state in which the Company is incorporated. Under Delaware law, the Company is permitted to pay preferred stock dividends only to the extent that shareholders’ equity exceeds the par value of the preferred stock (which par value was $175,000 at June 30, 2006).

ITEM 6
EXHIBITS

a) Exhibits

10.1 Purchase Agreement dated June 29, 2006 by and between LG&E Roanoke Valley L.P., LG&E Power Services L.L.C, and Westmoreland Coal Company

10.2 Third Amendment and Restatement of the Power Purchase and Operating Agreement effective as of December 1, 2000 between Westmoreland-LG&E Partners and Virginia Electric and Power Company

10.3 Second Amendment and Restatement of the Power Purchase and Operating Agreement dated November 21, 2000 between Westmoreland-LG&E Partners and Virginia Electric and Power Company for the Roanoke Valley II Project

10.4 Amended and Restated Construction and Term Loan Agreement dated as of December 1, 1993 among Westmoreland-LG&E Partners, the Lenders named therein, the Institutional Lenders, the Issuing Bank, the Co-Agents and Agent (each as defined therein)

10.5 Amendment No. 1 to Amended and Restated Construction and Term Loan Agreement dated as of November 4, 1994 among Westmoreland-LG&E Partners, the Lenders named therein, the Institutional Lenders, the Issuing Bank, the Co-Agents and Agent (each as defined therein)

10.6 Amendment No. 2 to Amended and Restated Construction and Term Loan Agreement dated as of December 30, 1994 among Westmoreland-LG&E Partners, the Lenders named therein, the Institutional Lenders, the Issuing Bank, the Co-Agents and Agent (each as defined therein)

56

10.7 Amendment No. 3 to Amended and Restated Construction and Term Loan Agreement dated as of January 31, 1995 among Westmoreland-LG&E Partners, the Lenders named therein, the Institutional Lenders, the Issuing Bank, the Co-Agents and Agent (each as defined therein)

10.8 Amendment No. 4 to Amended and Restated Construction and Term Loan Agreement dated as of October 19, 1995 among Westmoreland-LG&E Partners, the Lenders named therein, the Institutional Lenders, the Issuing Bank, the Co-Agents and Agent (each as defined therein)

10.9 Amendment No. 5 to Amended and Restated Construction and Term Loan Agreement dated as of December 15, 1996 among Westmoreland-LG&E Partners, the Lenders named therein, the Institutional Lenders, the Issuing Bank, the Co-Agents and Agent (each as defined therein)

10.10 Amendment No. 5 to Amended and Restated Construction and Term Loan Agreement dated as of August 23, 2000 among Westmoreland-LG&E Partners, the Lenders named therein, the Institutional Lenders and Institutional Agent and each Purchasing Institutional Lender, the Issuing Bank, the Co-Agents and Agent (each as defined therein)

10.11 Amendment No. 6 to Amended and Restated Construction and Term Loan Agreement dated as of November 21, 2000 among Westmoreland-LG&E Partners, the Lenders named therein, the Institutional Lenders and Institutional Agent and each Purchasing Institutional Lender, the Issuing Bank, the Co-Agents and Agent (each as defined therein)

10.12 Amendment No. 7 to Amended and Restated Construction and Term Loan Agreement dated as of November 15, 2001 among Westmoreland-LG&E Partners, the Lenders named therein, the Institutional Lenders and Institutional Agent and each Purchasing Institutional Lender, the Issuing Bank, the Co-Agents and Agent (each as defined therein)

10.13 Amendment No. 8 to Amended and Restated Construction and Term Loan Agreement dated as of November 28, 2001 among Westmoreland-LG&E Partners, the Lenders named therein, the Institutional Lenders and Institutional Agent and each Purchasing Institutional Lender, the Issuing Bank, the Co-Agents and Agent (each as defined therein)

10.14 Amendment No. 9 to Amended and Restated Construction and Term Loan Agreement dated as of March 1, 2002 among Westmoreland-LG&E Partners, the Lenders named therein, the Institutional Lenders and Institutional Agent and each Purchasing Institutional Lender, the Issuing Bank, the Co-Agents and Agent (each as defined therein)

10.15 Amendment No. 10 to Amended and Restated Construction and Term Loan Agreement dated as of April 8, 2003 among Westmoreland-LG&E Partners, the Lenders named therein, the Institutional Lenders and Institutional Agent and each Purchasing Institutional Lender, the Bond L/C Issuing Bank, the Co-Agents (each as defined therein), Credit Suisse First Boston in the capacities named therein and Dexia Credit Local, New York Agency, in the capacities named therein

10.16 Note Purchase Agreement dated June 29, 2006 between Westmoreland Energy LLC and the Purchaser named therein

(31) Rule 13a-14(a)/15d-14(a) Certifications.

(32) Certifications pursuant to 18 U.S.C. Section 1350.

57 SIGNATURES

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:    November 3, 2006	/s/ David J. Blair
	David J. Blair
	Chief Financial Officer
	(A Duly Authorized Officer)
Date:    November 3, 2006	/s/ Kevin A. Paprzycki
	Kevin A. Paprzycki
	Controller and
	Principal Accounting Officer
	(A Duly Authorized Officer)

58 EXHIBIT INDEX

Exhibit
Number Description

10.1 Purchase Agreement Dated June 29, 2006 by and between LG&E Roanoke Valley L.P., LG&E Power Services LLC, and Westmoreland Coal Company

10.2 Third Amendment and Restatement of the Power Purchase and Operating Agreement effective as of December 1, 2000 between Westmoreland-LG&E Partners and Virginia Electric and Power Company

10.3 Second Amendment and Restatement of the Power Purchase and Operating Agreement dated November 21, 2000 between Westmoreland-LG&E Partners and Virginia Electric and Power Company for the Roanoke Valley II Project

10.4 Amended and Restated Construction and Term Loan Agreement dated as of December 1, 1993 among Westmoreland-LG&E Partners, the Lenders named therein, the Institutional Lenders, the Issuing Bank, the Co-Agents and Agent (each as defined therein)

10.5 Amendment No. 1 to Amended and Restated Construction and Term Loan Agreement dated as of November 4, 1994 among Westmoreland-LG&E Partners, the Lenders named therein, the Institutional Lenders, the Issuing Bank, the Co-Agents and Agent (each as defined therein)

10.6 Amendment No. 2 to Amended and Restated Construction and Term Loan Agreement dated as of December 30, 1994 among Westmoreland-LG&E Partners, the Lenders named therein, the Institutional Lenders, the Issuing Bank, the Co-Agents and Agent (each as defined therein)

10.7 Amendment No. 3 to Amended and Restated Construction and Term Loan Agreement dated as of January 31, 1995 among Westmoreland-LG&E Partners, the Lenders named therein, the Institutional Lenders, the Issuing Bank, the Co-Agents and Agent (each as defined therein)

10.8 Amendment No. 4 to Amended and Restated Construction and Term Loan Agreement dated as of October 19, 1995 among Westmoreland-LG&E Partners, the Lenders named therein, the Institutional Lenders, the Issuing Bank, the Co-Agents and Agent (each as defined therein)

10.9 Amendment No. 5 to Amended and Restated Construction and Term Loan Agreement dated as of December 15, 1996 among Westmoreland-LG&E Partners, the Lenders named therein, the Institutional Lenders, the Issuing Bank, the Co-Agents and Agent (each as defined therein)

10.10 Amendment No. 5 to Amended and Restated Construction and Term Loan Agreement dated as of August 23, 2000 among Westmoreland-LG&E Partners, the Lenders named therein, the Institutional Lenders and Institutional Agent and each Purchasing Institutional Lender, the Issuing Bank, the Co-Agents and Agent (each as defined therein)

59

10.11 Amendment No. 6 to Amended and Restated Construction and Term Loan Agreement dated as of November 21, 2000 among Westmoreland-LG&E Partners, the Lenders named therein, the Institutional Lenders and Institutional Agent and each Purchasing Institutional Lender, the Issuing Bank, the Co-Agents and Agent (each as defined therein)

10.12 Amendment No. 7 to Amended and Restated Construction and Term Loan Agreement dated as of November 15, 2001 among Westmoreland-LG&E Partners, the Lenders named therein, the Institutional Lenders and Institutional Agent and each Purchasing Institutional Lender, the Issuing Bank, the Co-Agents and Agent (each as defined therein)

10.13 Amendment No. 8 to Amended and Restated Construction and Term Loan Agreement dated as of November 28, 2001 among Westmoreland-LG&E Partners, the Lenders named therein, the Institutional Lenders and Institutional Agent and each Purchasing Institutional Lender, the Issuing Bank, the Co-Agents and Agent (each as defined therein)

10.14 Amendment No. 9 to Amended and Restated Construction and Term Loan Agreement dated as of March 1, 2002 among Westmoreland-LG&E Partners, the Lenders named therein, the Institutional Lenders and Institutional Agent and each Purchasing Institutional Lender, the Issuing Bank, the Co-Agents and Agent (each as defined therein)

10.15 Amendment No. 10 to Amended and Restated Construction and Term Loan Agreement dated as of April 8, 2003 among Westmoreland-LG&E Partners, the Lenders named therein, the Institutional Lenders and Institutional Agent and each Purchasing Institutional Lender, the Bond L/C Issuing Bank, the Co-Agents (each as defined therein), Credit Suisse First Boston in the capacities named therein and Dexia Credit Local, New York Agency, in the capacities named therein

10.16 Note Purchase Agreement dated June 29, 2006 between Westmoreland Energy LLC and the Purchaser named therein

31 Rule 13a-14(a)/15d-14(a) Certifications.

32 Certifications pursuant to 18 U.S.C. Section 1350.

60

EX-10

Exhibit 10.1

PURCHASE AGREEMENT

DATED JUNE 23 2006

BY AND BETWEEN

LG&E ROANOKE VALLEY L.P.

LG&E POWER SERVICES LLC

AND

WESTMORELAND COAL COMPANY

TABLE OF CONTENTS

Page

ARTICLE 1. DEFINITIONS AND CONSTRUCTION 2

1.1 Defined Terms 2

1.2 Construction 7

ARTICLE 2. PURCHASE AND SALE 7

2.1 Purchase and Sale; Other Transactions 7

2.2 Purchase Price 8

2.3 Closing 9

2.4 Deliveries at Closing 9

2.5 Casualty Losses 10

2.6 Payments 12

ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF SELLER 12

3.1 Organization 12

3.2 Enforceability 13

3.3 Sellers' Consents and Approvals; No Violation or Conflict by Sellers 13

3.4 Title to the Interest and the Assets 13

3.5 Ownership 14

3.6 Brokers' Fees 14

3.7 No Adverse Developments 14

ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF BUYER 14

4.1 Organization and Qualification 15

4.2 Enforceability 15

4.3 Buyer's Consents and Approvals; No Violation or Conflict by Buyer 15

4.4 Brokers' Fees 16

4.5 Investment Intention 16

4.6 Accredited Investor 16

4.7 Financial Resources 16

4.8 Lender Consent 16

ARTICLE 5. COVENANTS OF SELLER AND BUYER 16

5.1 FERC and NCUC Transaction Authorization 16

5.2 Conduct of Business Pending the Closing 17

5.3 Access to Information; Books and Records 17

5.4 Public Announcements 17

5.5 Intentionally Omitted 18

5.6 Commercially Reasonable Efforts 18

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5.7 Consents 19

5.8 Substitute Letters of Credit; Cash Deposit 19

5.9 Further Assistance 19

5.10 Use of LG&E Name 19

5.11 Replacement Insurance 20

5.12 Preservation of Company Status 20

ARTICLE 6. CONDITIONS PRECEDENT TO CLOSING 20

6.1 Conditions Precedent to Obligations of Buyer 20

6.2 Conditions Precedent to Obligations of Sellers 21

ARTICLE 7. INDEMNITIES AND ADDITIONAL COVENANTS 22

7.1 Survival 22

7.2 Sellers' Indemnity 22

7.3 Buyer's Indemnity 23

7.4 Indemnification Procedure 24

7.5 Post-Closing Tax Matters 26

7.6 No Additional Representations 27

7.7 Exclusivity of Remedies 27

ARTICLE 8. TERMINATION 28

8.1 Termination 28

8.2 Effect of Termination 29

ARTICLE 9. MISCELLANEOUS 29

9.1 Expenses 29

9.2 Transfer Taxes, Recording Fees and Real Estate Taxes 29

9.3 Waiver and Amendment 29

9.4 Assignment 29

9.5 Notices 29

9.6 Dispute Resolution; Arbitration; Governing Law 30

9.7 Severability 31

9.8 Counterparts 31

9.9 No Third Party Beneficiaries 31

9.10 Entire Agreement; Exhibits and Schedules 31

9.11 Disclosure 31

9.12 Closing Over Breaches 31

9.13 Employment of Employees of Sellers and Affiliates 32

9.14 Post Closing Cooperation 32

9.15 Consent Agreement 32

9.15 ARB Case 32

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SCHEDULES:

Schedule 1.1(a) Buyer Required Consents

Schedule 1.1(i) Sellers Required Consents

Schedule 2.2 Purchase Price Allocation

Schedule 2.6 Payment Instructions

EXHIBITS:

Exhibit 2.4(a)(v)—I Form of LPS Agreements Assignment and Assumption Agreement (ROVA O&M Agreement)

Exhibit 2.4(a)(v)—II Form of LPS Agreements Assignment and Assumption Agreement (Other O&M Agreements)

Exhibit 2.4(a)(v)—III Form of LPS Agreements Assignment and Assumption Agreement (Other LPS Assets)

Exhibit 2.4(a)(vi) Form of Interest Assignment and Assumption Agreement

Exhibit 2.4(a)(vii) Form of VMA Assignment and Assumption Agreement

Exhibit 2.4(a)(viii) Form of Transition Services Agreement

Exhibit 2.4(a) (ix) Form of E.ON U.S. Guarantee Letter

Exhibit 2.4(a)(xi)(I, II) Forms of Credit Related Assignment and Assumption Agreements

Exhibit 2.4(b)(x) Form of Buyer Guarantee Letter

Exhibit 2.4(b)(xi) Form of Consent, Waiver and Amendment Agreement

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PURCHASE AGREEMENT

        THIS PURCHASE AGREEMENT (“this Agreement”) is dated as of June 23, 2006, by and between LG&E Roanoke Valley, L.P., a California limited partnership (“LG&E”) and LG&E Power Services LLC, a Delaware limited liability company (“LPS” and, collectively with LG&E, the “Sellers”), and Westmoreland Coal Company, a Delaware corporation (“Buyer”). Sellers and Buyer are referred to herein collectively as the “Parties” and each of them individually as a “Party.”

RECITALS

        WHEREAS, LG&E owns a 50% partnership interest (the “Interest”) in Westmoreland –LG&E Partners, a Virginia general partnership (the “Company”), that owns and operates two individual coal-fired generating facilities, including a 165 MW (net) pulverized coal reheat unit (“ROVA I”), and a 44 MW (net) pulverized Coal non-reheat unit (“ROVA II”), both located in Weldon Township, Halifax County, North Carolina, together known as The Roanoke Valley Energy Facility (“ROVA”);

        WHEREAS, Westmoreland Roanoke Valley, L.P. owns the other 50% partnership interest in the Company and is a party, along with LG&E, to the Amended and Restated General Partnership Agreement (the “Partnership Agreement”) of the Company, dated as of December 1, 1993;

        WHEREAS, LPS is in the business of providing operating services to power plants pursuant to four agreements (the “O&M Agreements”) as follows:

The Facility Operating Agreement, dated as of November 22, 2000, between Virginia Electric and Power Company (“VEPCO”) and LPS with respect to VEPCO’s power production facility located in or near Southampton, Virginia;

The Facility Operating Agreement, dated as of November 22, 2000, between VEPCO and LPS with respect to VEPCO’s power production facility located in or near Altavista, Virginia;

The Facility Operating Agreement, dated as of November 22, 2000, between VEPCO and LPS with respect to VEPCO’s power production facility located in or near Hopewell, Virginia, as amended pursuant to Amendment No. 1 dated March 4, 2002;

The Operations and Maintenance Agreement, dated as of April 19, 2004, between VEPCO and LPS with respect to VEPCO’s power production facility located in or near Gordonsville, Virginia; and

The Amended and Restated Facility Operating Agreement, dated as of December 1, 1993, between the Company and LPS (as successor in interest in UC Operating Services);

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        WHEREAS, Buyer desires to purchase (or to cause one or more of its wholly-owned subsidiaries to purchase) from Sellers, and Sellers desires to sell to Buyer (or its permitted assignee(s)), the Interest and the O&M Agreements and certain other assets of LPS; and

        WHEREAS, the Company and VEPCO have entered into an agreement (the “Consent Agreement”) pursuant to which VEPCO has consented to the purchase and sale of the Interest (waiving any right of first refusal or similar right in connection with the purchase and sale) and to the assignment and assumption of the O&M Agreements(releasing LPS from liability under the O&M Agreements upon such assignment and assumption), as contemplated by this Agreement for both transactions.

        NOW, THEREFORE, in consideration of the premises and of the mutual representations, warranties and covenants contained herein, the Parties hereby agree as follows:

ARTICLE 1.
DEFINITIONS AND CONSTRUCTION

        1.1 Defined Terms. Capitalized terms not otherwise defined in this Agreement shall have the meanings given to them as follows:

        “Affiliate” shall mean, with respect to any Person, any other Person that, directly or indirectly, controls, is controlled by, or is under a common control with, such Person. The term “control” (including the terms “controlled by” and “under common control with”) as used in the preceding sentence means the possession, directly or indirectly, of the power to direct or cause the direction of management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise.

        “Agent” shall mean Dexia Credit Local, New York Agency, in its capacity as agent under the Credit Agreement.

        “Agreement” is defined in the Preamble and shall consist of this Agreement and the Exhibits and Schedules referred to herein and attached hereto.

        “Ancillary Agreements” shall mean the agreements and certificates required or contemplated to be delivered pursuant to this Agreement in connection with the Closing.

        “Assets” shall mean the LPS Agreements, the equipment owned by LPS and used in its Richmond office or at one of the Facilities, the PC Loans, the O&M Receivables, the VMA Receivables and the operating procedures and the LPS Know How.

        “Assume the Defense” shall have the meaning given to such term in Section 7.4.

        “Authorizing Documents” shall mean the resolutions, minutes, consents or other documents documenting the action taken by any of Sellers or Buyer to authorize this Agreement, the Ancillary Agreements and the transactions contemplated thereby.

        “Available Employees” shall have the meaning given to such term in Section 9.13.

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        “Basis for Indemnification” shall have the meaning given such term in Section 9.12.

        “Books and Records” shall mean all original books, records, data and information owned or possessed by the Company and all books, records, data and information with respect to the operation of ROVA possessed by the Company or Sellers, including minute books, financial and accounting records, purchase orders and invoices, sales orders and sales order log books, credit and collection records with respect to customers and supply sources, and all other general correspondence, records, books and files, including all records (maintenance and otherwise), drawings and warranties relating to Equipment.

        “Buyer” shall have the meaning given such term in the Preamble to this Agreement.

        “Buyer Indemnified Parties” shall have the meaning given such term in Section 7.2(a).

        “Buyer Required Consents” shall mean those consents, approvals, notices and waivers, each of which is set forth in Schedule 1.1(a).

        “Casualty Loss” means any physical damage to, or destruction or condemnation of, all or a portion of ROVA by fire, the elements, theft, vandalism, eminent domain, any other casualty or any other cause other than damage that constitutes ordinary wear and tear or similar immaterial damage (not involving more than $100,000 in the aggregate) occurring in the ordinary course of business.

        “Claim” shall mean all demands, claims, written notices, actions, investigations, causes of action, proceedings and arbitrations, regardless of whether ultimately determined to be valid.

        “Closing” shall have the meaning given such term in Section 2.3.

        “Closing Date” shall have the meaning given such term in Section 2.3.

        “Company” shall have the meaning given such term in the Preamble to this Agreement.

        “Consent Agreement” shall have the meaning given such term in the Recitals to this Agreement.

        “Credit Agreement” shall mean the Amended and Restated Construction and Term Loan Agreement dated as of December 1, 1993 among the Company, the Agent and the lenders, institutional lender, issuing bank and co-agents party thereto (the “Lenders”), as amended from time to time.

        “Debt Protection Account” shall mean the account established and maintained pursuant to Section 6.1(f) of the Credit Agreement.

        “Disclosure Schedules” shall mean the Schedules attached hereto corresponding to the representations and warranties of Sellers set forth in Article 3 or Buyer set forth in Article 4.

        “Effective Date” means the date of this Agreement, which is set forth in the Preamble hereto.

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        “Encumbrance” shall mean any right, option, right of refusal, restriction, covenant, condition, agreement, lien, pledge, security interest, mortgage or encumbrance of title.

        “Equity Interests” shall mean stock, general or limited partnership interests, limited liability company membership interests or any other form of equity interest.

        “Existing Letters of Credit” means the letter of credit dated April 4, 2003 currently having a face amount of $5,000,000 issued by Bank One, N.A. for the benefit of the Agent and which has been delivered to the Agent pursuant to Section 6.1(f) of the Credit Agreement, as such letter of credit may be amended prior to the Closing, together with any additional or substitute letters of credit delivered by Sellers or any of its Affiliates to the Agent pursuant to Section 6.1(f) of the Credit Agreement.

        “Facilities” shall mean ROVA and VEPCO’s power production facilities located in or near Gordonsville, Southampton, Altavista, and Hopewell Virginia.

        “FERC” shall mean the Federal Energy Regulatory Commission or any successor thereto.

        “FERC and NCUC Transaction Approvals” shall have the meaning given such term in Section 5.1.

        “Final Loss Adjustment” shall have the meaning given to such term in Section 2.5(a)(iii).

        “Governing Instruments” shall mean the certificate of incorporation, by-laws, limited partnership certificate, partnership agreement, limited liability company agreement or equivalent instruments of any Person that is an entity.

        “Governmental Authority” shall mean: (a) any federal, state, regional or local government; (b) any governmental, regulatory, legislative, judicial or administrative agency, board, commission, body, instrumentality or other authority exercising or entitled to exercise any administrative, executive, judicial, legislative, police, regulatory or taxing authority or power; and (c) any court or governmental tribunal.

        “Indemnification” shall mean the right of a Buyer Indemnified Party to indemnification pursuant to Section 7.2(a) or the right of a Sellers Indemnified Party to indemnification pursuant to Section 7.3(a).

        “Indemnified Party” shall have the meaning given such term in Section 7.4.

        “Indemnifying Party” shall have the meaning given such term in Section 7.4.

        “Interest” shall have the meaning given such term in the Recitals to this Agreement.

        “Interim Loss Adjustment” shall have the meaning given to such term in Section 2.5(a)(ii).

        “Knowledge of Buyer” and “to Buyer’s Knowledge” mean, and shall be limited to, the actual knowledge of those individuals involved in the transactions contemplated by this Agreement on behalf Buyer and those individuals involved in the administration of Buyer’s relationship with the Company.

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        “Knowledge of Sellers” and “to Sellers’ Knowledge” mean, and shall be limited to, the actual knowledge of the plant manager at each of the Facilities, the LPS General Manager of Plant Operations, the individual who on behalf of LPO is primarily responsible for the provision of treasury functions to the Company pursuant to the Venture Management Agreement, the individual who on behalf of LPO is primarily responsible for the provision of accounting services to the Company pursuant to the Venture Management Agreement, and the individual who on behalf of LPO is primarily responsible for the provision of all other services to the Company pursuant to the Venture Management Agreement, in each case, as of the time when the determination of whether the Sellers has Knowledge is being made.

        “Laws” shall mean any constitution, law, statute, code, regulation, rule, injunction, judgment, order, ordinance, decree, directive, ruling, charge, permit, license, approval, determination or other authorization or restriction of any applicable Governmental Authority.

        “Liabilities” means liabilities, debts or obligations, absolute or contingent, matured or unmatured, liquidated or unliquidated, accrued or unaccrued, known or unknown.

        “Losses” shall mean all debts, liabilities, obligations, losses, damages, costs and expenses (including, interest including prejudgment interest in any litigated matter), penalties, fines, court costs and reasonable consultants’ and attorneys’ fees and expenses, judgments, settlements and assessments.

        “LPO” means LG&E Power Operations Inc., a California corporation.

        “LPS” shall have the meaning given such term in the Preamble to this Agreement.

        “LPS Agreements” shall mean the O&M Agreements, the Richmond Lease, and the agreements by which LPS leases a postage meter and a copier machine.

        “LPS Know How” shall mean the know how utilized by LPS in performing the O&M Agreements as set forth in LPS’s operating manuals and safety procedures.

        “O&M Agreements” shall have the meaning given such term in the Recitals to this Agreement.

        “O&M Receivables” shall mean the receivables of LPS attributable to the O&M Agreements (including all amounts accrued through the Closing Date under the O&M Agreements regardless of whether they have been invoiced or whether they are currently payable).

        “Partnership Agreement” shall have the meaning given such term in the Recitals to this Agreement.

        “Party” and “Parties” shall have the meanings given such terms in the Preamble to this Agreement.

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        “PC Loan Price” shall have the meaning given such term in Section 9.13.

        “PC Loans” shall have the meaning given such term in Section 9.13.

        “Permits” shall mean all licenses, identification numbers, permits, certificates, orders, consents, approvals, registrations, authorizations, qualifications and filings required under all applicable Laws.

        “Person” shall mean any natural person, firm, partnership, association, corporation, limited liability company, trust, Governmental Authority or other entity.

        “Purchase Price” shall have the meaning given such term in Section 2.2.

        “Purchase Rights” shall mean any right of Virginia Electric and Power Company (“Virginia Power”) to purchase the Interest pursuant to the Third Amendment and Restatement of the Power Purchase and Operating Agreement by and between the Company and Virginia Power effective as of December 1, 2000 (the “ROVA I PPA”), the First Refusal Agreement between the Company and Virginia Power dated November 19, 1991, or the Second Amendment and Restatement of the Power Purchase and Operating Agreement by and between the Company and Virginia Power dated November 21, 2000 (the “ROVA II PPA”).

        “Replacement Insurance” shall have the meaning given to such term in Section 5.11.

        “Required Consents” shall mean the Sellers Required Consents and the Buyer Required Consents.

        “Richmond Lease” shall mean the lease for the office space leased by LPS in Richmond, Virginia.

        “ROVA,” “ROVA I” and “ROVA II” shall have the meanings given such terms in the Recitals to this Agreement.

        “Securities Act” shall have the meaning given such term in Section 4.5.

        “Sellers” shall have the meaning given such term in the Preamble to this Agreement.

        “Sellers Indemnified Parties” shall have the meaning given such term in Section 7.3(a).

        “Sellers Required Consents” shall mean those consents, approvals, notices and waivers, each of which is set forth on Schedule 1.1(i) on the part of Sellers or the Company that are required in connection with the consummation of the transactions contemplated by this Agreement.

        “Settlement Date” shall have the meaning given such term in Section 2.5(a)(iii).

        “Substitute Letters of Credit” means one or more letters of credit satisfying the requirements of Section 6.1(f) of the Credit Agreement that are issued by an Affiliate of Partner or another issuer which, in either case, satisfies the requirements of Section 6.1(f) of the Credit Agreement, and are delivered by Partner to the Agent in accordance with Section 6.1(f) of the Credit Agreement.

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        “Tax” or “Taxes” shall mean any federal, state, county, local, or foreign taxes, charges, levies, imposts, duties, other assessments, or similar charges of any kind whatsoever, including any interest, penalties and additions imposed thereon or with respect thereto.

        “Tax Return” shall mean any report, return, information return or other information required to be supplied by the Company to a taxing authority in connection with Taxes.

        “Termination Date” means June 30, 2006.

        “Venture Management Agreement” shall mean the Amended and Restated Venture Management Agreement dated December 1, 1993 between the Company, WEL and LPO.

        ”VEPCO” shall have the meaning given such term in the Recitals to this Agreement.

        “VMA Receivables” shall mean the receivables of LPO attributable to the VMA Agreement (including all amounts accrued through the Closing Date under the VMA Agreement regardless of whether they have been invoiced or whether they are currently payable).

        “WEL” shall mean Westmoreland Energy, LLC, a Delaware limited liability company.

        1.2 Construction. All article, section, subsection, schedule and exhibit references herein are to this Agreement unless otherwise specified. All schedules and exhibits attached to this Agreement constitute a part of this Agreement and are incorporated herein. Unless the context of this Agreement clearly requires otherwise, (i) the singular shall include the plural and the plural shall include the singular wherever and as often as may be appropriate, (ii) the words “includes” or “including” shall mean “including without limitation,” and (iii) the words “hereof,” “herein,” “hereby,” “hereunder,” and similar terms in this Agreement shall refer to this Agreement as a whole and not any particular section or article in which such words appear.

ARTICLE 2.
PURCHASE AND SALE

        2.1 Purchase and Sale; Other Transactions. Upon and subject to the terms and conditions of this Agreement, at the Closing (a) Sellers agree to sell, assign, transfer and convey to designated subsidiaries of Buyer, as provided in Section 2.4 below, all of their right, title and interest in and to the Interest and the Assets, and Buyer agrees to (i) purchase the Interest, (ii) cause certain designated subsidiaries to accept the assignment, transfer and conveyance of all such right, title and interest in and to the Interest, as provided in Section 2.4 below, pursuant to the assignment and assumption agreement in substantially the form of Exhibit 2.4(a)(vi) attached hereto, and (ii) pay or cause one or more of its subsidiaries to pay the Purchase Price to Sellers in accordance with Section 2.2, (b) Sellers agree to cause LPO to assign and transfer the Venture Management Agreement and the VMA Receivables to Buyer or a designated subsidiary of Buyer, and Buyer agrees to accept or cuase a designated subsidiary to accept such assignment and assume the obligations of LPO under the Venture Management Agreement pursuant to the assignment and assumption agreement in substantially the form of Exhibit 2.4(a)(vii) attached hereto, (c) Sellers agree to assign and transfer the Assets to Buyer or one or more designated subsidiaries of Buyer, and Buyer agrees to accept or cause its subsidiaries to accept such assignment and assume the obligations of LPS under the LPS Agreements pursuant to the assignment and assumption agreements in substantially the form of Exhibit 2.4(a)(v) (I), (II), and (III) attached hereto, (d) Buyer agrees to deliver or cause to be delivered to the Agent (and/or the Lenders under the Credit Agreement) Substitute Letters of Credit or cash, at Buyer’s option, in an aggregate amount equal to the amount available to be drawn under the Existing Letters of Credit, and (e) Buyer and Sellers agree to sign and deliver, or cause to be signed and delivered, as applicable, the Credit Related Assignment and Assumption Agreements in the form of 2.4(a)(xi)(I) and (II). Except for (a) the Liabilities of Sellers under the Partnership Agreement, the LPS Agreements and the Venture Management Agreement assumed pursuant to the Assignment and Assumption Agreements delivered pursuant to Sections 2.4(b)(iv), (v), and (vi) and (b) the Liabilities assumed pursuant to the Credit Related Assignment and Assumption Agreements delivered pursuant to Section 2.4(b)(ix), Buyer is not assuming any Liabilities of Sellers or their Affiliates.

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        2.2 Purchase Price. Subject to the terms and conditions of this Agreement, and in consideration of the transactions described in Section 2.1, Buyer shall pay to Sellers at Closing the total purchase price for the Interest (the “Purchase Price”) in an amount equal to:

               (a)        THIRTY-ONE MILLION UNITED STATES DOLLARS (US $31,000,000);

               (b)        minus the amount, if any, available to be drawn under the Existing Letters of Credit immediately prior to the Closing;

               (c)        plus the PC Loan Price;

               (d)        plus the amount of the O&M Receivables as of the Closing Date (without diminution for reserves or any other reason);

               (e)        plus the amount of the VMA Receivables as of the Closing Date (without diminution for reserves or any other reason).

The Purchase Price shall be allocated among the Interest and the Assets as set forth in Schedule 2.2.

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        2.3 Closing. The closing of the transactions contemplated by this Agreement (the “Closing”) shall occur at 10:00 a.m. EST on April 30, 2006 (the “Closing Date”) at the offices of E.On US LLC, 220 West Main Street, Louisville, Kentucky 40202, or (ii) such other time, date or place as the Parties may otherwise agree.

        2.4  Deliveries at Closing.

               (a)       By Sellers to Buyer. At the Closing, Sellers shall deliver, or cause to be delivered, to Buyer the following items, each properly executed and dated as of the Closing Date:

                      (i)        Copies of the Governing Instruments and Authorizing Documents of Sellers, certified by an appropriate officer, partner, manager, member or other representative of Sellers;

                      (ii)        The certificate required pursuant to Section 6.1(c) hereof;

                      (iii)        A statement, in the form set forth in Treasury Regulation § 1.1445-2(b)(2) and made under penalties of perjury by Sellers, that (among other things) Sellers is not a foreign person;

                      (iv)        An IRS Form W-9 completed by Sellers;

                      (v)        Assignment and Assumption Agreements with respect to the Assets, duly executed by LPS in substantially the form of Exhibit 2.4(a)(v)(I), (II), and (III) attached hereto;

                      (vi)        An Assignment and Assumption Agreement with respect to the Interest, duly executed by LG&E in substantially the form of Exhibit 2.4(a)(vi) attached hereto;

                      (vii)        An Assignment and Assumption Agreement with respect to the Venture Management Agreement, duly executed by LPO, in substantially the form of Exhibit 2.4(a)(vii) attached hereto;

                      (viii)        A Transition Services Agreement, duly executed by LPS, in the Form of Exhibit 2.4(a)(viii);

                      (ix)        A letter from E.On U.S. LLC, addressed to the Buyer, guarantying the payment obligations of the Sellers under this Agreement, in substantially the form of Exhibit 2.4(a)(ix);

                      (x)        A list showing for each PC Loan, the name of the borrower, the maturity date, the outstanding balance as of the Closing Date, and the amount of monthly payments; and

                      (xi)        Credit Related Assignment and Assumption Agreements in the form of Exhibit 2.4(a)(xi).

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               (b)       By Buyer to Sellers. At the Closing, Buyer shall deliver, or cause to be delivered, to Sellers the following items, each (where applicable) properly executed and dated as of the Closing Date:

                      (i)        The Purchase Price calculated in accordance with Section 2.2;

                      (ii)        A Certificate of an appropriate officer, partner, manager, member or other representative of Buyer as to the Governing Instruments and Authorizing Documents of Buyer;

                      (iii)        The Certificate required pursuant to Section 6.2(c) hereof;

                      (iv)        Assignment and Assumption Agreements with respect to the Assets, duly executed by Buyer in substantially the form of Exhibit 2.4(a)(v) (I), (II), and (III) attached hereto duly executed by the subsidiaries of Buyer named therein;

                      (v)        An Assignment and Assumption Agreement with respect to the Interest duly executed by the designated subsidiary of Buyer in substantially the form of Exhibit 2.4(a)(vi) attached hereto;

                      (vi)        An Assignment and Assumption Agreement with respect to the Venture Management Agreement, duly executed by the designated subsidiary of Buyer in substantially the form of Exhibit 2.4(a)(vii) attached hereto;

                      (viii)        A Transition Services Agreement, duly executed by Buyer, in the Form of Exhibit 2.4(a)(viii);

                      (ix)        Credit Related Assignment and Assumption Agreements in the form of Exhibit 2.4(a)(xi);

                      (x)        A letter from Buyer, addressed to the Sellers and their Affiliates, guarantying the obligations of the subsidiaries of Buyer that are assignees under the Assignment and Assumption Agreements delivered pursuant to this Agreement, in substantially the form of Exhibit 2.4(b)(x); and

                      (xi)        A Consent, Waiver and Amendment Agreement duly executed by all parties thereto in substantially the form of Exhibit 2.4(b)(xi) attached hereto.

               (c)       Other Documents. Buyer and Sellers shall execute and deliver to each other at Closing such other documents and agreements as may be reasonably necessary and desirable to consummate the transactions contemplated by this Agreement.

        2.5  Casualty Losses.

               (a)        If, before the Closing Date, a Casualty Loss occurs and the estimated cost to repair or restore the damage related to such Casualty Loss (or the diminution in value of ROVA attributable to a Casualty Loss if such Casualty Loss is a condemnation or taking by eminent domain) is less than $2,000,000, then such Casualty Loss shall not affect the obligation of the Parties to close the transactions contemplated by this Agreement and:

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                      (i)        each representation or warranty affected by such Casualty Loss shall be deemed to be true for all purposes under this Agreement (including Sections 6.1(b) and 7.2(a)) to the same extent that it would have been true if such Casualty Loss had not occurred; provided, however, for the avoidance of doubt, the occurrence of a Casualty Loss shall not cause a representation or warranty to be deemed to be true to the extent that such representation or warranty would not have been true if the Casualty Loss had not occurred;

                      (ii)        the Purchase Price payable at the Closing shall be reduced by an amount (the “Interim Loss Adjustment”) equal to fifty percent (50%) of the difference of (x) the estimated cost to repair or restore the damage (or the diminution in value of ROVA attributable to a condemnation or taking by eminent domain) related to such Casualty Loss, minus (y) the estimated net insurance or condemnation proceeds (other than insurance proceeds, if any, in respect of business interruption insurance) that will be received by the Company in respect of such Casualty Loss; and

                      (iii)        a post-Closing adjustment shall be made to account for the difference between the Interim Loss Adjustment and an amount (the “Final Loss Adjustment”) equal to fifty percent (50%) of the difference of (x) the actual cost to repair or restore the damage (or the diminution in value of ROVA attributable to a condemnation or taking by eminent domain) related to such Casualty Loss, minus (y) the actual net insurance or condemnation proceeds (other than insurance proceeds, if any, in respect of business interruption insurance) that are received by the Company in respect of such Casualty Loss. Buyer shall give Sellers notice of the Final Loss Adjustment, together with reasonable documentation supporting the basis for and calculation of the Final Loss Adjustment, within thirty (30) days after the later of (A) the completion of the repair or restoration of the damage related to such Casualty Loss, or (B) the receipt by the Company of all insurance or condemnation proceeds to which it is entitled as a result of the Casualty Loss, but no later than one year following the date specified in clause (A) (such date, as applicable, the “Settlement Date”). If the Interim Loss Adjustment was less than the Final Loss Adjustment (determined as of the Settlement Date), Sellers shall pay the amount of such difference to the Buyer, and if the Interim Loss Adjustment was greater than the Final Loss Adjustment (determined as of the Settlement Date), Buyer shall pay the amount of such difference to Sellers. Such payment shall be paid by the applicable Party within fifteen (15) days after (1) if payment is owed by Sellers to Buyer, the date Buyer has given Sellers the notice required by this clause (iv), or (2) if payment is owed by Buyer to Sellers, the date Buyer is required to give Sellers the notice required by this clause (iv). If, after the Settlement Date, the Company receives any insurance or condemnation proceeds (other than insurance proceeds, if any, in respect of business interruption insurance) in respect of such Casualty Loss, then Buyer shall pay to Sellers an amount equal to fifty percent (50%) of the actual net insurance or condemnation proceeds (other than insurance proceeds, if any, in respect of business interruption insurance) that are received by the Company after the Settlement Date in respect of such Casualty Loss. Buyer shall pay such amount to Sellers within fifteen (15) days after the applicable insurance or condemnation proceeds are received by the Company and shall be accompanied by a statement of out-of-pocket expenses deducted to determine the amount of net proceeds.

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For purposes of clauses (ii) and (iii) of this Section 2.5(a), “net insurance or condemnation proceeds” shall mean the amount of insurance or condemnation proceeds received (or in the case of clause (ii) estimated to be received) minus the amount of out-of-pocket costs reasonably incurred (or in the case of clause (ii) estimated to be reasonably incurred) in collecting such insurance or condemnation proceeds; provided, costs of collecting proceeds of business interruption insurance shall in no event be deducted.

               (b)        If, before the Closing Date, a Casualty Loss occurs and the estimated cost to repair or restore the damage related to such Casualty Loss (or the diminution in value of ROVA attributable to a Casualty Loss if such Casualty Loss is a condemnation or taking by eminent domain) is equal to or greater than $2,000,000, then Buyer may elect to terminate this Agreement by delivering written notice of such termination to Sellers within thirty (30) days after receipt by Buyer of Sellers’ written notice that a Casualty Loss covered by this Section 2.5(b) has occurred; provided, however, if Buyer does not terminate this Agreement under such circumstances and the Closing occurs despite such Casualty Loss then:

                      (i)        each representation or warranty affected by such Casualty Loss shall be deemed to be true for all purposes under this Agreement (including Sections 6.1(b) and 7.2(a)) to the same extent that it would have been true if such Casualty Loss had not occurred; provided, however, for the avoidance of doubt, the occurrence of a Casualty Loss shall not cause a representation or warranty to be deemed to be true to the extent that such representation or warranty would not have been true if the Casualty Loss had not occurred;

                      (ii)        no adjustment to the Purchase Price shall be made with respect to such Casualty Loss; and

                      (iii)        Sellers shall not be entitled to receive any insurance or condemnation proceeds with respect to such Casualty Loss.

        2.6 Payments. All payments required by this Agreement shall be made by wire transfer or delivery of immediately available funds in accordance with the payment instructions set forth on Schedule 2.6 hereto or in accordance with other payment instructions given by the recipient by written notice to the payor a reasonable period of time prior to the date the payment must be made or, if the payment must be made within a particular number of days, prior to the first day of such period.

ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF SELLERS

        Sellers hereby represent and warrant to Buyer on and as of the Effective Date that, except as set forth in the Disclosure Schedules or as otherwise provided in Section 9.12:

        3.1 Organization. LG&E is a limited partnership duly organized, validly existing and in good standing under the laws of the State of California and has all requisite limited partnership power and authority to own, lease and operate its properties and to carry on its business as currently conducted. LPS is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite power and authority to own, lease and operate its properties and to carry on its business as currently conducted.

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        3.2 Enforceability. (i) The execution, delivery and performance of this Agreement and the Ancillary Agreements is within Sellers’ power and authority; and (ii) the execution and delivery by Sellers of the Ancillary Agreements and the consummation by it of the transactions contemplated by this Agreement and the Ancillary Agreements has been duly and validly authorized and no other internal proceedings on its part are necessary to authorize its execution and delivery of the Ancillary Agreements or its consummation of the transactions contemplated by this Agreement and the Ancillary Agreements, (iii) the Ancillary Agreements to which either of the Sellers is a party will be duly and validly executed and delivered by it, and (iv) each Sellers’ obligations under this Agreement are and its obligations under the Ancillary Agreements to which it is a party will be, when executed and delivered by the parties to the Ancillary Agreements, its legal, valid and binding obligations, enforceable against it in accordance with their respective terms subject to (A) applicable bankruptcy, insolvency, fraudulent conveyance, fraudulent transfer, reorganization, moratorium or other similar laws relating to creditors’ rights or creditors’ remedies generally and (B) general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity).

        3.3  Sellers’ Consents and Approvals; No Violation or Conflict by Sellers.

               (a)        Except for the FERC and NCUC Transaction Approvals and the Required Consents, no notice to, filing or registration with, and no Permit of any Governmental Authority or any consent or approval of any other Person is necessary or is required to be made or obtained by Sellers in connection with the execution and delivery of this Agreement or the Ancillary Agreements by Sellers or for the consummation by Sellers of the transactions contemplated by this Agreement and the Ancillary Agreements.

               (b)        The execution and delivery of this Agreement and the Ancillary Agreements and the performance of this Agreement and the Ancillary Agreements by Sellers and the consummation of the transactions contemplated hereby and thereby do not (i) conflict with or result in any breach of any provision of either Seller’s Governing Instruments, (ii) conflict with or violate any Law applicable to either Seller or any of its respective properties or assets, or (iii) subject to obtaining all Sellers Required Consents, conflict with or result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation, modification or acceleration) under, any of the terms, conditions or provisions of any contract, agreement, lease, license, mortgage, indenture, instrument or other arrangement to which either Seller is a party or by which it or any of its properties or assets may be bound, or (iv) subject to obtaining all Sellers Required Consents, result in the creation of any material lien, charge or encumbrance of any kind whatsoever upon the Interest.

        3.4 Title to the Interest and the Assets. Sellers owns the Interest and Assets beneficially and of record and free and clear of any and all Encumbrances. Except for the Purchase Rights, there are no outstanding contracts, agreements, options or commitments of any nature obligating Sellers to transfer all or any portion of the Interest. Upon Closing, including assignment of the Interest to Buyer at the Closing and Buyer’s payment of the Purchase Price, Buyer will be the sole beneficial owner of the Interest and the Assets, free and clear of all Encumbrances other than the Purchase Rights and any Encumbrances created by Buyer.

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        3.5 Ownership. The Interest represents a 50% general partnership interest in the Company. The Interest has been duly and validly issued and was not issued in violation of any preemptive or other similar right. Assuming the accuracy of the representations contained in Sections 4.5 and 4.6, the Interest and Assets were offered and sold in compliance with all applicable federal and state securities laws and regulations. Except for the Purchase Rights, there are no outstanding or authorized options, warrants, purchase rights, conversion rights, exchange rights, or other contracts or commitments to subscribe for or purchase, or other rights of any kind (preemptive or otherwise) to acquire, the Interest. Except as set forth in the Governing Instruments of the Company, there are no voting trusts, proxies or other similar agreements or understandings applicable to the Interest.

        3.6 Brokers’ Fees. None of Sellers or any Affiliate of Sellers has engaged with respect to the transactions contemplated by this Agreement a broker, finder or other Person serving a similar function, which engagement will or may result in any liability or obligation of Buyer or any of its Affiliates or to which any of their assets (including, if the transactions contemplated by this Agreement are consummated, the Interest or the Assets of the Company) would be subject.

        3.7 No Adverse Developments. To the Knowledge of Sellers, there have been no developments or incidents, and there exist no conditions, which could reasonably be expected to have a material adverse effect on the operations, financial condition, or financial results of ROVA, except for developments, incidents, and conditions which, (i) have been disclosed to the Management Committee of the Company, (ii) have been disclosed to Buyer or an Affiliate of Buyer, or (iii) are otherwise within the Knowledge of Buyer.

ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF BUYER

               Buyer hereby represents and warrants to Sellers on and as of the Effective Date that:

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        4.1 Organization and Qualification. Buyer is a corporation duly organized, validly existing and in good standing under the laws of Delaware, and has all requisite power and authority to own, lease and operate its properties and to carry on its business as currently conducted. Each subsidiary of Buyer that is designated by Buyer to be an assignee of any of the Assets or the Interest (the “Designated Subsidiaries”) is either a limited liability company or a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction in which it was formed, and has all requisite power and authority to own, lease and operate its properties and to carry on its business as currently conducted

        4.2 Enforceability. (a) The performance by Buyer of this Agreement and performance by Buyer and the Designated Subsidiaries of the Ancillary Agreements required thereby from them is within their respective power; and (b) the consummation of the transactions contemplated by this Agreement and the Ancillary Agreements have been duly authorized, and no other internal proceedings on its part are necessary to authorize this Agreement or the Ancillary Agreements or to consummate the transactions contemplated thereby, (c) this Agreement has been, and the Ancillary Agreements required thereby to which Buyer or any of the Designated Subsidiaries is a party will be, duly and validly executed and delivered by it, and (d) Buyer’s obligations under this Agreement are, and the obligations of Buyer and each of the Designated Subsidiaries under the Ancillary Agreements required thereby from them will be, when executed and delivered by the parties to the Ancillary Agreements, their valid and binding obligations, enforceable against them in accordance with their respective terms subject to (i) applicable bankruptcy, insolvency, fraudulent conveyance, fraudulent transfer, reorganization, moratorium or other similar laws relating to creditors’ rights or creditors’ remedies generally; and (ii) general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity).

        4.3  Buyer’s Consents and Approvals; No Violation or Conflict by Buyer.

               (a)        Except for the FERC and NCUC Transaction Approvals, no notice to, filing or registration with, and no permit, authorization, consent or approval of, any Governmental Authority is necessary or is required to be made or obtained by Buyer in connection with the consummation by Buyer of the transactions contemplated by this Agreement.

               (b)        The performance of this Agreement and any Ancillary Agreeemnts by Buyer and the consummation of the transactions contemplated thereby do not (i) conflict with or result in any breach of any provision of the Governing Instruments of Buyer, (ii) conflict with or violate any Law applicable to Buyer, or any of its properties or assets, or (iii) subject to obtaining all Buyer Required Consents, conflict with or result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation, modification or acceleration) under, any of the terms, conditions or provisions of any contract, agreement, lease, license, mortgage, indenture, instrument or other arrangement to which Buyer is a party or by which Buyer or any of its properties or assets may be bound. The performance of each Ancillary Agreement by the Designated Subsidiary which is a party thereto and the consummation of the transactions contemplated thereby will not (i) conflict with or result in any breach of any provision of the Governing Instruments of such Designated Subsidiary, (ii) conflict with or violate any Law applicable to such Designated Subsidiary, or any of its properties or assets, or (iii) subject to obtaining all Buyer Required Consents, conflict with or result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation, modification or acceleration) under, any of the terms, conditions or provisions of any contract, agreement, lease, license, mortgage, indenture, instrument or other arrangement to which such Designated Subsidiary is a party or by which such Designated Subsidiary or any of its properties or assets may be bound.

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        4.4 Brokers’ Fees. Neither Buyer nor any Affiliate of Buyer has engaged with respect to the transactions contemplated by this Agreement a broker, finder or other Person serving a similar function, which engagement will or may result in any liability or obligation of Sellers or any of its Affiliates or to which any of its assets would be subject.

        4.5 Investment Intention. Buyer is acquiring the Assets and the Interest for its own account for investment purposes only and not with a view to the distribution (as such term is defined in Section 2(a)(11) of the Securities Act of 1933, as amended (the “Securities Act”)) thereof, it being understood that the right to dispose of the Interest shall be entirely within the discretion of Buyer; provided, however, Buyer understands that the Interest has not been registered under the Securities Act or any applicable state securities laws and cannot be sold unless subsequently registered under the Securities Act and any applicable state securities laws or an exemption from such registration is available.

        4.6  Accredited Investor. Buyer is an "accredited investor" as such term is defined in Rule 501(a) under the Securities Act.

        4.7  Financial Resources. Buyer will have financial resources sufficient to satisfy Buyer's obligations under this Agreement, which resources may include funds from third-party sources.

        4.8  Lender Consent. Buyer has no reason to believe that the Lenders would refuse to consent to the transactions contemplated by this Agreement as required by the Credit Agreement.

ARTICLE 5.
COVENANTS OF SELLER AND BUYER

        5.1 FERC and NCUC Transaction Authorization. The FERC has already granted authorization of Buyer’s acquisition of Sellers’ jurisdictional facilities (as defined in the Federal Power Act) and the North Carolina Utility Commission has already granted authorization for the transfer of the Company’s certificate (the “FERC and NCUC Transaction Approvals”). From and after the Effective Date, Buyer shall cooperate with Sellers in connection with any filings required in connection with the FERC and NCUC Transaction Approvals and shall use commercially reasonable efforts to promptly provide to Sellers all information concerning Buyer necessary for any filing with the FERC. Sellers shall cause the Company, prior to the Closing Date, to file a notice with the FERC of a change in structure, if any, and direct and indirect ownership of the Company as necessary to maintain the Company’s market-based rate authorization; provided, Sellers shall have no obligation to pursue any order or determination of the FERC or participate in any proceeding of the FERC, in each case relating to or initiated in response to such notice.

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        5.2 Conduct of Business Pending the Closing. Sellers agree that, from the Effective Date until the Closing Date or the earlier termination of this Agreement pursuant to Article 8, unless otherwise agreed to by Buyer in writing or expressly contemplated by this Agreement:

               (a)        LPS shall conduct its operations in the ordinary and usual course of business and consistent with past practice and exercise its commercially reasonable efforts to maintain the O&M Agreements in accordance with their terms.

               (b)        Sellers will not sell, transfer, pledge, hypothecate, divide, assign or otherwise alienate any portion of the Interest or the Assets.

        5.3  Access to Information; Books and Records.

               (a)     Between the Effective Date and Closing or earlier termination of this Agreement pursuant to Article 8, Buyer and its authorized representatives will be given access (solely for the purpose of planning the transfer of operations to Buyer) on reasonable notice during normal business hours to: (i) Company and LPS accountants; (ii) the Books and Records of the Company (including the right to make copies thereof), regardless of the form or medium in which such Books and Records are maintained, provided that the Parties contemplate that such Books and Records will be made available in a manner intended to preserve the confidentiality of the transactions contemplated by this Agreement prior to Closing; (iii) inspect, during normal business hours, all of the Assets; and (iv) conduct such other reviews and inspections as Buyer may reasonably request, subject to Sellers’ reasonable requirements; provided, however, that any such access shall be conducted in a mutually satisfactory manner that (A) is intended to preserve the confidentiality of the transactions contemplated by this Agreement prior to Closing, (B) is consistent with this Agreement, and (C) does not interfere with the operation of LPS. In addition, Sellers shall cause LPS to give reasonable access, upon reasonable notice and during normal business hours, to its personnel. Nothing in this Section 5.3 shall entitle Buyer or its representatives to conduct any environmental investigation or testing at ROVA, except for any such environmental investigation as is capable of being conducted solely by an inspection of ROVA.

               (b)     Sellers will deliver copies of the Books and Records for calendar years 2004 and 2005 and for 2006 through the Closing to the Buyer at the place designated by Buyer within twenty business days of the Closing. Sellers shall retain all original Books and Records for at least seven years after their date and shall allow Buyer reasonable access to such Books and Records as Buyer may require. Sellers shall notify Buyer prior to destroying any of the Books and Records and shall give Buyer the option, at Buyer’s expense, of having such Books and records shipped to Buyer rather than being destroyed.

        5.4 Public Announcements. Each of Buyer and Sellers shall consult with and obtain the approval (which approval will not be unreasonably withheld) of the other Party before issuing any press release or making any other public statement with respect to this Agreement or any of the transactions contemplated hereby, except as may be required by Law or by obligations pursuant to any listing agreement with any national securities exchange or inter-dealer quotation system or as required in connection with the FERC and NCUC Transaction Approvals (and, in the reasonable judgment of the Party making such announcement or public statement, based upon advice of counsel, prior consultation with and approval of the other Party, despite reasonable efforts to obtain same, would prevent dissemination of such announcement or public statement in a timely enough fashion to comply with such applicable Law, listing agreement provision or exchange policy or requirement in connection with the FERC and NCUC Transaction Approvals), and, in such event, each Party agrees to give prompt notice to the other Party prior to any such written release or statement and, to the extent possible, based on the advice of counsel seek confidential treatment of such information or filing. Buyer has advised Sellers that, based on the advice of counsel, Buyer must file a Form 8K with the Securities and Exchange Commission describing its purchase of the Interest and the Assets within four business days of the execution of this Agreement.

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        5.5  Intentionally Omitted.

        5.6  Commercially Reasonable Efforts.

               (a)        From the Effective Date until the earlier of the Closing Date or the date on which this Agreement is terminated pursuant to Article 8, each of the Parties shall use its commercially reasonable efforts to obtain in an expeditious manner the satisfaction of all conditions precedent to the obligations of the other Party to consummate the purchase and sale of the Interest. Nothing in this paragraph shall obligate any Party to pay money to any Person or to contribute money or other capital to the Company (other than for fees and expenses of its professional advisors and filing fees).

               (b)        Sellers shall use commercially reasonable efforts (which shall not include the payment of money, other than other than for fees and expenses of its professional advisors and filing fees) to obtain, or to cause the Company, or cooperate with Buyer, to obtain, all Required Consents prior to the Closing. After the Effective Date, Buyer shall use commercially reasonable efforts (which shall not include the payment of money other than for fees and expenses of its professional advisors and filing fees), to obtain, or cooperate with Sellers or the Company to obtain, all Required Consents prior to the Closing.

               (c)        The Parties shall cooperate and use commercially reasonable efforts (which shall not include agreeing to any modifications of the terms of the underlying obligations and shall not require the payment of any money other than for fees and expenses of its professional advisors and filing fees) in order that, effective on or prior to the Closing Date, the Existing Letters of Credit shall be returned to Sellers or cancelled and terminated and all Liabilities, if any, of Sellers or its Affiliates related thereto shall be fully, completely and unconditionally released. Without limiting what would otherwise constitute commercially reasonable efforts (which shall not include agreeing to any modifications of the terms of the underlying obligations and shall not require the payment of any money other than for fees and expenses of its professional advisors and filing fees), Buyer shall seek the consent and cooperation of the Agent as contemplated by Section 5.8.

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        5.7  Consents.

               (a)        From the Effective Date to the earlier of the Closing Date or the date on which this Agreement is terminated pursuant to Article 8, each Party will use its commercially reasonable efforts (which shall not require the payment of any money other than for fees and expenses of its professional advisors and filing fees) to obtain the consents, approvals, authorizations, waivers, permits, certificates and orders of Governmental Authorities and any other third parties that may be or become necessary or advisable for the performance of its obligations under this Agreement and the consummation of the transactions contemplated hereby and will cooperate in all reasonable respects with the other Party in promptly seeking to obtain such consents, approvals, authorizations, waivers, permits, certificates and orders as may be necessary or advisable for the performance of their respective obligations pursuant to this Agreement. None of the Parties will take any action for the purpose of delaying, impairing or impeding the receipt of any required approvals, and each Party will use its commercially reasonable efforts (which shall not require the payment of any money other than for fees and expenses of its professional advisors and filing fees) to secure such approvals as promptly as possible.

               (b)        To the extent that Permits are required to be transferred to Buyer, each of the Parties will use its commercially reasonable efforts (which shall not require the payment of any money other than for fees and expenses of its professional advisors and filing fees) to facilitate such transfers of Permits by the Closing, without any material change in the terms thereof.

        5.8 Substitute Letters of Credit; Cash Deposit. At the Closing, Buyer shall, at its option, either (a) deliver to the Agent Substitute Letters of Credit, or (b) deposit with the Agent cash, in each case, in an amount equal to the undrawn amount of the Existing Letters of Credit (but not more than $9,850,000) so that, subject to the terms and provisions of the Credit Agreement and the consent and cooperation of the Agent, upon delivery of such Substitute Letters of Credit to, or deposit of cash with, the Agent, the Existing Letters of Credit shall be released and returned to Sellers at the Closing.

        5.9 Further Assistance. After the Closing Date, each Party shall take, without additional consideration, such further reasonable action (including the execution and delivery of such further instruments and documents and the grant of access to any individuals, premises, books or records) as any other Party reasonably may request as may be necessary or desirable to carry out the purposes of this Agreement.

        5.10 Use of LG&E Name. Buyer acknowledges that neither the Company nor the Buyer has any claim or rights in or to the name “LG&E”. Buyer agrees that as soon as practicable after the Closing, but in any event within thirty (30) days following the Closing, it will cause the Company to file, register or submit such documents as are necessary to change its name to remove the name “LG&E” and any variation thereof and to amend each certificate, partnership agreement or other Governing Instrument of the Company to reflect such name change. Buyer shall not use the “LG&E” name in connection with operating its business, including in connection with providing services under the O&M Agreements. Buyer further agrees that within thirty (30) days following the Closing it shall use its commercially reasonable efforts to remove the name “LG&E” from all signs, stationery, Assets and other items owned or used by the Company and Buyer and shall thereafter cause the Company not to use the name “LG&E” or any variation thereof for any purpose or reason whatsoever. Nothing in this paragraph shall obligate Buyer to pay money to any Person (other than for fees and expenses of its professional advisors and filing fees).

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        5.11 Replacement Insurance. Buyer agrees to obtain or cause to be obtained as of the Closing replacement insurance arrangements (“Replacement Insurance”) for the Company providing replacement coverage equivalent to the existing coverage maintained by or on behalf of the Company as of the Effective Date or, if such replacement coverage cannot be obtained on a commercially reasonable basis, replacement coverage that is as close to equivalent to the existing coverage as can be obtained on a commercially reasonable basis.

        5.12 Preservation of Company Status. Each of Buyer and Sellers agrees that if the transactions contemplated by this Agreement would result in a termination of the Company for federal income tax purposes, it will take all actions reasonably within its control to cause the transactions contemplated by this Agreement to nonetheless be effective and to waive (and to cause the Company to waive) any Claims or Losses in connection with such termination. Without limiting the generality of the foregoing, each of Buyer and Sellers agrees to vote its interest in the Company (and cause its or its subsidiary’s representative on the Company’s Management Committee to vote) to take such actions and to agree to amend the Partnership Agreement as necessary and appropriate to permit the transactions to occur and to effect such waiver.

ARTICLE 6.
CONDITIONS PRECEDENT TO CLOSING

        6.1 Conditions Precedent to Obligations of Buyer. The obligation of Buyer to consummate the purchase and sale of the Interest and Assets as contemplated by this Agreement is subject to the satisfaction or waiver at or prior to the Closing of the following conditions precedent:

               (a)        Sellers shall have performed and complied in all material respects with all obligations and covenants that are to be performed or complied with or necessary to be performed or complied with by Sellers on or before the Closing Date;

               (b)        the representations and warranties of Sellers set forth in Article 3, taken as a whole, shall be true and correct in all material respects both when made and as if made again on and as of the Closing Date (provided that all representations and warranties which are made as of a specific date shall be true and correct as if made only as of such date);

               (c)        Buyer shall receive at the Closing a certificate executed by Sellers, in form reasonably satisfactory to Buyer, certifying that, to the knowledge of the officer executing such certification, the matters referred to in paragraphs (a) and (b) of this Section 6.1 have been satisfied;

               (d)        all Required Consents including the FERC and NCUC Transaction Approvals shall have been obtained and remain in effect;

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               (e)        no investigation, suit, action or other proceeding shall be threatened or pending before any Governmental Authority that seeks constraint, prohibition, damages or other relief in connection with the purchase and sale of the Assets and the Interest or the consummation of the other transactions contemplated by this Agreement;

               (f)        no notice shall have been given by VEPCO to the Sellers or the Company between the date of this Agreement and the Closing Date stating that a breach has occurred under one or more of the O&M Agreements or under a material contract between VEPCO and the Company;

               (g)        the Agent shall have acknowledged in form and substance reasonably acceptable to Buyer that the Replacement Insurance satisfies the insurance requirements of the Credit Agreement;

               (h)        neither Party shall have exercised any termination rights which it is entitled to exercise pursuant to Sections 2.5(b) or 8.1; and

               (i)        Sellers shall have tendered to Buyer all of the documents, instruments and other items related to the Company which Sellers are required to deliver at Closing pursuant to Section 2.4(a), subject only to the delivery by Buyer of the Purchase Price and the documents, instruments and other items which Buyer is obligated to deliver at Closing pursuant to Section 2.4(b).

               (j)        Buyer shall have received documentation releasing any pledges to Seller or its Affiliates by Buyer or its Affiliates that secure obligations that have expired and can no longer arise.

        6.2 Conditions Precedent to Obligations of Sellers. The obligation of Sellers to consummate the purchase and sale of the Interest and Assets as contemplated by this Agreement is subject to the satisfaction or waiver on or prior to the Closing Date of the following conditions precedent:

               (a)        Buyer shall have performed and complied in all material respects with all obligations and covenants that are to be performed or complied with or necessary to be performed or complied with by it on or before the Closing Date;

               (b)        the representations and warranties of Buyer set forth in Article 4, taken as a whole, shall be true and correct in all material respects both when made and as if made again on and as of the Closing Date (provided that all representations and warranties which are made as of a specific date shall be true and correct as if made only as of such date);

               (c)        Sellers shall have received a certificate of an officer of the Buyer, in form reasonably satisfactory to Sellers, certifying that, to the knowledge of the officer making such certification, the matters referred to in paragraphs (a) and (b) of this Section 6.2 have been satisfied;

               (d)        all Required Consents and the FERC and NCUC Transaction Approvals shall have been obtained and remain in effect;

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               (e)        Sellers and all of their Affiliates shall have been fully, completely and unconditionally released from all of their respective Liabilities (if any) in respect of the Existing Letters of Credit, no amounts shall have been drawn under the Existing Letters of Credit, and the Existing Letters of Credit shall have been returned to Sellers at the Closing;

               (f)        no investigation, suit, action or other proceeding shall be threatened or pending before any Governmental Authority that seeks constraint, prohibition, damages or other relief in connection with the purchase and sale of the Interest or the consummation of the other transactions contemplated by this Agreement;

               (g)        neither Party shall have exercised any termination rights which it is entitled to exercise pursuant to Sections 2.5(b) or 8.1; and

               (h)        Buyer shall have tendered to Sellers the Purchase Price and all of the documents, instruments and other items which Buyer is required to deliver at Closing pursuant to Section 2.4(b), subject only to the delivery by Sellers of the documents, instruments and other items which Sellers is obligated to deliver at Closing pursuant to Section 2.4(a).

ARTICLE 7.
INDEMNITIES AND ADDITIONAL COVENANTS

        7.1 Survival. All representations, warranties, covenants, and obligations in this Agreement, the Schedules, Exhibits, and any other certificate or document delivered pursuant to this Agreement will survive the Closing.

        7.2  Sellers’ Indemnity.

               (a)       General. Sellers hereby agrees to indemnify and hold harmless Buyer, its Affiliates and their respective officers, directors and shareholders and their successors and permitted assigns (“Buyer Indemnified Parties”) from and against, any and all Losses or Claims that any Buyer Indemnified Party may suffer or incur, or become subject to, as a result of or arising from: (i) any breach or inaccuracy of any of the representations and warranties made by Sellers in or pursuant to this Agreement; and (ii) any failure of Sellers or its Affiliates to carry out, perform, satisfy and discharge any of their covenants, agreements, undertakings, liabilities or obligations under this Agreement or under any of the documents and instruments delivered by Sellers pursuant to this Agreement.

               (b)       Survival of Remedies. The Sellers’ Indemnification obligation pursuant to this Section 7.2 shall survive the Closing.

               (c)       Limitations on Liability. The Buyer Indemnified Parties shall not be entitled to Indemnification for any Losses or Claims that, when added to all Losses and Claims for which Indemnification has already been made by Sellers, would exceed an amount equal to the Purchase Price as adjusted by any refunds or payments actually made pursuant to Section 2.5. Sellers shall have no obligation to indemnify the Buyer Indemnified Parties for any Losses or Claims arising from the failure to obtain any Required Consent waived in writing by Buyer pursuant to Section 6.1.

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               (d)        [INTENTIONALLY OMITTED]

               (e)       Derivative Losses. The Company shall not be treated as an Affiliate of Buyer or a Buyer Indemnified Party for purposes of this Section 7.2, and Sellers shall have no obligations to the Company pursuant to any provision of this Agreement. If the Company suffers or incurs, or becomes subject to, any Losses or Claims that it would not have suffered, incurred or become subject to if (i) the representations and warranties made by Sellers in this Agreement were not breached or inaccurate, or (ii) Sellers and its Affiliates did not fail to carry out, perform, satisfy and discharge any of their covenants, agreements, undertakings, liabilities or obligations under this Agreement or under any of the documents and instruments delivered by Sellers pursuant to this Agreement, then Buyer shall be entitled to Indemnification pursuant to Section 7.2(a) for Losses indirectly incurred by it as a result of such circumstances; provided, however, that the amount of such Indemnification shall in no event exceed the after-tax economic impact on the value of the Interest, as determined by a discounted cash-flow methodology based on the actual and projected cash flows to Buyer, resulting from such Losses and Claims that the Company suffered or incurred or to which it became subject. Except as provided in this Section 7.2(e), neither Buyer nor any Buyer Indemnified Party shall have any right to Indemnification under this Section 7.2 as a result of Losses or Claims suffered or incurred by the Company or to which the Company becomes subject.

               (f)       Losses Covered by Insurance. The amounts for which Sellers shall be liable under Section 7.2(a) shall be reduced by any insurance proceeds actually received by the Company in connection with the facts and circumstances giving rise to the right of Indemnification. If, after a Buyer Indemnified Party has been indemnified for any Losses or Claims, insurance proceeds are received by the Company in connection with the facts and circumstances giving rise to such Losses or Claims, then the Buyer Indemnified Party who has received such Indemnification shall refund to Sellers the amount of such Indemnification that was paid to the extent that it would not have been payable if such insurance proceeds had been received by the Company prior to the payment of such Indemnification. Such refund shall be paid within ten (10) days following the receipt by the Company of the insurance proceeds giving rise to such refund. If any Buyer Indemnified Party other than Buyer fails to make such refund during such period, Buyer shall make such refund within five (5) days after the end of such period.

        7.3  Buyer’s Indemnity.

               (a)       General. Buyer hereby agrees to indemnify and hold harmless Sellers, their Affiliates and their respective officers, directors and shareholders and their successors and permitted assigns (“Sellers Indemnified Parties”) from and against, any and all Losses or Claims that the Sellers Indemnified Parties may at any time suffer or incur, or become subject to, as a result of or arising from: (i) any breach or inaccuracy of any of the representations and warranties made by the Buyer in or pursuant to this Agreement; (ii) any failure by the Buyer to carry out, perform, satisfy and discharge any of its covenants, agreements, undertakings, liabilities or obligations under this Agreement or under any of the documents and instruments delivered by the Buyer pursuant to this Agreement; (iii) after the Closing has occurred, the Company’s failure to pay and discharge when and as it becomes due and payable any Liability of the Company other than those with respect to which Buyer is entitled to Indemnification pursuant to Section 7.2(a) hereof; and (iv) Buyer’s or any of its Affiliates’ failure to pay, discharge or perform when required any Liability under the O&M Agreements and the Venture Management Agreement required to be paid, discharged or performed after the Closing. Subject to Section 9.12, disclosure after the Effective Date of a breach or inaccuracy of a representation or warranty made by Sellers pursuant to this Agreement shall not affect Sellers’ liability under this Agreement with respect to such breach or inaccuracy.

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               (b)       Survival of Remedies. The Buyer’s Indemnification obligation pursuant to this Section 7.3 shall survive the Closing.

               (c)       Limitations on Liability The Sellers Indemnified Parties shall not be entitled to Indemnification for any Losses or Claims with respect to Section 7.3(i) and (ii) that, when added to all Losses and Claims for which Indemnification has already been made by Sellers with respect to Section 7.3(i) and (ii), would exceed an amount equal to the Purchase Price as adjusted by any refunds or payments actually made pursuant to Section 2.5. Buyer shall have no obligation to indemnify the Sellers Indemnified Parties for any Losses or Claims arising from the failure to obtain any Required Consent waived in writing by Sellers pursuant to Section 6.2.

               (d)        [INTENTIONALLY OMITTED]

               (e)       Derivative Losses. The Company shall not be treated as an Affiliate of Sellers or a Sellers Indemnified Party for purposes of this Section 7.3, and Buyer shall have no obligations to the Company pursuant to any provision of this Agreement.

        7.4  Indemnification Procedure.

               (a)        If a claim against Sellers or Buyer (each, an “Indemnifying Party”) for Indemnification pursuant to the provisions of Sections 7.2(a) or 7.3(a) is to be made by any Buyer Indemnified Party or Sellers Indemnified Party (each, an “Indemnified Party”), such Indemnified Party shall give notice of such claim to the Indemnifying Party promptly after such Indemnified Party becomes aware of any fact, condition or event which may give rise to Claims or Losses for which Indemnification may be sought under Sections 7.2(a) or 7.3(a); provided, that, failure to timely give notice shall not relieve the Indemnifying Party from any obligation under this Agreement except to the extent, if any, the Indemnifying Party is materially prejudiced thereby.

               (b)        In the case of a claim for Indemnification involving the assertion of a Claim by a third party against such Indemnified Party, provided that the Indemnifying Party (i) admits in writing to the Indemnified Party that such Claim is covered by the indemnity provisions of Section 7.2(a) or 7.3(a) hereof, as applicable, (ii) the Indemnifying Party has and provides reasonable evidence that the Indemnifying Party has the financial capacity and resources to be fully responsible for all such liabilities and obligations relating to such Claim and (iii) the Indemnifying Party thereafter conducts the defense of such third party Claim as actively and diligently as is reasonably appropriate, the Indemnifying Party shall have the right to contest and defend by all appropriate legal proceedings such Claim and to control all settlements (unless the Indemnified Party agrees to assume the cost of settlement and to forego such indemnity) and to select a recognized and reputable lead counsel acceptable to Indemnified Party to defend any and all such Claims at the sole cost and expense of the Indemnifying Party (“Assume the Defense”); provided, however, that the Indemnifying Party shall not be entitled to Assume the Defense and shall pay the cost and expense of counsel retained by the Indemnified Party if (1) the Claim relates to or arises in connection with any criminal or quasi-criminal proceedings, action, indictment, allegation or investigation of or against the Indemnified Party or its Affiliates, (2) the Indemnified Party has been advised by counsel that a reasonable likelihood exists of a conflict of interest between defenses to the Claim available to the Indemnifying Party and the Indemnified Party; or (3) upon petition by the Indemnified Party, the appropriate court rules that the Indemnifying Party failed or is failing to defend the Claim as actively and diligently as is reasonably appropriate; provided, further, that the Indemnifying Party may not effect any settlement that could result in any cost, expense or liability to, or have any material adverse effect upon, any Indemnified Party unless such Indemnified Party consents in writing to such settlement and the Indemnifying Party agrees to indemnify such Indemnified Party therefor.

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               (c)        In the case of a claim for Indemnification under Section 7.2(a) made pursuant to Section 7.2(e) and involving the assertion of a Claim by a third party against the Company, provided that (i) Sellers admits in writing to the Buyer Indemnified Party that such Claim is covered by the indemnity provisions of Section 7.2(a) and 7.2(e), (ii) Sellers has and provides reasonable evidence that Sellers has the financial capacity and resources to be fully responsible for all such liabilities and obligations relating to such Claim and (iii) Sellers thereafter conducts the defense of such third party Claim as actively and diligently as is reasonably appropriate, Sellers shall have the right to Assume the Defense of such Claim to the extent that any Buyer Indemnified Party has the right to contest and defend such Claim, to control any settlement of such Claim, or to select counsel to defend such Claim; provided, however, that Sellers shall not be entitled to Assume the Defense and shall pay the cost and expense of counsel retained by the Buyer Indemnified Party if (1) the Claim relates to or arises in connection with any criminal or quasi-criminal proceedings, action, indictment, allegation or investigation of or against the Indemnified Party or its Affiliates, (2) the Indemnified Party has been advised by counsel that a reasonable likelihood exists of a conflict of interest between defenses to the Claim available to Sellers and the Buyer Indemnified Party; or (3) upon petition by the Buyer Indemnified Party, the appropriate court rules that Sellers failed or is failing to defend the Claim as actively and diligently as is reasonably appropriate, and; provided, further, that Sellers may not effect any settlement that could result in any cost, expense or liability to, or have any material adverse effect upon, any Buyer Indemnified Party unless such Buyer Indemnified Party consents in writing to such settlement and Sellers agrees to indemnify such Buyer Indemnified Party therefor.

               (d)        In the event the Indemnifying Party does not admit in writing to the Indemnified Party seeking Indemnification that such Claim is covered by the indemnity provisions of Section 7.2(a) or 7.3(a) hereof, as applicable, such Indemnified Party shall take such actions as it deems necessary to defend such Claim; provided, however, that the Indemnified Party may not effect any settlement that could result in any cost, expense, liability to, or have any material adverse effect upon the Indemnifying Party without consent of the Indemnifying Party, which consent shall not be unreasonably withheld and which consent or objection thereto must be provided in a timely manner as the circumstances dictate and in any event within ten (10) business days of such request. Once an Indemnifying Party Assumes the Defense with respect to a claim, an Indemnified Party may select a recognized and reputable counsel satisfactory to Indemnified Party to participate in any defense of that third party Claim, in which event such Indemnified Party’s counsel shall be at the sole cost and expense of such Indemnified Party; provided, however, that the cost and expense of Indemnified Party’s counsel that were incurred prior to the date the Indemnifying Party Assumes the Defense in connection with responding to the third party Claim shall be borne by the Indemnifying Party.

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               (e)        In connection with any such third party Claim, the Parties shall cooperate with each other (at the Indemnifying Party’s cost and expense) and provide each other with access to relevant books and records in their possession. Sellers and Buyer shall cause the Sellers Indemnified Parties and the Buyer Indemnified Parties, respectively, to comply with the provisions of this Section 7.4.

        7.5  Post-Closing Tax Matters.

               (a)       Review of Tax Returns; Proration of Income and Loss. With respect to Tax Returns not yet filed as of the Closing Date which cover periods ending on or before or including the Closing Date, Sellers or Buyer, as the case may be, shall reasonably cooperate with the other Party in permitting the other Party to review and comment on such Tax Returns made available pursuant to Section 12.1 of the Partnership Agreement. The Parties agree that for purposes of allocating items of Company income, gain, loss and deduction between Sellers and Buyer for any taxable periods that include but do not end on the Closing Date (a “Straddle Tax Period”) Sellers and Buyer will, to the extent permitted by applicable Law and the Partnership Agreement, elect with the relevant taxing authority to treat such taxable period for all purposes as a short taxable period ending as of the Closing Date. In any case where applicable Law does not permit such an election to be made, all items of Company income, gain, loss and deduction shall be allocated between the period before the Closing Date and the period beginning the day after the Closing Date using a closing-of-the-books method assuming that the Straddle Period consisted of two taxable periods, one ending at the close of the Closing Date and the other beginning at the start of the day after the Closing Date, except that (i) exemptions, allowances or deductions that are calculated on an annual basis (such as the deduction for depreciation) and (ii) deductions relating to real property, personal property, intangibles and other similar Taxes relating to assets shall, in each case, be allocated on a per-diem basis taking into account the period for which the asset was held. If the election or allocation provided above is not permitted by the Partnership Agreement, all items of Company income, gain, loss and deduction shall be allocated in accordance with the provisions of the Partnership Agreement; provided, each of Sellers and Buyer agrees to exercise any of its rights (and to cause its Affiliates to exercise any of their rights) under the Partnership Agreement to permit, and to cause its representative or representatives on the management committee to permit and approve, the election and allocation provided for above and/or to put into effect such allocation as between Sellers and Buyer.

               (b)       Cooperation on Tax Matters. Buyer and Sellers shall cooperate fully, as and to the extent reasonably requested by the other Party, in connection with the filing of Tax Returns of the Company and any audit, litigation or other proceeding with respect to Taxes of the Company. Such cooperation shall include the retention and (upon the other Party’s request) the provision of records and information which are reasonably relevant to any such audit, litigation or other proceeding and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided under this Agreement. Buyer and Sellers agree (i) to retain all books and records with respect to Tax matters pertinent to the Company relating to any taxable period beginning before the Closing until the expiration of the statute of limitations (and, to the extent notified by Buyer or Sellers, any extensions thereof) of the respective taxable periods, and to abide by all record retention agreements entered into with any taxing authority, and (ii) to give the other Party reasonable written notice prior to destroying or discarding any such books and records and, if the other Party so requests, Buyer or Sellers, as the case may be, shall allow the other Party to take possession of such books and records.

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        7.6 No Additional Representations. Buyer acknowledges that its wholly-owned indirect subsidiary is a 50% general partner in the Company and Buyer is thereby generally familiar with all aspects of its assets, operation and financial results and prospects, including, without limitation, its Books and Records, Tax Returns, contracts, insurance policies and other information relating to the Company, and that it and its representatives have had a full opportunity to meet with the employees of LPS to discuss in detail the Assets. Buyer acknowledges that none of Sellers, the Company or any other Person has made any representation or warranty, expressed or implied, as to, and none of Buyer or any of its Affiliates has relied upon, the accuracy or completeness of any information regarding the Company or the Assets furnished or made available to Buyer and its representatives, except as expressly set forth in this Agreement, and neither Sellers nor any other Person shall have or be subject to any liability to Buyer or any other Person resulting from the distribution to Buyer, or Buyer’s use of, any such information, including the Offering Memorandum dated April 2003, and any information, documents or material made available to Buyer or its representatives in any “data rooms”, management presentations or in any other medium in expectation of the transactions contemplated by this Agreement. Buyer acknowledges that, should the Closing occur, Buyer shall acquire the Interest (including the share in the Company’s assets represented thereby) and the Assets without any representation or warranty as to merchantability or fitness for any particular purpose, in an “as is” condition and on a “where is” basis, except as otherwise expressly set forth in this Agreement. Specifically, Buyer agrees that its use of the LPS Know How is strictly at Buyer’s risk and that Buyer (i) will have no recourse against Sellers or their affiliates with respect to any adverse consequences there from and (ii) will indemnify Sellers and the Sellers Indemnified Parties against all claims that arise by Buyer’s use of the LPS Know How after the Closing.

        7.7 Exclusivity of Remedies. Notwithstanding anything to the contrary in this Agreement, no Party shall be liable to the other Party or any Indemnified Party for (i) any consequential, special, indirect or incidental damages sustained by any other Party or Indemnified Party or (ii) punitive or exemplary damages. The Indemnification provided for in Sections 7.2 and 7.3 shall constitute the exclusive remedy for the Parties with respect to any Losses and Claims arising under or related to this Agreement except that either Party may seek specific performance with respect to any breaches or threatened breaches of the covenants set forth in this Agreement and either Party may seek damages against the other Party if such damages are the result of intentional fraud on the part of the other Party.

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ARTICLE 8.
TERMINATION

        8.1  Termination. This Agreement may be terminated and the transactions contemplated thereby abandoned as follows:

               (a)        By the written consent of Buyer and Sellers at any time prior to the Closing;

               (b)        By written notice of Buyer or Sellers to the other if a final, non-appealable order to restrain, enjoin or otherwise prevent the consummation of the transactions contemplated by this Agreement shall have been entered;

               (c)        By written notice of Buyer to Sellers at any time on or after the Termination Date if the Closing shall not have occurred by reason of a failure of any condition precedent under Section 6.1 unless the failure results primarily from a material breach by Buyer of any representation, warranty or covenant contained in this Agreement;

               (d)        By written notice of Sellers to Buyer at any time on or after the Termination Date if the Closing shall not have occurred by reason of a failure of any condition precedent under Section 6.2, unless the failure results primarily from a material breach by Sellers of any representation, warranty or covenant contained in this Agreement;

               (e)        By written notice of Buyer to Sellers if the FERC and NCUC Transaction Approvals or any other consent or approval to be obtained from any Governmental Authority in order to effect the transactions contemplated in this Agreement shall be subject to any condition that would require Buyer or any of its Affiliates to dispose of any significant portion of its assets or lines of business; provided, however, before Buyer shall have the right to terminate this Agreement pursuant to this Section 8.1(e), Buyer shall, and shall cause its Affiliates, to use commercially reasonable efforts to have the applicable Governmental Authority remove such condition from the transaction approval, including seeking rehearing or reconsideration of such condition;

               (f)        By written notice of Buyer to Sellers in the event there has been a material breach by Sellers of its respective agreements, covenants, representations or warranties contained in this Agreement if (i) such breach has not been cured within ten (10) days after Buyer’s written notice thereof to Sellers, or (ii) if not curable within ten (10) days, Sellers has taken reasonable actions within ten (10) days after Buyer’s written notice thereof to Sellers designed to cure such breach during a reasonable period of time (but in any event prior to the Termination Date) and Sellers continues to take reasonable actions to cure such breach until it is cured;

               (g)        By written notice of Sellers to Buyer in the event there has been a material breach by Buyer of its agreements, covenants, representations or warranties contained in this Agreement if (i) such breach has not been cured within ten (10) days after Sellers’ written notice thereof to Buyer, or (ii) if not curable within ten (10) days, Buyer has taken reasonable actions within ten (10) days after Sellers’ written notice thereof to Buyer designed to cure such breach during a reasonable period of time (but in any event prior to the Termination Date) and Buyer continues to take reasonable actions to cure such breach until it is cured; or

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               (h)        By written notice of Buyer to Sellers pursuant to Section 2.5(b).

        8.2 Effect of Termination. Notwithstanding any termination of this Agreement pursuant to Section 8.1, the provisions of Sections 3.6, 4.4 and 5.4 and Articles 7, 8 and 9 shall survive any such termination. Upon any termination of this Agreement pursuant to Section 8.1, Sellers and Buyer shall have no obligation or liability to each other except with respect to (i) any breaches of covenants made in this Agreement prior to such termination and (ii) those provisions that survive the termination pursuant to the first sentence of this Section 8.2. If and only if the transactions contemplated by this Agreement are not consummated because of a material breach of this Agreement by Buyer, the terms of this Agreement shall be deemed to constitute an “Offering Notice” for which the “Offering Period” has expired without being exercised for purposes of, and with the meanings ascribed to those terms, in Section 8.3 of the Partnership Agreement.

ARTICLE 9.
MISCELLANEOUS

        9.1 Expenses. Except as otherwise set forth herein, each of Sellers and Buyer shall bear and pay all costs and expenses incurred by it in connection with the transactions contemplated by this Agreement.

        9.2 Transfer Taxes, Recording Fees and Real Estate Taxes. All sales, use or other taxes normally imposed on a buyer or imposed on a seller that are properly chargeable to a buyer (other than taxes on gross income, net income or gross receipts) and duties, levies on other governmental charges incurred by or imposed with respect to the transactions contemplated by this Agreement and all recording fees shall be shared equally by Buyer and Sellers.

        9.3 Waiver and Amendment. Any provision of this Agreement may be waived only in writing at any time by the Party that is entitled to the benefits thereof. This Agreement may not be amended or supplemented at any time, except by an instrument in writing signed on behalf of each Party. The waiver by any Party of any breach of a provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach.

        9.4 Assignment. This Agreement shall not be assignable by any Party without the prior written consent of the other Party, except that Either Party may assign this Agreement in whole or in part to an Affiliate of that Party. This Agreement shall inure to the benefit of and will be binding upon the Parties and their respective legal representatives, successors and permitted assigns.

        9.5 Notices. All notices, requests, demands, claims and other communications that are required to be or may be given under this Agreement must be in writing and shall be deemed to have been duly given when received if (a) delivered in person or by courier, (b) sent by telecopy or facsimile transmission, or (c) mailed, by registered or certified mail, postage prepaid return receipt requested, to the intended recipient at following addresses:

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If to Sellers:

LG&E Power Services LLC
LG&E Roanoke Valley L.P.
C/o LG&E Energy LLC
220 West Main Street
Louisville, Kentucky 40202
Attn: President
Fax: (502) 627-4622

with copy to:

LG&E Energy LLC
220 West Main Street
Louisville, Kentucky 40202
Attn: General Counsel
Fax: (502) 627-4622

If to Buyer:

Westmoreland Coal Company
14^th Floor
2 North Cascade Avenue
Colorado Springs, CO 80903
Attn: Douglas P. Kathol
Fax: (719) 448-5824

with copy to:

Westmoreland Coal Company
14^th Floor
2 North Cascade Avenue
Colorado Springs, CO 80903
Attn: General Counsel
Fax: (719) 448-5824  

or to such other address for a Party as that Party shall have furnished to the others by notice given in accordance with this Section 9.5. Such notices shall be effective upon actual receipt at the addresses above.

        9.6 Dispute Resolution; Arbitration; Governing Law. All controversies, disputes, differences or questions relating to or in connection with this Agreement shall be referred by any Party to binding arbitration in accordance with the then-prevailing Commercial Arbitration Rules of the American Arbitration Association. Such arbitration shall be the exclusive method for resolution of the dispute, and the determination of the arbitrator shall be final and binding on the Parties (except to the extent that there exist grounds for vacation of an award under applicable arbitration statutes). In the event of any disagreement between the Parties arising out of any provision of this Agreement and prior to its referral to arbitration, the Parties shall use their respective good faith efforts to resolve such disagreement. If the Parties fail to resolve such disagreement, either Buyer or Sellers may submit such matter for arbitration in accordance with this Section 9.6. The arbitration shall be conducted in the English language and shall take place in Washington, D.C. under the auspices of the American Arbitration Association and in accordance with its Commercial Arbitration Rules. The costs of such arbitration shall be determined by and allocated between the Parties by the arbitrator in its decision. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia, excluding any conflict of law rules that may direct the application of the laws of another jurisdiction.

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        9.7 Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provision, covenants and restrictions of this Agreement shall continue in full force and effect and shall in no way be affected, impaired or invalidated unless such an interpretation would materially alter the rights and privileges of any Party or materially alter the terms of the transactions contemplated by this Agreement.

        9.8 Counterparts. This Agreement may be executed in counterparts, each of which shall be an original, but all of which together shall constitute one and the same agreement.

        9.9 No Third Party Beneficiaries. Except as provided in Article 7, neither this Agreement nor any document delivered in connection with this Agreement, confers upon any Person not a Party any rights or remedies hereunder or thereunder.

        9.10 Entire Agreement; Exhibits and Schedules. This Agreement, including the Exhibits and Disclosure Schedules and any other documents executed and delivered pursuant to this Agreement, constitutes the entire agreement and supersede all other prior agreements and understandings, both oral and written, among the Parties or any of them, with respect to the subject matter hereof. No representation, promise, inducement or statement of intention has been made by any Party which is not embodied in or superseded by this Agreement or in the documents referred to herein, and no Party shall be bound by or liable for any alleged representation, promise, inducement or statement of intention not so set forth.

        9.11 Disclosure. Any fact, circumstance or condition disclosed by Sellers or Buyer in a Disclosure Schedule corresponding to the representations and warranties in a particular section of Article 3 or 4 shall be deemed disclosed in the Disclosure Schedule corresponding to the representations and warranties in another section of Article 3 or 4 (or in a new Disclosure Schedule that corresponds to such section if no Disclosure Schedule exists that corresponds to such section) if the relevance of such fact, circumstance or condition to a representation or warranty in such other section is reasonably apparent from the disclosure made in the Disclosure Schedule in which the disclosure is made.

        9.12 Closing Over Breaches. Notwithstanding anything in Sections 7.2 or 7.3 to the contrary, if either Party elects to proceed with the Closing with Knowledge by such Party of any breach or inaccuracy of any representation or warranty by the other Party and the other Party can demonstrate that such Party had Knowledge of such breach, inaccuracy, circumstance, condition or event (each, a “Basis for Indemnification”), then the Basis for Indemnification will be deemed waived by such Party that elects to proceed with the Closing, and such Party shall be deemed to have fully released and forever discharged the other Party with respect to any Indemnification or other claims with respect to such Basis for Indemnification of which such Party had Knowledge.

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        9.13 Employment of Employees of Sellers and Affiliates. Seller acknowledges that Buyer intends to offer employment to certain of those employees of LPS permanently located at the Richmond, Virginia, office or at one of the Facilities (the “Available Employees”). Buyer agrees to employ at least seventy percent of the Available Employees. In determining whether to employ a particular Available Employee, Buyer will utilize information it receives from that Available Employee (e.g., application information, interviews, etc.). The Sellers have advised the Buyer that it may not rely on information in the employee files (other than training records and certifications) or on recommendations or information provided by any of LPS’s exempt employees or any of the personnel located at the Richmond, Virginia office (such information and recommendations are collectively referred to as the “Employee Information”). Buyer shall not seek Employee Information and, should it obtain Employee Information, it shall disregard it in making its employment decisions. LPS has outstanding loans to certain of the Available Employees with which the employees purchased computer equipment for their personal use. At the Closing, Buyer will purchase from LPS all such loans outstanding to Available Employees hired by Buyer (“PC Loans”) for an aggregate purchase price equal to the aggregate balance of all such loans (the “PC Loan Price”). Buyer agrees that, from the Effective Date until three years after the Closing Date, neither it nor any of its Affiliates shall, directly or indirectly, solicit for employment or hire any employee (other than the Available Employees) of either of the Sellers or any of their Affiliates. Prior to the Closing, Seller shall provide to Buyer the following information with respect to each Available Employee: service dates (including dates of broken service), salary, any accommodations that are made due to a disability or health considerations of the employee (so that Buyer can make the same accommodation), any legal requirements specific to the employee that Buyer, as a subsequent employer, must comply with (garnishment, court orders, etc.).

        9.14 Post Closing Cooperation. After the Closing, Buyer shall give Sellers reasonable access to the Available Employees then in its (or its Affiliates’) employee in connection any litigation or dispute in which the Sellers (or any of their Affiliates) are or may become involved. Such access shall include making employees available to testify in depositions or formal proceedings.

        9.15 Consent Agreement. At, or immediately after the Closing, Buyer shall (or cause the Company to) make the payment required by the Consent Agreement (and otherwise comply with the Consent Agreement) in accordance with its terms.

        9.16 ARB Case. LPS is currently litigating a case styled as CLIFF MORRISS V. LG&E POWER SERVICES, LLC, ARB CASE NO. 05-047 ALJ NO. 2004-CAA-00014 (the “Case”). The administrative law judge determined that Mr. Morriss was wrongfully terminated and ordered remedies including back pay and reinstatement. LPS has appealed that determination. Neither the Buyer nor any of its Affiliates are assuming any liability under the Case or any obligation to defend the Case, both of which shall remain with LPS: provided, Buyer will cause its applicable Affiliate to employ Mr. Morriss if a reinstatement order is sustained and the adjudicating authority determines that the Buyer or a subsidiary of Buyer is a successor in interest to LPS for purposes of the order of reinstatement; provided, that Sellers agree that they will not object to Buyer, at its expense, intervening (or otherwise similarly participating) in such litigation (including any appeals) on the sole issue of whether Buyer or one of its Affiliates is a successor in interest to LPS.

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        IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be executed on its behalf by its officers thereunto duly authorized, all as of the date first above written.

SELLERS:		BUYER:
LG&E Roanoke Valley, L.P.		Westmoreland Coal Company
By:   LGE Power 16 Incorporated
	General Partner	By: ________________________________
	By: ________________________________	Title: ________________________________
	Title: ________________________________	Date: ________________________________
	Date: ________________________________
LG&E Power Services LLC
	By: ________________________________
	Title: ________________________________
	Date: ________________________________

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EX-10

Exhibit 10.2

THIRD AMENDMENT AND RESTATEMENT OF THE

POWER PURCHASE AND OPERATING AGREEMENT

BY AND BETWEEN

WESTMORELAND — LG&E PARTNERS

AS SUCCESSOR IN INTEREST TO

BECKLEY COGENERATION COMPANY

AND

VIRGINIA ELECTRIC AND POWER COMPANY

THIRD AMENDMENT AND RESTATEMENT OF
THE POWER PURCHASE AND OPERATING AGREEMENT

Table of Contents

ARTICLE 1: Definitions 5

1.1    "Actual Capacity Factor" 5

1.2    "Annual O&M Capacity Component" 6

1.3    "Average Capacity Factor" 6

1.4    "Business Day" 7

1.5    "Calendar Day" or "Day" 7

1.6    "Calendar Month" or "Month" 7

1.7    "Calendar Quarter" or "Quarter" 7

1.8    "Calendar Year" or "Year" 7

1.9    "Capacity Purchase Payment" 8

1.10    "Capacity Purchase Payment Adjustment" 8

1.11    "Capacity Unit Price" 8

1.12    "Commercial Operations Date" 8

1.13    "Delivered Capacity" 8

1.14    "Design Limits" 9

1.15    "Dispatch" 10

1.16    "Effective Date" 10

1.17    "Emergency" 10

1.18    "Energy Purchase Price" 11

1.19    "Extended Term" or "Extended Terms" 11

1.20    "FERC" 11

1.21    "Facility" 11

1.22    "Financial Closing" 11

1.23    "Fixed Capacity Component" 11

1.24    "Forced Outage" 11

1.25    "Initial Term" 11

1.26    "Interconnection Facilities" 12

1.27    "Interconnection Point" 12

1.28    "Interest" 12

1.29    "Maintenance Outage" 12

1.30    "Maximum Annual Capacity Payment" 12

1.31    "Maximum Capacity Summer" 13

1.32    "Maximum Capacity 13

1.33    "Maximum Capacity Unit Price" 13

1.34    "NCUC" 14

1.35    "NERC" 14

1.36    "Net Electrical Output" 14

1.37    "O&M Capacity Component" 14

1.38    "Off Peak Hours" 14

1.39    "Prudent Electrical Practices" 14

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1.40    "Prudent Utility Practices" 15

1.41    "PURPA" 15

1.42    "Qualifying Facility" or "QF" 15

1.43    "SCC" 15

1.44    "Scheduled Outage" 15

1.45    "Summer Period" 15

1.46    "Term" 15

1.47    "Tracking Account" 15

1.48    "Winter Period" 16

ARTICLE 2: Sale and Purchase of Energy and Capacity 16

ARTICLE 3: Notices 17

ARTICLE 4: Pre- and Post-Operation Period 18

ARTICLE 5: Term and Termination 20

ARTICLE 6: Representations and Warranties of Operator 21

ARTICLE 7: Control and Operation of the Facility 25

ARTICLE 8: Interconnection 31

ARTICLE 9: Metering 32

ARTICLE 10: Compensation. Payment, and Billings 35

ARTICLE 11: Capacity Ratings 43

ARTICLE 12: Insurance 43

ARTICLE 13: Liability, Noncompliance and Guarantees 45

ARTICLE 14: Force Majeure 50

ARTICLE 15: Taxes and Claims for Labor and Materials 51

ARTICLE 16: Choice of Law 52

ARTICLE 17: Miscellaneous Provisions 52

ARTICLE 18: Statutory and Regulatory Changes 53

ARTICLE 19: Entirety 55

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THIRD AMENDMENT AND RESTATEMENT OF
THE POWER PURCHASE AND OPERATING AGREEMENT
BY AND BETWEEN
WESTMORELAND - LG&E PARTNERS
AS SUCCESSOR IN INTEREST TO
BECKLEY COGENERATION COMPANY
AND
VIRGINIA ELECTRIC AND POWER COMPANY

        THIS THIRD AMENDMENT AND RESTATEMENT, effective as of the Effective Date, of the POWER PURCHASE AND OPERATING AGREEMENT effective January 11, 1989 and executed January 24, 1989, first amended and restated March 28, 1990 (“First Amendment and Restatement”), and subsequently amended and restated November 15, 1991 (“Second Amendment and Restatement”), is by and between WESTMORELAND — LG&E PARTNERS, a Virginia general partnership with its principal office located in Charlottesville, Virginia (“Operator”), as successor in interest to BECKLEY COGENERATION COMPANY, a Delaware limited partnership, and VIRGINIA ELECTRIC AND POWER COMPANY, a Virginia public service corporation with its principal office located in Richmond, Virginia, operating in North Carolina as North Carolina Power (“North Carolina Power” or “Company”). As used herein, the term “Original Agreement No. 1” shall refer to the Power Purchase and Operating Agreement as executed on January 24, 1989. The term “Agreement” shall refer to the Second Amendment and Restatement as amended and restated hereby and as the same may hereafter be amended and in effect. Both Operator and North Carolina Power are herein individually referred to as “Party” and collectively referred to as “Parties”.

R E C I T A L S

        WHEREAS, the Company had entered into the Original Agreement No. 1, executed January 24, 1989, with Beckley Cogeneration Company, a partnership whose general partners were Westpower-Beckley L.P., a partnership whose general partner was Westmoreland-Beckley, Inc., Borealis Power Partners, a limited partnership whose general partner was Borealis Power Company, Inc., and S.N.W./Beckley, L.P., a partnership whose general partner was Stone & Webster Beckley Corporation; and

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        WHEREAS, such partnership was going to develop an electric generating facility known as The Beckley Project in Beckley, West Virginia; and

        WHEREAS, such partnership chose not to develop such facility in Beckley, West Virginia; and

        WHEREAS, S.N.W./Beckley, L.P. withdrew from the partnership; and

        WHEREAS, Hadson Roanoke Valley, L.P., a California limited partnership whose general partner was Hadson Power 16 Incorporated, bought the interest of Borealis Power Partners; and

        WHEREAS, Westmoreland-Roanoke Valley, L.P., formerly Westmoreland-Beckley, Inc., and Hadson Roanoke Valley, L.P., as Westmoreland-Hadson Partners, planned to own and operate a new generation facility located inside North Carolina Power’s certificated retail service area in Halifax County, North Carolina, with a maximum nameplate rating of 203,250 KVA; such facility in all future correspondence to be identified as the Roanoke Valley Project (or the “Facility”); and

        WHEREAS, the Original Agreement No. 1 was first amended and restated March 28, 1990 pursuant to the First Amendment and Restatement to reflect the above changes; and

        WHEREAS, the First Amendment and Restatement was then amended and restated November 15, 1991 pursuant to the Second Amendment and Restatement; and

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        WHEREAS, Hadson Roanoke Valley, L.P., subsequently changed its name to LG&E Roanoke Valley, L.P., whose general partner is LG&E Power 16 Incorporated, and Westmoreland-Hadson Partners subsequently changed its name to Westmoreland — LG&E Partners.

        WHEREAS, the Parties now want to further amend and restate the Agreement; and

        WHEREAS, the Commercial Operations Date occurred on May 29, 1994; and

        WHEREAS, Operator wishes to sell exclusively to North Carolina Power all of the Facility’s Net Electrical Output, such sale to be pursuant to the terms and conditions set forth herein; and

        WHEREAS, North Carolina Power wishes to purchase energy and capacity, which may be dispatched by North Carolina Power pursuant to the terms and conditions set forth herein;

        NOW, THEREFORE, in consideration of these premises and of the mutual covenants and agreements hereinafter set forth, Operator and North Carolina Power covenant and agree, and amend and restate the Second Amendment and Restatement in its entirety, as follows:

ARTICLE 1: Definitions

        Whenever the following terms appear in this Agreement, whether in the singular or in the plural, present or past tense, they shall have the meaning stated below:

        1.1    “Actual Capacity Factor” — For any Year, the quotient (expressed as a percentage) obtained by dividing: (a) the Delivered Capacity for such Year by (b) the sum of (i) the product of the Maximum Capacity — Summer and the number of hours in the Summer Period during such Year, and (ii) the product of the Maximum Capacity — Winter and the number of hours in the Winter Period during such Year. Notwithstanding the foregoing provisions, (A) the Actual Capacity Factor for each of 1998 and 1999 shall be deemed conclusively to be 91.629% and 85.721%, respectively, and (B) the Actual Capacity Factor for each of 2004, 2009, 2014 and 2019 shall be deemed conclusively to be the quotient obtained pursuant to the calculation in the preceding sentence, plus three percent (3%). Without limiting the generality of the foregoing provisions, the Actual Capacity Factor shall also be calculated for all of the Year 2000.

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        1.2    “Annual O&M Capacity Component”— For any Year during which the O&M Capacity Component increases or decreases, the Annual O&M Capacity Component shall be the quotient obtained by dividing (a) the sum of (i) the product obtained by multiplying the O&M Capacity Component in effect as of January 1 of such Year by the number of days from and including January 1 of such Year through the Day preceding the effective date of such increase or decrease, and (ii) the product obtained by multiplying the O&M Capacity Component after giving effect to such increase or decrease by the number of days from and including the effective date of such increase or decrease through the last Day of such Year, by (b) the total number of days in such Year. Notwithstanding the foregoing provisions, the Annual O&M Capacity Component for any Year during which the O&M Capacity Component does not increase or decrease shall equal such O&M Capacity Component.

        1.3    “Average Capacity Factor” — For any Year other than 2000, the average of the Actual Capacity Factor for each of the three (3) preceding Years; provided that in no event shall the Average Capacity Factor be deemed to be less than (a) 86% in any Year from 2001 through 2009, or (b) 85% in 2010 or any Year thereafter during the Initial Term; provided that the minimum Average Capacity Factor, if any, during any Extended Term shall be subject to the mutual agreement of the Parties. Notwithstanding the foregoing provisions, the Average Capacity Factor for each of 2004, 2009, 2014 and 2019 shall be deemed conclusively to be the average referred to in the preceding sentence, plus three percent (3%).

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        1.4    “Business Day” — Monday through Friday excluding holidays recognized by North Carolina Power. As of the date of this Agreement, these holidays include New Year’s Day, Martin Luther King’s Birthday, Good Friday, Memorial Day, Fourth of July, Labor Day, Veteran’s Day, Thanksgiving Day, day after Thanksgiving Day, Christmas Eve and Christmas Day. The Day North Carolina Power observes such holidays may be changed by North Carolina Power upon ten (10) Days written notice to Operator.

        1.5    “Calendar Day” or “Day” — A Calendar Day shall be the 24-hour period beginning and ending at 12:00 midnight Eastern Time. The terms Day and Calendar Day may be used interchangeably and shall have the same definition.

        1.6    “Calendar Month” or “Month” — A Calendar Month shall begin at 12:00 midnight on the last Day of the preceding Month and end at 12:00 midnight on the last Day of the current Month. The terms Month and Calendar Month may be used interchangeably and shall have the same definition.

        1.7    “Calendar Quarter” or “Quarter” — A Calendar Quarter shall be a 3-Month period beginning 12:00 midnight on December 31, March 31, June 30, or September 30. The terms Calendar Quarter and Quarter shall be used interchangeably and shall have the same definition.

        1.8    “Calendar Year” or “Year” — A Calendar Year shall be the 12-Month period beginning 12:00 midnight on December 31 and ending at 12:00 midnight on the subsequent December 31. The terms Year and Calendar Year may be used interchangeably and shall have the same definition. Notwithstanding the foregoing provisions, if the Initial Term is canceled, expires or otherwise terminates on any Day other than December 31, the terms Year and Calendar Year shall also be deemed to refer to the time from and including January 1 of such Year through the effective date of such cancellation, expiration or termination for purposes of this Agreement.

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        1.9    “Capacity Purchase Payment” — The amount North Carolina Power will pay Operator for Delivered Capacity in accordance with Article 10.

        1.10    “Capacity Purchase Payment Adjustment” — The amount calculated as such in Section 10.15(b).

        1.11    “Capacity Unit Price” — At any time, the quotient obtained by dividing the sum of the applicable Fixed Capacity Component and the applicable O&M Capacity Component by the applicable Average Capacity Factor, expressed in cents/kWh; provided that, at any time during the Years 2004, 2009, 2014 and 2019, the divisor in the foregoing calculation shall be the applicable Average Capacity Factor minus three percent (3%).

        1.12    “Commercial Operations Date” — May 29, 1994.

        1.13    “Delivered Capacity”— The amount of capacity that Operator delivers from the Facility to North Carolina Power, which, for all purposes, shall be deemed to be the sum of (a) the Net Electrical Output that is delivered to North Carolina Power and that, during any Off Peak Hour, does not exceed 101% of the Maximum Capacity — Summer or Maximum Capacity — Winter, as the case may be, expressed in kWh, and (b) during those hours that North Carolina Power (i) has Dispatched the Facility off-line, or to produce Net Electrical Output at less than the applicable Maximum Capacity – Summer or Maximum Capacity — Winter, or (ii) was unable, refused or otherwise failed to receive Net Electrical Output for any reason, including, without limitation, pursuant to Section 7.5, the difference obtained by subtracting the Net Electrical Output actually delivered during such Dispatch, inability, refusal or failure, if any, from the kilowatt-hours that Operator potentially could have delivered if the Facility had operated at the Maximum Capacity – Summer or Maximum Capacity – Winter, as the case may be, during such Dispatch, inability, refusal or failure. For purposes of the preceding sentence, any hour during which Operator increases or reduces the production of Net Electrical Output in response to Dispatch by North Carolina Power shall be deemed for all purposes hereunder to be an hour described in clause (b)(i) of this Section 1.13. Notwithstanding the foregoing provisions, if Operator is first in a Scheduled Outage, Maintenance Outage, or Forced Outage, and North Carolina Power thereafter (A) Dispatches the Facility off-line, or to produce Net Electrical Output at less than the applicable Maximum Capacity – Summer or Maximum Capacity —Winter, or (B) is unable, refuses or otherwise fails to receive Net Electrical Output, then, to the extent, if any, that such Scheduled Outage, Maintenance Outage, or Forced Outage is concurrent with such Dispatch, inability, refusal or failure by North Carolina Power, the Delivered Capacity during such period of concurrence shall only include the Net Electrical Output actually delivered. during such period, as specified in clause (a) of this Section 1.13.

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        1.14    “Design Limits” — When the Facility operates in accordance with this Agreement, it is capable of operation over the continuous range from 52,500 kW (summer) and 53,200 kW (winter) (“Minimum Operating Level”) and through a maximum operating level which shall be the Maximum Capacity – Summer or Maximum Capacity – Winter, as the case may be. After the Facility has been off line, it can achieve the levels of operation specified below within the time periods indicated below:

(a) If the Facility has been off line for less than 8 hours (hot start), it can be resynchronized  within 3 hours following notice to start-up and can achieve its Minimum Operating Level within 6 hours following notice to start-up.

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(b) “Effective Date” — If the Facility has been off line between 8 hours and 24 hours (warm start), it can be resynchronized within 7 hours following notice to start-up and can achieve its Minimum Operating Level within 10 hours following notice to start-up.

(c) If the Facility has been off line for more than 24 hours (cold start), it can be resynchronized within 12 hours following notice to start-up and can achieve its Minimum Operating Level within 15 hours following notice to start-up.

Once the Facility has been synchronized with North Carolina Power’s system and brought to its Minimum Operating Level, its Net Electrical Output may be increased at the rate of 7% of the Minimum Operating Level per minute. If the Facility is operating above its Minimum Operating Level, its Net Electrical Output may be reduced at the rate of 10% of the Minimum Operating Level per minute down to the Minimum Operating Level. The maximum cold starts caused by North Carolina Power shall not exceed 20 per year not including starts after any Facility outages. Minimum run time, at or above the Minimum Operating Level, between shutdowns is twelve (12) hours.

        1.15    “Dispatch” — The right of North Carolina Power, or its exercise, in accordance with Prudent Utility Practices, to schedule and control, directly or indirectly, manually or automatically from any of its division or system operating centers, the generating level of the Facility in order to commence, increase, decrease or cease the delivery of Net Electrical Output pursuant to the conditions set forth in Article 7.

        1.16    “Effective Date”— December 1, 2000, or such later effective date as is approved by the FERC.

        1.17    “Emergency” — A condition or situation which, in the sole judgment of North Carolina Power, affects or will affect North Carolina Power’s ability to meet its obligations to maintain safe, adequate and continuous electric service to North Carolina Power’s customers and/or the customers of any member of NERC.

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        1.18    “Energy Purchase Price” — The price per kilowatt hour that North Carolina Power will pay, in accordance with Article 10, Operator for Net Electrical Output delivered to North Carolina Power.

        1.19    “Extended Term” or “Extended Terms” — Shall have the meanings given to such terms in Section 5.2.

        1.20    “FERC” — The Federal Energy Regulatory Commission or any successor thereto.

        1.21    “Facility”— Operator’s generation facility, including land, primary and auxiliary equipment and all transmission equipment, whether owned by Operator or others (except that which is owned by North Carolina Power), installed on Operator’s side of the Interconnection Point, necessary for the delivery of the Net Electrical Output of the Facility and that are not Interconnection Facilities.

        1.22    “Financial Closing”— December 18, 1991, which is .the date on which documents providing funding for the construction of the Facility were executed.

        1.23    “Fixed Capacity Component” — (a) during each of the Years 2000 through 2008, and from and including January 1, 2009 through May 28, 2009, 3.185 cents/kWh, and (b) from and including May 29, 2009 through the end of the Initial Term, 0.822 cents/kWh; provided that the Fixed Capacity Component during any Extended Term shall be subject to the mutual agreement of the Parties.

        1.24    “Forced Outage” — Any unplanned interruption or reduction of Net Electrical Output that is attributable to breakdown or failure of Facility equipment or that, in Operator’s Judgment, is required by safety considerations.

        1.25    “Initial Term” —Shall have the meaning given to such torn in Section 5.1.

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        1.26    “Interconnection Facilities” — All the facilities installed by North Carolina Power to enable North Carolina Power to receive Net Electrical Output, or Net Electrical Output and Delivered Capacity, from the Facility, including but not limited to all metering equipment; transmission and distribution lines and associated equipment; transformers and associated equipment on its side of the Interconnection Point; relay and switching equipment; protective devices and safety equipment; and telemetering equipment, wherever located.

        1.27    “Interconnection Point” — The physical point(s) where the Net Electrical Output of the Facility is delivered to the North Carolina Power system at a voltage acceptable to North Carolina Power. This point will be on the high voltage side of the Operator’s step-up transformer.

        1.28    “Interest” — The compensation for the accrual of monetary obligations under this Agreement computed Monthly and prorated daily from the time each such obligation arises based on an annual interest rate equal to the Prime Rate plus two (2) percent. For purposes of this Agreement, Prime Rate shall mean the rate of interest from time to time publicly announced by The Chase Manhattan Bank, NA., (or its successor) at its principal office, presently located at 1 Chase Manhattan Plaza, New York, New York 10081, as its prime commercial lending rate, determined for each obligation to pay interest at the time such obligation arises.

        1.29    “Maintenance Outage”— An interruption or reduction of the Facility’s availability that (i) is not a Forced Outage or a Scheduled Outage, and (ii) Operator elects to take in good faith for the purpose of performing work on the Facility that should not, in the reasonable opinion of Operator, be postponed until the next Scheduled Outage.

        1.30    “Maximum Annual Capacity Payment” — During any Year is the sum of (a) the product of (i) the Maximum Capacity — Summer, (ii) the Maximum Capacity Unit Price, and (iii) the number of hours in the Summer Period during that Year, and (b) the product of (i) the Maximum Capacity — Winter, (ii) the Maximum Capacity Unit Price, and (iii) the number of hours in the Winter Period during that Year. Notwithstanding the foregoing provisions, the Maximum Annual Capacity Payment for the Year 2009 shall be the sum of (a) the product of (i) the Maximum Capacity — Summer, (ii) the applicable Maximum Capacity Unit Price, and (iii) the number of hours in the Summer Period during that Year to which such Maximum Capacity Unit Price applies, and (b) the product of (i) the Maximum Capacity —Winter, (ii) the applicable Maximum Capacity Unit Price, and (iii) the number of hours in the Winter Period during that Year to which such Maximum Capacity Unit Price applies. Notwithstanding the foregoing provisions, the Maximum Annual Capacity Payment for each of the Years 2004, 2009, 2014 and 2019 shall be deemed conclusively to be the amount derived from the foregoing calculations for such Year, plus the aggregate amount of the additional payments for such Year provided for in Section 10.15(c) hereof.

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        1.31    “Maximum Capacity Summer” — The amount of capacity designated as such in Section 11.1.

        1.32    “Maximum Capacity — Winter” — The amount of capacity designated as such in Section 11.1.

        1.33    “Maximum Capacity Unit Price” — During any Year, is the sum of the Fixed Capacity Component for such Year, and the Annual O&M Capacity Component for such Year, expressed in cents/kWh. Notwithstanding the foregoing provisions, there shall be two (2) Maximum Capacity Unit Prices for the Year 2009, one applicable to the time from and including January 1, 2009 through May 28, 2009 and calculated using the Fixed Capacity Component in effect at that time, and the second applicable to the time from and including May 29, 2009 through December 31, 2009 and calculated using the Fixed Capacity Component in effect at that time.

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        1.34    "NCUC" - The North Carolina Utility Commission or any successor thereto.

        1.35    “NERC” — The North American Electric Reliability Council, including any successor thereto and subdivisions thereof.

        1.36    “Net Electrical Output” — All of the Facility’s generating output made available for sale; such Net Electrical Output shall be measured by the North Carolina Power-owned metering (on a kilowatt-hour basis) that would be located both (i) on the high voltage side of the Operator’s step-up transformer and (ii) on the North Carolina Power owned side of the Interconnection Point

        1.37    “O&M Capacity Component” — 2.160 cents/kWh in 2000 dollars, which shall be increased or decreased, as appropriate, on April 1, 2001 and on each April 1 thereafter by the percentage change in the Gross Domestic Product Implicit Price Deflator Index first published for the previous Calendar Year as specified by the US Department of Commerce, or such other organization as the Parties may mutually agree.

        1.38    “Off Peak Hours”— During the periods March 1 through June 14 and September 16 through November 30, those hours from 2200 hour to 0600 hour Monday through Friday and all day Saturday and Sunday.

        1.39    “Prudent Electrical Practices” — The practices, methods and use of equipment required to protect North Carolina Power’s system, employees, agents, and customers from malfunctions occurring at the Facility and to protect the Facility, and Operator’s employees and agents at the Facility, from malfunctions occurring on North Carolina Power’s system or on any other electric utility with which North Carolina Power is directly or indirectly electrically connected, and to adhere to applicable industry codes, standards, and regulations.

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        1.40    “Prudent Utility Practices” — The practices generally followed by the electric utility industry, as changed from time to time, which generally include, but are not limited to, engineering and operating considerations.

        1.41    "PURPA" - The Public Utility Regulatory Policies Act of 1978.

        1.42    “Qualifying Facility”or “QF” — A cogeneration facility or a small power production facility which is a Qualifying Facility under Subpart B of Subchapter K, Part 292 of Chapter I, Title 18, Code of Federal Regulations, promulgated by the FERC. Such a facility must be “new capacity” pursuant to PURPA, construction of which began on or after November 9, 1978.

        1.43    “SCC” — The State Corporation Commission of Virginia or any successor thereto.

        1.44    “Scheduled Outage” — A planned interruption of the Facility’s generation exceeding seven (7) consecutive Days that is required or recommended in Operator’s sole discretion, for inspection, preventive maintenance, corrective maintenance or repair or replacement of equipment and that is scheduled as such pursuant to the provisions of Section 7.2.

        1.45    “Summer Period” —The Summer Period shall be the six (6) Month period beginning 12:00 midnight on March 31 and ending at 12:00 midnight on the following September 30.

        1.46    “Term” —Shall have the meaning given to such term in Section 5.1.

        1.47    “Tracking Account” — A notional account in which amounts are added and subtracted as provided in Section 10.15(b).

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        1.48    “Winter Period” —The Winter Period shall be the six (6) Month period beginning 12:00 midnight on September 30 and ending at 12:00 midnight on the following March 31. Any references in this Agreement to specific Sections shall be deemed to be references to Sections of this Agreement, unless the context requires otherwise.

ARTICLE 2: Sale and Purchase of Energy and Capacity

        2.1    Operator agrees to sell, and North Carolina Power agrees to purchase, the Net Electrical Output of the Facility, but only to the extent that the Facility is Dispatched by North Carolina Power, and subject to the terms and conditions of this Agreement.

        2.2    Operator agrees to sell, and North Carolina Power agrees to purchase, Delivered Capacity from the Facility, subject to the terms and conditions of this Agreement.

        2.3    The Parties agree that Operator has fulfilled its obligation to provide the information, documentation and other materials required pursuant to Section 2.3 of the Second Amendment and Restatement.

        2.4    Operator has provided North Carolina Power, within ninety (90) Days after the Commercial Operations Date, a copy of a completion certificate issued by a widely recognized engineering firm that was acting as unaffiliated independent engineer for the lenders representing to the lenders, after construction was substantially completed, that the constructed Facility, if maintained in accordance with Prudent Electrical Practices, Prudent Utility Practices, and the terms of this Agreement could be reasonably expected to have a useful life at least equal to the Initial Term.

        2.5    The information, documentation and other materials referred to in Section 2.3 are for North Carolina Power’s use in administering this Agreement only.

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ARTICLE 3: Notices

        3.1    Any notice or communication required to be in writing hereunder shall be given by any of the following means: registered, certified, or first class mail, ground or air courier, telex, telecopy, or telegram. Such notice or communication shall be sent to the respective Parties at the address listed below. Except as expressly provided herein, any notice shall be deemed to have been given when sent. Any notice given by first class mail shall be considered sent at the time of posting and, if sent by ground or air courier, such notice shall be deemed sent one business Day after delivery to the courier. Communications by telex, telecopy, or telegram shall be deemed given when confirmed by telecopy machine report indicating satisfactory transmission and shall be followed up by depositing a copy of the same in the post office for transmission by registered, certified, or first class mail in an envelope properly addressed as follows:

In the case of Operator to:

Westmoreland - - Roanoke Valley, L.P.
c/o WEI - Roanoke Valley, Inc.
2 North Cascade Avenue, 14th Floor
Colorado Springs, Colorado 80903
Attn: President

With copy to:

LG&E Roanoke Valley, L.P.
c/o LG&E Power 16 Incorporated
12500 Fair Lakes Circle, Suite 350
Fairfax, Virginia 22033-3804
Attn: President

In the case of North Carolina Power to:

Virginia Electric and Power Company (if by hand)
Director - Capacity Acquisition
One James River Plaza
701 East Cary Street, 15th Floor
Richmond, Virginia 23219

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Virginia Electric and Power Company (if by mail)
Director - Capacity Acquisition
P.O. Box 26666
Richmond, Virginia 23261

        3.2    Either Party may, by prior written notice to the other, change the representative or the address to which such notices and communications are to be sent.

ARTICLE 4: Pre- and Post-Operation Period

        4.1    Operator shall, at its expense, acquire, and maintain in effect, from the FERC and from any and all other federal, state, and local agencies, commissions and authorities with jurisdiction over Operator and/or the Facility, all permits, licenses, and approvals, and complete or have completed all environmental impact studies necessary as follows:

(a) For the construction, operation, and maintenance of the Facility,

(b) For Operator to perform its obligations under this Agreement,

(c) To obtain and maintain certification as a Qualifying Facility, until the Commercial Operations Date. If in the future (i) there is no QF certification available under PURPA, FERC regulations or any similar statute or regulations; (ii) PURPA, the FERC regulations or similar statutes or regulations alter the requirements for maintenance of QF certification for the Facility by imposing significant new criteria or procedures which are more stringent than criteria or procedures in effect on November 15, 1991; or (iii) Operator elects, after the Commercial Operations Date, to change from QF status to Exempt Wholesale Generator (EWG) status, then Operator shall not be obligated to maintain QF certification. However if Operator does not maintain QF certification. then Operator agrees to obtain approval of any state or federal agencies flooded for this Agreement if it is deemed a wholesale electric contract (for example, under Section 205 of the Federal Power Act). Operator covenants that it shall use its best efforts to obtain such approvals. Operator agrees not to elect dropping QF status under item (iii) above unless all such approvals are obtained. Notwithstanding the foregoing provisions, the Parties hereby acknowledge that Operator previously elected to change from QF status to Exempt Wholesale Generator status and, in connection therewith, has obtained all such necessary approvals.

        4.2    Not used.

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        4.3    Operator has provided North Carolina Power with generator manufacturer’s capability curves, relay types, and proposed relay settings for review and inspection by North Carolina Power, and, within sixty (60) Days of receiving such material, North Carolina Power informed Operator, in writing, that the proposed relay types and relay settings were acceptable. Operator also has provided North Carolina Power with Facility design heat balance diagram, flow diagrams, Automatic Generation Control logic, and major equipment list for review. Operator shall notify North Carolina Power of any changes to any information provided in this Section in a timely manner.

        4.4    Operator and North Carolina Power have mutually developed written pre-commercial operations and post-commercial operations operating procedures consistent with the terms and conditions of this Agreement. The operating procedures discussed in this Section 4.4 are intended as a guide and shall be limited to how the Operator’s Facility and output are integrated into North Carolina Power’s bulk electric system. Topics covered include, but are not necessarily limited to, method of day-to-day communications; key personnel list for both Operator and utility operating centers; clearances and switching practices; outage scheduling; daily capacity and energy reports; unit operations log; and reactive power support.

        4.5    North Carolina Power prepared and submitted to Operator a written voltage schedule, North Carolina Power may change such voltage schedule upon thirty (30) Days prior written notice to Operator. Operator shall use such voltage schedule in the operation of its Facility. This voltage schedule shall be based on the normally expected operating conditions for the Facility and the reactive power requirements of North Carolina Power’s system.

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ARTICLE 5: Term and Termination

        5.1    The Initial Term of this Agreement is for a period of twenty-five (25) years commencing with the Commercial Operations Date, unless extended under this Article 5, terminated, or canceled. The Initial Term, as extended under this Article 5 during any Extended Term, is sometimes hereafter referred to as the “Term.” In the event a Force Majeure condition delays a Party’s performance as stipulated in Article 14 of this Agreement after the Commercial Operations Date, then North Carolina Power may at its sole option extend the Term of this Agreement a period of time equal to the Force Majeure delay. North Carolina Power must provide the Operator a notice of its intent to extend this Agreement no less than 2 years prior to the end of the Initial Term, unless such Force Majeure occurs less than 2 years from the end of the Initial Term, in which case such notice must be provided to Operator by North Carolina Power sixty (60) Days after the end of the Force Majeure delay period.

        5.2    This Agreement may be extended for periods of up to five (5) years each (individually, an “Extended Term” and, collectively, the “Extended Terms”), provided that two (2) years prior to the end of the Initial Term, or any subsequent Extended Term, as the case may be, the Parties agree in writing to such extension.

        5.3    If either Party defaults under this Agreement, then the non-defaulting Party shall give the defaulting Party written notice describing such default. The defaulting Party shall be given sixty (60) Days from the receipt of such notice to cure such default. However, if the default cannot be cured within sixty (60) Days with the exercise of reasonable diligence, then the non-defaulting Party shall grant an additional reasonable period of time to cure such default, if the default is an Operator default. If the defaulting Party fails to cure such default within the prescribed period of time, then the non-defaulting Party may, in addition to any other rights or remedies available at law or in equity, immediately terminate this Agreement and consider defaulting Party in material breach of its obligations under this Agreement. Any of the following conditions shall be considered defaults by Operator under this Section 5.3, including without limitation:

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(a) Failure to comply with the requirements of Section 13.4; or

(b) Unless excused by Force Majeure as specified in Article 14, abandonment of operation of the Facility at any time; or

(c) Attempts by Operator, its employees, contractors or subcontractors of any tier, to operate, maintain, or tamper with the Interconnection Facilities without the prior written consent of North Carolina Power.

        5.4    Termination of this Agreement shall not be construed as a forfeiture or waiver of any statutory right of a Qualifying Facility to sell to North Carolina Power non-firm energy produced from the Facility.

ARTICLE 6: Representations and Warranties of Operator

        6.1    Operator represents and warrants that, as of December 1, 1990 and at all times thereafter during the Term of this Agreement, Operator will have a reliable supply of fuel of quality and in quantity sufficient to deliver energy and capacity as provided hereunder. From time to time, as North Carolina Power may reasonably request, Operator shall provide North Carolina Power evidence of its compliance with this obligation. Alternate supplies of fuel will be considered in determining whether Operator has a reliable supply of fuel.

        6.2    Operator warrants that the Facility will be operated and maintained in accordance with (i) operating procedures developed pursuant to Section 4.4, (ii) generally accepted Prudent Utility Practices, including without limitation, synchronizing, voltage and reactive power control, and (iii) generally accepted Prudent Electrical Practices.

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        6.3    Operator warrants that the Facility will be operated in such a manner so as not to have an adverse effect on North Carolina Power’s voltage level or voltage waveform.

        6.4    Operator warrants that the Facility will be operated at the voltage levels determined pursuant to Section 4.5, provided such operation is within the Design Limits.

        6.5    Operator shall, at all times, conform to all laws, ordinances, rules and regulations applicable to it. Operator shall give all required notices, shall procure and maintain all governmental permits, licenses and inspections necessary for its performance of this Agreement, and shall pay all charges and fees in connection therewith.

        6.6    Operator agrees to comply with all applicable provisions, and successor provisions thereto, of Executive Order 11246, as amended; § 503 of the Rehabilitation Act of 1973, as amended; § 402 of the Vietnam Era Veterans Readjustment Assistance Act of 1974, as amended; and implementing regulations sot forth in 41 C.F.R, §§ 60-1, 60-250, and 60-741 and the applicable provisions relating to the utilization of small and minority business concerns as set forth in 15 U.S.C. § 637, as amended. Operator agrees that the equal opportunity clause set forth in 41 C.F.R. § 60-1.4 and the affirmative action clauses set forth in 41 C.F.R. § 60-250.4 and 41 C.F.R. § 60-741.4 and the clauses relating to the utilization of small and minority business concerns set forth in 15 U.S.C. § 637(d)(3) and 48 C.F.R. § 52-219-9 are hereby incorporated by reference and made a part of this Agreement. Operator will adopt and comply with a small business and small disadvantaged business subcontracting plan which will conform to ..the requirements set forth in 15 U.S.C. § 637(d)(6). The provisions of this section shall apply to Operator only to the extent that (i) such provisions are required of Operator under existing law, (ii) Operator is not otherwise exempt from said provisions and (iii) compliance with said provisions is consistent with and not violative of 42 U.S.C. §2000e et seq., 42 U.S.C. § 1981 et seq., or other acts of Congress.

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        6.7    Any fines or other penalties incurred by Operator or its agents, employees or subcontractors for noncompliance by Operator, its employees, or subcontractors with laws, rules, regulations or ordinances shall not be reimbursed by North Carolina Power but shall be the sole responsibility of Operator. If fines, penalties or legal costs are assessed against North Carolina Power by any government agency or court due to noncompliance by Operator with any of the laws, rules, regulations or ordinances referred to in Sections 6.5 and 6.6 above or any other laws, rules, regulations or ordinances with which compliance is required herein, or if the work of Operator or any part thereof is delayed or stopped by order of any government agency or court due to Operator’s noncompliance with any such laws, rules, regulations or ordinances, Operator shall indemnify and hold harmless North Carolina Power against any and all fines or penalties imposed on North Carolina Power clearly attributable to the solo failure of Operator to comply therewith. Operator shall also reimburse North Carolina Power for any and all legal or other expenses (including attorneys’ fees) reasonably incurred by North Carolina Power in connection with such fines or penalties.

        6.8    The Operator and general partners of Operator hereby represent and warrant that:

(a) (i)      The Operator is a partnership duly organized, validly existing and in good standing  under the laws of the Commonwealth of Virginia; (ii) the general partners of Operator are Westmoreland-Roanoke Valley, L.P., a limited partnership whose general partner is WEI-Roanoke Valley, Inc., both of which are duly organized, validly existing and in good standing under the laws of the State of Delaware, and LG&E Roanoke Valley, L.P., a limited partnership whose general partner is LG&E Power 16 Incorporated, both of which are duly organized, validly existing and in good standing under the laws of the State of California. Operator and the general partners of Operator are or will be qualified to do business in North Carolina and in each other jurisdiction where the failure so to qualify would have a material adverse effect upon their business or financial condition; and each has all requisite power and authority to conduct its business, to own its properties, and to execute, to deliver, and to perform its obligations under this Agreement.

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(b) The execution, delivery and performance by the Operator of this Agreement have been duly authorized by all necessary partnership or corporate action as applicable, and do not and will not (i) require any consent or approval of the Operator’s Board of Directors, partners or shareholders as applicable, other than that which has been obtained (evidence of which shall be, if it has not heretofore been, delivered to North Carolina Power), (ii) violate any provisions of the Operator’s corporate bylaws or other organic documents, any indenture, contract or agreement to which it is a party or by which it or its properties may be bound, or any law, rule, regulation, order, writ, judgement, injunction, decree, determination, or award presently in effect having applicability to the Operator, or (iii) result in a breach or constitute a default under the Operator’s corporate bylaws, other organic documents or other material indentures, contracts, or agreements, and the Operator is not in default under its corporate bylaws or other organic documents or other material indentures, contracts, or agreements to which it is a party or by which it or its property may be bound.

(c) No authorizations or approval by any governmental or other official agency is necessary for the due execution and delivery by the Operator of this Agreement as in effect on the date of this Agreement.

(d) This Agreement is a valid and binding obligation of the Operator.

(e) There is no pending or threatened action or proceeding affecting the Operator before any court, governmental agency or arbitrator that could reasonably be expected to affect materially and adversely the financial condition or operations of the Operator or the ability of the Operator to perform its obligations hereunder, or which purports to affect the legality, validity or enforceability of this Agreement (as in effect on the date of this Agreement).

        6.9    Not used.

        6.10    Operator agrees that, upon request of North Carolina Power, it shall deliver or cause to be delivered from time to time to North Carolina Power certifications of its officers, accountants, engineers, or agents as to such matters directly related to Operator’s ability to perform its obligations under this Agreement as North Carolina Power may reasonably request.

        6.11    The general partners of Operator agree to preserve and keep in force and effect Operator’s and their own corporate existence (if applicable) and all franchises, licenses and permits necessary to the proper conduct of its business, including without limitation the business of constructing, owning and operating the Facility.

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        6.12    Operator will keep proper books of record and account in which full and correct entries will be made of all dealings or transactions of or in relation to its business and affairs, in accordance with generally accepted accounting principles consistently applied. From time to time through the Term of this Agreement, but no more frequently than annually, North Carolina Power, at Operator’s cost, shall have the right to designate an independent public accounting firm to conduct a review of the Operator’s auditor’s audit of the books and records of Operator under a confidentiality agreement with Operator to the limited extent necessary (i) to verify that they are being kept in accordance with generally accepted accounting principles, and (ii) to advise North Carolina Power of the financial condition of Operator and that Operator is not in default under any loan agreements, transmission agreements or fuel supply agreements. Operator shall make all pertinent records available at its office at Charlottesville, Virginia during normal business hours.

        6.13    Operator will provide to North Carolina Power, on a Monthly basis, a statement of the total quantity and total delivered cost of all fuel consumed in the Facility.

ARTICLE 7: Control and Operation of the Facility

        7.1    Operator shall inform the North Carolina Power operations center designated in the interconnection study performed pursuant to Article 8 as to the daily operating schedule and generation capability of its Facility, including, without limitation, during any Forced Outage. In addition, by the 5th of each Month after the first Month after the Commercial Operations Date, Operator shall provide North Carolina Power with Facility performance and events data for the preceding Month in a format consistent with the most current NERC Generating Availability Data Systems (“GADS”) reporting standards. Event reporting terminology and definitions under the NERC GADS reporting standards do not modify the terms of this Agreement.

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        7.2    Operator shall submit to North Carolina Power, in writing, by September 1 of each Year, its planned Scheduled Outage periods for the next Year. Operator may modify its Scheduled Outage periods by notifying North Carolina Power. of any such modifications at least ninety (90) Days (or less if North Carolina Power agrees) in advance. Such Scheduled Outages shall not exceed 30 Days in each Year, except for those Years where major maintenance overhauls are planned. Operator may only schedule major maintenance overhauls to occur in 2004, 2009, 2014 and 2019, unless mutually agreed otherwise. During such major maintenance overhaul years, Scheduled Outages shall not exceed 42 Days. North Carolina Power shall have the right to approve the start date of any Scheduled Outage, such approval not to be unreasonably withheld, delayed or conditioned, and, in any event, shall notify Operator of such approval or disapproval no later than the October 31 next following the submission by Operator of its planned Scheduled Outage periods for the next Year. At least thirty (30) days prior to any Scheduled Outage, Operator shall provide North Carolina Power with whatever schedule for such Scheduled Outage that Operator then has. Operator shall not schedule a Scheduled Outage during the Months of December, January, February or during the period from June 15 through September 15 of any Year without the prior written consent of North Carolina Power. In addition to Scheduled Outages, Operator is entitled to an unlimited number of Maintenance Outages and Forced Outages during any Year. Operator shall provide North Carolina Power with forty-eight (48) hours advance notice, or such lesser notice as is practicable under the circumstances, of the timing and estimated duration of any Maintenance Outage, and shall provide North Carolina Power with such notice as is practicable under the circumstances of the occurrence and estimated duration of any Forced Outage. Each such notice shall identify, to the extent then known by Operator, the equipment involved in such outage and the capacity that will not be available for Dispatch. During any such outage, Operator shall notify North Carolina Power promptly of any material changes in the notice information previously provided to North Carolina Power. The Parties shall work together in good faith to coordinate the start date of any Maintenance Outage. If North Carolina Power reasonably requests Operator to return all or part of that portion of the Facility that is affected by a Maintenance Outage or Forced Outage, as the case may be, to operational status, Operator shall complete its maintenance and repair work as soon as reasonably practical.

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        7.3    North Carolina Power shall have the right, upon six (6) months prior written notice, to revise the six (6) Months during which Operator shall not, unless mutually agreed, schedule a Scheduled Outage.

        7.4    Each Party shall keep complete and accurate records and all other data required by each of them for the purposes of proper administration of this Agreement.

(a) All such records shall be maintained for a minimum of five (5) years after the creation of such record or data and for any additional length of time required by regulatory agencies with jurisdiction over the Parties; provided, however, that Operator shall not dispose of or destroy any such records even after the five (5) years without thirty (30) Days prior notice to North Carolina Power.

(b) Operator shall maintain an accurate and up-to-date operating log at the Facility with records of: (i) real and reactive power production for each clock hour, (ii) changes in operating status, Scheduled Outages and Forced Outages; and (iii) any unusual conditions found during inspections and operations.

(c) Either Party shall have the right from time to time, upon fourteen (14) Days written notice to the other Party, to examine the relevant records and data of the other Party relating to this Agreement at any time during the period the records are required to be maintained.

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(d) North Carolina Power shall have the right to monitor Operator’s operation and maintenance practices regarding the Facility and to conduct physical inspections of the Facility at reasonable intervals; provided that North Carolina Power shall not conduct such inspections more frequently than once every Calendar Quarter, except during any Facility outage. Operator shall consider all reasonable requests by North Carolina Power resulting from such monitoring and inspections. Operator shall cooperate in such operations and maintenance reviews and physical inspections of the Facility as may be reasonably requested by North Carolina Power. North Carolina Power’s reviews and inspections of the Facility and recommendations as a result thereof shall not be construed as endorsing the design thereof nor as any warranty of the safety, durability or reliability of the Facility.

        7.5    Subject to the provisions of this Agreement, North Carolina Power can Dispatch the Facility, and make changes in Dispatch, but only to the extent consistent with the Design Limits. Subject to the provisions of this Agreement, Operator shall control and operate the Facility consistent with North Carolina Power’s Dispatch of the Facility; provided, however, that from time to time North Carolina Power shall not be obligated to accept or receive, and may require Operator to reduce or cease the delivery of, Net Electrical Output if:

(a) North Carolina Power has declared a system Emergency;

(b) Force Majeure prevents North Carolina Power from receiving the Net Electrical Output;

(c) It is necessary to construct, install, maintain, repair, replace, remove, investigate, inspect or test any part of the Interconnection Facilities or any other affected part of North Carolina Power’s system; or

(d) For any other reason consistent with Prudent Electrical Practices or Prudent Utility Practices.

North Carolina Power will make a reasonable effort to notify and coordinate such reductions and cessations of delivery of Net Electrical Output to North Carolina Power with Operator. If North Carolina Power requires Operator to reduce or cease the delivery of Net Electrical Output in any of the circumstances described in clauses (b), (c) or (d) of this Section 7.5, North Carolina Power shall provide Operator with forty-eight (48) hours prior notice thereof, or such lesser notice as is practicable under the circumstances. Any reduction or cessation in the delivery of Net Electrical Output to North Carolina Power required of Operator hereunder shall be implemented and completed as soon as possible consistent with Prudent Utility Practices.

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        7.6    When North Carolina Power Dispatches the Facility off-line pursuant to the provisions of Section 7.5, North Carolina Power will provide Operator with an estimate, to the nearest hour, of when the Facility can commence the delivery of Net Electrical Output. North Carolina Power will provide Operator with twenty (20) minutes notice of changes in operating levels to be achieved by the Facility, except that when the Facility is operated with Automatic Generation Control, North Carolina Power shall not be required to provide such notice.

        7.7    Operator shall employ qualified personnel for operating and monitoring the Facility and for maintaining communications between the Facility and North Carolina Power and shall ensure that such personnel are on duty at all times, twenty-four (24) hours a Day and seven (7) Days a week. During Scheduled Outages, Maintenance Outages, Forced Outages or any event of Force Majeure, Operator shall only be required to ensure that personnel are on duty to respond to North Carolina Power requests.

        7.8    The Parties recognize that North Carolina Power is a member of NERC and that, to ensure continuous and reliable electric service, North Carolina Power operates its system in accordance with the operating criteria and guidelines of NERC. If an Emergency is declared, North Carolina Power’s operations center will notify Operator’s personnel and, if requested by North Carolina Power, Operator’s personnel shall place the Net Electrical Output within the exclusive control of North Carolina Power’s operations center for the duration of such Emergency. Without limiting the generality of the foregoing, North Carolina Power’s operations center may require Operator’s personnel to raise or lower production of energy generated by the Facility to maintain safe and reliable load levels and voltages on North Carolina Power’s transmission and/or distribution system; provided, however, any changes in the level of the Net Electrical Output required of Operator hereunder shall be implemented in a manner consistent with safe operating procedures and within the Facility’s Design Limits.

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        7.9    Operator shall cooperate with North Carolina Power in establishing Emergency plans, including without limitation, recovery from a local or widespread electrical blackout; voltage reduction in order to effect load curtailment; and other plans which may arise. The Operator shall make technical references available concerning start-up times, black-start capabilities and minimum load-carrying ability.

        7.10    Operator shall, during an Emergency, supply such power as the Facility is able to generate within its Design Limits and North Carolina Power is able to receive. If Operator has a Scheduled Outage or any other outage, and such Scheduled Outage or other outage occurs or would occur coincident with an Emergency, Operator shall make all good faith efforts to reschedule the Scheduled Outage or other outage, or, if the Scheduled Outage or other outage has begun, to expedite the completion thereof.

        7.11    Operator shall operate the Facility with its speed governor and voltage regulator in-service whenever the Facility is connected to or operated in parallel with the North Carolina Power system at the sole discretion of North Carolina Power. The Parties recognize that the Automatic Generation Control (AGC) equipment at the Facility is not operational as of the Effective Date. Within ninety (90) Days after written notice from North Carolina Power to do so, Operator shall make such AGC equipment operational and thereafter shall operate the Facility with such AGC equipment in-service, subject to Prudent Utility Practices, whenever the Facility is connected to or operated in parallel with the North Carolina Power system at the sole discretion of North Carolina Power. If North Carolina Power subsequently directs Operator to operate the Facility with such AGC equipment out-of-service, North Carolina Power may thereafter re-direct Operator to operate the Facility with such AGC equipment in-service, but only after giving Operator such advance notice as shall be reasonable under the circumstances. Operator shall have its protective relays recalibrated and operationally checked at least once every two years by a person qualified to perform such service and shall give North Carolina Power ten (10) Days prior notice of such recalibrations and checks. North Carolina Power may have a person present at such checks. North Carolina Power shall be notified by Operator of the results of those operational checks.

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ARTICLE 8: Interconnection

        8.1    North Carolina Power had the Interconnection Facilities completed and capable of transmitting electricity to and from the Facility by August 1, 1993.

        8.2    Operator shall be responsible for the design, construction, installation, maintenance and operation of the Facility and any auxiliaries and interconnection equipment at the Facility that interfaces with North Carolina Power’s equipment located at the Facility. Operator shall also be responsible for the delivery of the Facility’s Net Electrical Output to the Interconnection Point.

        8.3    If it is determined in the interconnection study performed by North Carolina Power pursuant to Sections 8.6 below that the North Carolina Power owned metering facilities (which may include current and potential transformers and telemetering equipment) should be installed on Operator’s property, Operator shall be responsible for the installation of such metering facilities which would be provided to Operator by North Carolina Power. The installation of any North Carolina Power owned metering facilities on Operator’s side of the Interconnection Point shall be subject to North Carolina Power’s approval, which approval shall not be unreasonably withheld.

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        8.4    North Carolina Power, shall be responsible for the design, construction, installation (except as provided in Section 8.3), maintenance and ownership of the Interconnection Facilities.

        8.5    Not used.

        8.6    North Carolina Power performed and provided to Operator an interconnection study. The interconnection study (i) determined the Interconnection Point and the time required to complete the Interconnection Facilities and (ii) designated the North Carolina Power operations center that coordinates the operation of the Facility.

        8.7    Not used.

        8.8    North Carolina Power constructed the Interconnection Facilities in accordance with the design determined in the interconnection study performed pursuant to Section 8.6.

        8.9    North Carolina Power reserves the right to modify or expand its requirements for protective devices to conform with Prudent Electrical Practices.

        8.10    Each Party shall notify the other in advance of any changes to its system that will affect the proper coordination of protective devices on the two systems.

ARTICLE 9: Metering

        9.1    North Carolina Power shall own and maintain all meters and metering devices (including remote terminal units) used to measure the delivery and receipt of Net Electrical Output, or Net Electrical Output and Delivered Capacity, for payment purposes. Nothing in this Agreement shall prevent Operator from installing meters and metering devices for backup purposes.

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        9.2    Operator shall provide at its expense:

(a) For the purpose of telemetering, a telecommunication circuit to the operations center designated by North Carolina Power.

(b) A voice telephone extension for the purpose of accessing North Carolina Power’s dial-up metering equipment and for communicating with the designated North Carolina Power operations center.

(c) An extension of North Carolina Power’s System Operations Center’s PBX system in the control room of the Facility.

(d) Equipment to transmit and receive telecopies for the purpose of administering this Agreement.

Items provided by Operator in accordance with this Section 9.2 shall be subject to the approval of North Carolina Power, which approval shall not unreasonably be withheld.

        9.3    All meters and metering equipment used to determine the Net Electrical Output, or Net Electrical Output and Delivered Capacity, delivered to North Carolina Power shall be sealed, and the seals broken only by North Carolina Power personnel when the meters are to be read, inspected, tested, or adjusted. North Carolina Power shall give Operator two (2) weeks prior written notice whenever North Carolina Power is going to inspect, test or adjust meters, and Operator shall have the right to be present.

        9.4    On a regular schedule and, in addition, upon two (2) weeks prior written notice by Operator, North Carolina Power will test the meter(s) in accordance with the provisions for meter testing in North Carolina Power’s approved Terms and Conditions for Supplying Electricity as filed with the NCUC at the time the test is performed. Operator may have a representative present during any metering inspection, test, or adjustment. When, as a result of such a test, a meter is found to be no more than two (2) percent fast or slow because of incorrect calibration or tampering, no adjustment will be made in the amount paid to Operator for Net Electrical Output, or Net Electrical Output and Delivered Capacity, delivered to North Carolina Power. If the meter is found to be more than two (2) percent fast or slow, North Carolina Power will calculate the correct amount delivered to North Carolina Power for the actual period during which inaccurate measurements were made or, if the actual period cannot be determined to the mutual satisfaction of the Parties, for a period equal to one-half of the time elapsed since the most recent test, but in no case for a period in excess of twelve (12) months. The previous payments by North Carolina Power for this period shall be subtracted from the amount of payments that are calculated to have been owed under this Agreement. The difference shall be offset against or added to the next payment to either Party as appropriate under this Agreement or other agreements between the Parties. The percentage registration of a meter will be calculated by the “weighted average”of light load and full load, which is calculated by giving a value of one (1) to the light load and a value of four (4) to the full load.

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        9.5    Whenever it is found that, for any reason other than incorrect calibration or tampering, the metering apparatus has not registered the true amount of electricity which has been delivered by Operator to North Carolina Power, the electricity delivered during the entire period of incorrect registration shall be estimated, and the amount of electricity so estimated will be used in calculating the corrected amounts to be paid to Operator. The adjusted amount will be for the actual period during which inaccurate measurements were made or, if the actual period cannot be determined to the mutual satisfaction of the Parties, for a period equal to one-half of the time elapsed since the most recent test of the metering apparatus, but in no case for a period in excess of twelve (12) Months. Any overpayments or underpayments by North Carolina Power for Net Electrical Output, or Net Electrical Output and Delivered Capacity, delivered by Operator to North Carolina Power shall be corrected in the manner described in Section 9.4.

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ARTICLE 10: Compensation. Payment, and Billings

        10.1    The Operator shall be compensated for the Net Electrical Output of the Facility on a per kWh basis at a rate equal to the Energy Purchase Price. The Energy Purchase Price is composed of the Fuel Compensation Price, specified in Sections 10.2 through 10.7 below, and the O&M Price specified in Section 10.14.

        10.2    The Base Fuel Compensation Price, BFCP, for Net Electrical Output received from the Facility shall be 0.280 cents/kWh, effective October 1, 2000. The Base Fuel Compensation Price shall be subject to adjustment only as specified herein.

        10.3    For the purpose of this Section, the following terms, whether in the singular or in the plural, shall have the meaning stated below:

(a) Base Index — The GDP Implicit Price Deflator Index for the 2nd Quarter of 2000 as first published by the US Department of Commerce equal to 106.8. (Base year 1996 = 100)

(b) Reference Index — The GDP Implicit Price Deflator Index first published for the 2nd Calendar Quarter prior to the Quarter for which the Fuel Compensation Price is being determined.

Should the index specified herein be discontinued, an index specified by the appropriate government agency as the replacement index, if any, shall be used. If no replacement index is specified, a new index which most accurately reflects changes for the applicable cost component shall be substituted by agreement of the Parties. If the basis of the calculation of the index specified herein is substantially modified, the index as modified may continue to be used or another index may be substituted by agreement of the Parties. A change in the base year reporting basis, minor changes in weighting, and minor changes in benchmarks shall not be construed as substantial modification to the index, and the affected values shall be established in accordance with the instructions issued by the appropriate government agency.

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        10.4    At least two (2) weeks prior to the beginning of each Calendar Quarter, the Fuel Compensation Price that will be effective during that Calendar Quarter shall be calculated as follows:

         Fuel Compensation Price =  Reference Index   X BFCP
                                   -----------------
                                      Base Index

        10.5    Not used.

        10.6    Operator may, with at least two (2) weeks prior written notice, specify, revise, or revoke a discount to the Fuel Compensation Price to be used in the following Calendar Month. This discount shall then be applied against the Fuel Compensation Price as calculated herein, and the resultant price will be used in lieu of the Fuel Compensation Price for the purposes of establishing the Energy Purchase Price used for payments. When no such specification, revision or revocation is made, the undiscounted Fuel Compensation Price shall be used for said purposes. This discount will be effective, in the form specified in the Operator’s notice, until Operator provides further notice as specified in this Section 10.6, except, however, that such discount shall be effective for at least one Calendar Month. The resultant discounted Fuel Compensation Price shall not exceed the undiscounted Fuel Compensation Price calculated in accordance with this Article 10.

        10.7    North Carolina Power agrees to pay for Net Electrical Output delivered prior to the Commercial Operations Date at the rate set forth in this Article 10.

        10.8    Not used.

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        10.9    Not used.

        10.10    Not used.

        10.11    Not used

        10.12    Not used

        10.13    Not used

        10.14    North Carolina Power shall also pay Operator, on a per kWh basis, a variable operation and maintenance adjustment. This O&M Price shall be 0.240 cents/kWh in 2000 dollars and shall be increased or decreased, as appropriate, on April 1, 2001 and on each April 1 thereafter by the percentage change in the Gross Domestic Product Implicit Price Deflator Index first published for the previous Calendar Year as specified by US Department of Commerce, or such other organization as the Parties may mutually agree.

        10.15    North Carolina Power shall pay Operator for Delivered Capacity a Capacity Purchase Payment plus any Capacity Purchase Payment Adjustment, as follows:

(a) The Capacity Purchase Payment shall be payable monthly and shall be the product of the applicable (i) Delivered Capacity (expressed in kWh) and (ii) Capacity Unit Price; provided that, for each of the Years 2004, 2009, 2014 and 2019 the term “Capacity Purchase Payment”shall also include the additional payments provided in Section 10.15(c) for such Year. Notwithstanding the foregoing provisions, North Carolina Power shall not be obligated in any Year to pay Capacity Purchase Payments that, in the aggregate, exceed the Maximum Annual Capacity Payment for such Year, except for Capacity Purchase Payment Adjustments as hereafter provided.

(b) Notwithstanding the foregoing provisions, and in order to determine Capacity Purchase Payment Adjustments and changes in the Tracking Account:

(i)      If the Actual Capacity Factor for any Year is less than the Average Capacity Factor, the difference obtained by subtracting (A) the aggregate Capacity Purchase Payments for such Year from (B) the Maximum Annual Capacity Payment for such Year, shall be subtracted from the Tracking Account;

(ii)      If the Actual Capacity Factor for any Year is greater than the Average Capacity Factor, the difference obtained by subtracting (A) the Maximum Annual Capacity Payment for such Year from (B) the sum of (y) the product of the applicable Delivered Capacity (expressed in kWh) and Capacity Unit Price, and (z) the aggregate additional payments provided for in Section 10.15(c), for such Year, shall be added to the Tracking Account;

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(iii)      If the Actual Capacity Factor for any Year is less than the Average Capacity Factor and, prior to subtracting from the Tracking Account with respect thereto as provided in Section 10.15(b)(i), there is a net positive balance in the Tracking Account, North Carolina Power shall pay Operator a Capacity Purchase Payment Adjustment equal to the lesser of (A) such net positive balance, or (B) the amount to be subtracted as provided in Section 10.15(b)(i). The amount of any such Capacity Purchase Payment Adjustment shall be paid by North Carolina Power prior to the twenty-fifth (25th) Day following the end of such Year.

(iv)      If the Actual Capacity Factor for any Year is greater than the Average Capacity Factor and, prior to adding to the Tracking Account with respect thereto as provided in Section 10.15(b)(ii), there is a net negative balance in the Tracking Account, North Carolina Power shall pay Operator a Capacity Purchase Payment Adjustment equal to the lesser of (A) the absolute value of such net negative balance, or (B) the amount to be added as provided in Section 10.15(b)(ii), but,

(x) for any such Year occurring prior to 2014, such Capacity Purchase Payment Adjustment, when added to the aggregate Capacity Purchase Payments for such Year, shall not exceed 104% of the Maximum Annual Capacity Payment for such Year;  

(y) for 2014, such Capacity Purchase Payment Adjustment, when added to the aggregate Capacity Purchase Payments for such Year, shall not exceed 105.19% of the Maximum Annual Capacity Payment for such Year; and  

(z) for any such Year occurring after 2014, such Capacity Purchase Payment Adjustment, when added to the aggregate Capacity Purchase Payments for such Year, shall not exceed 106% of the Maximum Annual Capacity Payment for such Year.  

The amount of any such Capacity Purchase Payment Adjustment shall be paid by North Carolina Power prior to the twenty-fifth (25th) Day following the end of such Year.

(v)      Notwithstanding the provisions of Section 10.15(b)(ii), if, (A) there is a net negative balance in the Tracking Account as of the beginning of any Year, (B) the Actual Capacity Factor is greater than the Average Capacity Factor for such Year, and (C) but for the applicable provisions of Section 10.15(e) and clause (x), (y) or (z) of Section 10.15(b)(iv), the Capacity Purchase Price Adjustment, together with the aggregate Capacity Purchase Payments for such Year, would exceed the applicable limitation provided therein, the excess of the sum of the aggregate Capacity Purchase Payments and the amount that otherwise would be added to the Tracking Account pursuant to Section 10.15(b)(ii) for such Year over:

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(x) 104% of the Maximum Annual Capacity Payment for any such Year occurring prior to 2014;

(y) 105.19% of the Maximum Annual Capacity Payment for the Year 2014;

(z) 106% of the Maximum Annual Capacity Payment for any such Year occurring after 2014;

shall not be included in the amount added to the Tracking Account with respect to such Year, but shall be carried over and added to the Tracking Account for the following Year, and used in the calculation of a Capacity Purchase Payment Adjustment for such following Year, as follows:

(1) If the Actual Capacity Factor is less than the Average Capacity Factor for such following Year,

first, the difference described in Section 10.15(b)(i) with respect to such following Year shall be subtracted from the negative Tracking Account balance as of the beginning of such following Year,

second, North Carolina Power shall pay Operator a Capacity Purchase Payment Adjustment equal to the lesser of (A) the absolute value of the net negative balance in the Tracking Account at the end of such following Year (after subtracting such difference), or (B) such carried over amount, and

third, such carried over amount shall then be added to the Tracking Account; or

(2) If the Actual Capacity Factor is greater than the Average Capacity Factor for such following Year,

first, the difference described in Section 10.15(b)(ii) with respect to such following Year shall be added to such carried over amount,

second, North Carolina Power shall pay Operator a Capacity Purchase Payment Adjustment equal to the lesser of (A) the absolute value of the negative balance in the Tracking Account, or (B) the sum of such carried over amount and such difference, and

third, the sum of such carried over amount and such difference shall then be added to the Tracking Account; or

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(3) If the Actual Capacity Factor equals the Average Capacity Factor for such following Year,

first, North Carolina Power shall pay Operator a Capacity Purchase Payment Adjustment equal to the lesser of (A) the absolute value of the net negative balance in the Tracking Account, or (B) such carried over amount, and

second, such carried over amount shall then be added to the Tracking Account.

The amount of any such Capacity Purchase Payment Adjustment shall be paid by North Carolina Power prior to the twenty-fifth (25th) Day following the end of such following Year and shall be subject to the applicable limitations set forth in Section 10.15(b)(iv)(x), (y) or (z).

(vi) Notwithstanding any contrary provisions of this Section 10.15:

(x) In lieu of any Capacity Purchase Payment or Capacity Purchase Payment Adjustment with respect to all or any portion of the Year 2000, from and after the Effective Date through December 31, 2000, North Carolina Power shall make monthly capacity payments to Operator as provided in Section 10.17 each in the amount of $6,523,726.00 (as appropriately prorated for any partial Month).

(y) If the Actual Capacity Factor for the Year 2000 is less than 89.000%, Operator shall refund to North Carolina Power as provided in Section 10.17 an amount equal to the product of (1) the difference obtained by subtracting such Actual Capacity Factor (expressed as a decimal rounded to 5 places (e.g., .88417)) from .89000, and (2) the aggregate capacity payments made by North Carolina Power to Operator with respect to the Year 2000, including, without limitation, the monthly capacity payments described in Section 10.15(b)(vi)(x) and any capacity payments made pursuant to the applicable provisions of the Second Amendment and Restatement with respect to the Year 2000, and the amount of such refund shall be subtracted from the Tracking Account as of January 1, 2001.

(z) If the Actual Capacity Factor for the Year 2000 is greater than 89.064%, an amount shall be added to the Tracking Account as of January 1, 2001 equal to the product of (1) the difference obtained by subtracting .89064 from such Actual Capacity Factor (expressed as a decimal rounded to 5 places (e.g., .89417)), and (2) the aggregate capacity payments made by North Carolina Power to Operator with respect to the Year 2000, including, without limitation, the monthly capacity payments described in Section 10.15(b)(vi)(x) and any capacity payments made pursuant to the applicable provisions of the Second Amendment and Restatement with respect to the Year 2000.

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(vii)      Sample calculations pursuant to this Section 10.15 are attached as Exhibit A.

(c) For each Month of the Year 2004, an amount calculated as follows shall be added to each monthly Capacity Purchase Payment payable with respect to such Month:

(applicable Capacity Unit Price (expressed in $/kWh)) * (166,100) * (8784) * ((1/12)(.03))

For each Month of the Years 2009, 2014, and 2019, an amount calculated as follows shall be added to each monthly Capacity Purchase Payment payable with respect to such Month (provided that the amount payable with respect to May, 2009 shall be calculated by prorating such Month in accordance with the different Capacity Unit Prices that are applicable thereto):

(applicable Capacity Unit Price (expressed in $/kWh)) * (166,100) * (8760) * ((1/12)(.03)).

(d) Not used.

(e) As provided in clauses (x), (y) and (z) of Section 10.15(b)(iv), in no case shall the aggregate of the Capacity Purchase Payments and any Capacity Purchase Payment Adjustment (1) for any Year before 2014 exceed 104% of the Maximum Annual Capacity Payment for such Year, (2) for 2014 exceed 105.19% of the Maximum Annual Capacity Payment for 2014, or (3) for any Year after 2014 exceed 106% of the Maximum Annual Capacity Payment for such Year, as the case may be.

        10.16    Operator shall pay North Carolina Power an amount reflecting all reasonable costs incurred by North Carolina Power for meter reading and billing. The monthly meter reading and billing charge per meter shall equal the basic customer charge in Schedule 6 — Large General Service.

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        10.17    Meters shall be read, and bills rendered, according to the meter reading and billing schedule established by North Carolina Power except that not more than forty-five (45) Days shall pass between readings. Payment for the Net Electrical Output, or Net Electrical Output and Delivered Capacity, delivered to North Carolina Power during the billing period shall be made on the third (3rd) Business Day of the second (2nd) Month after the Month that such Net Electrical Output and Delivered Capacity are delivered; provided that, if such third (3rd) Business Day is a holiday for North Carolina Power, payment will be made on the next Business Day. Interest shall accrue on the outstanding payments due Operator commencing on the Day after such payments are required to be made as aforesaid. However, any amounts due North Carolina Power arising out of this Agreement or from the Facility’s purchase of electricity from North Carolina Power may, at the sole option of North Carolina Power, be offset against the amounts due Operator, and, in such event, the net result shall be paid to the appropriate party by the date specified in the second (2nd) sentence of this Section 10.17. Payment to North Carolina Power shall be made by check to the following address:

Virginia Power
P.O. Box 26019
Richmond, Virginia 23260-6019

Payment to Operator shall be made by wire transfer to the following account:

Bank of New York
ABA 021000018
Credit CSFB — Westmoreland LG&E ROVA I & II
Account Number 8900410639
For further credit to Westmoreland-LG&E Roanoke Valley I & II Project Control Acct
Account Number 331309-02

Either Party may, by prior written notice to the other, change the address to which such payments are to be sent.

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ARTICLE 11: Capacity Ratings

        11.1    Notwithstanding any contrary provisions of this Agreement, the Maximum Capacity — Summer shall be deemed to be 165,000 kW and the Maximum Capacity – Winter shall be deemed to be 167,200 kW for all purposes hereunder.

        11.2    Not used.

        11.3    Not used.

        11.4    Not used.

        11.5    Not used.

        11.6    Not used.

        11.7    Not used.

        11.8    Not used.

        11.9    Not used.

ARTICLE 12: Insurance

        12.1    Operator shall obtain and maintain the following policies of insurance during the Term of this Agreement:

(a) Worker’s Compensation insurance which complies with the laws of the State of North Carolina and Employers’Liability Insurance with a limit of $1,000,000; and

(b) Comprehensive or Commercial General Liability insurance with bodily injury and property damage combined single limit of $5,000,000 per occurrence. Such insurance shall include, but not necessarily be limited to, specific coverage for contractual liability encompassing the indemnification provisions in Article 13, broad form property damage liability, personal injury liability, explosion and collapse hazard coverage, products/completed operations liability, and, where applicable, watercraft protection and indemnity liability; and

(c) Comprehensive Automobile Liability insurance with bodily Injury and property damage combined single limit of $5,000,000 per occurrence covering vehicles owned, hired or non-owned; and

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(d) Excess Umbrella Liability Insurance with a single limit of at least $5,000,000 per occurrence in excess of the limits of insurance provided in subparagraphs (a), (b), and (c) above.

        12.2    The amounts of insurance required in Section 12.1 above may be satisfied by the Operator purchasing primary coverage in the amounts specified or by buying a separate excess Umbrella Liability policy together with lower limit primary underlying coverage. The structure of the coverage is the Operator’s option, so long as the total amount of insurance meets North Carolina Power’s requirements.

        12.3    The coverage requested in Section 12.1(b) above and any Umbrella or Excess coverage should be “occurrence” form policies. In the event Operator has “claims-made” form coverage, Operator must obtain prior approval of all “claims made” policies from North Carolina Power.

        12.4    Operator shall cause its insurers to amend its Comprehensive or Commercial General Liability and, if applicable, Umbrella or Excess Liability policies with the following endorsement items (a) through (e); and to amend Operator’s Workers’ Compensation and Auto Liability policies with endorsement item (e):

(a) North Carolina Power, its directors, officers, and employees are additional insureds under this Policy for their liability arising out of Operator’s operation and not for their independent acts; and

(b) This insurance is primary with respect to the interest of North Carolina Power, its directors, officers, and employees and any other insurance maintained by them is excess and not contributory with this insurance; and

(c) The following Cross Liability clause is made a part of the policy: “In the event of claims being made by reason of (i) personal and/or bodily injuries suffered by any employee or employees of one insured hereunder for which another insured hereunder is or may be liable, or (ii) damage to property belonging to any insured hereunder for which another insured is or may be liable, then this policy shall cover such insured against whom a claim is made or may be made in the same manner as if separate policies have been issued to each insured hereunder, except with respect to the limits of insurance”; and

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(d) Insurer hereby waives all rights of subrogation against North Carolina Power, its officers, directors and employees; and

(e) Notwithstanding any provision of the policy, this policy may not be canceled, non-renewed or materially changed by the insurer without giving thirty (30) Days prior written notice to North Carolina Power. All other terms and conditions of the policy remain unchanged.

        12.5    Operator shall cause its insurers or agents to provide North Carolina Power with certificates of insurance evidencing the policies and endorsements listed above. Failure of North Carolina Power to obtain certificates of insurance does not relieve Operator of the insurance requirements set forth herein. Failure to obtain the insurance coverage required by this Article 12 shall in no way relieve or limit Operator’s obligations and liabilities under other provisions of this Agreement.

ARTICLE 13: Liability, Noncompliance and Guarantees

        13.1    Neither Party shall hold the other Party (including its corporate affiliates, parent, subsidiaries, directors, officers, employees and agents) liable for any claims, losses, costs and expenses of any kind or character (including, without limitation, loss of earnings and attorneys’fees) for damage to property of North Carolina Power or Operator in any way occurring incident to, arising out of, or in connection with a Party’s performance under this Agreement, except as provided in Section 13.2 below.

        13.2    Operator and North Carolina Power agree to indemnify and hold each other harmless from and against all claims, demands, losses, liabilities and expenses (including reasonable attorneys’ fees) for personal injury or death to persons and damage to each other’s property or facilities or the property of any other person or corporation to the extent arising out of, resulting from or caused by their negligent or intentional acts, errors, or omissions.

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        13.3    Not used.

        13.4    Commencing with the Commercial Operations Date, Operator shall provide and maintain, at Operator’s sole expense, security for Operator’s performance under this Agreement as described in Section 13.5 below, in an amount equal to $4,500,000. Such security shall be maintained throughout the Term of this Agreement.

        13.5    Security for compliance with Section 13.4 above shall consist of one or more of the following:

(a) An unconditional and irrevocable direct pay letter of credit issued by a bank acceptable to North Carolina Power in a form and with substance acceptable to North Carolina Power,

(b) A payment or performance bond issued by a company acceptable to North Carolina Power for payment to North Carolina Power in the event of a material breach by Operator in a form and with substance acceptable to North Carolina Power,

(c) A corporate guarantee which North Carolina Power, at its discretion, deems to be equivalent in quality to the security detailed in (a) and (b) above in a form and with substance acceptable to North Carolina Power.

        13.6   

(a) North Carolina Power shall have an exclusive right to purchase any Transfer Interest or Equity Interest (as hereinafter defined) on the terms and conditions set forth herein; provided, however, Operator may grant the steam buyer a right of first refusal to purchase any Transfer Interest, which right shall be prior to North Carolina Power’s right of first refusal. Any such right of first refusal granted to the steam buyer shall require the steam buyer to continue operating the Facility in accordance with the provisions of this Agreement. North Carolina Power’s rights, as specified herein with respect to transfer of an Equity Interest, shall not apply to transfers to an entity which is directly or indirectly controlled by, in control of, or under common control with the Operator.

(b) If Operator or any of its subsidiaries, affiliates or other related entities ever desire to dispose of its or their right, title, or Interest in the Facility, or any part thereof (hereinafter referred to as a “Transfer Interest”), other than a transfer solely as a financial device (e.g. a sale and leaseback of the Facility or the granting of a mortgage as security interest in the Facility), or if Operator receives a bona fide offer to purchase or lease the Facility, or any part thereof (hereinafter also referred to as a “Transfer Interest”), which offer Operator is prepared to accept, or if any interest in Operator, (hereinafter referred to as an “Equity Interest”) is to be transferred or sold, Operator shall give notice thereof in writing to North Carolina Power (the “Notice”). The Notice shall (i) specify the terms under which such Transfer Interest or Equity Interest is to be transferred or disposed of, including the purchase price of the Transfer Interest or Equity Interest, and (ii) include a copy of the acceptable offer, if any, received by Operator, as the case may be.

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(c) If the steam buyer has been granted a right of first refusal as set forth above, the Operator shall offer the Transfer Interest to the steam buyer in accordance with the terms of the steam buyer’s right of first refusal. If the steam buyer waives its right with respect to the Transfer Interest or the steam buyer does not have a right of first refusal, Operator shall offer such Transfer Interest to North Carolina Power on the terms set forth in the Notice.

(d) For a period of one hundred twenty (120) Days after receipt by North Carolina Power of the Notice, or ninety (90) Days after North Carolina Power receives Notice from the Operator that the steam buyer has waived its right of first refusal, whichever is longer; North Carolina Power shall have the right to exercise its right to purchase the Transfer Interest or Equity Interest by giving written notice thereof to Operator.

(e) In the event North Carolina Power elects not to exercise its right to purchase pursuant to the foregoing provisions then for a period of one year from the date North Carolina Power notifies Operator of such election, Operator shall be free to transfer such Transfer Interest to a Transferee, or such Equity Interest, at a price no lower than and on terms. not materially more favorable than those offered in the Notice. For the purpose of this Section 13.6 and Article 17, Transferee shall mean a person who either is an experienced power plant operator, legally permitted to operate the Facility, or shall have engaged the services of another person who is an experienced power plant operator legally permitted to operate the Facility. Operator shall ensure that by the terms of such transfer, North Carolina Power’s right of first refusal, shall continue on the terms and conditions contained herein with respect to any subsequent transfer. Any sale of any Transfer Interest or Equity Interest shall not extinguish North Carolina Power’s right to purchase with respect to any portion of the Facility or the Operator, as the case may be, not transferred pursuant to such sale. Any lease of any Transfer Interest shall not extinguish North Carolina Power’s right to purchase with respect to any extensions of such lease or with respect to any other leases, sales or other dispositions of any Transfer Interest. Notwithstanding any other provisions, Operator agrees (i) that it will ensure that the terms of any transfer (other than a transfer to North Carolina Power) of all or a portion of its interest in the Facility or the Operator provides for the continued operation of the Facility in accordance with and under the terms of this Agreement; and (ii) any transfer (other than a transfer to North Carolina Power) which results in a transfer of management control over the operation of the Facility shall require the transferee’s acceptance of an assignment of the transferor’s obligations under this Agreement with respect to the operation of the Facility pursuant to Section 17.1 of this Agreement.

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(f) If North Carolina Power elects to exercise its right to purchase with respect to the Transfer Interest or Equity Interest, the Parties shall endeavor to fully consummate the transfer within 120 Days after North Carolina Power exercises its right to purchase.

(g) Notwithstanding the foregoing, in the event of a transfer of an Equity Interest, North Carolina Power agrees not to exercise its right to purchase if, but only if, the transfer of such interest shall be made to a party reasonably acceptable to, and approved by, North Carolina Power.

(h) Operator may not consolidate with or be a Party to a merger with any other entity; provided, however, that:

(1) Any subsidiary of Operator may merge or consolidate with or into Operator or any wholly-owned subsidiary of Operator so long as, in any such merger or consolidation, Operator shall be the surviving or continuing entity;

(2) Operator may consolidate or merge with any other entity if (i) the successor formed by or resulting from such consolidation or merger shall be a solvent entity organized under the laws of the United States of America or a state thereof or the District of Columbia, (ii) after giving effect to such merger or consolidation, no default under this Agreement shall exist, (iii) such successor or transferee entity shall expressly assume in writing the due and punctual performance and observance of all the terms, covenants, agreements and conditions of this Agreement and shall furnish North Carolina Power an opinion of independent counsel to the surviving entity to the effect that each of the entities participating in such consolidation or merger or transfer of assets was, at the time thereof, duly created, validly existing, in good standing and otherwise in compliance with the applicable provisions of the corporation, partnership, trust or limited liability company laws of its respective state of formation, that the surviving entity is duly formed, validly existing and in good standing, that the surviving entity has all requisite power and authority to assume and perform this Agreement, that such assumption and performance have been duly authorized by all necessary corporate, partnership, trust or limited liability company action, as the case may be, on the part of the surviving entity and that compliance by the surviving entity with the terms of this Agreement will not conflict with, or result in any breach of any of the provisions of, or constitute a default under any agreement to which it is a party, or result in the creation or imposition of a lien upon the property of the surviving entity.

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(i) Each Party to this Agreement covenants and agrees to sign, execute and deliver, or cause to be signed, executed and delivered, and to do or make, or cause to be done or made, upon the written request of the other Party, any and all agreements, instruments, papers, deeds, acts or things, supplemental, confirmatory or otherwise, as may be reasonably required by other Party for the purpose of or in connection with North Carolina Power’s right to purchase established hereby.

(j) North Carolina Power’s right to purchase under this Section 13.6 shall not apply to:

(1) any transfer among the general partners named in this Agreement;

(2) any transfer from one of the general partners of Operator to a limited partnership, the sole general partner of which is such general partner,

(3) the admission or substitution of limited partners to a partnership.

        13.7    Not used.

        13.8    The Parties agree that the provisions of Article 10 concerning the Energy Purchase Price and the Capacity Purchase Payment, the calculation thereof and any resulting decrease therein, constitute North Carolina Power’s sole and exclusive remedies with respect to any Scheduled Outage, Maintenance Outage, Forced Outage or any other failure not constituting a breach of Operator’s obligations under this Agreement to produce, make available or deliver electric energy or capacity to North Carolina Power, and that they fairly and reasonably compensate North Carolina Power for any harm or loss that North Carolina Power is likely to suffer in connection with any such failure by Operator. It is further understood, and agreed that such provisions are in lieu of any actual damages for such occurrences. North Carolina Power hereby waives any and all other damages and remedies for or with respect to such occurrences. The Parties hereby waive any defense challenging the validity of any such provisions on the grounds that they are void as penalties or are not reasonably related to actual damages. It is further understood and agreed that, should Operator broach its obligations under this Agreement, North Carolina Power has not waived its right to seek any and all damages, in equity or at law, against Operator for its breach.

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ARTICLE 14: Force Majeure

        14.1    Neither Party shall be responsible or liable for or deemed in breach of this Agreement because of any delay in the performance of their respective obligations hereunder due solely to circumstances beyond the reasonable control of the Party experiencing such delay, including but not limited to acts of God; unusually severe weather conditions; strikes or other labor difficulties; war; riots; requirements, actions or failures to act on the part of governmental authorities preventing performance; inability despite due diligence to obtain required licenses; or Certificate of Convenience and Necessity; accident; fire; damage to or breakdown of necessary facilities; or transportation delays or accidents (such causes hereinafter called “Force Majeure”); provided that:

(a) The non-performing Party gives the other Party within forty-eight (48) hours written notice describing the particulars of the occurrence;

(b) The suspension of performance is of no greater scope and of no longer duration than is required by the Force Majeure;

(c) The non-performing Party uses its best efforts to remedy its inability to perform;

(d) When the non-performing Party is able to resume performance of its obligations under this Agreement, that Party shall give the other Party written notice to that effect; and

(e) The Force Majeure was not caused by or connected with any negligent or intentional acts, errors, or omissions, or failure to comply with any law, rule, regulation, order or ordinance or any breach or default of this Agreement.

        14.2    The term Force Majeure does not include changes in market conditions or governmental action to the extent that they affect the cost or availability of Operator’s supply of fuel or any alternate supplies of fuel or the demand for Operator’s products or products of the steam host.

50

        14.3    Not used.

        14.4    Except as otherwise provided in Article 5, in no event will any condition of Force Majeure extend this Agreement beyond its stated Term. If any condition of Force Majeure delays a Party’s performance for a time period greater than thirty six (36) Months, the Party not delayed by such Force Majeure may terminate this Agreement, without further obligation, or extend such period at its sole discretion if the Party delayed by such Force Majeure is exercising due diligence in its efforts to cure the condition of Force Majeure.

ARTICLE 15: Taxes and Claims for Labor and Materials

        15.1    All present or future federal, state, municipal or other lawful taxes applicable by reason of the sale of Net Electrical Output or Delivered Capacity shall be paid by Operator.

        15.2    Operator will promptly pay and discharge all lawful taxes, assessments and governmental charges or levies imposed upon it or upon or in respect of all or any part of its property or business, all trade accounts payable in accordance with usual and customary business terms, and all claims for work, labor or materials which, if unpaid, might become a lien or charge upon any of its property; provided, however, that Operator shall not be required to pay any such tax, assessment, charge, levy, account payable or claim if:

(a) The validity, applicability or amount thereof is being contested in good faith by appropriate actions or proceedings which will prevent the forfeiture or sale of any property of Operator or any material interference with the use thereof by Operator and

(b) Operator shall sot aside on its books reserves doomed by it to be adequate with respect thereto.

51

ARTICLE 16: Choice of Law

        16.1    This Agreement shall be interpreted, construed and governed by the laws of the Commonwealth of Virginia. The Parties hereby submit to the jurisdiction of courts located in, and venue is hereby stipulated to be in, Richmond, Virginia.

ARTICLE 17: Miscellaneous Provisions

        17.1    Neither Party shall assign this Agreement or any portion thereof without the prior written consent of the other Party which consent shall not be unreasonably withheld; provided, however, such consent shall not be required prior to an assignment to a parent, subsidiary or affiliated entity; but provided, further that:

(a) Any assignee shall be a Transferee as defined in Section 13.6 of this Agreement and shall expressly assume assignor’s obligations hereunder;

(b) No such assignment shall impair any security given by Operator hereunder; and

(c) Unless expressly agreed by the other Party, no assignment, whether or not consented to, shall relieve the assignor of its obligations hereunder in the event its assignee fails to perform.

North Carolina Power shall consent to the assignment by Operator of its rights herein as security for financing obtained for the Facility and shall execute documents reasonably satisfactory to North Carolina Power requested by Operator to evidence such consent.

        17.2    This Agreement, including the appendices hereto, can be amended only by agreement between the Parties in writing.

        17.3    The failure of either Party to insist in any one or more instances upon strict performance of any provisions of this Agreement, or to take advantage of any of its rights hereunder, shall not be construed as a waiver of any such provisions or the relinquishment of any such right or any other right hereunder, which shall remain in full force and effect,

52

        17.4    The headings contained in this Agreement are used solely for convenience and do not constitute a part of the agreement between the Parties hereto, nor should they be used to aid in any manner in the construction of this Agreement.

        17.5    This Agreement is intended solely for the benefit of the Parties hereto. Nothing in this Agreement shall be construed to create any duty to, or standard of care with reference to, or any liability to, any person not a Party to this Agreement.

        17.6    This Agreement shall not be interpreted or construed to create an association; joint venture, or partnership between the Parties or to impose any partnership obligation or liability upon either Party. Neither Party shall have any right, power or authority to enter into any agreement or undertaking for, or act on behalf of, or to act as or be an agent or representative of, or to otherwise bind, the other Party.

        17.7    Cancellation, expiration or earlier termination of this Agreement shall not relieve the Parties of obligations that, by their nature, should survive such cancellation, expiration or termination, including, without limitation, warranties, remedies, promises of indemnity and confidentiality.

        17.8    Notwithstanding any contrary provisions hereof, the Second Amendment and Restatement shall remain in full force and effect until this Agreement is accepted for filing by the FERC and becomes effective under the Federal Power Act.

ARTICLE 18: Statutory and Regulatory Changes

        18.1    The Parties recognize and hereby agree that if any federal, state or municipal government or regulatory authority, including, without limitation, the SCC, should for any reason enter an order, modify its rules, or take any action whatsoever, having the effect of disallowing North Carolina Power the recovery from its customers of all or any portion of the payments for Delivered Capacity and Net Electrical Output hereunder in excess of the energy and capacity prices established (notwithstanding any limitations on the size of the Facility) by the SCC pursuant to 18 C.F.R. 292.304(c) (currently represented by Schedule 19 POWER PURCHASES FROM COGENERATION AND SMALL POWER PRODUCTION QUALIFYING FACILITIES) and in effect for the period of disallowance, hereinafter referred to as the Disallowance (except where such disallowance is due to North Carolina Power’s failure to seek recovery or comply with procedural requirements governing recovery of such costs), then:

53

If the Disallowance occurs before the eighteenth anniversary of the Commercial Operations Date, North Carolina Power shall continue to make the payments specified in Article 10 through the eighteenth anniversary of the Commercial Operations Date. Payments for Delivered Capacity beginning on the eighteenth anniversary of the Commercial Operations Date shall not exceed the amount unaffected by the Disallowance. Further, North Carolina Power may, at its option, beginning on the eighteenth anniversary of the Commercial Operations Date withhold up to seventy-five (75) percent of the payments for Delivered Capacity after said eighteenth anniversary until the sooner of (i) the twentieth anniversary of the Commercial Operations Date or (ii) the entire amount of the Disallowance is repaid with Interest from the date each part of the Disallowance was paid to Operator. In the event that such withholding does not fully repay the Disallowance and accrued Interest by the twentieth anniversary of the Commercial Operations Date, the Operator shall pay the remainder to North Carolina Power within one hundred and twenty (120) Days after the twentieth anniversary of the Commercial Operations Date in a lump sum, or;

If the Disallowance occurs after the eighteenth anniversary of the Commercial Operations Date all future payments for Delivered Capacity shall not exceed the amount unaffected by the Disallowance. Further, the Operator shall repay the full amount of the Disallowance with Interest by the later of (i) one year from the date of such Disallowance or (ii) the twenty-first anniversary of the Commercial Operations Date. The Parties obligate themselves to all good faith efforts to establish, if practicable, an appeal and overruling of the Disallowance or a superseding order, approval of modified rules or tariffs, or other action so as to allow timely resumption of full, or failing that, adjusted payments hereunder.

54

ARTICLE 19: Entirety

        19.1    This Agreement is intended by the Parties as the final expression of their Agreement and is intended also as a complete and exclusive statement of the terms of their Agreement with respect to the Net Electrical Output and Delivered Capacity sold and purchased hereunder. All prior written or oral understandings, offers or other communications of every kind pertaining to the sale of Net Electrical Output and Delivered Capacity hereunder between the Parties or between Westmoreland-Hadson Partners and North Carolina Power are hereby abrogated and withdrawn.

        IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed the ______ day of _________, 2000.

WESTMORELAND-LG&E PARTNERS, a Virginia general partnership by its GENERAL PARTNERS:

WESTMORELAND-ROANOKE VALLEY, L.P.,
a Delaware limited partnership, by WEI-ROANOKE
VALLEY, INC., a Delaware corporation, its
general partner

Date:_______________ By: /s/ W. Michael Lepchitz
Title: President

LG&E ROANOKE VALLEY, L.P., a California
limited partnership, by LG&E POWER 16
INCORPORATED, a California corporation, its
general partner

55

Date:_______________ By: /s/ George W. Basinger
Title: President and Chief Financial Officer

VIRGINIA ELECTRIC AND POWER
COMPANY, a Virginia public service corporation
operating in North Carolina
as North Carolina Power

Date:_______________ By: /s/ E. Paul Hilton
Name: E. Paul Hilton
Title: Senior Vice President-Bulk Sales

56

EXHIBIT A
EXAMPLES OF PAYMENTS FOR DELIVERED CAPACITY

ASSUME: MAXIMUM CAPACITY — SUMMER = 165,000 kW
MAXIMUM CAPACITY — WINTER = 167,200 kW
FIXED CAPACITY COMPONENT = 3.185¢/kWh
O&M CAPACITY COMPONENT = 2.160¢/kWh from 1/1 through 3/31;
2.203¢/kWh from 4/1 through 12/31 (reflecting GDPIPD adjustment as of 4/1 of + 2%)
ANNUAL O&M CAPACITY COMPONENT = 2.192¢/kWh
MAXIMUM CAPACITY UNIT PRICE = 5.377¢/kWh
A MONTH HAS 720 HOURS
A YEAR HAS 8,760 HOURS

ALL EXAMPLES ASSUME DISPATCH OF THE FACILITY AT 100%, EXCEPT AS OTHERWISE NOTED IN ANY EXAMPLE, AND, IN ANY EVENT, DO NOT TAKE INTO ACCOUNT THE SPECIAL REQUIREMENTS FOR CALCULATING DELIVERED CAPACITY DURING RAMP-UP OR RAMP-DOWN PERIODS IN RESPONSE TO DISPATCH AS PROVIDED IN SECTION 1.13.

ABBREVIATIONS:

ACF = ACTUAL CAPACITY FACTOR
AO&MCC = ANNUAL O&M CAPACITY COMPONENT
AVCF = AVERAGE CAPACITY FACTOR
CPP = CAPACITY PURCHASE PAYMENT
CPPA = CAPACITY PURCHASE PAYMENT ADJUSTMENT
CUP = CAPACITY UNIT PRICE
DC = DELIVERED CAPACITY
FCC = FIXED CAPACITY COMPONENT
FM = FORCE MAJEURE
FO = FORCED OUTAGE
GDPIPD = GROSS DOMESTIC PRODUCT IMPLICIT PRICE DEFLATOR
MO = MAINTENANCE OUTAGE
MACP = MAXIMUM ANNUAL CAPACITY PAYMENT
MCS = MAXIMUM CAPACITY — SUMMER
MCW = MAXIMUM CAPACITY — WINTER
MCUP = MAXIMUM CAPACITY UNIT PRICE
NCPF = NORTH CAROLINA POWER FAILURE TO RECEIVE NEO
NEO = NET ELECTRICAL OUTPUT
OMCC = O&M CAPACITY COMPONENT
SO = SCHEDULED OUTAGE
TA = TRACKING ACCOUNT

57

MONTHLY CAPACITY PURCHASE PAYMENTS

EXAMPLE NO. 1 — Average Capacity Factor = 88.000%. Monthly Capacity Purchase Payment for a Winter Period month (during which OMCC is 2.160¢/kWh) with no SO, MO, FO, FM, or NCPF and NEO equal to MCW in every hour.

CUP [Section 1.3, 1.11, 1.23, & 1.37]

= (FCC + OMCC) / AVCF
=(3.185¢/kWh + 2.160¢/kWh) / .88000
= 6.074¢/kWh

(DC) [Section 1.13(a)]

= NEO
= (720) * (MCW)
= 120,384,000 kWh

CPP [Section 10.15(a)(i) & (ii)]

= (DC)*(CUP)
= (120,384,000) * (.06074)
= $7,312,124.16

EXAMPLE NO. 2 — Average Capacity Factor = 88.000%. Monthly Capacity Purchase Payment for a Winter Period month (during which OMCC is 2.160¢/kWh) with no SO, MO, FO, FM, or NCPF and Facility operates at 50% of MCW in every hour.

(DC) [Section 1.13(a)]

= NEO
= (720) * (MCW) * (50%)
= 60,192,000 kWh

CPP [Section 10.15(a)(i) & (ii)]

= (DC) * (CUP)
= (60,192,000) * (.06074)
= $3,656,062.08

EXAMPLE NO. 3 — Average Capacity Factor = 88.000%. Monthly Capacity Purchase Payment for a Winter Period month (during which OMCC is 2.160¢/kWh) with either a SO, MO, FO, or FM, that reduces NEO to zero during such event for 50 hours, and no NCPF and NEO equal to MCW in every other hour.

58

DC [Section 1.13(a)]

= NEO
= (720-50) * (MCW)
= 112,024,000 kWh

CPP [Section 10.15(a)(i) & (ii)]

= (DC) * (CUP)
= (112,024,000) * (.06074)
= $6,804,337.76

EXAMPLE NO. 4 — Average Capacity Factor = 88.000%. Monthly Capacity Purchase Payment for Winter Period month (during which OMCC is 2.160¢/kWh) with no SO, MO, FM, FO, or NCPF, NEO exceeds 101% of MCW in 50 Off Peak Hours and NEO equal to MCW in every other hour.

DC [Section 1.13(a)]

= ((MCW) * (50) * (101%)) + ((MCW) * (720-50))
= 120,467,600 kWh

CPP [Section 10.15(a)(i) & (ii)]

= (DC) * (CUP)
= (120,467,600) * (.06074)
= $7,317,202.02

EXAMPLE NO.5 — Average Capacity Factor = 88.000%. Monthly Capacity Purchase Payment for a Winter Period month during which (a) OMCC is 2.160¢/kWh, (b) an NCPF reduces NEO to zero for 50 hours, (c) the Facility is first in a zero generation SO, MO, FO, or FM when the NCPF occurs, (d) such SO, MO, FO, or FM lasts 20 hours during the NCPF and (e) NEO equal to MCW in every other hour.

DC [Section 1.13(a) & (b)]

= ((50-20) * (MCW)) + ((MCW) * (720-50))
= 117,040,000 kWh

CPP [Section 10.15(a)(i) & (ii)]

= (DC) * (CUP)
= (116,204,000) * (.06074)
= $7,109,009.60

59

EXAMPLE NO. 6 — Average Capacity Factor = 88.000%. Monthly Capacity Purchase Payment for January, 2004 during which (a) OMCC is 2.160¢/kWh, (b) there is no SO, MO, FO, FM, or NCPF and (c) NEO equal to MCW in every hour.

(DC) [Section 1.13(a)]

= NEO
= (744) * (MCW)
= 124,396,800 kWh

CPP [Section 10.15(a)(i) & (ii) & 10.15(c)]

= ((DC)*(CUP)) + (Monthly Additional Payment under Section 10.15(c)
= ((124,396,800) * (.06074)) + ((.06074) * (166,100) * (8784) * ((1/12)(.03)))
= $7,555,861.63 + $221,552.55
= $7,777,414.18

END OF YEAR TRACKING ACCOUNT BALANCING AND CAPACITY PURCHASE PAYMENT ADJUSTMENTS

EXAMPLE NO. 1 — Tracking Account has a negative $750,000 balance at start of a Year (that is not a leap year or a major maintenance outage year) [Section 1.47 & 10.15(b)]. AVCF equals 88.000%. The Facility produces constant NEO of 149,733 kW during each Winter Period hour and 147,762 kW during each Summer Period hour, yielding an ACF of 89.553%, i.e., DC / ((MCS * Hours in the Summer Period) + (MCW * Hours in the Winter Period)). [Section 1.1]

CUP [Section 1.3, 1.11, 1.23, & 1.37] Jan – Mar

= (3.185(cent)/kWh + 2.160(cent)/kWh) / .88000
= 6.074(cent)/kWh

CUP [Section 1.3,1.11.1.23, & 1.37] Apr – Dec

= (3.185(cent)/kWh + 2.203(cent)/kWh) / .88000
= 6.123(cent)/kWh

MCUP [Section 1.33. 1,23, & 1.2]

= FCC + AO&MCC
= 3.185(cent)/kWh + 2.192(cent)/kWh
= 5.377(cent)/kWh

60

MACP allowed for the Year [Section 1.30 & 10.15(a)]

= ((MCW) * (Hours in the Winter Period) * (MCUP)) + ((MCS) * (Hours in the Summer Period) * (MCUP))
= ((167200) * (4368) * (.05377)) + ((165,000) * (4392) * (.05377))
= $39,269,822.59 + $38,966,043.60
= $78,235,866.19

Total Capacity Purchase Payments made during the Year are capped at MACP or $78,235,866.19 [Section 1.30 & 10.15(a)]

Product of the applicable Delivered Capacity and Capacity Unit Price for the Year

= ((NEC, from 1/1 through 3/31) * (applicable CUP)) + ((NEO from 4/1 through 9/30) * (applicable CUP)) + ((NEO from 10/1 through 12/31) * (applicable CUP))
= ((149,733) * (90) * (24) * (.06074)) + ((147,762) * (183) * (24) * (.06123)) + ((149,733) * (92) * (24) * (.06123))
= $79,624,484.94

CPPA [Section 1.10 & 10.15(b)(iv)]

= Least of (a) 4% of MACP, (b) amount by which product of DC and CUP for the year exceeds the MACP or (c) absolute value of negative Tracking Account balance
= Least of (a) (MACP)*(.04), (b) $1,388,618.75 or (c) $750,000
= Least of (a) ($78,235,866.19)*(.04), (b) $1,388,618.75 or (c) $750,000
= Least of (a) $3,129,434.65, (b) $1,388,618.75 or (c) $750,000
= $750,000

Tracking Account balance at the end of the Year [Section 10.15(b)(ii)]

= (negative Tracking Account balance at the beginning of the Year) + ((Product of DC and CUP for the Year) - (MACP))
= (negative $750,000) + (($79,624,484.94) - ($78,235,866.19))
= (negative $750,000) + ($1,388,618.75)
= positive $638,618.75

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EXAMPLE NO. 2 — Tracking Account has a positive $750,000 balance at start of a Year (that is not a leap year or a major maintenance outage year) [Section 1.47 & 10.15(b)]. AVCF equals 88.000%. The Facility produces constant NEO of 149,733 kW during each Winter Period hour and 147,762 kW during each Summer Period hour, yielding an ACF of 89.553%, i.e., DC / ((MCS * Hours in the Summer Period) + (MCW * Hours In the Winter Period)). [Section 1.1]

CUP [Section 1.3, 1.11, 1.23, & 1.37] Jan – Mar

= (3.185(cent)/kWh + 2.160(cent)/kWh) / .88000
= 6.074(cent)/kWh

CUP [Section 1.3, 1.11, 1.23, & 1.37] Apr – Dec

= (3.185(cent)/kWh + 2.203(cent)/kWh) / .88000
= 6.123(cent)/kWh

MCUP [Section 1.33, 1.23, & 1.2]

= FCC +AO&MCC
= 3.185(cent)/kWh + 2.192(cent)/kWh
= 5.377(cent)/kWh

MACP  allowed for the Year [Section 1.30 & 10.15(a)]

= ((MCW) * (Hours in the Winter Period) * (MCUP)) + ((MCS) * (Hours in the Summer Period) * (MCUP))
= ((167200) * (4368) * (.05377)) + ((165,000) * (4392) * (.05377))
= $39,269,822.59 + $38,966,043.60
= $78,235,866.19

Total Capacity Purchase Payments made during the Year are capped at MACP or $78,235,866.19 [Section 1.30 & 10.15(a)]

Product of the applicable Delivered Capacity and Capacity Unit Price for the Year

= ((NEC from 1/1 through 3/31) * (applicable CUP)) + ((NEC from 4/1 through 9/30) * (applicable CUP)) + ((NEO from 10/1 through 12/31) * (applicable CUP))
= ((149,733) * (90) * (24) * (.06074)) + ((147,762) * (183) * (24) * (.06123)) + ((149,733) * (92) * (24) * (.06123))
= $79,624,484.94

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CPPA = Tracking Account has positive balance and ACF is greater than AVCF, therefore no CPPA. [Section 10.15(b)(iii) & (iv)]

Tracking Account balance at the end of the Year [Section 10.15(b)(ii)]

= (positive Tracking Account balance at the beginning of the Year) + ((Product of DC and CUP for the Year) — (MACP))
= (positive $750,000) + (($79,624,484.94) - ($78,235,866.19))
= (positive $750,000) + ($1,388,618.75)
= positive $2,138,618.75

EXAMPLE NO.3 — Tracking Account has a negative $4,260,000 balance at start of a Year (that Is not a leap year or a major maintenance outage year) [Section 1.47 & 10.15(b)(iv)]. AVCF equals 88.000%. The Facility produces constant NEO of 159,248 kW during each Winter Period hour and 157,153 kW during each Summer Period hour, yielding an ACF of 95.244%, i.e., DC / ((MCS * Hours in the Summer Period) + (MCW * Hours in the Winter Period)). [Section 1.1]

CUP [Section 1.3, 1.11, 1.23, & 1.37] Jan – Mar

= (3.185(cent)/kWh + 2.160(cent)/kWh) 1.88000
= 6.074(cent)/kWh

CUP [Section 1.3, 1.11, 1.23, & 1.37] Apr – Dec

= (3.185(cent)/kWh + 2.203(cent)/kWh) / .88000
= 6.123(cent)/kWh

MCUP [Section 1.33, 1.23, & 1.2]

= FCC + AO&MCC
= 3.185(cent)/kWh + 2.192(cent)/kWh
= 5.377(cent)/kWh

MACP allowed for the Year [Section 1.30 & 10.15(a)]

= ((MCW) * (Hours in the Winter Period) * (MCUP)) + ((MCS) * (Hours in the Summer Period) * (MCUP))
= ((167200) * (4368) * (.05377)) + ((165,000) * (4392) * (.05377))
= $39,269,822.59 + $38,966,043.60
= $78,235,866.19

Total Capacity Purchase Payments made during the Year are capped at MACP or $78,235,866.19 [Section 1.30 & 10.15(a)]

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Product of the applicable Delivered Capacity and Capacity Unit Price for the Year

= ((NEO from 1/1 through 3/31) * (applicable CUP)) + ((NEO from 4/1 through 9/30) * (applicable CUP)) + ((NEO from 10/1 through 12/31) * (applicable CUP))
= ((159,248) * (90) * (24) * (.06074)) + ((157,153) * (183) * (24) * .06123)) + ((159,248) * (92) * (24) * (.06123))
= $84,684,674.14

CPPA [Section 10.15(b)(iv)]

= Least of (a) 4% of MRCP, (b) amount by which product of DC and CUP for the year exceeds the MACP or (o) absolute value of negative Tracking Account balance
= Least of (a) ($78,235,866.19) * (.04), (b) $6,448,807.95 or (c) $4,250,000
= Least of (a) $3,129,434.65, (b) $6,448,807.95 or (c) $4,250,000
= $3,129,434.65

Tracking Account balance at the end of the Year [Section 10.15(b)(v)]

= (negative Tracking Account balance at the beginning of the Year) + ((MACP) * (.04))
= (negative $4,250,000) + ($3,129,434.65)
= negative $1,120,565.35.

The amount by which the product of DC and CUP for the Year exceeds the sum of MACP and CPPA, i.e., $3,319,373.30, shall not be included in the amount added to the Tracking Account with respect to such Year pursuant to Section 10.15(b)(ii), but shall be carried over and added to the Tracking Account for the following Year, and used in the calculation of any applicable Capacity Purchase Payment Adjustment, under Section 10.15(b)(iii) or (iv), for such following Year, after first making the applicable adjustments provided under Section 10.15(b)(v)(1) or (2).

EXAMPLE NO.4 — Tracking Account has a negative $1,120,565.35 balance at start of the Year (that is not a leap year or a major maintenance outage year) following the Year described in Example No. 3, with $3,319,373.30 carried over from such preceding Year. [Section 1.47 & 10.15(b)(iv)]. AVCF equals 88.000%. The Facility produces constant NEO of 159,248 kW during each Winter Period hour and 157,153 kW during each Summer Period hour, yielding an ACF of 95.244%, i.e., DC / ((MCS * Hours in the Summer Period) + (MCW * Hours in the Winter Period)). [Section 1.1]

64

CUP [Section 1.3, 1.11, 1.23, & 1.37] Jan – Mar

= (3.185(cent)/kWh + 2.160(cent)/kWh) / .88000
= 6.074(cent)/kWh

CUP [Section 1.3. 1.11, 1.23, & 1.37] Apr – Dec

= (3.185(cent)/kWh + 2.203(cent)/kWh) / .88000
= 6.123(cent)/kWh

MCUP [Section 1.33, 1.23, & 1.2]

= FCC + AO&MCC
= 3.185(cent)/kWh + 2.192(cent)/kWh
= 5.377(cent)/kWh

MACP allowed for the Year [Section 1.30 & 10.15(a)]

= ((MCW) * (Hours in the Winter Period) * (MCUP)) + ((MCS) * (Hours in the Summer Period) * (MCUP))
= ((167200) * (4368) * (.05377)) + ((165,000) * (4392) * (.05377))
= $39,269,822.59 + $38,966,043.60
= $78,235,866.19

Total Capacity Purchase Payments made during the Year are capped at MACP or $78,235,866.19 [Section 1.30 & 10.15(a)]

Product of the applicable Delivered Capacity and Capacity Unit Price for the Year

= ((NEO from 1/1 through 3/31) * (applicable CUP)) + ((NEO from 4/1 through 9/30) * (applicable CUP)) + ((NEO from 10/1 through 12/31) * (applicable CUP))
= ((159,248) * (90) * (24) * (.06074)) + ((157,153) * (183) * (24) * (.06123)) + ((159,248) * (92) * (24) * (.06123))
= $84,684,674.14

CPPA [Section 10.15(b)(v)(2)]

= Least of (a) 4% of MACP, (b) the carried-over amount from the preceding Year plus the amount by which the product of DC and CUP for the Year exceeds the MACP, or (c) absolute value of negative Tracking Account balance
= Least of (a) ($78,235,866.19) * (.04), (b) ($3,319,373.30) + ($6,448,807.95) or (c) $1,120,565.35
= Least of (a) $3,129,434.65, (b) $9,768,181.25 or (c) $1,120,565.35
= $1,120,565.35

65

Tracking Account balance at the end of the Year [Section 10.15(b)(v)(2)]

= ((negative Tracking Account balance at the beginning of the Year) + (Carried-over amount from the preceding Year)) + ((Product of DC and CUP for the Year) – (MACP))
= ((negative $1,120,565.35) + ($3,319,373.30)) + ($6,448,807.95)
= positive $8,647,615.90.

EXAMPLE NO. 5 — Tracking Account has a negative $1,120,565.35 balance at start of the Year (that is not a leap year or a major maintenance outage year) following the Year described in Example No. 3, with $3,319,373.30 carried over from such preceding Year [Section 1.47 & 10.15(b)(iv)]. AVCF equals 88.000%. The Facility produces constant NEO of 143,792 kW during each Winter Period hour and 141,900 kW during each Summer Period hour, yielding an ACF of 86.000%, i.e., DC / ((MCS * Hours in the Summer Period) + (MCW * Hours in the Winter Period)), [Section 1.1]

CUP [Section 1.3, 1.11, 1.23, & 1.37] Jan – Mar

= (3.185(cent)/kWh + 2.160(cent)/kWh) / .88000
= 6.074(cent)/kWh

CUP [Section 1.3, 1.11, 1.23, & 1.37] Apr – Dec

= (3.185(cent)/kWh + 2.203(cent)/kWh) / .88000
= 6.123(cent)/kWh

MCUP [Section 1.33, 1.23, & 1.2]

= FCC + AO&MCC
= 3.185(cent)/kWh + 2.192(cent)/kWh
= 5.377(cent)/kWh

MACP allowed for the Year [Section 1.30 & 10.15(a)]

66

= ((MCW) * (Hours in the Winter Period) * (MCUP)) + ((MCS) * (Hours in the Summer Period) * (MCUP))
= ((167200) * (4368) * (.05377)) +((165,000) * (4392) * (.05377))
= $39,269,822.59 + $38,966,043.60
= $78,235,866.19

Total Capacity Purchase Payments made during the Year are capped at MACP or $78,235,866.19 [Section 1.30 & 10.15(a)]

Product of the applicable Delivered Capacity and Capacity Unit Price for the Year

= ((NEO from 1/1 through 3/31) * (applicable CUP)) + ((NEO from 4/1 through 9/30) * (applicable CUP) + (NEO from 10/1 through 12/31) * (applicable CUP))
= ((143,792) * (90) * (24) * (.06074)) + ((141,900) * (183) * (24) * (.06123)) + ((143,792) * (92) * (24) * (.06123))
= $76,465,415.06

(which, since it is less than MACP, equals the total Capacity Purchase Payments for the Year.) [Section 10.15(a)]

CPPA [Section 10.15(b)(v)(1)]

= Least of (a) 4% of MRCP, (b) the carried-over amount from the preceding Year, or (c) absolute value of negative Tracking Account balance (after subtracting ((MACP) – (Product of DC and CUP for the Year)))
= Least of (a) ($78,235,866.19) * (.04), (b) $3,319,373.30, or (c) (1,120,565.35) + (1,770,451.13)
= Least of (a) $3,129,434.65, (b) $3,319,373.30, or (c) $2,891,016.48
= $2,891,016.48

Tracking Account balance at the end of the Year [Section 10.15(b)(v)(1)

= ((negative Tracking Account balance at the beginning of the Year) — ((MACP) – (Product of DC and CUP for the Year))) + (Carried-over amount from the preceding Year)
= ((negative $1,120,565.35) - ($1,770,451.13)) + ($3,319,373.30)
= (negative $2,891,016.48) + ($3,319,373.30)
= positive $428,356.82

67

EXAMPLE NO. 6 — Tracking Account has a negative $2,000,000 balance at start of a Year (that is not a leap year or a major maintenance outage year) [Section 1.47 & 10.15(b)(iv)]. AVCF equals 88.000%. The Facility produces constant NEO of 159,248 kW during each Winter Period hour and 157,153 kW during each Summer Period hour, yielding an ACF of 95.244%, i.e., DC / ((MCS * Hours in the Summer Period) + (MCW * Hours in the Winter Period)). [Section 1.1]

CUP [Section 1.3, 1.11, 1.23, & 1.37] Jan – Mar

= (3.185(cent)/kWh + 2.160(cent)/kWh) / .88000
= 6.074(cent)/kWh

CUP [Section 1.3, 1.11, 1.23, & 1.37] Apr – Dec

= (3.185(cent)/kWh + 2.203(cent)/kWh) / .88000
= 6.123(cent)/kWh

MCUP [Section 1.33, 1.23, & 1.2]

= FCC + AO&MCC
= 3.185(cent)/kWh + 2.192(cent)/kWh
= 5.377(cent)/kWh

MACP allowed for the Year [Section 1.30 & 10.15(a)]

= ((MCW) * (Hours in the Winter Period) * (MCUP)) + ((MCS) * (Hours in the Summer Period) * (MCUP))
= ((167200) * (4368) * (.05377)) + ((165,000) * (4392) * (.05377))
= $39,269,822.59 + $38,966,043.60
= $78,235,866.19

Total Capacity Purchase Payments made during the Year are capped at MACP or $78,235,866.19 [Section 1.30 & 10.15(a)]

Product of the applicable Delivered Capacity and Capacity Unit Price for the Year

= ((NEO from 1/1 through 3/31) * (applicable CUP)) + ((NEO from 4/1 through 9/30) * (applicable CUP)) + ((NEO from 10/1 through 12/31) * (applicable CUP))
= ((159,248) * (90) * (24) * (.06074)) + ((157,153) * (183) * (24) * (.06123)) + ((159,248) * (92) * (24) * (.06123))
= $84,684,674.14

68

CPPA [Section 10.15(b)(iv)]

= Least of (a) 4% of MACP, (b) amount by which product of DC and CUP for the year exceeds the MACP or (c) absolute value of negative Tracking Account balance
= Least of (a) ($78,235,866.19) * (.04), (b) $6,448,807.95 or (c)
= Least of (a) $3,129,434.65, (b) $6,448,807.95 or (c) $2,000,000
= $2,000,000

Tracking Account balance at the end of the Year [Section 10.15(b)(ii)]

= (negative Tracking Account balance at the beginning of the Year) + ((Product of DC and CUP for the Year) – (MACP))
= (negative $2,000,000) + (($84,684,674.14) - ($78,235,866.19))
= (negative $2,000,000) + ($6,448,807.95)
= positive $4,448,807.95

EXAMPLE NO. 7 — Tracking Account has a negative $2,000,000 balance at start of the Year 2014 [Section 1.47 & 10.15(b)(iv)]. AVCF equals 91.000%, i.e., the average of the ACF for the three-preceding Years (88.000%) + (3%). The Facility produces constant NEO of 143,792 kW during each Winter Period hour and 141,900 kW during each Summer Period hour, yielding an ACF of 89.000%, i.e., (DC / ((MCS * Hours In the Summer Period) + (MCW * Hours in the Winter Period))) + (3%). [Section 1.1]

CUP [Section 1.3, 1.11, 1.23, & 1.37] Jan – Mar

= (3.185(cent)/kWh + 2.160(cent)/kWh) / .88000
= 6.0740/kWh

CUP [Section 1.3, 1.11, 1.23, & 1.37] Apr – Dec

= (3.185(cent)/kWh + 2.203(cent)/kWh) /.88000
= 6.123(cent)/kWh

MCUP [Section 1.33, 1.23, & 1.2]

= FCC + AO&MCC
= 3.185(cent)/kWh + 2.192(cent)/kWh
= 5.377(cent)/kWh

MACP allowed for the Year [Section 1.30, 10.15(a) & 10.15(c)]

= ((MCW) * (Hours in the Winter Period) * (MCUP)) + ((MCS) * (Hours in the Summer Period) * (MCUP)) + (Total Additional Payments under Section 10.15(c))
= ((167200) * (4368) * (.05377)) + ((165,000) * (4392) * (.05377)) + ((.06074) * (166,100) * (8760) * ((1/4)(.03))) + ((.06123) * (166100) * (8760) ((3/4)(.03)))
= $39,269,822.59 + $38,966,043.60 + $662,841.65 + $2,004,566.72
= $80,903,274.56

69

Total Capacity Purchase Payments made during the Year are capped at MACP or $80,903,274.56 [Section 1.30 & 10.15(a)]

Product of the applicable Delivered Capacity and Capacity Unit Price for the Year

= ((NEO from 1/1 through 3/31) * (applicable CUP)) + ((NEO from 4/1 through 9/30) * (applicable CUP)) + ((NEO from 10/1 through 12/31) * (applicable CUP))
= ((143,792) * (90) * (24) * (.06074)) i- ((141,900) * (183) * (24) * (.06123)) + ((143,792) * (92) * (24) * (.06123))
= $76,465,415.06

Total Additional Payments for the Year

= ((.06074) * (166,100) * (8760) * ((1/4)(.03))) + ((.06123) * (166100) * (8760) ((3/4)(.03)))
= $662,841.65 + $2,004,566.72
= $2,667,408.37

Sum of total Additional Payments for the Year and the Product of the applicable Delivered Capacity and Capacity Unit Price for the Year

= $2,667,408.37 + $76,465,415.06
= $79,132,823.43

(which, since it is less than MACP, equals the total Capacity Purchase Payments for the Year.) [Section 10.15(a)]

CPPA = Tracking Account has negative balance and ACF is less than AVCF, therefore no CPPA. [Section 10.15(b)(iii) & (iv)]

Tracking Account balance at the end of the Year [Section 10.15(b)(ii)]

70

= (negative Tracking Account balance at the beginning of the Year) – (Amount by which MACP exceeds aggregate CPP for the Year)
= (negative $2,000,000) – (($80,903,274.56) – ($79,132,823.43))
= (negative $2,000,000) – ($1,770,451.13)
= negative $3,770,451.13

EXAMPLE NO.8 — Tracking Account has a positive $750,000 balance at start of a Year (that is not a leap year or a major maintenance outage year) [Section 1.47 & 10.15(b)]. AVCF equals 88.000%. The Facility produces constant NEO of 143,792 kW during each Winter Period hour and 141,900 kW during each Summer Period hour, yielding an ACF of 86.000%, i.e., DC / ((MCS * Hours in the Summer Period) + (MCW * Hours in the Winter Period)). [Section 1.1]

CUP [Section 1.3, 1.11, 1.23, & 1.37] Jan – Mar

= (3.185(cent)/kWh + 2.160(cent)/kWh) 1.88000
= 6.074(cent)/kWh

CUP [Section 1.3, 1.11, 1.23, & 1.37] Apr– Dec

= (3.185(cent)/kWh + 2.203(cent)/kWh) / .88000
= 6.123(cent)/kWh

MCUP [Section 1.33, 1.23, & 1.2]

= FCC + AO&MCC
= 3.185(cent)/kWh + 2.192(cent)/kWh
= 5.377(cent)/kWh

MACP allowed for the Year [Section 1.30 & 10.15]

= ((MCW) * (Hours in the Winter Period) * (MCUP)) + ((MCS) * (Hours in the Summer Period) * (MCUP))
= ((167200) * (4368) * (.05377)) + ((165,000) * (4392) * (.05377))
= $39,269,822.69 + $38,966,043.60
= $78,235,866.19

Total Capacity Purchase Payments made during the Year are capped at MACP or $78,235,866.19 [Section 1.30 & 10.15(a)]

Product of the applicable Delivered Capacity and Capacity Unit Price for the Year

71

= ((NEO from 1/1 through 3/31) * (applicable CUP)) + ((NEO from 4/1 through 9/30) * (applicable CUP)) + ((NEO from 10/1 through 12/31) * (applicable CUP))
= ((143,792) * (90) * (24) * (.06074)) + ((141,900) * (183) * (24) * (.06123)) + ((143,792) * (92) * (24) * (.06123))
= $76,465,415.06

(which, since it is less than MACP, equals the total Capacity Purchase Payments for the Year.) [Section 10.15(a)]

CPAA [Section 10.15(b)(iii)]

= Lesser of (a) amount by which MACP exceeds aggregate CPP for the Year, or (b) positive Tracking Account balance
= Lesser of (a) $1,770,451.13 or (b) $750,000
= $750,000

Tracking Account balance at the end of the Year [Section 10.15(b)(i)]

= (positive Tracking Account balance at the beginning of the Year) – (Amount by which MACP exceeds aggregate CPP for the Year)
= (positive $750,000) – (($78,235,866.19) – ($76,465,415.06))
= (positive'$750,000)-- ($1,770,451.13)
= negative $1,020,451.13

EXAMPLE NO. 9 — Tracking Account has a negative $750,000 balance at start of a Year (that is not a leap year or a major maintenance outage year) [Section 1.47 & 10.15(b)]. AVCF equals 88.000%. The Facility produces constant NEO of 143,792 kW during each Winter Period hour and 141,900 kW during each Summer Period hour, yielding an ACF of 86.000%, i.e., DC / ((MCS * Hours in the Summer Period) + (MCW * Hours in the Winter Period)). [Section 1.1]

CUP [Section 1.3, 1.11, 1.23, & 1.37] Jan – Mar

= (3.185(cent)/kWh + 2.160(cent)/kWh) / .88000
= 6.074(cent)/kWh

CUP (Section 1.3, 1.11, 1.23, & 1.37] Apr - Dec

= (3.185(cent)/kWh + 2.203(cent)/kWh) / .88000
= 6.123(cent)/kWh

MCUP [Section 1.33, 1.23, & 1.2]

= FCC +AO&MCC
= 3.185¢/kWh + 2.192¢/kWh
= 5.377¢./kWh

72

MACP allowed for the Year [Section 1.30 & 10.15(a)]

= ((MCW) * (Hours in the Winter Period) * (MCUP)) + ((MCS) * (Hours in the Summer Period) * (MCUP))
= ((167200) * (4368) * (.05377)) + ((165,000) * (4392) * (.05377))
= $39,269,822.59 + $38,966,043.60
= $78,235,866.19

Total Capacity Purchase Payments made during the Year are capped at MACP or $78,235,866.19 [Section 1.30 & 10.15(a)]

Product of the applicable Delivered Capacity and Capacity Unit Price for the Year

= ((NEO from 1ll through 3/31) * (applicable CUP)) + ((NEO from 4/1 through 9/30) * (applicable CUP)) + ((NEO from 10/1 through 12/31) * (applicable CUP))
= ((143,792) * (90) * (24) * (.06074)) + ((141,900) * (183) * (24) * (.06123)) + ((143,792) * (92) * (24) * (.06123))
= $76,465,415.06

(which, since it is less than MACP, equals the total Capacity Purchase Payments for the Year.) [Section 10.15(a)]

CPPA = Tracking Account has negative balance and ACF is less than AVCF, therefore no CPPA [Section 10.15(b)(iii) or (iv)]

Tracking Account balance at the end of the Year [Section 10.15(b)(i)]

= (the negative Tracking Account balance at the beginning of the Year) – (Amount by which MACP exceeds aggregate CPP for the Year)
= (negative $750,000) — (($78,235,866.19) — ($76,465,415.06))
= (negative $750,000) — ($1,770,451.13)
= negative $2,520,451.13

MAJOR MAINTENANCE OVERHAUL YEAR ANNUAL CAPACITY FACTOR CONSIDERATIONS

73

EXAMPLE NO. 1 — Assume ACF for 2007 = 88.567% and for 2008 = 87.255%. The quotient (expressed as a percentage) obtained by dividing: (a) the Delivered Capacity for 2009 by (b) the sum of (i) the product of MCS and the number of hours in the Summer Period, and (ii) the product of MCW and the number of hours in the Winter Period = 84.688% [Section 1.1(a)&(b)].

ACF for 2009

= (84.688%)+(3%)
= 87.688%. [Section 1.1(B)]

AVCF for 2010

= ((ACF for 2007)+(ACF for 2008)+(ACF for 2009))/3
= ((88.567%)+(87.255%)+(87.688%))/3
= 87.837%. [Section 1.3]

74

EX-10

Exhibit 10.3

SECOND AMENDMENT AND RESTATEMENT

OF THE

POWER PURCHASE AND OPERATING AGREEMENT

BETWEEN

WESTMORELAND — LG&E PARTNERS

AND

VIRGINIA ELECTRIC AND POWER COMPANY

FOR

THE ROANOKE VALLEY II PROJECT

SECOND AMENDMENT AND RESTATEMENT OF THE
POWER PURCHASE AND OPERATING AGREEMENT

Table of Contents

ARTICLE 1: Definitions 5

1.1	"Abandonment"	5
1.2	"Business Day"	5
1.3	"Capacity Purchase Price"	5
1.4	"Commercial Operations Date"	5
1.5	"Common Systems"	6
1.6	"Day"	6
1.7	"Dependable Capacity"	6
1.8	"Design Limits"	6
1.9	"Dispatch"	7
1.10	"Effective Date"	7
1.11	"Emergency"	8
1.12	"Energy Purchase Price"	8
1.13	"Estimated Dependable Capacity"	8
1.14	"Facility"	8
1.15	"FERC"	8
1.16	"Financial Closing"	8
1.17	"Forced Outage"	8
1.18	"Initial Dependable Capacity"	9
1.19	"Interconnection Facilities"	9
1.20	"Interconnection Point"	9
1.21	"Interest Rate"	9
1.22	"Maintenance Outage"	9
1.23	"Month"	10
1.24	"NERC"	10
1.25	"Net Electrical Output"	10
1.26	"NCUC"	10
1.27	"Off Peak Hours"	10
1.28	"On-Peak Hours"	10
1.29	"O&M Price"	10
1.30	"Prudent Electrical Practices"	10
1.31	"Prudent Utility Practices"	10
1.32	"PURPA"	11
1.33	"QF"	11
1.34	"Quarter"	11
1.35	"Roanoke Valley I Project"	11
1.36	"Scheduled Outage"	11
1.37	"Summer Demonstration Period"	11
1.38	"Summer Period"	11

1

1.39	"Term"	11
1.40	"Winter Demonstration Period"	12
1.41	"Winter Period"	12
1.42	"Year"	12

ARTICLE 2: Sale and Purchase of Net Electrical Output and Dependable Capacity 12

ARTICLE 3: Notices 13

ARTICLE 4: Pre- and Post-Operation Period 14

ARTICLE 5: Term, Defaults, and Termination 16

ARTICLE 6: Representations, Warranties and Covenants 23

ARTICLE 7: Control and Operation of the Facility; Dispatch 28

ARTICLE 8: Interconnection 34

ARTICLE 9: Metering 35

ARTICLE 10: Compensation, Payment, and Billings 38

ARTICLE 11: Testing and Capacity Ratings 45

ARTICLE 12: Insurance 48

ARTICLE 13: Liability, Noncompliance and Guarantees 50

ARTICLE 14: Force Majeure 55

ARTICLE 15: Taxes and Claims for Labor and Materials 57

ARTICLE 16: Choice of Law 58

ARTICLE 17: Miscellaneous Provisions 58

ARTICLE 18: Statutory and Regulatory Changes 60

ARTICLE 19: Coordination of Communications 63

ARTICLE 20: Entirety 63

DATA REQUIRED TO PERFORM INTERCONNECTION STUDY EXHIBIT A-1

EXAMPLES OF PAYMENTS FOR DEPENDABLE CAPACITY EXHIBIT B-1

ROANOKE VALLEY I/II PROJECT STEAM DISTRIBUTION AND METERING SYSTEM EXHIBIT C-1

2

SECOND AMENDMENT AND RESTATEMENT
OF THE
POWER PURCHASE AND OPERATING AGREEMENT
BETWEEN
WESTMORELAND — LG&E PARTNERS
AND
VIRGINIA ELECTRIC AND POWER COMPANY
FOR THE ROANOKE VALLEY II PROJECT

        THIS AGREEMENT, effective as of the Effective Date, is by and between WESTMORELAND — LG&E PARTNERS, a Virginia general partnership with its principal office located in Charlottesville, Virginia (“Operator’), and VIRGINIA ELECTRIC AND POWER COMPANY, a Virginia public service corporation with its principal office located in Richmond, Virginia, operating in North Carolina as North Carolina Power (“North Carolina Power” or “Company”). Both Operator and North Carolina Power are herein individually referred to as “Party” and collectively referred to as “Parties”.

R E C I T A L S

        WHEREAS, North Carolina Power was a party to a Power Purchase and Operating Agreement with Wheelabrator Tidewater, Inc. dated July 13, 1990 (hereinafter referred to as "Agreement No. 1") under which Wheelabrator Tidewater, Inc. was going to develop a waste to energy facility in Portsmouth, Virginia, and Wheelabrator Tidewater, Inc. was unable to secure a reliable fuel source; and

        WHEREAS, Wheelabrator Tidewater Inc. assigned its rights and obligations under Agreement No. I to Westpower — Covington, L.P. with consent from North Carolina Power via the CONSENT TO THE TRANSFER OF POWER PURCHASE AND OPERATING AGREEMENT dated December 21, 1990; and

3

        WHEREAS, Westpower — Covington, L.P. has relocated the Facility to a location in Halifax County, North Carolina and changed the design of the Facility from a waste to energy to a pulverized coal design; and

        WHEREAS, the owners of Westpower — Covington, L.P. have further assigned Agreement No. 1 to Westmoreland — LG&E Partners via the ASSIGNMENT AND ASSUMPTION AGREEMENT AND CONSENT TO ASSIGNMENT dated April 28, 1993; and

        WHEREAS, Operator owns and operates a new electric generating facility located within North Carolina Power’s certificated retail service area in Halifax County, North Carolina adjacent to the cogeneration facility known as the Roanoke Valley I Project, with a nameplate rating of 56,000 kVA; such facility in all future correspondence to be identified as the Roanoke Valley II Project (“Facility”); and

        WHEREAS, the Parties agree that the Commercial Operations Date occurred on June 1, 1995; and

        WHEREAS, Operator wishes to sell, exclusively to North Carolina Power, all of the Facility’s electric generation and capacity made available for sale, such sale to be pursuant to the terms and conditions set forth herein; and

        WHEREAS, North Carolina Power wishes to purchase the Net Electrical Output and Dependable Capacity that is Dispatched by North Carolina Power pursuant to the terms and conditions set forth herein; and

        WHEREAS, the Parties amended and restated Agreement No. 1 pursuant to that certain Amendment and First Restatement, dated as of April 29, 1993 (the “First Amendment and Restatement”); and

4

        WHEREAS, the Parties now want to amend and restate the First Amendment and Restatement by this Second Amendment and Restatement (hereinafter referred to as the “Agreement”).

        NOW, THEREFORE, in consideration of these premises and of the mutual covenants and agreements hereinafter set forth, Operator and North Carolina Power covenant and agree, and amend and restate the First Amendment and Restatement in its entirety, as follows:

ARTICLE 1: Definitions

        Whenever the following terms appear in this Agreement and in the Recitals hereto, whether in the singular or in the plural, present or past tense, they shall have the meaning stated below:

        1.1    “Abandonment” — Voluntary cessation of construction or operation of the Facility, and the withdrawal of all, or substantially all, personnel by Operator from the Facility for reasons other than North Carolina Power’s acts or omissions or an event of Force Majeure.

        1.2    “Business Day” —Monday through Friday excluding, holidays recognized by North Carolina Power. As of the date of this Agreement, these holidays include New Year’s Day, Martin Luther King’s Birthday, Good Friday, Memorial Day, Fourth of July, Labor Day, Veteran’s Day, Thanksgiving Day, day after Thanksgiving Day, Christmas Eve and Christmas Day. North Carolina Power’s observation of such holidays may be changed by North Carolina Power upon ten (10) Days written notice to Operator.

        1.3    “Capacity Purchase Price” — The price, in cents per kilowatt-hour, North Carolina Power will pay Operator for Dependable Capacity.

        1.4    “Commercial Operations Date” — June 1, 1995.

5

        1.5    “Common Systems” —The Common Systems are Coal Receiving, Coal Reclaim, Service Water Pump Station, Fire Water Pump Station, Coal Pile Run-off Pond Pumps and Wastewater Treatment System, Control Room/DCS System, Administration Building, Ash Silo and Load Out, Lime Receiving and Handling, Auxiliary Boiler, Maintenance Shops and Warehouse, Fuel Oil Receiving and Storage, Portions of Process Steam and Condensate Return Lines, Potable Water System, Portions of Service, emergency and back-up power system, and Control Air Systems Serving Common Systems. Additional items may be added to this list of Common Systems, provided the Parties agree that such items are or must be shared with the Roanoke Valley I Project and in no way can such items enable the Roanoke Valley II Project and the Roanoke Valley I Project to provide electrical power and/or steam to each other in a manner which could be used to satisfy the Dispatch or QF requirements of the other.

        1.6    “Day” — The 24-hour period beginning and ending at 12:00 midnight the prevailing Eastern Standard or Daylight Savings Time.

        1.7    “Dependable Capacity” — The amount of electrical generation, set by Operator pursuant to Article 11, for each Summer Period and Winter Period and made available from the Facility to North Carolina Power.

        1.8    “Design Limits” — When the Facility is Dispatched on-line by North Carolina Power, it is capable of operation over the continuous range from 0% of the Dependable Capacity through 100% of the Dependable Capacity (the “Maximum Operating Level”). North Carolina Power may Dispatch the Facility down to a level of zero (0) MW (off-line) or under non-Emergency conditions to levels ranging from twelve (12) MW (“Minimum Operating Level”) through the Maximum Operating Level. Except in an Emergency, after the Facility has been off line due to a Scheduled Outage, a Maintenance Outage, a Forced Outage, an event of Force Majeure or in response to North Carolina Power’s Dispatch of the Facility, it can achieve the level(s) of operation specified below within the time period(s) indicated below:

6

(a) If the Facility has been off line for less than 8 hours (hot start), it can be resynchronized within 3 hours and can achieve its Minimum Operating Level within 6 hours following North Carolina Power’s notice to start-up.

(b) If the Facility has been off line between 8 hours and 24 hours (warm start), it can be resynchronized within 7 hours and can achieve its Minimum Operating Level within 10 hours following North Carolina Power’s notice to start-up.

(c) If the Facility has been off line for more than 24 hours (cold start), it can be resynchronized within 12 hours and can achieve its Minimum Operating Level within 15 hours following North Carolina Power’s notice to start-up.

Once the Facility has been synchronized with North Carolina Power’s system and brought to its Minimum Operating Level, its Net Electrical Output may be incised at the rate of 1.2 MW per minute. If the Facility is operating above its Minimum Operating Level, its Net Electrical Output may be reduced at the rate of 1.2 MW per minute down to the Minimum Operating Level.

        1.9   “Dispatch” — The right of North Carolina Power, or its exercise, in accordance with Prudent Utility Practices to (i) schedule and control (albeit, indirectly) from any of its division or system operating centers, the generating level of the Facility in order to commence, increase, decrease or cease the delivery of Net Electrical Output to the North Carolina Power system and (ii) distribute the total North Carolina Power energy needs among available electric energy sources for optimum system economy with due consideration of incremental generating costs, incremental power purchase costs, and incremental transmission losses, load flow considerations and other operational considerations as reasonably determined solely by North Carolina Power.

        1.10    “Effective Date”— The latest date as of which this Agreement has been executed by both of the Parties, as evidenced by the dates opposite such signatures.

7

        1.11    “Emergency” — A condition or situation which in the sole reasonable judgment of North Carolina Power affects, or reasonably may affect, North Carolina Power’s ability to meet its obligations to maintain safe and reliable electric service to North Carolina Power’s customers and/or the customers of any member of NERC.

        1.12    “Energy Purchase Price” — The price per kilowatt-hour North Carolina Power will pay Operator in accordance with Article 10, Sections 1 through 6 for the Net Electrical Output delivered to North Carolina Power.

        1.13    “Estimated Dependable Capacity” — Those levels of Dependable Capacity for both the Summer Period and the Winter Period that Operator estimates the Facility will be able to provide for the Term. Such levels are set forth in Section 11.1 hereof.

        1.14    “Facility” —Operator’s generation plant, including, without limitation or regard to level of development, land, engineering and design documents, all energy producing equipment and its auxiliary equipment, fuel handling equipment and all equipment either installed or to be installed on Operator’s side of the Interconnection Point that is not Interconnection Facilities. The Facility includes one (1) steam boiler and one (1) turbine generating unit.

        1.15    "FERC" - The Federal Energy Regulatory Commission or any successor thereto.

        1.16    “Financial Closing”— If the Facility is financed by a third party, the date on which documents which provide funding for the construction of the Facility are executed, and such funds are released pursuant to those documents. If the Facility is not financed by a third party, the date on which the intercompany credit agreement relating to construction financing of the Facility is entered into between Operator and any affiliated company.

        1.17    “Forced Outage” — An event, causing an interruption or reduction in the Facility’s Net Electrical Output, that is not (i) a Scheduled Outage, a Maintenance Outage or an event of Force Majeure or (ii) attributed to Dispatch by North Carolina Power, unless such Dispatch is required due to Operator’s failure to comply with Sections 6.2, 6.3, or 6.4 of this Agreement and which failure presents a threat to the safety or reliability of North Carolina Power’s bulk electric system.

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        1.18    “Initial Dependable Capacity” — The Dependable Capacity for the first Summer Period and Winter Period that is established pursuant to Section 11.

        1.19    “Interconnection Facilities” — All the facilities, wherever located, installed by North Carolina Power to enable North Carolina Power to receive Net Electrical Output and Dependable Capacity from the Facility including, but not limited to, all metering and telemetering equipment; transmission and distribution lines and associated equipment; transformers and associated equipment; relay and switching equipment; and protective devices and safety equipment.

        1.20    “Interconnection Point” — The physical point(s) where the Net Electrical Output of the Facility is delivered to the North Carolina Power system.

        1.21    “Interest Rate” — At any time, the rate of interest which is 2 percent higher than the rate of interest from time to time publicly announced by The Chase Manhattan Bank, NA., at its principal office, presently located at 1 Chase Manhattan Plaza, New York, New York 10081, as its prime commercial lending rate. Interest at the Interest Rate shall be computed Monthly and prorated daily from the time such obligation arises.

        1.22    “Maintenance Outage”— An interruption or reduction of the Facility’s availability that (i) is not a Scheduled Outage, and (ii) Operator elects to take in good faith for the purpose of performing work on the Facility that should not, in the reasonable opinion of Operator, be postponed until the next Scheduled Outage.

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        1.23    “Month” — The period beginning on the first Day of a calendar month and ending on the last Day of such month.

        1.24    “NERC” — The North American Electric Reliability Council, including any successor thereto and subdivisions thereof.

        1.25    “Net Electrical Output” — The Facility’s electrical energy output produced in accordance with North Carolina Power’s Dispatch, measured in accordance with Article 9, and delivered to the Interconnection Point.

        1.26    “NCUC” — North Carolina Utilities Commission or any successor thereto.

        1.27    “Off Peak Hours”— The hours between 10:00 PM and 7:00 AM Monday through Friday and all Day Saturday and Sunday.

        1.28    “On-Peak Hours” — The hours between 7:00 AM and 10:00 PM Monday through Friday.

        1.29    “O&M Price” — The price North Carolina Power will pay Operator in accordance with Section 10.6 for variable operations and maintenance expenses.

        1.30    “Prudent Electrical Practices” — The use of equipment, practices or methods, as required to comply with applicable industry codes, standards, and regulations (i) to protect North Carolina Power’s system, employees, agents, and customers from malfunctions occurring at the Facility and (ii) to protect the Facility, and Operator’s employees and agents at the Facility, from malfunctions occurring on North Carolina Power’s system or on any other electric utility system with which North Carolina Power is directly or indirectly electrically connected.

        1.31    “Prudent Utility Practices” — The practices generally followed by the electric utility industry, as changed from time to time, which generally include, but are not limited to, engineering and operating considerations, the use of equipment, practices, methods, and adherence to applicable industry codes, standards, and regulations.

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        1.32    "PURPA" - The Public Utility Regulatory Policies Act of 1978.

        1.33    “QF” — A cogeneration facility or a small power production facility which is a Qualifying Facility under Subpart B of Subchapter K, Part 292 of Chapter I, Title 18, Code of Federal Regulations, promulgated by the FERC.

        1.34    “Quarter” — A 3-Month period beginning either January 1, April 1, July 1, or October 1.

        1.35    “Roanoke Valley I Project” — The coal fired generating facility directly adjacent to the south of the Facility, owned by the Operator and identified as the Roanoke Valley Project in the Third Amendment and Restatement of the Power Purchase and Operating Agreement between Operator and Virginia Electric and Power Company, dated the same date as this Agreement.

        1.36    “Scheduled Outage”— A planned interruption of the Facility’s generation exceeding seven (7) consecutive Days that is required or recommended, in Operator’s sole discretion, for inspection, preventive maintenance, corrective maintenance or repair or replacement of equipment and that is scheduled as such pursuant to the provisions of Section 7.2.

        1.37    “Summer Demonstration Period” — The period beginning June 15 and ending at the end of the Day on the following September 15, or some other three consecutive month portion of the Summer Period designated by North Carolina Power.

        1.38    "Summer Period" - The Months of April through September.

        1.39    “Term” — The initial term of this Agreement as specified in Section 5.1, plus any renewal term determined pursuant to Section 5.2.

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        1.40    “Winter Demonstration Period” —The period beginning December 1 and ending at the end of the Day on the last Day of the following February, or some other three consecutive month portion of the Winter Period designated by North Carolina Power.

        1.41    "Winter Period" - The Months of October through March.

        1.42    "Year" - The 12-Month period beginning January 1 and ending at the end of the Day on the subsequent December 31.

ARTICLE 2: Sale and Purchase of Net Electrical Output and Dependable Capacity

        2.1    Subject to the terms and conditions of this Agreement, Operator agrees to sell exclusively to North Carolina Power all of the electric generation made available for sale from the Facility, and North Carolina Power agrees to purchase the Net Electrical Output that is Dispatched by North Carolina Power.

        2.2    Except as otherwise provided herein, and subject to other terms hereof, Operator agrees to sell, and North Carolina Power agrees to purchase. Dependable Capacity from the Facility beginning on the Commercial Operations Date as determined pursuant to Article 11.

        2.3    The Parties agree that Operator has fulfilled its obligation to provide the information, documentation and other materials required pursuant to Section 2.3 of the First Amendment and Restatement.

        2.4    In addition to the Facility’s Net Electrical Output and Dependable Capacity sold to North Carolina Power pursuant to this Agreement, Operator may propose to sell additional electrical energy and capacity from the Facility to North Carolina Power in response to any future North Carolina Power solicitation for capacity. However, nothing in this Agreement obligates North Carolina Power to purchase such electrical energy and capacity.

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ARTICLE 3: Notices

        3.1    Any notice or submittals required by this Agreement or by North Carolina Power, other than notices or communications related to Dispatch, will be in writing and delivered to the addresses set forth below:

In the case of Operator to:

Westmoreland — Roanoke Valley, L.P.
c/o WEI – Roanoke Valley, Inc.
2 North Cascade Avenue, 14th Floor
Colorado Springs, Colorado 80903
Attn: President

With a copy to:

LG&E Roanoke Valley, L.P.
c/o LG&E Power 16 Incorporated
12500 Fair Lakes Circle, Suite 350
Fairfax, Virginia 22033-3804
Attn: President

In the case of North Carolina Power to:

Virginia Electric and Power Company (if by hand)
Director — Capacity Acquisition
One James River Plaza
701 East Cary Street, 15th Floor
Richmond, Virginia 23219
Facsimile Number: (804) 771-3005

Virginia Electric and Power Company (if by mail)
Director — Capacity Acquisition
P.O. Box 26666
Richmond, Virginia 23261
Facsimile Number: (804) 771-3005

All such notices or submittals, other than those rotated to Dispatch, shall be sent either by hand-delivery, registered or certified U.S. mail returned receipt requested, overnight delivery, or facsimile and will be effective and deemed to have been delivered: (i) when presented if hand-delivered to a Party; (ii) on the third Business Day after the date delivered to the U. S. Post Office if sent by registered or certified U. S. mail; (iii) on the next Business Day after the date delivered to an overnight delivery company; or (iv) when confirmed by telecopy machine report indicating satisfactory transmission, respectively, addressed as aforesaid if sent by facsimile. Notices providing notice of an Event of Default shall require the use of any two (2) of the above means. Such notices shall be effective and deemed to have been delivered when the last such means has been complied with. All other written communications regarding this Agreement, including submittals of payments, may be sent by any of the above means including regular first class U. S. mail.

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        3.2    Either Party may, by prior written notice to the other, change the representative or the address to which notices and communications are to be sent.

        3.3    Operator shall provide North Carolina Power with three (3) copies of any written notice, communication or submittal called for by this Agreement that is of an odd size, shape or material or otherwise not readily reproducible on conventional office copiers.

ARTICLE 4: Pre- and Post-Operation Period

        4.1    Operator shall, at its expense, obtain and maintain certification of the Facility from the FERC as a QF. Notwithstanding the foregoing sentence, or any other contrary provisions hereof, Operator has already obtained approval from the FERC as an Exempt Wholesale Generator (EWG). North Carolina Power agrees that Operator may elect to operate the Facility without QF status and that Operator shall not be obligated to maintain such QF certification. However, if Operator so elects and before relinquishing such QF status, Operator first shall obtain the approvals of any state or federal agencies that are needed to permit Operator to operate the Facility without QF status. Operator covenants that it shall use its reasonable efforts to obtain such approvals, and North Carolina Power agrees to support any application or other efforts by Operator to obtain such approvals. Operator agrees to maintain QF status until all such approvals are obtained. This Agreement shall continue in full force and effect whether or not such approvals are obtained. Notwithstanding any contrary provisions hereof, North Carolina Power hereby waives, releases and relinquishes any and all rights and causes of action that it may have against Operator as they relate to the requirement that Operator maintain the QF status of the Facility during the period from (and including) 1995 through the earlier of the date as of which Operator relinquishes the QF status of the Facility as aforesaid or January 1, 2002.

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        In addition, at its expense, Operator shall acquire and maintain in effect, from any and all other federal, state and local agencies, commissions and authorities with jurisdiction over Operator and/or the Facility, all permits, licenses, and approvals, and complete or have completed all environmental impact studies necessary as follows:

(a) For the operation and maintenance of the Facility.

(b) For Operator to perform its obligations under this Agreement.

        4.2    Not used.

        4.3    Not used.

        4.4    Not used.

        4.5    Operator and North Carolina Power have mutually developed and agreed to written operating procedures. The operating procedures are based on the design of the Facility and the design of the interconnection to North Carolina Power’s bulk electric system. The operating procedures are intended as a guide on how to integrate the Operator’s Facility, its Dependable Capacity, and Net Electrical Output into North Carolina Power’s bulk electric system. Topics covered include, but are not necessarily limited to, procedures for testing pursuant to Article 11; method of day-to-day communications; key personnel lists for Operator and North Carolina Power; clearances and switching practices; outage reporting and scheduling; daily Dependable Capacity and Net Electrical Output reports; unit operations log; and reactive power support. Such operating procedures shall be consistent with the terms and conditions of this Agreement.

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        4.6    North Carolina Power has prepared and submitted to Operator a written voltage schedule. North Carolina Power may change such voltage schedule any time during the Term upon thirty (30) Days prior written notice to Operator. Operator hall use such voltage schedule in the operation of its Facility. This voltage schedule shall be based on the normally expected operating conditions for the Facility and the reactive power requirements of North Carolina Power’s system.

        4.7    Not used

        4.8    Not used.

ARTICLE 5: Term, Defaults, and Termination

        5.1    The initial term of this Agreement is for a period of twenty-five (25) years commencing with the Commercial Operations Date, unless extended under this Article 5, terminated, or canceled.

        5.2    Upon agreement by the Parties, this Agreement may be extended for periods of up to five (5) years each, provided that two (2) years prior to the end of the initial term, or the prior extended term, as the case may be, the Parties agree to such extension in writing.

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        5.3

(a) Events of Default — Operator — Any of the following shall constitute an “Event of Default” as to Operator, if not cured in all material respects within the applicable cure period provided herein, if any. Such failure or action must be cured within (i) sixty (60) Days after receipt of notice from North Carolina Power describing the Event of Default or (ii) such other time period as may be expressly stated in this Section 5.3(a). Except for Events of Default described in Sections 5.3(a)(5), 5.3(a)(9), 5.3(a)(10), and 5.3(a)(l1), for which no cure period is allowed, if the Event of Default described in such notice is the type of default that is not capable of being cured in all material respects within the sixty (60) Day period or other period provided herein, and Operator can demonstrate that Operator has promptly commenced and is continuing to use due diligence to cure the Event of Default, North Carolina Power shall grant an additional period of time reasonably sufficient to cure the Event of Default, but such period of time shall not exceed one hundred and twenty (120) Days in which to cure such Event of Default.

(1) Not used;

(2) Not used;

(3) Abandonment of operation of the Facility at any time;

(4) Not used;

(5) Operator, at any time, shall fail to pay any sum due and payable to North Carolina Power arising hereunder, and such sum or portion thereof remains outstanding after two consecutive bills have been rendered in accordance with Section 10.9. No cure period shall be permitted for such an Event of Default;

(6) Any representation or warranty made by Operator pursuant to Section 6.12 herein or in any certificate delivered to North Carolina Power pursuant hereto or thereto shall prove to have been incorrect on the date given in any material respect, unless (i) within 20 Days after notice thereof has been given to Operator by North Carolina Power, Operator cures any material and adverse effect on North Carolina Power resulting from such fact, circumstance or condition being otherwise than as first represented, or (ii) such fact, circumstance or condition being otherwise than as first represented does not materially adversely affect North Carolina Power;

(7) A court having jurisdiction shall enter (i) a decree or order for relief in respect of Operator in an involuntary case or proceeding under any applicable Federal or state bankruptcy, insolvency, reorganization or other similar law, or (ii) a decree or order adjudicating Operator bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of Operator under any applicable Federal or state law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of Operator or of any substantial part of its affairs;

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(8) Operator shall (i) commence a voluntary case or proceeding under any applicable Federal or state bankruptcy, insolvency, reorganization or other similar law or any other case or proceeding to be adjudicated a bankrupt or insolvent, or (ii) consent to the entry of a decree or order for relief in respect of Operator in any involuntary case or proceeding under any applicable Federal or state bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or (iii) file any petition, answer or consent seeking reorganization or relief under any applicable Federal or state law, or (iv) consent to the filing of any petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of Operator or of any substantial part of its property, or (v) make an assignment for the benefit of creditors, or (vi) be unable, or admit in writing its inability, to pay its debts as they become due, or (vii) take any action in furtherance of any of the foregoing;

(9) In connection with any event described in subsections (7) or (8) of this Section 5.3(a), this Agreement shall be rejected within the meaning of the Bankruptcy Reform Act of 1978, as amended, for which event no cure period shall be permitted hereunder;

(10) Operator directed or endorsed acts by its employees, contractors or subcontractors of any tier, of tampering with the Interconnection Facilities, for which event no cure period shall be permitted hereunder;

(11) Failure to post security as stipulated in Section 13.5; for which event no cure period shall be permitted hereunder; Operator agrees that in no event shall Operator be entitled to any extension of the deadline for the posting of security pursuant to Section 13.5, including by reason of Force Majeure pursuant to Article 14;

(12) Not used;

(13) Operator, at any time, shall fail to discharge or perform any other material duty or obligation of Operator under this Agreement;

(14) Not used;

(15) Operator loses QF certification (except as permitted pursuant to Section 4.1 hereof), for which event a 365 Day cure period shall be permitted hereunder,

(16) If electric power is, at any time, delivered to or received by the Facility from the Roanoke Valley I Project, or from any source other than either North Carolina Power or Operator’s Facility, other than for Common Systems; for which event Operator shall not be paid for Dependable Capacity during the period commencing on the earlier of the date (i) such event was discovered or (ii) the event can be reasonably determined to have commenced and ending when the Facility is modified to prevent the event from occurring in the future. If such event occurs during a test for Dependable Capacity of either the Facility or the Roanoke Valley I Project, the test shall be considered null and void, and North Carolina Power may draw the entire security provided under Section 13.5 of this Agreement;

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(17) Operator causes, allows for, or provides in any way an electrical connection between the Facility and the Roanoke Valley I Project, or any other project or entity on Operator’s side of the Interconnection Point other than those required for operation of Common Systems; for which event Operator shall not be paid for Dependable Capacity during the period commencing on the earlier of the date (i) such event was discovered or (ii) the event can be reasonably determined to have commenced and ending when the Facility is modified to prevent the event from occurring in the future, and North Carolina Power may draw the entire security provided under Section 13.5 of this Agreement; or

(18) Operator causes, allows for, or accepts steam delivery from the Roanoke Valley I Project, or any other project or entity at any point upstream of the Facility’s meter located upstream of the interconnection point with the common steam line which is used to measure the Facility’s steam output (see Exhibit C) and such act has the effect of assisting the Facility in meeting its QF requirements; for which event Operator shall not be paid for Dependable Capacity during the period commencing the earlier of the date (i) such event was discovered or (ii) the event can be reasonably determined to have commenced and ending when the Facility is modified to prevent the event from occurring in the future, and North Carolina Power may draw the entire security provided under Section 13.5 of this Agreement; provided that the events described in this clause (18) shall no longer constitute an Event of Default, and North Carolina Power shall have no right to draw the security provided under Section 13.5 of this Agreement for the events described in this clause (18), from and after the date as of which Operator relinquishes the Facility’s QF status as permitted pursuant to Section 4.1 hereof.

(19) Not used.

(b) Rights of North Carolina Power for Event of Default of Operator — (i) If an Event of Default as to Operator has occurred that results in Operator’s failure to deliver any Net Electrical Output, then North Carolina Power shall have no obligation to pay the Capacity Purchase Price for Dependable Capacity until the earlier of either (x) the Day the Facility resumes delivery of Net Electrical Output or (y) such Event of Default has been cured. (ii) If an Event of Default as to Operator has not been cured in all material respects at the conclusion of the cure period applicable to such Event of Default, North Carolina Power, at its discretion, may take one or more of the following actions:

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(1) Upon the expiration of the applicable cure period provided for in this Article 5, if any, proceed by appropriate proceedings, judicial, administrative or otherwise, at law, in equity or otherwise, to protect and enforce its rights, to recover any damages to which it may be entitled, and to enforce performance by Operator, including specific performance of Operator’s obligations hereunder; or

(2) Terminate this Agreement by notice to Operator.

The rights and remedies herein provided in case of an Event of Default as to Operator shall not be exclusive but, to the extent permitted by law, shall be cumulative and in addition to all other rights and remedies existing at law, in equity or otherwise. No delay or omission of North Carolina Power to exercise any right or remedy accruing upon any Event of Default as to Operator shall impair any such right or remedy or constitute a waiver of such event or an acquiescence thereto.

(c) Events of Default — North Carolina Power — Any of the following shall constitute an “Event of Default” as to North Carolina Power, if not cured in all material respects within the applicable cure period provided herein, if any. Such failure or action must be cured within (i) sixty (60) Days after receipt of notice from Operator describing the Event of Default or (ii) such other time period as may be expressly stated in this Section 53(c). If the Event of Default described in such notice is the type of default that is not capable of being cured in all material respects within the sixty (60) Day period or other period provided herein, and North Carolina Power can demonstrate that North Carolina Power has promptly commenced and is continuing to use due diligence to cure the Event of Default, Operator shall grant an additional period of time sufficient to cure the Event of Default, but such period of time shall not exceed one hundred and twenty (120) Days.

(1) North Carolina Power shall fail to pay any amount due and payable under this Agreement, and such failure shall have continued for a period of 20 Days after notice thereof has been given by Operator to North Carolina Power; provided, however, that for purposes of this subsection, the phrase “cured in all material respects” shall mean payment in full of any sum payable to Operator;

(2) North Carolina Power shall fail to accept or purchase Net Electrical Output in accordance with this Agreement, and such failure shall continue for a period of ten (10) Days after notice thereof shall have been given to North Carolina Power by Operator; or

(3) North Carolina Power, at any time, shall fall to discharge or perform any other material duty or obligation of North Carolina Power under this Agreement.

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(d) Rights of Operator for Event of Default of North Carolina Power — If an Event of Default as to North Carolina Power has occurred and such Event of Default shall not have been cured in all material respects at the conclusion of the cure period applicable to such Event of Default, Operator, at its discretion, may take one or more of the following actions:

(1) proceed against North Carolina Power by appropriate proceedings, judicial, administrative or otherwise, at law, in equity or otherwise, to protect and enforce its rights and to recover any damages to which it may be entitled, and to enforce performance by North Carolina Power, including specific performance of North Carolina Power’s obligations hereunder;

(2) by written notice to North Carolina Power, suspend its obligations hereunder until such failure is cured, and if such failure continues for ten (10) Days after such notice of suspension, Operator may terminate this Agreement by notice to North Carolina Power. If Operator terminates this Agreement pursuant to this Section 53(d), North Carolina Power shall, at Operator’s request, wheel the Facility’s generation under pricing and terms and conditions then in effect at the time of termination.

The rights and remedies herein provided in case of an Event of Default as to North Carolina Power hail not be exclusive but, to the extent permitted by law, shall be cumulative and in addition to all other rights and remedies existing at law, in equity, or otherwise. No delay or omission of Operator to exercise any right or remedy accruing upon any Event of Default as to North Carolina Power shall impair any such right or remedy or constitute a waiver of such event or an acquiescence thereto.

        5.4    Not used.

        5.5

(a) North Carolina Power may terminate this Agreement at its convenience upon three hundred and sixty-five (365) Days notice to the Operator. In such event, North Carolina Power shall pay Operator a lump sum amount (“Termination Amount”) equal to. the net present value of all projected payments for Dependable Capacity and Net Electrical Output for the remaining term of this Agreement assuming (i) that the percentage change in the Gross National Product Implicit Price Deflator published by the US Department of Commerce, Bureau of Labor Statistics (“GDPIPD”) for the remaining term of this Agreement is 5% per year and (ii) a discount rate equal to the long term borrowing rate, at the time that North Carolina Power exercises its right to terminate hereunder, for electric utilities rated A1 by Moody’s and/or A+ by Standard & Poors, as determined by a mutually agreeable investment banking firm of national standing as of the date of such termination. In the event of such termination for convenience, North Carolina Power shall agree to transmit the Facility’s Net Electrical Output to any electric utility outside the North Carolina Power control area with which North Carolina Power is directly interconnected, provided that such transmission can be performed without impairing the reliability of North Carolina Power’s system or the quality of service to its customers; provided, however, that North Carolina Power’s agreement to transmit the Net Electrical Output of the Facility as described herein is expressly conditioned upon Operator’s waiver of, and Operator hereby waives, any right that Operator may have under PURPA to demand that North Carolina Power purchase the Dependable Capacity or Net Electrical Output of the Facility. The rate charged by North Carolina Power for such transmission service shall be nondiscriminatory and shall be subject to approval by the appropriate, regulatory authorities.

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(b) In the event North Carolina Power exercises its right to terminate pursuant to Section 5.5(a), North Carolina Power shall have the right to identify alternative purchasers of Dependable Capacity and Net Electrical Output generated by the Facility and Operator shall consider in good faith such alternative purchasers as potential purchasers of the Facility’s Dependable Capacity and Net Electrical Output. Notwithstanding the preceding sentence, Operator shall use all commercially reasonable efforts to obtain a contract with a third party for the sale of the Facility’s Dependable Capacity and Net Electrical Output. In the event that Operator executes a contract with a third party for the sale of the Facility’s Dependable Capacity and Net Electrical Output on terms and conditions reasonably satisfactory to Operator, Operator shall return to North Carolina Power an amount equal to (i) the net present value of the projected future payments for the lesser of (x) the term of such third party contract and any other third party contracts entered into as a replacement or substitute for this Agreement or (y) that period of time that would otherwise have remained as the balance of the Term of this Agreement if it had remained in effect, from such third party for the Facility’s Dependable Capacity and Net Electrical Output (utilizing the same Dependable Capacity level and assumptions for GDPIPD and discount rate as utilized for calculation of the Termination Amount) net of transmission costs or (ii) 50% of the Termination Amount, whichever is less.

(c) The difference between the Termination Amount and the amount to be repaid to North Carolina Power pursuant to Section 5.5(b) (“Net Termination Amount”) shall be calculated on a pre-tax basis. To the extent that the Net Termination Amount is subject to applicable state and federal income taxes, it will be further adjusted to provide Operator an amount equal to the Net Termination Amount calculated on an after-tax basis. Upon payment of the Termination Amount calculated hereunder, North Carolina Power shall have no other obligation or liability to the Operator except as described in this Section 5.5, and Operator shall retain title to the Facility.

(d) Each of the Parties agrees to cooperate with the other Party in implementing the provisions of this Section 5.5 by providing the appropriate information and documentation reasonably requested by the other Party.

        5.6    Not used.

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ARTICLE 6: Representations, Warranties and Covenants

        6.1    Operator represents and warrants that, at all times during the Term, Operator will have a supply of fuel, of quality and in quantity, sufficient to deliver the Net Electrical Output at the Dependable Capacity level for a continuous thirty Day period. From time to time, as North Carolina Power may reasonably request, Operator shall provide North Carolina Power evidence of its compliance with this obligation. Alternate supplies of fuel will be considered in determining whether Operator has a reliable supply of fuel.

        6.2    Operator covenants that the Facility will be operated and maintained in material accordance with the following:

(a) Operating procedures developed pursuant to Section 4.5.

(b) Prudent Utility Practices, including without limitation synchronizing, voltage and reactive power control.

(c) Generally accepted Prudent Electrical Practices.

        6.3    Operator covenants that the Facility will be operated in such a manner so as not to have an adverse effect on North Carolina Power’s voltage level or voltage waveform.

        6.4    Operator covenants that the Facility will be operated at the voltage levels determined pursuant to Section 4.6 provided such levels are within the Design Limits of the Facility.

        6.5    Not used.

        6.6    Operator covenants that it shall obtain and maintain the insurance coverage specified in Article 12 of this Agreement with respect to the operation of the Facility.

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        6.7    Operator covenants that North Carolina Power shall have access to and the right to inspect the Facility at reasonable times on a recurring basis as deemed necessary by North Carolina Power. All inspections by North Carolina Power pursuant to this Agreement shall only occur upon prior reasonable notice to Operator and in a manner that shall not interfere with the orderly operation of the Facility. North Carolina Power’s inspections of the Facility shall not be construed as endorsing the design thereof, nor as any warranty of the safety, durability, reliability, or suitability of the Facility. Such inspections shall not relieve Operator of any of Operator’s obligations under this Agreement.

        6.8    Operator covenants that it shall, (i) at all times, conform to all applicable laws, ordinances, rules and regulations applicable to it; (ii) give all required notices, procure and maintain all governmental permits, licenses and inspections necessary for its performance of this Agreement; and (iii) pay all charges and fees in connection therewith.

        6.9    Operator covenants that it shall comply with all applicable provisions, and successor provisions thereto, of Executive Order 11246, as amended; § 503 of the Rehabilitation Act of 1973, as amended; §402 of the Vietnam Era Veterans Readjustment Assistance Act of 1974, as amended; and implementing regulations set forth in 41 C.F.R. §§ 60-1, 60-250, and 60- 741 and the applicable provisions relating to the utilization of small and minority business concerns as set forth in 15 U.S.C. § 637, as amended. Operator agrees that the equal opportunity clause set forth in 41 C.F.R. § 60-1.4 and the affirmative action clauses set forth in 41 C.F.R. § 60-250.4 and 41 C.F.R. § 60-741.4 and the clauses relating to the utilization of small and minority business concerns set forth in 15 U.S.C. § 637(d)(3) and 48 C.F.R. § 52-219-9 are hereby incorporated by reference and made a part of this Agreement. If this Agreement has a value of more than $500,000, Operator shall adopt and comply with a small business and small disadvantaged business subcontracting plan which shall conform to the requirements set forth in 15 U.S.C. § 637(d)(6). The provisions of this section 6.9 shall apply to Operator only to the extent that:

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(a) such provisions are otherwise required of Operator under existing law,

(b) Operator is not otherwise exempt from said provisions and

(c) compliance with said provisions is consistent with and not violative of 42 U.S.C. § 2000e et seq., 42 U.S.C. § 1981 et seq., or other acts of Congress.

        6.10    Any fines or other penalties incurred by Operator or its agents, employees or subcontractors for noncompliance by Operator, its employees, or subcontractors with laws, rules, regulations or ordinances shall not be reimbursed by North Carolina Power but shall be the sole responsibility of Operator. If fines, penalties or legal costs are assessed against North Carolina Power by any government agency or court due to noncompliance by Operator with any of the laws, rules, regulations or ordinances referred to in Sections 6.8 and 6.9 above or any other laws, rules, regulations or ordinances with which compliance is required herein, or if the work of Operator or any part thereof is delayed or stopped by order of any government agency or court due to Operator’s noncompliance with any such laws, rules, regulations or ordinances, Operator shall indemnify and hold harmless North Carolina Power against any and all fines, penalties, and except to the extent Operator’s liabilities are limited elsewhere in this Agreement, losses, liabilities, damages, and claims suffered or incurred to the extent caused by the failure of Operator to comply therewith. Operator shall also reimburse North Carolina Power for any and all legal or other expenses (including attorneys’ fees) reasonably incurred by North Carolina Power in connection with such fines, penalties, losses, liabilities, damages or claims. Nothing in this Section 6.10 shall expand Operator’s liabilities to the extent such liabilities are otherwise limited in this Agreement.

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        6.11    Operator covenants that no authorization or approval by any governmental or other official agency is necessary for the due execution, delivery and performance by the Operator of this Agreement, as in effect on the date hereof.

        6.12    The Operator and general partners of Operator hereby represent and warrant:

(a) (i) The Operator is a partnership duly organized and validly existing under the laws of the Commonwealth of Virginia; (ii) the general partners of Operator are Westmoreland-Roanoke Valley, L.P. a partnership whose general partner is WEI-Roanoke Valley, Inc., both of which are duly organized, validly existing and in good standing under the laws of the State of Delaware, and LG&E Roanoke Valley, L.P. a limited partnership whose general partner is LG&E Power 16 Incorporated, both of which are duly organized, validly existing and in good standing under the laws of the State of California. Operator and the general partners of Operator are or will be qualified to do business in North Carolina and in each other jurisdiction where the failure so to qualify would have a material adverse effect upon their business or financial condition; and each has all requisite power and authority to conduct its business, to own its properties, and to execute, to deliver, and to perform its obligations under this Agreement.

(b) The execution delivery and performance by the Operator of this Agreement have been duly authorized by all necessary partnership or corporate action as applicable, and do not and will not (i) require any consent or approval of the Operator’s Board of Directors, partners or shareholders as applicable, other than that which has been obtained (evidence of which has been delivered to North Carolina Power), (ii) violate any provisions of the Operator’s corporate bylaws or other organic documents, any indenture, contract or agreement to which it is a party or by which it or its properties may be bound, or any law, rule, regulation, order, writ, judgment, injunction, decree, determination, or award presently in effect having applicability to the Operator, or (iii) result in a breach or constitute a default under the Operator’s corporate bylaws, other organic documents or other material indentures, contracts, or agreements, and the Operator is not in default under its corporate bylaws or other organic documents or other material indentures, contracts, or agreements to which it is a party or by which it or its property may be bound.

(c) This Agreement is a valid and binding obligation of the Operator.

(d) There is no pending or, to the best of the Operator’s knowledge and belief, threatened action or proceeding affecting the Operator before any court, governmental agency or arbitrator that could reasonably be expected to affect materially and adversely the financial condition or operations of the Operator or the ability of the Operator to perform its obligations hereunder, or which purports to affect the legality, validity or enforceability of this Agreement (as in effect on the date hereof).

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        6.13    Operator agrees that upon request of North Carolina Power and, in the case of (ii) below at no cost to North Carolina Power, Operator shall cause its counsel to issue an opinion to North Carolina Power affirming the representations in Section 6.12 and setting forth such further matters as North Carolina Power may reasonably request either (i) to comply with requests of regulatory bodies having proper jurisdiction, or (ii) in connection with North Carolina Power’s execution of consents or other documents related to the financing of the Facility. North Carolina Power agrees that, upon request of Operator and at Operator’s expense, North Carolina Power shall cause its counsel to issue an opinion to Operator or its lender(s) addressing such matters as Operator may reasonably request related to the financing of the Facility.

        6.14    Operator agrees that, upon request of North Carolina Power, it shall deliver or cause to be delivered from time to time to North Carolina Power certifications of its officers, accountants, engineers, or agents as to such matters as North Carolina Power may reasonably request.

        6.15    Operator agrees to preserve and keep in force and effect its partnership existence and all franchises, licenses and permits necessary to the proper conduct of its business, including without limitation the business of owning and operating the Facility.

        6.16    Operator shall keep proper books of record and account in which full correct entries will be made of all dealings or transactions of or in relation to its business and affairs, in accordance with generally accepted accounting principles consistently applied. From time to time through the Term of this Agreement, but no more frequently than annually, North Carolina Power, at Operator’s cost, shall have the right to designate an independent public accounting firm to conduct a review of the Operator’s auditor’s audit of the books and records of Operator under a confidentiality agreement with Operator to the limited extent necessary (i) to verify that they are being kept in accordance with generally accepted accounting principles, and (i) to advise North Carolina Power of the financial condition of Operator and that Operator is not in default under any loan agreements or fuel supply agreements. Operator shall make all pertinent records available at its office at Charlottesville, Virginia during normal business hours.

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        6.17    Operator shall provide North Carolina Power access, at the Facility, to any maintenance evaluations or reports it performs with respect to the Facility or has performed by or obtains from any third party including those with a financial security interest in or lien on the Facility. The Operator shall use due diligence to obtain for itself, and maintain at the Facility for North Carolina Power, copies of any evaluations or reports with respect to the Facility generated at the request of such third parties or performed by an engineer employed by any such third party.

        6.18   Operator will provide to North Carolina Power, on a Monthly basis, a statement of the total quantity and total delivered cost of all fuel consumed in the Facility.

ARTICLE 7: Control and Operation of the Facility; Dispatch

        7.1    Prior to the beginning of each operating day (such day to be defined in the operating procedures developed pursuant to Section 4.5) Operator shall inform the North Carolina Power operations center designated in the interconnection study performed pursuant to Article 8 as to the daily operating availability and expected maximum generation capability of its Facility, including, without limitation, any anticipated Forced Outage.

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        7.2    Operator shall submit to North Carolina Power, in writing, by September 1 of each Year, its planned Scheduled Outage periods for the next Year. Operator may modify its Scheduled Outage periods by notifying North Carolina Power of any such modifications at least ninety (90) Days (or less if North Carolina Power agrees) in advance. Operator shall not plan Scheduled Outages of its Facility during the Winter Demonstration Period or during the Summer Demonstration Period of any Year that would decrease the Net Electrical Output of the Facility below the Dependable Capacity level established by testing pursuant to Article 11 without the prior written consent of North Carolina Power. Operator agrees and understands that North Carolina Power shall not be obligated to grant approval for such periods. Such Scheduled Outages shall not exceed 30 equivalent Days (for example, 60 days at 50% capacity equals 30 equivalent Days) in each Year except that every 5 Years up to 42 equivalent Days may be scheduled. North Carolina Power shall have the right to approve the start date of any Scheduled Outage, such approval not to be conditioned or unreasonably withheld or delayed, and, in any event, shall notify Operator of such approval or disapproval no later than the October 31 next following the submission by Operator of its planned Scheduled Outage periods for the next Year. During Scheduled Outages, North Carolina Power shall not Dispatch the Facility above Operator’s scheduled generation level without the prior approval of the Operator. Such approval by Operator shall not be unreasonably withheld, delayed or conditioned. In addition to Scheduled Outages, Operator is entitled to an unlimited number of Maintenance Outages during any Year. Operator shall provide North Carolina Power with forty-eight (48) hours advance notice, or such lesser notice as is practicable under the circumstances, of the timing and estimated duration of any Maintenance Outage. Each such notice shall identify, to the extent then known by Operator, the equipment involved in such Maintenance Outage and the capacity that will not be available for Dispatch. During any such Maintenance Outage, Operator shall notify North Carolina Power promptly of any material changes in the notice information previously provided to North Carolina Power. The Parties shall work together in good faith to coordinate the start date of any Maintenance Outage. If North Carolina Power reasonably requests Operator to return all or part of that portion of the Facility that is affected by a Maintenance Outage, as the case may be, to operational status, Operator shall complete its maintenance and repair work as soon as reasonably practical.

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        7.3    North Carolina Power shall have the right, upon one (1) year prior written notice, to revise the periods, not exceeding six (6) Months, in the aggregate, during which Operator shall not, unless mutually agreed, perform Scheduled Outages.

        7.4    Each Party shall keep complete and accurate records and all other data required by each of them for the purposes of proper administration of this Agreement (including, for so long as Operator is required to maintain QF status under Section 4.1 hereof, information necessary to determine whether Operator has complied with minimum PURPA QF efficiency requirements) in accordance with the following guidelines:

(a) All such records shall be maintained for a minimum of five (5) years after the creation of such record or data and for any additional length of time required by regulatory agencies with jurisdiction over the Parties; provided, however, that Operator shall not dispose of or destroy any such records even after the five (5) years without thirty (30) Days prior notice to North Carolina Power.

(b) Operator shall maintain an accurate and up-to-date operating log at the Facility with records of: (i) real and reactive power production for each clock hour; (ii) changes in operating status, Scheduled Outages, Maintenance Outages and Forced Outages; and (iii) any unusual conditions found during operation or inspections.

(c) Either Party shall have the right from time to time, upon fourteen (14) Days written notice to the other Party, to examine the records and data of the other Party required to be maintained under this Agreement any time during the period the records are required to be maintained.

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(d) By the 5^th of each Month, Operator shall provide North Carolina Power with Facility performance and events data for the preceding Month in accordance with current NBRC and Generating Availability Data Systems (GADS) reporting standards.

(e) North Carolina Power shall have the right, for so long as Operator is required to maintain QF status under Section 4.1 hereof, to audit the Facility’s performance to determine if Operator is complying with Operator’s QF certification.

        7.5    North Carolina Power shall have the right to Dispatch the Facility in accordance with its Design Limits subject to the following notice provisions:

(a) Not used.

(b) North Carolina Power will provide Operator with thirty (30) minutes notice (in addition to ramp rate times) of changes in operating levels to be achieved by the Facility when the Facility is operating between the Minimum Operating Level and 23 MW.

(c) When North Carolina Power Dispatches the Facility off-line, North Carolina Power will provide Operator with an estimate, to the nearest hour, of when the Facility will be required back on-line. In the event North Carolina Power requires the Facility be back on-line earlier than such estimated time, Operator may require, as reasonably necessary, North Carolina Power to provide up to an additional six (6) hour notice in excess of the periods of time set forth in Section 1.8 of this Agreement.

Operator agrees to comply with the notices received from North Carolina Power pursuant to (b) and (c) above.

        7.6    In addition to North Carolina Power’s rights under Section 7.5 above, North Carolina Power shall have the right to Dispatch the Facility outside its Design Limits but within Prudent Utility Practices, Prudent Electrical Practices, permit requirements, and its technical capabilities when:

(a) In North Carolina Power’s sole opinion, a condition exists which presents a physical threat to any persons or property; or

(b) It is necessary to construct, install, maintain, repair, replace, remove, investigate, inspect or test any part of the Facility or the Interconnection Facilities, or any other affected part of North Carolina Power’s system.

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North Carolina Power will make a reasonable effort to notify and coordinate with Operator concerning such Dispatch. With respect to Section 7.6(b) above, North Carolina Power shall provide Operator with at least forty-eight (48) hours prior notice except in the event of an Emergency. Any change in Facility output required of Operator hereunder shall be implemented and completed as soon as possible consistent with Prudent Utility Practices.

        7.7    Operator shall employ qualified personnel for operating and monitoring the Facility and for maintaining communications between the Facility and North Carolina Power and shall ensure that such personnel are on duty at all times, twenty-four (24) hours a Day and seven (7) Days a week. During Scheduled Outages, Maintenance Outages, Forced Outages or any event of Force Majeure, Operator shall only be required to ensure that personnel are on duty to respond to North Carolina Power requests.

        7.8    The Parties recognize that North Carolina Power is a member of NERC and that, to ensure continuous and reliable electric service, North Carolina Power operates its system in accordance with the operating criteria and guidelines of NERC. If an Emergency is declared, North Carolina Power’s operations center will notify Operator’s personnel and, if requested by North Carolina Power, Operator’s personnel shall place the Net Electrical Output within the exclusive (albeit indirect) control of North Carolina Power’s division or system operations center for the duration of such Emergency. Without limiting the generality of the foregoing, during an Emergency North Carolina Power’s operations center may require Operator’s personnel to raise or lower the Net Electrical Output generated by the Facility to maintain safe and reliable load levels and voltages on North Carolina Power’s transmission and/or distribution system; provided, however, any changes in the level of the Net Electrical Output required of Operator hereunder shall be implemented in a manner consistent with safe operating procedures and within the Facility’s technical capabilities.

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        7.9    Operator shall cooperate with North Carolina Power in establishing Emergency plans, including without limitation, recovery from a local or widespread electrical blackout; voltage reduction in order to effect load curtailment; and other plans which may arise. The Operator shall make technical references available concerning start-up times, black-start capabilities (if applicable) and minimum load-carrying ability.

        7.10    Operator shall, during an Emergency, supply such power as the Facility is able to generate within its capability and North Carolina Power is able to receive. If Operator has a Scheduled Outage, and such Scheduled Outage occurs or would occur coincident with an Emergency, Operator shall make all good faith efforts, consistent with Prudent Utility Practices, to reschedule the outage or, if the outage has begun, to expedite the completion thereof.

        7.11    Operator shall operate the Facility with its speed governors and voltage regulators in-service whenever the Facility is connected to or operated in parallel with the North Carolina Power system.

        7.12    Operator may request North Carolina Power to Dispatch the Facility during a Scheduled Outage period. Operator must make such request at least twenty-four hours prior to the commencement of such requested Dispatch. North Carolina Power shall, consistent with Prudent Utility Practices, Dispatch the Facility during Scheduled Outage periods in accordance with Operator’s request.

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ARTICLE 8: Interconnection

        8.1    Operator shall be responsible for the design, construction, installation, maintenance and ownership of the Facility.

        8.2    If it is determined in the interconnection study performed by North Carolina Power pursuant to Section 8.5 that the North Carolina Power owned metering facilities (which may include current and potential transformers and telemetering equipment) should be installed on Operator’s property then: (i) North Carolina Power shall provide the Operator with the metering equipment, (ii) Operator shall be required to install such metering equipment and (iii) such installation shall be done as prescribed by North Carolina Power.

        8.3    North Carolina Power shall be responsible for the design, construction, installation, maintenance and ownership of the Interconnection Facilities at no cost to Operator.

        8.4    Operator has provided to North Carolina Power the data required in Exhibit A attached hereto.

        8.5    North Carolina Power performed an interconnection study within one hundred and twenty (120) Days of Operator’s completion of the requirements of Section 8.4 above. The interconnection study (i) determined the Interconnection Point and (ii) designated the North Carolina Power operations center that coordinates the operation of the Facility.

        8.6    Operator granted, on or prior to Financial Closing, to North Carolina Power all reasonably necessary rights of way and easements. Within thirty (30) Days of receipt of the interconnection study, Operator provided a site plan drawing showing the Facility’s grid system tied to the site property lines and switchyard for the purpose of the transmission line survey. Operator executed the documents that North Carolina Power required to record such rights of way and easements. Consideration for such grants, deeds or documents was the execution of the first Amendment and Restatement, and no other consideration shall be required. Operator agrees that such rights of way and easements shall survive termination or expiration of this Agreement.

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        8.7    North Carolina Power engineered and constructed the Interconnection Facilities in accordance with the design determined in the interconnection study performed pursuant to Section 8.5. North Carolina Power completed the Interconnection Facilities by August 1, 1994.

        8.8    Not used.

        8.9    North Carolina Power reserves the right to modify or expand its requirements for protective devices as reasonably necessary to conform with Prudent Electrical Practices and to ensure safe uninterrupted operation of its electrical system.

        8.10    Each Party shall notify the other in advance of any changes to its system that will affect the proper coordination of protective devices on the two systems.

ARTICLE 9: Metering

        9.1    North Carolina Power shall own and maintain all meters and metering devices (including remote terminal units) used to measure, for payment purposes, the delivery to North Carolina Power of the Facility’s Net Electrical Output and Dependable Capacity. Nothing in this Agreement shall prevent Operator, solely for Operator’s purposes, from installing Operator-owned and maintained meters and metering devices in addition to North Carolina Power-owned and maintained meters and metering devices.

        9.2    All North Carolina Power-owned meters and metering equipment used to determine the Net Electrical Output and Dependable Capacity delivered to North Carolina Power shall be sealed, and the seals opened only by North Carolina Power personnel when the metors are to be inspected, tested, or adjusted; North Carolina Power shall give Operator prior written notice of each such opening of the seals, and Operator shall have the right to be present. North Carolina Power will test the meter(s) in accordance with the provisions for meter testing set forth in North Carolina Power’s approved “Terms and Conditions for Supplying Electricity” as filed with the NCUC at the time the test is performed.

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        9.3    Operator shall provide at its expense:

(a) For the purpose of telemetering, a telecommunication circuit to the operations center designated by North Carolina Power;

(b) A voice telephone extension for the purpose of accessing North Carolina Power’s dial-up metering equipment and for communicating with. the designated North Carolina Power operations center;

(c) An extension of North Carolina Power’s system operations center’s PBX system in the control room of the Facility;

(d) Equipment to transmit and receive telecopies for purposes of generation scheduling, Dispatch orders and coordination of switching.

Each of the items provided by Operator in accordance with this Section 9.3 shall be subject to the approval of North Carolina Power, which approval shall not be unreasonably withheld.

        9.4    On a regular schedule and, in addition, upon two (2) weeks prior written notice to Operator, North Carolina Power will test the meter(s) in accordance with the provisions for meter testing in North Carolina Power’s approved Terms and Conditions for Supplying Electricity as filed with the NCUC at the time the test is performed. In addition, Operator may request North Carolina Power to perform tests of North Carolina Power’s meters, and Operator shall pay for the costs associated with such additional requested tests. North Carolina Power shall perform such requested tests of its meters within a reasonable period of time from receipt of notice of such request from Operator. Operator may have a representative present during any metoring inspection, test, or adjustment. When, as a result of such a test, a metor is found to be no more than two (2) percent fast or slow because of incorrect calibration or tampering, no adjustment will be made in the amount paid to Operator for energy, or energy and Dependable Capacity, delivered to North Carolina Power. However, within three Business Days of such meter test, the meter shall be recalibrated to within industry standards for such meter to remove the fast or slow meter reading. If the meter is found to be more than two (2) percent fast or slow, North Carolina Power will calculate the correct amount delivered to North Carolina Power for the actual period during which inaccurate measurements were made or, if the actual period cannot be determined to the mutual satisfaction of the Parties, for a period equal to one-half of the time elapsed since the most recent test. The previous payments by North Carolina Power for this period shall be subtracted from the amount of payments that are calculated to have been owed under this Agreement. The difference shall be offset against or added to the next payment to either Party as appropriate under this or other agreements between the Parties. The percentage registration of a meter will be calculated by the “weighted average” of light load and full load, which is calculated by giving a value of one (1) to the light load and a value of four (4) to the full load.

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        9.5    Whenever it is found that, for any reason other than incorrect calibration or tampering, the metering apparatus has not registered the true amount of electricity which has been delivered by Operator to North Carolina Power, the electricity delivered during the entire period of incorrect registration shall be estimated using alternative metering if available, and the amount of electricity so estimated will be used in calculating the corrected amounts to be paid to Operator. The adjusted amount will be for the actual period during which inaccurate measurements were made or, if the actual period cannot be determined to the mutual satisfaction of the Parties, for a period equal to one-half of the time elapsed since the most recent test of the metoring apparatus. Any overpayments or underpayments by North Carolina Power for energy, or energy and capacity, delivered by Operator to North Carolina Power shall be corrected in the manner described in Section 9.4.

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ARTICLE 10: Compensation, Payment, and Billings

        10.1    Operator shall be compensated for Net Electrical Output of the Facility on a cents per kWh basis at a rate equal to the Energy Purchase Price. For the purpose of payment to Operator for Net Electrical Output, the Net Electrical Output shall be reduced by 2.25% to compensate North Carolina Power for line losses. The Energy Purchase Price is a function of the fuel compensation price, the heat rate, and the O&M Price. Accordingly, the Energy Purchase Price for the integrated hourly Net Electrical Output = FH + V where (i) F = fuel compensation price (as set forth in Section 10.2), (ii) H = heat rate (as set forth in this Section 10.1), and (iii) V = O&M Price (as set forth in Section 10.6). The Facility’s heat rate is 16,000 Btus/kWh and shall remain fixed for the Term.

        10.2    The base fuel compensation price, effective October 1, 2000 for Net Electrical Output received from the Facility is 0.177 ¢/million Btus. The base fuel compensation price shall be subject to adjustment only as specified herein.

        10.3   For the purpose of this Agreement, the following terms, whether in the singular or in the plural, shall have the meaning stated below:

(a) Base Index — The Gross Domestic Product Implicit Price Deflator (GDPIPD) for the 2nd Quarter of 2000 as first published by the US Department of Commerce equal to 106.8, where 1996 equals 100.0.

(b) Reference Index — The GDPIPD Index first published for the 2nd Quarter prior to the Quarter for which the filet compensation price is being determined. The Reference Index shall be abbreviated as GDPIPD (q-2,y) where q is a Quarter and y is a year.

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Should the index specified herein be discontinued, an index specified by the appropriate government agency as the replacement index, if any, shall be used. If no replacement index is specified, a new index which most accurately reflects changes for the applicable cost component shall be substituted by agreement of the Parties. If the basis of the calculation of the index specified herein is substantially modified, the index as modified will continue to be used unless another index is substituted by mutual agreement of the Parties. A change in the base year reporting basis, minor changes in weighting, and minor changes in benchmarks shall not be construed as substantial modification to the index, and the affected values shall be re-established in accordance with the instructions issued by the appropriate government agency.

        10.4    At least two (2) weeks prior to the beginning of each Quarter the fuel compensation price (FCP) that will be effective during that subsequent Quarter shall be calculated as follows:

FCP = 0.177¢/million Btu   X    Reference Index GDPIPD (q-2,y)
                        106.8

Thus, if the fuel compensation price were being determined for the first Quarter of 2001, the numerator of the above equation would be GDPIPD (3,2000).

        10.5    Operator may nominate a revised fuel compensation price. This revised fuel compensation price will be used for purpose of payment and Dispatch. This revised fuel compensation price will be effective until the Operator notifies North Carolina Power in writing that the revised fuel compensation price is no longer to be used for purposes of payment and Dispatch, except however, that such revised fuel compensation price shall be effective for at least one (1) week. The revised fuel compensation price must be submitted to and received by North Carolina Power in writing prior to the close of business at 5:00 PM on the Monday before the effective date. The effective date will always be on a Friday in order to be consistent with North Carolina Power’s normal system operating schedule. The revised fuel compensation price shall not exceed the Energy Purchase Price calculated in accordance with this Article 10.

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        10.6    North Carolina Power shall pay Operator, on a per kWh basis, the O&M Price. This O&M Price shall be 0.187 cents/kWh fixed as of April 1, 1989, and shall be increased or decreased, as appropriate, on April 1, 1990 and on each April 1 thereafter by the percent change in the GDPIPD for the previous Year.

        10.7    Subject to Sections 5.3(a)16, 5.3(a)17, 5.3(a)18, 5.3(b)(i), and 14.4, the Operator shall be paid for Dependable Capacity as follows:

(a) For payment purposes only, the payments for Dependable Capacity shall be reduced by 2.25% to compensate North Carolina Power for line losses.

(b) Commencing on the Commercial Operations Date and, continuing until the fifteen (15) anniversary of the Commercial Operations Date, the Capacity Purchase Price shall be 4.909¢/kWh fixed for such fifteen (15) year period, plus 0.879¢/kWh in 1989 dollars increased or decreased as appropriate on April 1, 1990, and each April 1 thereafter through the period ending on the fifteenth anniversary of the Commercial Operations Date, by the percent change in the GDPIPD for the previous Year. Commencing on the fifteenth anniversary of the Commercial Operations’ Date and continuing for the remaining Term, the Capacity Purchase Price shall be 3.053¢/kWh fixed for such remaining Term, plus 0.879¢/kWh in 1989 dollars, increased or decreased as appropriate on April 1, 1990, and each April 1 thereafter for the Term, by the percent change in the GDPIPD for the previous Year.

(c) During those hours the Facility’s Net Electrical Output meets or exceeds the Dispatch level and the Dispatch level is equal to the Dependable Capacity level, Operator shall be paid the Capacity Purchase Price times the kilowatt-hours equal to the kilowatt-hours generated at the Dispatch level. (see examples Exhibit B)

(d) During those hours the Facility’s Net Electrical Output meets or exceeds the Dispatch level and the Dispatch level is less than the Dependable Capacity level, Operator shall be paid the Capacity Purchase Price times (i) the kilowatt-hours of Net Electrical Output equal to the kilowatt-hours generated at the Dispatch level, plus (ii) the kilowatt-hours that are the difference between the kilowatt-hours possible at the Dependable Capacity level and the kilowatt-hours possible at the Dispatch level. (sec examples Exhibit B)

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(e) During those hours that are Scheduled Outage hours, Operator shall be paid the Capacity Purchase Price times the kilowatt-hours equivalent to the Dependable Capacity times the number of hours in the Scheduled Outage. (see examples Exhibit B) During those hours that are Maintenance Outage hours, Operator shall be paid the Capacity Purchase Price times the kilowatt-hours equivalent to the Dependable Capacity times the number of hours in the Maintenance Outage, but only to the extent that the Maintenance Outage hours, when added to Scheduled Outage hours, do not, in the aggregate, exceed (i) 30 equivalent Days (for example, 60 days at 50% capacity equals 30 equivalent Days) in each Year or (ii) 42 equivalent Days every 5 Years.

(f) During those hours the Facility’s Net Electrical Output fails to meet the Dispatch level and the Dispatch level equals the Dependable Capacity level, Operator will be paid the Capacity Purchase Price times (i) the kilowatt-hours of Net Electrical Output, plus (ii) if available pursuant to Section 103(h), sufficient accumulated kilowatt-hours not to exceed 5% of the kilowatt-hours that could have been generated at the Dispatch level. In no case shall the sum of kilowatt-hours in 10.7(f)(i) and 10.7(f)(ii) equal more than the kilowatt-hours that could have been generated at the Dispatch level. (see example Exhibit B)

(g) During those hours the Facility’s Net Electrical Output fails to meet the Dispatch level and the Dispatch level is less than the Dependable Capacity level, Operator will be paid the Capacity Purchase Price times (i) the kilowatt-hours of Net Electrical Output, plus (ii) the kilowatt-hours that are the difference between the kilowatt-hours possible at the Dependable Capacity level and the kilowatt-hours possible at the Dispatch level, plus (iii) if available pursuant to Section 10.7(h), accumulated kilowatt-hours not to exceed 5% of the kilowatt-hours that could have been generated at the Dispatch level. In no case shall the sum of kilowatt-hours in 10.7(g)(i) and 10.7(g)(iii) equal more than the kilowatt-hours that could have been generated at the Dispatch level. (see example Exhibit B)

(h) For the purpose of offsetting lost kilowatt-hours pursuant to Section 10.7(f) and 10.7(g), the Facility, when operating in excess of the Dispatch level during the billing period, will be allowed to accumulate those excess kilowatt-hours generated during a billing period equal to an amount not to exceed 5% of the kilowatt-hours generated at the Dispatch level during such excess generation period(s). Kilowatt-hours generated in excess of 5% of those kilowatt-hours generated at the Dispatch level will not be considered when determining payments for Dependable Capacity. Accumulated kilowatt-hours can only be applied in the billing period during which their generation occurred. Unused accumulated kilowatt-hours in any billing period shall not be used in any other billing period. (see example Exhibit B).

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(i) Not used.

(j) If, as a result of any Summer Demonstration Period or Winter Demonstration Period testing done pursuant to Article 11, the Facility’s Dependable Capacity is set at a level less than 90% of the Facility’s immediately preceding Summer Period or Winter Period Dependable Capacity, respectively, as determined by testing pursuant to Sections 11.5 and 11.6, then Operator shall pay to North Carolina Power within thirty (30) Days of the test an amount equal to $40.00 per kW, (in 1989 dollars as escalated by the GDPIPD on April 1, 1990, and on each succeeding April 1), for the difference between 90% of the immediately preceding Summer Period or Winter Period Dependable Capacity and the Dependable Capacity determined for the current Summer Period or Winter Period, respectively, pursuant to such testing as liquidated damages for the detrimental impact of such lower Dependable Capacity on North Carolina Power’s generation planning. In no event shall Operator be required to pay liquidated damages under this Section 10.7(j) more than once during each Summer Demonstration Period or Winter Demonstration Period.

        10.8    Operator shall pay North Carolina Power an amount reflecting all reasonable costs incurred by North Carolina Power for meter reading and billing. The monthly meter reading and billing charge per meter shall equal the bask customer charge in the Rate Schedule under which the Operator purchases electricity from North Carolina Power in effect at the time the meter is read.

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        10.9    Meters shall be read, and bills rendered, according to the meter reading and billing schedule established by North Carolina Power, except that not more than forty-five (45) Days shall pass between readings. Such schedule normally results in twelve (12) readings per Year. Payment to Operator by North Carolina Power for the Net Electrical Output, or for the Net Electrical Output and Dependable Capacity, delivered to North Carolina Power during the billing period shall be made on the third (3rd) Business Day of the second (2nd) Month after the Month that such Net Electrical Output, or such Net Electrical Output and Dependable Capacity, are delivered; provided that, if such third (3rd) Business Day is a holiday for North Carolina Power, payment will be made on the next Business Day. Interest shall accrue, at the Interest Rate, on any outstanding payments due Operator commencing on the Day after such payments are required to be made as aforesaid. Any amounts due North Carolina Power attributed to purchases of electricity and related services from North Carolina Power by Operator shall be paid to North Carolina Power within twenty-eight (28) Days of the meter reading date; provided, however, that, at North Carolina Power’s sole discretion, North Carolina Power may offset any amounts due North Carolina Power by Operator against the amounts due Operator hereunder, and, in such event, the net result shall be paid to the appropriate party by the date specified in the third (3rd) sentence of this Section 10.9. Interest shall accrue, at the Interest Rate, on any outstanding payments due North Carolina Power commencing on the twenty-ninth (29th) Day after the meter reading date. In the event that either Party should dispute any portion of the amount shown on any statement rendered by the other Party for amounts due and payable hereunder, such Party, nevertheless, shall pay the amount shown on the statement. Any amount that is disputed in good faith and is thereafter determined not to have been due and payable by the disputing Party, together with interest, at the. Interest Rate, on such amount from the date such payment was originally paid, shall be due and payable to the disputing Party within ten (10) Days of final resolution of such dispute by written agreement of the Parties or final judgment of a court of competent jurisdiction. Operator agrees that its purchase of electricity from North Carolina Power will be on a rate schedule approved by the NCUC, that such schedule may change from time to time and that the terms and conditions of such changed schedule will supersede any provisions herein that are in conflict. Payment to North Carolina Power shall be made by check to the following address:

North Carolina Power
P.O. Box 26019
Richmond, Virginia 23260-6019

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Payment to Operator shall be made by wire transfer to the following account:

Bank of New York
ABA 021000018
Credit CSFB — Westmoreland LG&E ROVA I & II
Account Number 8900410639
For further credit to Westmoreland-LG&E Roanoke Valley I & II Project Control Acct
Account Number 331309-02

Either Party may, by written notice to the other, change the address to which such payments are to be sent.

        10.10    The Parties agree that North Carolina Power will be substantially damaged in amounts that will be difficult or impossible to: determine if the Facility cannot maintain the Dependable Capacity of at least ninety (90) percent of the immediately preceding Summer Period or Winter Period Dependable Capacity level established by testing as determined pursuant to Section 11.6.

Therefore, the Parties have agreed on sums, as set forth in Section 10.7(j), which the Parties agree are reasonable as liquidated doges for such occurrences. It is further understood and agreed that the payment of the liquidated damages is in lieu of any and all actual damages for such occurrences which would otherwise be owing to North Carolina Power and that such liquidated damages, if paid, shall be North Carolina Power’s sole and exclusive remedy for such occurrences. Operator hereby waives any defense as to the validity of any liquidated damages stated in this Agreement as they may appear on the grounds that such liquidated damages are void as penalties.

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ARTICLE 11: Testing and Capacity Ratings

        11.1    Operator’s original Estimated Dependable Capacity is 40 MW for the Summer Period and 41 MW for the Winter Period.

        11.2    All testing for the determination of Dependable Capacity shall be in accordance with the following criteria:

(a) Testing shall last for six (6) hours during a Winter Period test and twelve (12) hours during a Summer Period test from the time set forth in the notice provided by North Carolina Power pursuant to the notice provision of Section 11.2(c).

(b) Normal station use and operation of (i) unit auxiliaries (including without limitation spray modules and cooling towers required by regulatory or governmental authority) using steam or electricity produced at the Facility; and (ii) auxiliary equipment that produces steam or electricity is required during tests for Dependable Capacity; provided that the use and operation of auxiliary steam-producing equipment shall not be required during any such tests from and after the date as of which Operator relinquishes the Facility’s QF status as permitted pursuant to Section 4.1 hereof.

(c) North Carolina Power shall provide notice to Operator of the date and time of all tests. Such notice shall be provided to Operator no earlier than forty-eight (48) hours in advance of the date and time of the test and no later than necessary to allow the Facility, pursuant to the Design Limits, to reach the appropriate Summer Period or Winter Period Estimated Dependable Capacity for the appropriate Summer Period or Winter Period. Tests shall be initiated within fourteen days after the start of the appropriate Summer Demonstration Period or Winter Demonstration Period.

(d) During all tests, Operator may operate the Facility at any level consistent with Prudent Utility Practices, Prudent Electrical Practices, all licenses and permits, and technical limits of the Facility’s equipment.

(e) The lowest half-hour integrated kW demand reading from North Carolina Power-owned meters during any such test shall equal the tested level (the “Tested Level”).

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(f) North Carolina Power shall not schedule a test for Dependable Capacity to be conducted during a Scheduled Outage or, if Operator notifies North Carolina Power of a Maintenance Outage before North Carolina Power notifies Operator of a proposed test, during such Maintenance Outage, In addition, if Operator has notified North Carolina Power prior to North Carolina Power’s notice of commencement of a test that the Facility is experiencing a Forced Outage, then North Carolina Power shall not schedule a test for Dependable Capacity to be conducted during that Forced Outage. Notwithstanding the immediately preceding sentence, if a Forced Outage occurs any time after North Carolina Power has given notice of a test or during a test, then the test will be completed in its entirety and the results of that test will be used in the determination of Dependable Capacity in accordance with this Article 11. If during the last allowed test under any Section in this Article XI, the test is interrupted or affected by an event of Force Majeure, Operator shall be entitled to one additional test for Dependable Capacity.

        11.3    Testing was performed to establish the Initial Dependable Capacity for the Summer Period in which the Commercial Operations Date occurred, and the Initial Dependable Capacity for such Summer Period was established at 44.0 MW.

        11.4    Testing was performed to establish the Initial Dependable Capacity for the Winter Period which followed the Summer Period in which the Commercial Operations Date occurred, and the Initial Dependable Capacity for such Winter Period was established at 45.1 MW.

        11.5    Testing to determine the Dependable Capacity for each Summer Period and Winter Period after the Summer Period or Winter Period in which the Initial Dependable Capacity was determined shall be as follows:

(a) At least fourteen Days prior to the beginning of each Summer Period or Winter Period, Operator may notify North Carolina Power of the level of generation (“Projected Dependable Capacity”) at which North Carolina Power may Dispatch the Facility during the period before Operator sets the Dependable Capacity. Such Projected Dependable Capacity shall not exceed 110% of the Estimated Dependable Capacity for the appropriate Summer Period or Winter Period.

(b) If Operator fails to notify North Carolina Power of a Projected Dependable Capacity, the Dependable Capacity shall be the same level as the previous appropriate Summer Period or Winter Period, up to which North Carolina Power may Dispatch the Facility.

(c) Commencing with the start of each Summer Period or Winter Period for which Operator has notified North Carolina Power of a Projected Dependable Capacity, North Carolina Power may Dispatch the Facility up to the Projected Dependable Capacity and shall pay Operator for capacity at the Projected Dependable Capacity level.

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(d) Whether or not Operator sets a Projected Dependable Capacity, North Carolina Power may require a test for Dependable Capacity and, if so, must do so within the first fourteen (14) Days of the appropriate Summer Demonstration Period or Winter Demonstration Period.

(e) North Carolina Power shall provide notice to Operator of the date and time of the test in accordance with Section 11.2(c) and shall monitor such test.

(f) Within three (3) Business Days after the completion of the test, North Carolina Power shall provide Operator the results of the test.

(g) Within three (3) Business Days after receipt of the test results, Operator shall notify North Carolina Power whether or not Operator accepts or rejects the test.

(h) If Operator accepts the test, Operator shall stipulate in the notice pursuant to 11.5(g) the level at which the Dependable Capacity is set, and such level shall not exceed the lesser of (i) 110% of the Estimated Dependable Capacity for the appropriate Summer Period or Winter Period or (ii) the appropriate Tested Level.

(i) If Operator rejects the test, fails to accept the test, or fails to set the Dependable Capacity level in accordance with Section 11.5(h), the test is null and void. Operator may, within five Business Days from receipt of test results, request one additional test. Such test shall be conducted within fourteen Days of notice requesting such test, and such test shall be conducted pursuant to the procedures established in Sections 11.5(a) through 11.5(h). No additional Operator requested tests will be allowed in any Summer Period or Winter Period other than the test allowed in this Section 11.5(g) or pursuant to Section 11.2(f).

(j) If, after testing, Operator sets the Dependable Capacity equal to or less than the Projected Dependable Capacity, payments for Dependable Capacity shall be decreased retroactive to the start of the appropriate Summer Period or Winter Period.

(k) If, after testing, Operator sets the Dependable Capacity greater than the Projected Dependable Capacity, payments for Dependable Capacity shall be increased, effective the Day North Carolina Power receives such notice, to reflect the new Dependable Capacity.

(l) If, after testing, Operator sets the Dependable Capacity equal to the Projected Dependable Capacity, payments for Dependable Capacity continue and will not be adjusted.

(m) If, after the completion of all testing for any Summer Period or Winter Period, Operator fails to set the Dependable Capacity pursuant to this Section 11.5 or Section 11.6, the Dependable Capacity shall be the lessor of (i) the Estimated Dependable Capacity for the appropriate Summer Period or Winter Period, (ii) the appropriate Tested Level, or (iii) the Dependable Capacity level of the previous corresponding Summer Period or Winter Period.

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        11.6    In addition to Operator requested tests, North Carolina Power may require tests of the Dependable Capacity throughout the Term of this Agreement as follows:

(a) Once per Summer Demonstration Period and Winter Demonstration Period at North Carolina Power’s sole discretion, and

(b) At any time Operator fails two (2) consecutive times to either achieve or maintain the operating level of the Facility within 15% of the Dispatch level prescribed by North Carolina Power.

For tests pursuant to Sections 11.6(a) and 11.6(b), Operator may, at its sole discretion, request one additional test within five (5) Days of the North Carolina Power required test if Operator is not satisfied with the results of the North Carolina Power required test. Upon completion of such test, Operator shall set the Dependable Capacity at any level up to the tested capacity, except that the Operator may not set the Dependable Capacity at any level, in excess of one hundred and ten (110) percent of the Estimated Dependable Capacity as specified in Section 11.1. Payments for Dependable Capacity shall be adjusted accordingly, effective the day after any such testing is performed pursuant to this Section 11.6.

ARTICLE 12: Insurance

        12.1    Operator shall obtain and maintain the following policies of insurance from and after the Effective Date and throughout the Term of this Agreement:

(a) Worker’s Compensation insurance which complies with the laws of the Commonwealth of Virginia, or any other applicable jurisdiction and Employers' Liability Insurance with limits of at least $1,000,000; and

(b) Comprehensive or Commercial General Liability insurance with bodily Injury and property damage combined single limits of at least $5,000,000 per occurrence. Such Insurance shall Include, but not necessarily be limited to, specific coverage for contractual liability encompassing the indemnification provisions in Article 13, broad form property damage liability, personal injury liability, explosion and collapse hazard coverage, products/completed operations liability, and, where applicable, watercraft protection and indemnity liability; and

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(c) Comprehensive Automobile Liability insurance with bodily injury and property damage combined single limits of at least $5,000,000 per occurrence covering vehicles owned, hired or non-owned; and

(d) Excess Umbrella Liability Insurance with a single limit of at least $5,000,000 per occurrence in excess of the limits of insurance provided in subparagraphs (a), (b), and (c) above.

(e) Such other insurance (as to risks covered, policy amounts, policy provisions or otherwise) as, in accordance with Prudent Utility Practices, are from time to time insured against for property and facilities similar in nature, use and location to the Facility to the extent the same is obtainable at commercially reasonable rates.

        12.2    The amounts of insurance required in Section 12.1 above may be satisfied by the Operator purchasing primary coverage in the amounts specified or by buying a separate excess Umbrella Liability policy together with lower limit primary underlying coverage. The structure of the coverage is the Operator’s option, so long as the total amount of insurance meets North Carolina Power’s requirements.

        12.3    The coverage requested in Section 12.1(b) above and any Umbrella or Excess coverage should be “occurrence”form policies. In the event Operator has “claims-made” form coverage, Operator must obtain prior approval of all “claims-made” policies from North Carolina Power.

        12.4    Operator shall cause its insurers to amend its Comprehensive or Commercial General Liability and, if applicable, Umbrella or Excess Liability policies with the following endorsement items (a) through (e); and to amend Operator’s Workers’ Compensation and Auto Liability policies with endorsement item (e):

(a) North Carolina Power, its directors, officers, and employees are additional insureds under this Policy as to liability arising out of operations of Operator; and

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(b) This insurance is primary with respect to the interest of North Carolina Power, its directors, officers, and employees and any other insurance maintained by them is excess and not contributory with this insurance; and

(c) The following Cross Liability clause is made a part of the policy: Except with respect to limits of insurance, and any rights or duties specifically assigned in this coverage part to the first Named Insured, this insurance applies (i) as if each Named Insured were the only Named Insured and (ii) separately to each insured against whom claim is made or suit is brought; and

(d) Insurer hereby waives all rights of subrogation against North Carolina Power, its officers, directors and employees; and

(e) Notwithstanding any provision of the policy, this policy may not be canceled, non-renewed, or materially changed by the insurer without giving thirty (30) Days prior written notice to North Carolina Power, provided, however, that such notice may be ten (10) Days in the event of nonpayment of premiums. All other terms and conditions of the policy remain unchanged.

        12.5    Operator shall cause its insurers or agents to provide North Carolina Power with certificates of insurance evidencing the policies and endorsements listed above. Failure of North Carolina Power to obtain certificates of insurance does not relieve Operator of the insurance requirements set forth herein. Failure to obtain the insurance coverage required by this Article 12 shall in no way relieve or limit Operator’s obligations and liabilities under other provisions of this Agreement.

ARTICLE 13: Liability, Noncompliance and Guarantees

        13.1    Neither Party shall hold the other Party (including its corporate affiliates, parent, subsidiaries, directors, officers, employees and agents) liable for any claims, losses, costs and expenses of any kind or character (including, without limitation, loss of earnings and attorneys’fees) for damage to property of North Carolina Power or Operator in any way occurring incident to, arising out of, or in connection with a Party’s performance or non-performance under this Agreement, except as provided in Section 13.2 below.

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        13.2    Operator and North Carolina Power agree to indemnify and hold each other harmless from and against all claims, demands, losses, liabilities and expenses (including reasonable attorneys’ fees) for personal injury, bodily injury, or death to persons and damage to each other’s property or facilities or the property of any other person, entity, or corporation to the extent arising out of, resulting from or caused by their negligence, gross negligence, or willful misconduct. This indemnity is in addition to the indemnity set forth in Section 6.10 of this Agreement.

        13.3    Not used.

        13.4    Not used.

        13.5    Commencing with the Commercial Operations Date, Operator shall provide and maintain, at Operator’s sole expense, security as described in Section 13.6, in an amount equal to $1,476,000 ($36.00 per kW for the Estimated Dependable Capacity for the Winter Period pursuant to Section 11.1). Such security shall be maintained throughout the Term and may be used to offset any amounts Operator may owe North Carolina Power.

        13.6    Security provided pursuant to Suction 13.5 above shall consist of an unconditional and irrevocable direct pay letter of credit issued by a bank acceptable to North Carolina Power and in a form and with substance acceptable to North Carolina Power; provided, however, in lieu of such letter of credit and upon the prior approval of North Carolina Power, which approval shall be in North Carolina Power’s sole discretion, Operator may provide a power plant performance insurance (if available on commercially reasonable terms) provided in a form and by an insurer acceptable to North Carolina Power.

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        13.7

(a) North Carolina Power shall have an exclusive right to purchase any Transfer Interest or Equity Interest (as hereinafter defined) on the terms and conditions set forth herein; provided, however, Operator may grant the steam buyer a right of first refusal to purchase any Transfer Interest, which right shall be prior to North Carolina Power’s right of first refusal. Any such right of first refusal granted to the steam buyer shall require the steam buyer to continue operating the Facility in accordance with the provisions of this Agreement.

(b) If Operator or anyone having an ownership interest in the Facility: (i) ever desires to dispose of its right, title, or interest in the Facility, or any part thereof; (ii) receives a bona fide offer to purchase or lease the Facility, or any part thereof, which offer the recipient is prepared to accept (hereinafter any such right, title, or interest referred to in (i) or (ii) above shall be referred to as a “Transfer Interest”); or if anyone having an ownership interest in the Operator, the partners in the Operator, or an entity formed for the purpose of holding interests in the Facility or any of the aforementioned entities ever desires to transfer or dispose of such interest (hereinafter any such interests shall be referred to as an “Equity Interest”); or if a bona fide offer for an Equity Interest is received, which offer the recipient is prepared to accept, the entity owning the subject Transfer Interest or Equity Interest shall give notice thereof in writing to North Carolina Power (the “Notice”). The Notice shall (i) specify the terms under which Operator desires to transfer or sell the Transfer Interest or Equity Interest, including the purchase price of the Transfer Interest or Equity Interest, or (ii) include a copy of the acceptable offer (including the acceptable terms and purchase price) received. If the steam buyer has been granted a right of first refusal as set forth above, the Operator shall offer the Transfer Interest to the steam buyer in accordance with the terms of the steam buyer’s right of first refusal. Operator shall offer such Transfer Interest, or Equity Interest, to North Carolina Power on the terms, including price, set forth in the Notice. For a period of one hundred twenty (120) Days after receipt by North Carolina Power of the Notice, or ninety (90) Days after North Carolina Power receives notice from Operator that the steam buyer has waived its right of first refusal, if applicable, whichever is longer. North Carolina Power shall have the right to exercise its right of first refusal with respect to the Transfer Interest or Equity Interest by giving written notice thereof to Operator.

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(c) If North Carolina Power elects to exercise its right of first refusal with respect to the Transfer Interest or Equity Interest, the Parties shall endeavor to fully consummate the transfer of the Transfer Interest or Equity Interest within one hundred twenty (120) Days after North Carolina Power exercises its right of first refusal, unless (i) the failure to consummate the transfer to North Carolina Power within such one hundred twenty (120) Day period arises out of the failure of North Carolina Power to timely obtain the necessary FERC, NCUC, or other utility related regulatory approvals with respect to such consummation and (ii) commencing on the date of the Notice, North Carolina Power shall have used reasonable efforts to obtain such approvals. In such case, such one hundred twenty (120) Day period shall be extended for such time as is necessary to obtain such approvals (but in no event longer than an additional one hundred twenty (120) Days) unless all such approvals have been obtained within such period, in which case North Carolina Power shall in any event have sixty (60) Days from the date the last such approval was obtained to consummate such transfer to North Carolina Power. If such consummation shall have not taken place within the initial one hundred twenty (120) Day period provided in (c) above, and such failure to consummate is not the result of North Carolina Power’s failure to timely obtain the necessary approval noted above, North Carolina Power shall pay Interest to Operator on the amount payable in respect of such Transfer Interest or Equity Interest beginning on the first Day after the conclusion of such initial one hundred twenty (120) Day period.

(d) In the event North Carolina Power elects not to exercise its right to purchase pursuant to the foregoing provisions, then for a period of one year from the later of the date (x) North Carolina Power notifies Operator of its election not to purchase or (y) the expiration of the applicable time periods provided in (c) above, Operator shall be free to transfer such Transfer Interest to a Transferee, or to transfer such Equity Interest, provided that in either case the transfer is at a price no lower than and on terms not materially more favorable than those offered in the Notice. For the purpose of this Section 13.7 and Article 17 hereof, Transferee shall mean a person who is either an experienced power plant operator, legally permitted to operate the Facility, or who shall have engaged, for the Term, the services of another person who is an experienced power plant operator legally permitted to operate the Facility and who does not, as a result of any transfer pursuant to this Section 13.7, violate North Carolina Power’s then publicly stated policy on Ownership Diversity of Non-Company Generation (“Ownership Diversity Policy”). Operator shall ensure that, by the terms of such transfer, North Carolina Power’s right of first refusal shall continue on the terms and conditions contained herein with respect to any subsequent transfer. Any transfer or sale of any Transfer Interest or Equity Interest shall not extinguish North Carolina Power’s right of first refusal with respect to any portion of the Facility, the Operator, the partners in Operator, or an entity thrilled for the purpose of holding interests in the Facility or any of the aforementioned entities, as the case may be, not transferred pursuant to such sale. Any lease of any Transfer Interest shall not extinguish North Carolina Power’s right of first refusal with respect to any extensions of such lease or with respect to any other leases, sales or other dispositions of any Transfer Interest. Notwithstanding any other provisions to the contrary, Operator agrees (i) that it will ensure that the terms of any transfer (other than a transfer to North Carolina Power) provide for the continued operation of the Facility in accordance with and under the terms of this Agreement; and (ii) any transfer (other than a transfer to North Carolina Power) of any Transfer Interest or Equity Interest which results directly or indirectly in a transfer of management control over the operation of the Facility shall be to a Transferee and require the Transferee’s acceptance of an assignment (pursuant to Section 17.1 of this Agreement) of the transferor’s obligations under this Agreement with respect to the operation of the Facility.

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(e) Notwithstanding the foregoing; North Carolina Power shall not exercise its right of first refusal, and the obligation of the second sentence of Section I3.7(b) to provide the Notice to North Carolina Power shall not apply under the following circumstances, provided that any such transfer or sale does not result in a violation of the Ownership Diversity Policy:

(i) any sale to implement the sale and leaseback of the Facility, or any assignment or pledge of an interest in the Facility or Operator, the partners in Operator, or an entity formed for the purpose of holding interests in the Facility or any of the aforementioned entities, which is undertaken for the purpose of obtaining financing for the Facility prior to or within twelve (12) months after the Commercial Operations Date.

(ii) any transfer of a Transfer Interest or Equity Interest whereby North Carolina Power’s ownership would cause, or in the reasoned legal opinion of Operator’s counsel is reasonably likely to cause the Facility to lose its status as a “Qualifying Facility” under the Public Utility Regulatory Policies Act of 1978, as amended or result in any governmental or regulatory action to reduce the amounts payable by North Carolina Power under this Agreement, provided, however, that this subsection (ii) shall not apply to transfers of a Transfer Interest or an Equity Interest comprising 100% of the interest in the Facility or Operator, or all of the partners in Operator.

(iii) any transfer or sale of an Equity Interest to an entity which is, directly or indirectly, controlled by, or in control of, or under common control with the Operator or to a Transferee which is a partner in the Operator on or before Financial Closing.

(iv) any transfer of a Transfer Interest or Equity Interest which (x) does not result directly or indirectly in a transfer of management control over the Facility, or (y) does not exceed any percent (50%) of the total ownership interest in the Facility or Operator, the partners in Operator, or an entity formed for the purpose of holding interests in the Facility or any of the aforementioned entities or (z) does not, when combined with other transfers made pursuant to this paragraph, exceed fifty percent (50%) of such total ownership interests;

(f) The Operator covenants and agrees to sign, execute and deliver, or cause to be signed, executed and delivered, and to do or make, or cause to be done or made, upon the written request of North Carolina Power, any and all agreements, instruments, papers deeds, acts or things, supplemental, confirmatory or otherwise, as may be required by North Carolina Power for the purpose of or in connection with the right of first refusal established hereby.

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        13.8    Neither Party shall be liable to the other Party for indirect, incidental, or consequential damages arising out of the performance or non-performance of its obligations under this Agreement, regardless of whether such liability arises out of claims based on contract, tort (including negligence), strict liability, operation of law or otherwise. Notwithstanding the above waiver of indirect, incidental or consequential damages, each Party to this Agreement shall be liable for obligations (i) to pay direct damages including, but not limited to, liquidated damages to the other Party as expressly set forth in this Agreement and (ii) to indemnify the other Party against those liabilities to third parties that are imposed by the first sentence of Section 13.2 of this Agreement.

ARTICLE 14: Force Majeure

        14.1    Neither Party shall be responsible or liable for or deemed in breach hereof because of any delay in the performance of or inability to perform its obligations hereunder to the extent that it is due to circumstances beyond the reasonable control of the Party experiencing such delay or inability, including but not limited to acts of God; unusually severe weather conditions; strikes or other labor difficulties; war; riots; except as described in Section 14.2, requirements, actions or failures to act on the part of governmental authorities or legislative, regulatory or judicial bodies or agencies; inability despite due diligence to obtain required permits or licenses; accident; or fire (such causes hereinafter called “Force Majeure”); provided that:

(a) The non-performing Party gives the other Party written notice describing the particulars of the occurrence within forty-eight (48) hours of the beginning of said occurrence;

(b) The suspension of performance is of no greater scope and of no longer duration than is required by the Force Majeure;

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(c) The non-performing Party uses all reasonable efforts to remedy its inability to perform;

(d) When the non-performing Party is able to resume performance of its obligations under this Agreement, that Party shall give the other Party written notice to that effect;

(e) The Force Majeure was not caused by or connected with the non-performing Party’s negligence, gross negligence, willful misconduct or failure to comply with any applicable law, rule, regulation, order or ordinance or any breach or default of this Agreement; and

(f) The Force Majeure was not attributed to normal wear and tear or flaws randomly experienced in power generation materials and equipment and their assembly and operation.

(g) Force Majeure, when applied to Operator, does not include unavailability of equipment to Operator, inability of Operator to renew permits, labor strikes or slowdowns of employees of Operator following the commercial Operations Date, unless same is caused by an occurrence which would fit the definition of Force Majeure in this Article 14.

        14.2    The term Force Majeure does not include (i) governmental, legislative, regulatory or judicial action to the extent that it affects the cost of Operator’s supply of fuel or any alternative supplies of fuel or (ii) the lack or unavailability of money or changes in market conditions that affect the cost or availability of Operator’s supply of fuel or any alternate supplies of fuel.

        14.3   In no event will any condition of Force Majeure extend (1) the deadline for Operator posting security pursuant to this Agreement or (ii) the Term of this Agreement. If any condition of Force Majeure delays a Party’s performance for a time period greater than eighteen (18) Months, the Party not delayed by such Force Majeure may terminate this Agreement without further obligation or liability of either Party, except obligations maturing prior to such termination, or extend such period at its sole discretion if the Party delayed by such Force Majeure is exercising due diligence in its efforts to cure the condition of Force Majeure.

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        14.4    In no event will North Carolina Power pay Operator for Dependable Capacity during a Force Majeure Period (for the purpose of this Article 14 Force Majeure Period means the period of time beginning with the date designated in Operator’s notice provided pursuant to Section 14.1(a) hereof and ending with Operator’s notice provided pursuant to Section 14.1(d) hereof) when Operator is unable to deliver the Facility’s Net Electrical Output to North Carolina Power.

ARTICLE 15: Taxes and Claims for Labor and Materials

        15.1    All present or future federal, state, municipal or other lawful taxes applicable to the sale of Net Electrical Output or Dependable Capacity shall be paid by Operator.

        15.2    Operator will pay and discharge (a) all lawful taxes, assessments or governmental charges or levies imposed upon it or in respect of all or any part of its property or business and (b) all trade accounts payable and all claims for work, labor or materials before the later of the due date thereof and the date upon which the amount due, if unpaid, would become a lien or charge on any of its property; provided, however, that Operator shall not be required to pay any such tax, assessment, charge, levy, account payable or claim if (i) the validity, applicability or amount thereof is being contested in good faith by appropriate actions or proceedings which will prevent the forfeiture or sale of any property of Operator or any material interference with Operator’s use thereof and (ii) Operator shall set aside on its books reserves deemed by it to be adequate with respect thereto.

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ARTICLE 16: Choice of Law

        16.1    This Agreement shall be interpreted, construed and governed by the laws of the Commonwealth of Virginia. The Parties hereby submit to the jurisdiction of courts located in, and venue is hereby stipulated to be in, Richmond, Virginia.

ARTICLE 17: Miscellaneous Provisions

        17.1    Neither Party shall assign this Agreement or any portion thereof without the prior written consent of the other Party, which consent shall not be unreasonably withheld; provided, however, North Carolina Power agrees to give such consent in the event of an assignment by Operator to its parent or wholly owned subsidiary; and provided further that: (i) any assignee shall be a Transferee who shall expressly assume assignor’s obligations hereunder, (ii) no such assignment shall impair any security given by Operator hereunder, and (iii) unless expressly agreed by the other Party, no assignment, whether or not consented to, shall relieve the assignor of its obligations hereunder in the event its assignee fails to perform. North Carolina Power shall consent to the assignment by Operator of its rights hereunder as security for the construction and/or permanent financing for the Facility and shall execute such documents as are requested by Operator and reasonably satisfactory to North Carolina Power to evidence such consent, including documents referred to in Section 18.1(d) of this Agreement.

        17.2    This Agreement, including the appendices and/or Exhibits hereto, can be amended only by agreement between the Parties in writing.

        17.3    The failure of either Party to insist in any one or more instances upon strict performance of any provisions of this Agreement, or to take advantage of any of its rights hereunder, shall not be construed as a waiver of any such provisions or the relinquishment of any such right or any other right hereunder, which shall remain in full force and effect.

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        17.4    The headings contained in this Agreement are used solely for convenience and do not constitute a part of this Agreement, nor should they be used to aid in any manner in the construction of this Agreement.

        17.5    This Agreement is intended solely for the benefit of the Parties hereto. Nothing in this Agreement shall be construed to create any duty to, or standard of care with reference to, or any liability to, any person not a Party to this Agreement.

        17.6    This Agreement shall not be interpreted or construed to create an association, joint venture, or partnership between the Parties or to impose any partnership obligation or liability upon either Party. Neither Party shall have any right, power or authority to enter into any Agreement or undertaking for, or act on behalf of, or to act as or be an agent or representative of, or to otherwise bind, the other Party.

        17.7    Cancellation, expiration or earlier termination of this Agreement shall not relieve the Parties of obligations that by their nature should survive such cancellation, expiration or termination, including without limitation warranties, remedies, promises of indemnity and confidentiality.

        17.8    All terms and conditions of the Confidentiality Agreement between North Carolina Power and Operator, dated as of June 27, 1990, shall survive and remain in effect during the Term of this Agreement, and the cancellation, expiration or earlier termination of this Agreement shall not relieve the Parties of obligations under such Confidentiality Agreement that by their nature should survive such cancellation, expiration or termination.

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ARTICLE 18: Statutory and Regulatory Changes

        18.1    The Parties recognize and hereby agree that if any federal, state or municipal government or regulatory authority, including without limitation the NCUC, should for any reason enter an order, modify its rules, or take any action whatsoever ordering North Carolina Power to pay bank to its customers amounts collected as a result of payments made hereunder or specifically disallowing North Carolina Power the recovery from its customers of all or any portion of the payments (i) made hereunder, or (ii) to be made hereunder for Dependable Capacity and Net Electrical Output (“Disallowance”) in excess of the sum of payments made, or to be made, for Dependable Capacity and Net Electrical Output based on the energy and capacity prices established (notwithstanding any limitations on the size of the Facility) by the NCUC pursuant to 18 C.F.R. 292.304(c) (currently represented by Schedule 19 POWER PURCHASES FROM COGENERATION AND SMALL POWER PRODUCTION QUALIFYING FACILITIES) and in effect at the time of the Disallowance for the period of time in which such Disallowance is in effect, then the following terms and conditions shall be applicable to such Disallowance, unless such Disallowance is due to North Carolina Power’s failure to seek recovery or comply with procedural requirements governing recovery of such costs. The number of years remaining in the Term of this Agreement will constitute the Schedule 19 length of contract used to determine the payment for Dependable Capacity hereunder.

(a) If the Disallowance occurs before the fifteenth anniversary of the Commercial Operations Date, North Carolina Power shall continue to pay for Dependable Capacity at the Capacity Purchase Price set forth in Article 10 through the fifteenth anniversary of the Commercial Operations Date. Payments for Dependable Capacity beginning on the fifteenth anniversary of the Commercial Operations Date shall not exceed the amount unaffected by the Disallowance. Further, North Carolina Power may, at its option, beginning on the fifteenth anniversary of the Commercial Operations Date withhold up to seventy-five (75) percent of the payments for Dependable Capacity until the sooner of (i) the eighteenth anniversary of the Commercial Operations Date or (ii) the entire amount of the Disallowance is repaid with interest at the Interest Rate from the date each part of the Disallowance was paid to Operator. In the event that such withholding does not fully repay the Disallowance and accrued interest at the Interest Rate by the eighteenth anniversary of the Commercial Operations Date, then Operator shall pay the remainder to North Carolina Power within twenty eight (28) Days after the eighteenth anniversary of the Commercial Operations Date in a lump sum;

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(b) If the Disallowance occurs after the fifteenth anniversary of the Commercial Operations Date, all future payments for Dependable Capacity shall not exceed the amount unaffected by the Disallowance. Further, the Operator shall repay the full amount of the Disallowance with interest at the Interest Rate by the later of (i) one year from the date of such Disallowance or (ii) the eighteenth anniversary of the Commercial Operations Date;

(c) In no event shall the Disallowance begin earlier than the date of the final order in which such Disallowance occurred.

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(d) Not later than ten (10) days after North Carolina Power receives notice that any federal, state, or municipal government regulatory authority, including the NCUC; has been requested to make or is considering a Disallowance, North Carolina Power shall use its best efforts to notify Operator in writing. Within thirty (30) days of the date of a final order creating a Disallowance, Operator shall, at its option, either grant to North Carolina. Power a valid second lien (the “Second Lien”) on the Facility securing North Carolina Power’s right to repayment of the Disallowance or provide to North Carolina Power a letter of credit in a face amount set forth below in form and substance satisfactory to Virginia Power. Any letter of credit issued or Second Lien granted pursuant to this Section shall secure the maximum amount of the Disallowance that Operator is obligated to repay North Carolina Power pursuant to this Agreement, based on the parties’ estimate of the amount of such Disallowance that could accrue assuming the Disallowance continues through the 15th anniversary of the Commercial Operations Date. Any Second Lien and the payment obligations secured thereby and all rights and privileges (including any rights to rents, income, profits, insurance proceeds and condemnation awards) granted to secure North Carolina Power shall be junior and in all respects subordinate to (i) the lien of any mortgage, deed of trust and/or other security interest securing construction or term financing, (ii) the obligations secured thereby (subject to the last sentence of this Section 18.1(d)), any “Permitted Loan Modification” (as defined below) and (iv) any other modifications to such obligations and instruments to which North Carolina Power consents (such consent not to be unreasonably withheld), (each of the foregoing being referred to herein as a “First Lien”). A “Permitted Loan Modification” shall mean and include (i) any increase in the principal amount of any construction or term financing if such increase is attributable to (A) improvements, alterations or repairs to the Facility including, without limitation, improvements required to comply with applicable law or necessary for the proper operation or maintenance of the Facility, or (B) interest accrual arising from or after a default by the borrower or as a result of a restructure of the loan after or in anticipation of any such default, (ii) any refinancing of construction or term financing to the extent such refinancing does not exceed 115% of the original principal amount of the construction or term financing which is being refinanced, (iii) any amendments, modifications or supplements to a First Lion which do not extend the term thereof or increase the amount scoured thereby, and (iv) any modifications, amendments, agreements, deeds of trust, lions or security interests executed in connection with or securing any of the foregoing. The form and substance of the instruments or documents creating the Second Lien shall be in all respects satisfactory to the holders of or beneficiaries under the First Lien and North Carolina Power consistent with (i) its position as a second lienor and standard commercial practice with respect to project financing and (ii) this Section 18.1(d). Such instruments or documents creating the Second Lien and documents providing for the use of Common Facilities by the Facility to ensure that the Facility can be owned and operated independent of the Roanoke Valley I Project shall be negotiated prior to or as part of any third party financing requiring the consent of North Carolina Power. North Carolina Power shall not be obligated to consent to such financing until such instruments or documents are negotiated and agreed to by the Parties. Operator shall provide the subordination provisions required by the lenders for the Roanoke Valley I Project, which shall serve as the basis for the subordination provisions for the Second Lien; provided, however, to the extent that these provisions conflict with the conditions of such subordination set forth in this Section 18.1(d), Section 18.1(d) shall control. Notwithstanding the foregoing, nothing contained in this Section 18.1(d) or the Second Lien (including the subordination provisions thereof) shall limit North Carolina Power’s right (i) to enforce any of its rights under this Agreement in the event of any breach by Operator of its obligations under this Agreement (including, without limitation, the right to bring an action for damages resulting from Operator’s failure to perform in accordance with this Article 18), or (ii) to enforce the Second Lien at any time after the 18th anniversary of the Commercial Operations Date and, in connection therewith, to sell the Facility subject to the First Lien.

The Parties obligate themselves to all good faith efforts to establish, if practicable, an appeal and overruling of the Disallowance or a superseding order, approval of modified rules or tariffs, or other action so as to allow timely resumption of full or, failing that, adjusted payments hereunder.

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ARTICLE 19: Coordination of Communications

        19.1    Operator agrees to coordinate with North Carolina Power all press, news, or other releases to private or public media groups relating to this Agreement and to allow North Carolina Power to review such releases in advance of release. Further, Operator agrees to comply with all reasonable requests of North Carolina Power as to the content or manner of publication of such releases.

        19.2    Operator agrees to allow North Carolina Power, at North Carolina Power’s option, to accompany Operator and/or participate in any discussions or filings with governmental or regulatory agencies relating to this Agreement.

ARTICLE 20: Entirety

        20.1    This Agreement and Exhibits A, B, and C attached hereto are intended by the Parties as the final expression of their agreement and are intended also as a complete and exclusive statement of the terms of their agreement with respect to the Net Electrical Output and Dependable Capacity sold and purchased hereunder and the manner of operation and maintenance of the Facility. All prior written or oral understandings, offers or other communications of every kind pertaining to the sale of Net Electrical Output and Dependable Capacity hereunder to North Carolina Power by Operator are hereby abrogated and superseded.

        IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed the ____ day of __________, 2000.

WESTMORELAND — LG&E PARTNERS, a
Virginia general partnership,
By: Its GENERAL PARTNERS:

VIRGINIA ELECTRIC AND
POWER COMPANY WESTMORELAND-ROANOKE VALLEY, L.P.,
a Delaware limited partnership
By: WEI-ROANOKE VALLEY, INC., a
Delaware corporation

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By: /s/ E. Paul Hilton
Title: Senior Vice President-Bulk Sales By: /s/ W. Michael Lepchitz
Title: President

LG&E ROANOKE VALLEY, L.P., a
California limited partnership
By: LG&E POWER 16 INCORPORATED, a California corporation

By: /s/ George W. Basinger
Title: President and Chief Financial Officer

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EXHIBIT A-1

EXHIBIT A

DATA REQUIRED TO PERFORM INTERCONNECTION STUDY

1. Electrical one-line of Facility

2. Explanation of proposed equipment protection and control scheme (may be shown functionally on one line)

3. Site plan showing plant layout, property lines, access roads and switchyard boundaries

4. Preliminary equipment layout and arrangement for switchyard and generator step-up transformer (GSU)

5. Estimated GSU impedance ± 20 percent

6. GSU connection and winding

7. Estimated generator reactances ± 10 percent

8. Estimated generator kilowatt rating ± 10 percent

9. Estimated generator kilovar rating ± 10 percent

10. Estimated station auxiliary load ± 20 percent

11. Requirements for construction and start-up power

12. Project schedule (I-J or bar chart format) including but not limited to the following milestones:

12.1 QF Status obtained

12.2 Engineering 30% complete

12.3 One line approved

12.4 Financial Closing

12.5 Major licenses/permits

12.6 Major material procurement

12.7 Start construction

12.8 Engineering 70% complete

12.9 Utility technical submittals complete

12.10 Operating procedures finalized

12.11 Energize interconnect

12.12 Initial synchronizing date

12.13 Capacity test complete

12.14 Anticipated Commercial Operations Date

        Data submitted in a preliminary or estimated form should be updated within 30 days after final equipment arrangements and specifications are established.

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EXHIBIT B-1

EXHIBIT B

EXAMPLES OF PAYMENTS FOR DEPENDABLE CAPACITY

ASSUME: 40 MW DEPENDABLE CAPACITY
CAPACITY PURCHASE PRICE - 1.0(cent)/KWH
HOURS PER BILLING PERIOD - 720 HOURS

CAPACITY PAYMENT FOR BILLING PERIOD???

EXAMPLE NO. 1: A) FACILITY DISPATCHED AT 40 MW - FACILITY OPERATES AT 40 MW. SEE 10.7(c).

B) CAPACITY PAYMENT FOR BILLING PERIOD = (720)(40MWX$0.01/KWH) = $288,000.00

EXAMPLE NO. 2: A) FACILITY DISPATCHED TO 40 MW - FACILITY OPERATES AT 38 MW. NO ACCUMULATED EXCESS GENERATION AVAILABLE. SEE 10.7(f)(i).

B) CAPACITY PAYMENT FOR BILLING PERIOD = (720)(38MW) ($0.01/KWH) = $273,600.00

EXAMPLE NO. 3: A) FACILITY DISPATCHED TO 40 MW - FACILITY OPERATES AT 42 MW. ACCUMULATES 2 MWH OF EXCESS GENERATION. HAS NO UNDER GENERATION (DOES NOT MISS DISPATCH) DURING PERIOD FORFEITS EXCESS MWH'S. SEE 10.7(c) AND 10.7(h).

B) CAPACITY PAYMENT FOR BILLING PERIOD = (720)(40MW) ($0.01/KWH) = $288,000.00

EXAMPLE NO. 4: A) FACILITY HAS 5 DAYS OF FULL OR PARTIAL SCHEDULED OUTAGE (100 HRS) OTHERWISE GENERATES AT DISPATCH LEVEL. SEE 10.7(e)

B) CAPACITY PAYMENT FOR BILLING PERIOD = (620)(40MW) ($0.01/KWH) + (100)(40MW) ($.0.01/KWH) = $288,000.00

EXAMPLE NO. 5: A) FACILITY DISPATCHED TO 20 MW - FACILITY OPERATES AT 20 MW. SEE I0.7(d)(i) AND I0.7(d)(ii).

B) CAPACITY PAYMENT FOR BILLING PERIOD = (720)(20MW) ($0.01/KWH) FOR NEO PLUS [(720)(40MW) — (720)(20MW)] ($0.01) = $288,000.00

EXAMPLE NO. 6: A) FACILITY DISPATCHED TO 20 MW - FACILITY OPERATES-AT 18 MW. NO ACCUMULATED EXCESS GENERATION AVAILABLE. SEE 10.7(g)(i) AND 10.7(g)(ii).

B) CAPACITY PAYMENT FOR BILLING PERIOD (720)(18MW) ($0.01/KWH) FOR NEO PLUS [(720)(40MW) — (720)(20MW)) ($0.01) — $273,600.00

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EXHIBIT B-2

EXAMPLE NO. 7: A) FACILITY DISPATCHED TO 20 MW - FACILITY OPERATES AT 22 MW. ACCUMULATES 2 MWH OF EXCESS GENERATION. HAS NO UNDER GENERATION (DOES NOT MISS DISPATCH) DURING PERIOD. FORFEITS EXCESS MWH'S. SEE 10.7(d)(i), 10.7(d)(ii) AND 10.7(h).

B) CAPACITY PAYMENT FOR BILLING PERIOD = (720)(20MW) ($0.01/KWH) FOR NEO PLUS [(720)(40MW) — (720)(20MW)] ($0.01) = $288,000.00

EXAMPLE NO. 8: A) FACILITY DISPATCHED TO 0 MW - FACILITY OPERATES AT 0 MW. SEE 10.7(d)(i) AND 10.7(d)(ii).

B) CAPACITY PAYMENT FOR BILLING PERIOD = (720)(0MW) ($0.01/KWH) FOR NEO PLUS [(720)(40MW) — (720)(0MW)] ($0.01) = $288,000.00

EXAMPLE NO. 9: A) FACILITY DISPATCHED TO 40 MW - FACILITY OPERATES AT 45 MW FOR 100 HRS., 20 MW FOR 100 HRS, AND 40 MW FOR 520 HRS.

B) ACCUMULATED MWH’S = (100)(2MW) = 200 MWH’S SEE 10.7(h)

C) CAPACITY PAYMENT FOR BILLING PERIOD =
(620)(40MW)($0.01/KWH) = $248,000.00 FOR NEO, SEE 10.7(c)
+ (100)(20)($0.01/KWH) $20,000.00 FOR NEO, SEE 10.7(g)(i)
+ (100)(2MW) ($0.01) = $2,000.00 SEE 10.7(g)(iii)
TOTAL = $270,000.00

NOTE: 300 MWH'S OF EXCESS GENERATION FORFEITED

EXAMPLE NO. 10: A) FACILITY DISPATCHED TO 40 MW FOR 600 HRS AND 20 MW FOR 100 HRS AND 20 HOURS OF SCHEDULED OUTAGE — FACILITY OPERATES WHEN DISPATCHED TO 40 MW AT 45 MW FOR 100 HRS AND 40 MW FOR 500 HRS, AND WHEN DISPATCHED TO 20 MW FACILITY OPERATES FOR 50 HRS AT 10 MW AND FOR 50 HRS AT 20 MW.

B) ACCUMULATED MWH’S = (100) (2MW) = 200 MWH’S SEE 10.7(h)

C) CAPACITY PAYMENT FOR BILLING PERIOD =
(500)(40MW)($0.01/KWH) $200,000.00 SEE 10.7(c)
+ (20)(40MW) ($0.01/KWH) $8,000 SEE 10.7(e)
+ (100)(40MW) ($0.01/KWH) $40,000.0 SEE 10.7(c)
+ (50)(10) ($0.01/KWH) $5,000.00 SEE 10.7(g)(i)
+ (50)(20M W)($0.01) $10,000.00 SEE 10.7(c)
+ [(100)(40MW) — (I OO)(20M W)] ($0.01) = $20,000.00 SEE 10.7(g)(ii)
+ (50) (1MW) ($0.01/KWH) $500.00 SEE 10.7(g)(iii)
TOTAL - $283,500.00

NOTE: 450 MWH’S OF EXCESS GENERATION FORFEITED

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EXHIBIT B-3

EXAMPLE NO. 11: A) FACILITY DISPATCHED TO 40 MW - FACILITY OPERATES AT 45 MW FOR 100 HRS, 40 MW FOR 500 HRS, AND 0 MW FOR 120 HRS.

B) ACCUMULATED MWH’S — (100) (2MW) = 200 MWH’S SEE 10.7(h)

C) CAPACITY PAYMENT FOR BILLING PERIOD =
(500)(40MW)($0.01 /K WH) = $200,000.00 SEE 10.7(c)
+ (100)(40)($0.01/KWH) = $40,000.00 SEE 10.7(c)
+ (100)(2MW)($0.01) = $2,000.00 SEE 10.7(h)
TOTAL = $242,000.00

NOTE: 300 MWH’S OF EXCESS GENERATION FORFEITED

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EXHIBIT C-1

EXHIBIT C

ROANOKE VALLEY (/(l PROJECT STEAM DISTRIBUTION AND METERING SYSTEM

Key:

(1) Steam meter located at RVP-I used to measure RVP-I’s steam output*

(2) Steam meter located at RVP-II used to measure RVP-II’s steam output*

(3) Steam meter located at RVP-I host used to measure steam sales to RVP-I host

(4) Steam meter located at RVP-II host used to measure steam sales to RVP-II host

* Defaults in Section 5.3(a) (18,19) tied to steam deliveries between RVP-I/II upstream of these meters

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EX-10

Exhibit 10.4

EX-10

Exhibit 10.5

AMENDMENT NO. 1 TO AMENDED AND RESTATED
CONSTRUCTION AND TERM LOAN AGREEMENT

        This AMENDMENT NO. 1 TO AMENDED AND RESTATED CONSTRUCTION AND TERM LOAN AGREEMENT, dated as of November 4, 1994, is made by and among (i) WESTMORELAND-LG&E PARTNERS, a Virginia general partnership, as Borrower, (ii) CREDIT SUISSE, NATIONAL WESTMINSTER BANK plc, THE BANK OF NOVA SCOTIA, THE SUMITOMO BANK, LIMITED, New York Branch, THE SUMITOMO TRUST AND BANKING CO., LTD., New York Branch, THE INDUSTRIAL BANK OF JAPAN, LTD., New York Branch, UNION BANK, UNION BANK OF SWITZERLAND, THE FUJI BANK LIMITED, Los Angeles Agency, CREDIT LYONNAIS, New York Branch, CREDIT SUISSE, Cayman Island Branch, THE TORONTO-DOMINION BANK and each Purchasing Lender, as Lenders, (iii) THE PRUDENTIAL INSURANCE COMPANY OF AMERICA and each Purchasing Institutional Lender, as institutional Lenders, (iv) CREDIT SUISSE, New York Branch, as the Issuing Bank, (v) CREDIT SUISSE, NATIONAL WESTMINSTER BANK plc, THE BANK OF NOVA SCOTIA and THE SUMITOMO BANK, LIMITED, New York Branch, as Co-Agents, and (vi) CREDIT SUISSE, as Agent for the Lenders, the Institutional Lenders and the issuing Bank.

W I T N E S S E T H:

        WHEREAS, the Amended and Restated Construction and Term Loan Agreement, dated as of December 1, 1993 (the “Credit Agreement”), among Borrower, the Lenders, the Institutional Lenders, the Issuing Bank, the Co-Agents and Agent sets forth, among other things, the terms and conditions upon which the Lenders and the institutional Lenders are willing to make available to Borrower certain Loans and Institutional Loans (unless otherwise defined herein, terms used herein and defined in the Credit Agreement shall have the meanings indicated in the Credit Agreement, and, unless otherwise specified herein, references to any “Article” or “Section” shall refer to the appropriate article or section of the Credit Agreement); and

        WHEREAS, Borrower, the Lenders, the Institutional Lenders, the Issuing Bank, the Co-Agents and Agent desire to amend the Credit Agreement as provided herein;

        NOW, THEREFORE, IT IS AGREED:

        Section 1.      Amendment. Subject to the limitations contained in Section 2 hereof, the Credit Agreement shall be amended as follows:

        The first sentence of Section 7.l(j) is hereby amended (i) by inserting a comma in place of “or” in the third line thereof; and (ii) by adding “or WEI” immediately after “KCCC” in the third line thereof.

        Section 2.      Limitations. Except as expressly provided herein, all of the representations, warranties, terms, covenants and conditions of the Credit Agreement shall remain unamended and shall continue to be, and shall remain, in full force and effect in accordance with their respective terms. This Amendment No. 1 shall be limited precisely as provided for herein, and shall not be deemed to be a waiver of, amendment of, consent to or modification of any other term of provision of the Credit Agreement.

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        Section 3.      Miscellaneous.

               (a)     On and after the effective date of this Amendment No. 1, each reference in the Credit Agreement to “this Agreement’, “hereunder”, “hereof” or words of like import, and each reference to the credit Agreement by the words thereunder”, “thereof or words of like import in any Project Document, Loan Instrument or other document executed in connection with the Credit Agreement, shall mean and be a reference to the Credit Agreement, as amended or otherwise modified by this Amendment No. 1.

               (b)     This Amendment No. 1 may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

               (c)     This Amendment No. 1 shall be governed by and construed and interpreted in accordance with the laws of the State of New York without regard to the principles of conflict of laws.

               (d)     All agreements, covenants, conditions and provisions of this Amendment No. 1 shall be binding upon and inure to the benefit of the successors and assigns of each of the parties hereto.

        IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to execute and deliver this Amendment No. 1 as of the date first above written.

BORROWER:

WESTMORELAND-LG&E PARTNERS

By: WESTMORELAND-ROANOKE VALLEY, L.P.,
as general partner

By: WEI-ROANOKE VALLEY, INC.,
AS GENERAL PARTNER

By: /s/ Matthew S. Sakurada
Name: Matthew S. Sakurada
Title: President

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By: LG&E ROANOKE VALLEY, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP,
as general partner

By: LG&E POWER 16 INCORPORATED,
as general partner

By: /s/ S. Bradford Rives
Name: S. Bradford Rives
Title: Vice President and Treasurer

AGENT, CO-AGENTS AND LENDERS:

CREDIT SUISSE, as Agent, Co-Agent and Lender

By: /s/ p.p. Roland Pfeuti
Name: Roland Pfeuti
Title: Member of Senior Management

By: /s/ Bryon McGregor
Name: Bryon McGregor
Title: Member of Senior Management

NATIONAL WESTMINSTER BANK PLC, as Co-Agent and Lender

By: /s/ p.p. T. Patrick Holland
Name: T. Patrick Holland
Title: Vice President

THE BANK OF NOVA SCOTIA, as Co-Agent and Lender

By: _____________________________
Name:
Title:

THE SUMITOMO BANK, LIMITED, New York Branch as Co-Agent and Lender

By: _____________________________
Name:
Title:

THE SUMITOMO TRUST AND BANKING CO., LTD
New York Branch, as Lender

3

By: _____________________________
Name:
Title:

THE INDUSTRIAL BANK OF JAPAN, LTD., New York Branch, as Lender

By: /s/ [illegible]
Name:
Title:

UNION BANK, as Lender

By: /s/ Julie Bloomfield
Name: Julie Bloomfield
Title: AVP

UNION BANK OF SWITZERLAND, as Lender

By: _____________________________
Name:
Title:

THE FUJI BANK LIMITED, Los Angeles Agency, as Lender

By: _____________________________
Name:
Title:

CREDIT LYONNAIS, New York Branch, as Lender

By: _____________________________
Name:
Title:

CREDIT LYONNAIS, Cayman Island Branch, as Lender

By: _____________________________
Name:
Title:

4

THE TORONTO DOMINION BANK, as Lender

By: /s/ Linda A. Lavin
Name: Linda A. Lavin
Title: Director

5

INSTITUTIONAL LENDER:

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA,

as Institutional Lender and Institutional Agent

By: /s/ Joseph J. Lemanowicz
Name: Joseph J. Lemanowicz
Title: Vice President

ISSUING BANK:

CREDIT SUISSE, New York Branch,
as Issuing Bank

By: /s/ p.p. Roland Pfeuti
Name: Roland Pfeuti
Title: Associate

6

EX-10

Exhibit 10.6

AMENDMENT NO. 2 TO AMENDED AND RESTATED
CONSTRUCTION AND TERM LOAN AGREEMENT

        This AMENDMENT NO. 2 TO AMENDED AND RESTATED CONSTRUCTION AND TERM LOAN AGREEMENT, dated as of December 30, 1994, is made by and among (i) WESTMORELAND-LG&E PARTNERS, a Virginia general partnership, as Borrower, (ii) CREDIT SUISSE, NATIONAL WESTMINSTER BANK plc, THE BANK OF NOVA SCOTIA, THE SUMITOMO BANK, LIMITED, New York Branch, THE INDUSTRIAL BANK OF JAPAN, LTD., New York Branch, UNION BANK, UNION BANK OF SWITZERLAND, THE FUJI BANK LIMITED, Los Angeles Agency, CREDIT LYONNAIS, New York Branch, CREDIT SUISSE, Cayman Island Branch, THE TORONTO-DOMINION BANK and each Purchasing Lender, as Lenders, (iii) THE PRUDENTIAL INSURANCE COMPANY OF AMERICA and each Purchasing Institutional Lender, as Institutional Lenders, (iv) CREDIT SUISSE, New York Branch, as the Issuing Bank, (v) CREDIT SUISSE, NATIONAL WESTMINSTER BANK plc, THE BANK OF NOVA SCOTIA and THE SUMITOMO BANK, LIMITED, New York Brach, as Co-Agents, and (vi) CREDIT SUISSE, as Agent for the Lenders, the Institutional Lenders and the Issuing Bank.

W I T N E S S E T H:

        WHEREAS, the Amended and Restated Construction and Term Loan Agreement, dated as of December 1, 1993, as amended by Amendment No. 1 dated as of November 4, 1994 (the “Credit Agreement”), among Borrower, the Lenders, the Institutional Lenders, the Issuing Bank, the Co-Agents and Agent sets forth, among other things, the terms and conditions upon which the Lenders and the Institutional Lenders are willing to make available to Borrower certain Loans and Institutional Loans (unless otherwise defined herein, terms and used herein and defined in the Credit Agreement shall have the meanings indicated in the Credit Agreement, and unless otherwise specified herein, references to any “Article” or “Section” shall refer to the appropriate article or section of the Credit Agreement); and

        WHEREAS, Borrower, the Lenders, the Institutional Lenders, the Issuing Bank, the Co-Agents and Agent desire to amend the Credit Agreement as provided herein:

        NOW, THEREFORE, IT IS AGREED:

        Section 1.      Amendment. Subject to the limitations contained in Section 2 hereof, the Credit Agreement is hereby amended as follows:

               (a)     Section 6.1(c)(vii) is hereby amended by inserting “up to a maximum amount of $18,000,000 prior to the Tranche B Conversion date and thereafter” after the comma in the fourth line thereof.

               (b)     Section 6.1(c) is hereby amended by adding a new subsection (xii) as follows:

1

               “(xii)        Notwithstanding anything contained herein, Borrower shall not make any distributions to partners prior to the Tranche A Conversion Date.”

               (c)     Section 7.1(j) is hereby amended by deleting “, WCSC, KCCC” in the third line thereof.

               (d)     Exhibit X is hereby amended by adding, in the appropriate alphabetic order, the following definitions:

               “Assumption Agreement” means the Assumption Agreement, dated as of December __, 1994, by Consol Kentucky in favor of Westmoreland and certain of its affiliates.

               “Consol Energy” means Consol Energy Inc., a Delaware corporation.

               “Consol Kentucky” means Consol of Kentucky Inc., a Delaware corporation.

               (e)     The definition of “Independent Engineer” in Exhibit X is hereby amended by deleting “and Associates” in the first line thereof.

               (f)     The definition of “Rail Transportation Agreement” in Exhibit X is hereby amended by inserting after the third comma in the thirteenth line thereof “as assigned to and assumed by Consol Kentucky pursuant to the Assumption Agreement,”.

               (g)     The definition of “Rova I Coal Subcontract” in Exhibit X is hereby amended by inserting after the first comma in the sixth line thereof “as assigned to and assumed by Consol Kentucky pursuant to the Assumption Agreement,”.

               (h)     The definition of “Rova I Coal Subcontract Guaranty” in Exhibit X is hereby amended in its entirety to read as follows:

               “Rova I Coal Subcontract Guaranty” means the Guaranty Agreement, dated as of December __, 1994, by Consol Energy for the benefit of Borrower guaranteeing Consol Kentucky’s performance under the Rova I Coal Subcontract, as the same may be amended, modified or supplemented from time to time.

               (i)     The definition of “Rova II Coal Subcontract” in Exhibit X is hereby amended by inserting after the third comma in the third line thereof “as assigned to and assumed by Consol Kentucky pursuant to the Assumption Agreement,”.

               (j)     The definition of “Rova II Coal Subcontract Guaranty” in Exhibit X is hereby amended in its entirety to read as follows:

               “Rova II Coal Subcontract Guaranty” means the Guaranty Agreement, dated as of December __, 1994, by Consol Energy for the benefit of Borrower guaranteeing Consol Kentucky’s performance under the Rova II Coal Subcontract, as the same may be amended, modified or supplemented from time to time.

2

               (k)     The definition of “Step-In Rights Agreement” in Exhibit X is hereby amended in its entirety to read as follows:

               “Step-In Rights Agreement” means, collectively, (i) the Lease Agreement, dated as of December 27, 1991, including Lease Supplement No. 1. between Keycorp Leasing Ltd. and Westmoreland; (ii) Step-In Rights Agreement and Assignment of Lease, dated as of December __, 1994, by Consol Kentucky in favor of Borrower; and (iii) the Consent to Assignment of Agreement, dated as of December 1, 1993, among Keycorp Leasing Ltd., Hitachi Credit America Corp., Borrower, Coal Supplier and Agent, as the same may be amended, modified or supplemented from time to time.

               (l)     The definition of “Tranche A Date Certain” in Exhibit X is hereby amended in its entirety to read as follows:

               “Tranche A Date Certain” means January 31, 1995, as the same may be extended upon request by Borrower and approved by all the Lenders and Institutional Lenders, but in no case shall the Tranche A Date Certain be extended beyond June 30, 1995.

        Section 2.      Limitations. Except as expressly stated hereby, all of the representations, warranties, terms, covenants and conditions of the Credit Agreement shall remain unamended and shall continue to be, and shall remain, in full force and effect in accordance with their respective terms. This Amendment No. 2 shall be limited precisely as provided for herein, and shall not be deemed to be a waiver of, amendment of, consent to or modification of any other term or provision of the Credit Agreement.

        Section 3.      Miscellaneous.

               (a)     On and after the effective date of this Amendment No. 2, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof” or words of like import, and each reference to the Credit Agreement by the words “thereunder”, “thereof” or words of like import in any Project Document, Loan Instrument or other document executed in connection with the Credit Agreement, shall mean and be a reference to the Credit Agreement, as amended or otherwise modified by this Amendment No. 2.

               (b)        This Amendment No. 2 may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

               (c)        This Amendment No. 2 shall be governed by and construed and interpreted in accordance with the laws of the State of New York without regard to the principles of conflict of laws.

               (d)        All agreements, covenants, conditions and provisions of this Amendment No. 2 shall be binding upon and inure to the benefit of the successors and assigns of each of the parties hereto.

               IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to execute and deliver this Amendment No. 2 as of the date first above written.

3

BORROWER:

WESTMORELAND-LG&E PARTNERS

By: WESTMORELAND-ROANOKE VALLEY, L.P.,
as general partner

By: WEI-ROANOKE VALLEY, INC.,
as general partner

By: /s/ Matthew S. Sakurada
Name: Matthew S. Sakurada
Title: President

By: LG&E ROANOKE VALLEY L.P.,
as general partner

By: LG&E POWER 16 INCORPORATED,
as general partner

By: /s/ S. Bradford Rives
Name: S. Bradford Rives
Title: Vice President and Treasurer

AGENT, CO-AGENTS AND LENDERS:

CREDIT SUISSE, as Agent, Co-Agent and Lender

By: /s/ p.p. Roland Pfeuti
Name: Roland Pfeuti
Title: Associate

By: /s/ Bryon McGregor
Name: Bryon McGregor
Title: Member of Senior Management

NATIONAL WESTMINSTER BANK PLC, as Co-Agent and Lender

By: /s/ T. Patrick Holland
Name: T. Patrick Holland
Title: Vice President

4

THE BANK OF NOVA SCOTIA, as Co-Agent and Lender

By: /s/ Donald J. Dupont
Name: Donald J. Dupont
Title: Vice President

THE SUMITOMO BANK, LIMITED, New York Branch as Co-Agent and Lender

By: /s/ Yoshinori Kawamura
Name: Yoshinori Kawamura
Title: Joint General Manager

THE SUMITOMO TRUST AND BANKING CO., LTD
New York Branch, as Lender

By: /s/ Hidehiko Asai
Name: Hidehiko Asai
Title: Deputy General Manager

THE INDUSTRIAL BANK OF JAPAN, LTD., New York Branch, as Lender

By: [illegible]
Name:
Title:

UNION BANK, as Lender

By: /s/ Julie Bloomfield
Name: Julie Bloomfield
Title: AVP

UNION BANK OF SWITZERLAND, as Lender

By: /s/ Paul J. Brink
Name: Paul J. Brink
Title: Assistant Treasurer

By: /s/ Paul G. Naumann
Name: Paul G. Naumann
Title: Managing Director

THE FUJI BANK LIMITED, Los Angeles Agency, as Lender

By: /s/ [illegible]
Name:
Title:

5

CREDIT LYONNAIS, New York Branch, as Lender

By: /s/ James F. Guidera
Name: James F. Guidera
Title: Vice President

CREDIT LYONNAIS, Cayman Island Branch, as Lender

By: /s/ James F. Guidera
Name: James F. Guidera
Title: Vice President

THE TORONTO DOMINION BANK, as Lender

By: /s/ Linda A. Lavin
Name: Linda A. Lavin
Title: Director

INSTITUTIONAL LENDER:

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA,

as Institutional Lender and Institutional Agent

By: /s/ Joseph J. Lemanowicz
Name: Joseph J. Lemanowicz
Title: Vice President

ISSUING BANK:

CREDIT SUISSE, New York Branch,

as Issuing Bank

By: /s/ p.p. Roland Pfeuti
Name: Roland Pfeuti
Title: Associate

6

EX-10

Exhibit 10.7

AMENDMENT NO. 3 TO AMENDED AND RESTATED
CONSTRUCTION AND TERM LOAN AGREEMENT

        This AMENDMENT NO. 3 TO AMENDED AND RESTATED CONSTRUCTION AND TERM LOAN AGREEMENT, dated as of January 31, 1995, is made by and among (i) WESTMORELAND-LG&E PARTNERS, a Virginia general partnership, as Borrower, (ii) CREDIT SUISSE, NATIONAL WESTMINSTER BANK plc, THE BANK OF NOVA SCOTIA, THE SUMITOMO BANK, LIMITED, New York Branch, THE SUMITOMO TRUST AND BANKING CO., LTD., New York Branch, THE INDUSTRIAL BANK OF JAPAN, LTD., New York Branch, UNION BANK, UNION BANK OF SWITZERLAND, THE FUJI BANK LIMITED, Los Angeles Agency, CREDIT LYONNAIS, New York Branch, CREDIT SUISSE. Cayman island Branch, THE TORONTO-DOMINION BANK and each Purchasing Lender, as Lenders, (iii) THE PRUDENTIAL INSURANCE COMPANY OF AMERICA and each Purchasing Institutional Lender, as Institutional Lenders, (iv) CREDIT SUISSE, New York Branch, as the Issuing Bank, (v) CREDIT SUISSE, NATIONAL WESTMINSTER BANK plc, THE BANK OF NOVA SCOTIA and THE SUMITOMO BANK, LIMITED, New York Branch, as Co-Agents, and (vi) CREDIT SUISSE, as Agent for the Lenders, the Institutional Lenders and the Iissuing Bank.

W I T N E S S E T H:

        WHEREAS, the Amended and Restated Construction and Term Loan Agreement, dated as of December 1, 1993, as amended by Amendment No. 1 dated as of November 4, 1994 and Amendment No. 2 dated as of December 30, 1994 (the “Credit Agreement”), among Borrower, the Lenders, the Institutional Lenders, the Issuing Bank, the Co-Agents and Agent sets forth, among other things, the terms and conditions upon which the Lenders and the Institutional Lenders are willing to make available to Borrower certain Loans and Institutional Loans (unless otherwise defined herein, terms used herein and defined in the Credit Agreement shall have the meanings indicated in the Credit Agreement, and, unless otherwise specified herein, references to any “Article” or “Section” shall refer to the appropriate article or section of the Credit Agreement); and

        WHEREAS, Borrower, the Lenders, the Institutional Lenders, the Issuing Bank, the Co-Agents and Agent desire to amend the Credit Agreement as provided herein;

        NOW, THEREFORE, IT IS AGREED;

        Section 1.      Amendment. Subject to the limitations contained in Section 2 hereof, the Credit Agreement is hereby amended as follows:

               (a)     Section 6.1(c)(vii) is hereby amended by inserting “or such other date as requested by Borrower and approved by Agent and Institutional Agent in their sole discretion” after the word “Date” in the third line thereof.

1

               (b)     The second paragraph of Section 6.1(f) is hereby amended by deleting the second and third sentences thereof and by inserting in lieu thereof the following:

               “The amount of any Debt Protection Letter of Credit shall equal the amount of cash withdrawn from the Debt Protection Account. Each Debt Protection Letter of Credit shall provide that Agent may draw down the amount of such Debt Protection Letter of Credit and apply the same to satisfy payment obligations for which funds in the Debt Protection Account may be used, and upon any such drawing Agent shall draw down the full amount of all such Debt Protection Letters of Credit and deposit the amount of such drawdowns in the Debt Protection Account. After Agent shall have so drawn down on any Debt Protection Letter of Credit, Borrower shall not be entitled to deliver additional Debt Protection Letters of Credit until and unless the Debt Protection Account is funded in the full amount of the Required Debt Protection Balance.”

               (c)     Section 6.l(g) is hereby amended by inserting “or, in the event that Virginia Power’s withholding of capacity payments on the basis of forced outages is upheld by a non-appealable decision of a court of competent jurisdiction, $25,000,000” after the word “$20,000,000” in the fifth line thereof.

               (d)     The definition of “Gross Revenues” in Exhibit X is hereby amended by adding after the word “Accounts” in the last line thereof the following:

               “; provided that (i) any accrued capacity payments related to forced outages not received by Borrower during such period shall not be deemed part of Gross Revenues for such period, (ii) the reversal of any accrual for such capacity payments not received during such period shall not be a deduction from Gross Revenues for such period, and (iii) the payment of any such accrued capacity payments received by Borrower during such period shall be deemed part of Gross Revenues for such period”.

        Section 2.      Limitations. Except as expressly stated hereby, all of the representations, warranties, terms, covenants and conditions of the Credit Agreement shall remain unamended and shall continue to be, and shall remain, in full force and effect in accordance with their respective terms. This Amendment No. 3 shall be limited precisely as provided for herein, and shall not be deemed to be a waiver of, amendment of, consent to or modification of any other term or provision of the Credit Agreement.

        Section 3.      Miscellaneous.

               (a)     On and after the effective date of this Amendment No. 3, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof” or words of like import, and each reference to the Credit Agreement by the words “thereunder”, “thereof” or words of like import in any Project Document, Loan Instrument or other document executed in connection with the Credit Agreement, shall mean and be a reference to the Credit Agreement, as amended or otherwise modified by this Amendment No. 3.

               (b)     This Amendment No. 3 may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

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               (c)     This Amendment No. 3 shall be governed by and construed and interpreted in accordance with the laws of the State of New York without regard to the principles of conflict of laws.

               (d)     All agreements, covenants, conditions and provisions of this Amendment No. 3 shall be binding upon and inure to the benefit of the successors and assigns of each of the parties hereto.

        IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to execute and deliver this Amendment No. 3 as of the date first above written.

BORROWER:

WESTMORELAND-LG&E PARTNERS

By: WESTMORELAND-ROANOKE VALLEY, L.P.,
as general partner

By: WEI-ROANOKE VALLEY, INC.,
as general partner

By: /s/ James S. Brown
Name: James S. Brown
Title:

By: LG&E ROANOKE VALLEY, L.P.,
as general partner

By: LG&E POWER 16 INCORPORATED,
as general partner

By: /s/ S. Bradford Rives
Name: S. Bradford Rives
Title: Vice President And Treasurer

3

AGENT, CO-AGENTS AND LENDERS:

CREDIT SUISSE, as Agent, Co-Agent and Lender

By: /s/ p.p. Roland Pfeuti
Name: Roland Pfeuti
Title: Associate

By: /s/ Bryon McGregor
Name: Bryon McGregor
Title: Member of Senior Management

NATIONAL WESTMINSTER BANK PLC, as Co-Agent and Lender

By: /s/ T. Patrick Holland
Name: T. Patrick Holland
Title: Vice President

THE BANK OF NOVA SCOTIA, as Co-Agent and Lender

By: /s/ Bruce A. Matheson
Name: Bruce A. Matheson
Title: Project Finance

THE SUMITOMO BANK, LIMITED, New York Branch as Co-Agent and Lender

By: /s/ Yoshinori Kawamura
Name: Yoshinori Kawamura
Title: Joint General Manager

THE SUMITOMO TRUST AND BANKING CO., LTD.

New York Branch, as Lender

By: /s/ Suraj P. Bhatia
Name: Suraj P. Bhatia
Title: Senior Vice President
           Manager, Project Finance Department

4

THE INDUSTRIAL BANK OF JAPAN, LTD., New York Branch, as Lender

By: /s/ [illegible]
Name:
Title:

UNION BANK, as Lender

By: /s/ Julie Bloomfield
Name: Julie Bloomfield
Title: AVP

UNION BANK OF SWITZERLAND, as Lender

By: /s/ Paul J. Brink
Name: Paul J. Brink
Title: Assistant Treasurer

By: /s/ Paul G. Naumann
Name: Paul G. Naumann
Title: Managing Director

THE FUJI BANK LIMITED, Los Angeles Agency, as Lender

By: /s/ [illegible]
Name:
Title:

CREDIT LYONNAIS, New York Branch, as Lender

By: /s/ James F. Guidera
Name: James F. Guidera
Title: Vice President

CREDIT LYONNAIS, Cayman Island Branch, as Lender

By: /s/ James F. Guidera
Name: James F. Guidera
Title: Vice President

5

THE TORONTO DOMINION BANK, as Lender

By: /s/ Linda A. Lavin
Name: Linda A. Lavin
Title: Director

INSTITUTIONAL LENDER:

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA,
as Institutional Lender and Institutional Agent

By: /s/ Joseph J. Lemanowicz
Name: Joseph J. Lemanowicz
Title: Vice President

ISSUING BANK:

CREDIT SUISSE, New York Branch, as Issuing Bank

By: /s/ p.p. Roland Pfeuti
Name: Roland Pfeuti
Title: Associate

6

EX-10

Exhibit 10.8

AMENDMENT NO. 4 TO AMENDED AND RESTATED
CONSTRUCTION AND TERM LOAN AGREEMENT

        This AMENDMENT NO. 4 TO AMENDED AND RESTATED CONSTRUCTION AND TERM LOAN AGREEMENT, dated as of October 19, 1995, by and among (i) WESTMORELAND-LG&E PARTNERS, a Virginia general partnership, as Borrower, (ii) CREDIT SUISSE, NATIONAL WESTMINSTER BANK Plc, THE BANK OF NOVA SCOTIA, THE SUMITOMO BANK, LIMITED, New York Branch, THE SUMITOMO TRUST AND BANKING CO., LTD., New York Branch, THE INDUSTRIAL BANK OF JAPAN, LTD., New York Branch, UNION BANK, UNION BANK OF SWITZERLAND, THE FUJI BANK LIMITED, Los Angeles Agency, CREDIT LYONNAIS, New York Branch, CREDIT SUISSE, Cayman Island Branch, THE TORONTO-DOMINION BANK and each Purchasing Lender, as Lenders, (iii) THE PRUDENTIAL INSURANCE COMPANY OF AMERICA and each Purchasing Institutional Lender, as Institutional Lenders, (iv) CREDIT SUISSE, New York Branch, as the Issuing Bank, (v) CREDIT SUISSE, NATIONAL WESTMINSTER BANK Plc, THE BANK OF NOVA SCOTIA and THE SUMITOMO BANK, LIMITED, New York Branch, as Co-Agents, and (vi) CREDIT SUISSE, as Agent for the Lenders, the Institutional Lenders and the Issuing Bank.

W I T N E S S E T H :

        WHEREAS, the Amended and Restated Construction and Term Loan Agreement, dated as of December 1, 1993, as amended by Amendment No. 1 dated as of November 4, 1994, Amendment No. 2 dated as of December 30, 1994 and Amendment No. 3 dated as of January 31, 1995 (the “Credit Agreement”), among Borrower, the Lenders, the Institutional Lenders, the Issuing Bank, the Co-Agents and Agent sets forth, among other things, the terms and conditions upon which the Lenders and the Institutional Lenders are willing to make available to Borrower certain Loans and Institutional Loans (unless otherwise defined herein, terms used herein and defined in the Credit Agreement shall have the meanings indicated in the Credit Agreement, and, unless otherwise specified herein, references to any “Article” or “Section” shall refer to the appropriate article or section of the Credit Agreement); and

        WHEREAS, Borrower, the Lenders, the Institutional Lenders, the Issuing Bank, the Co-Agents and Agent desire to amend the Credit Agreement as provided herein;

        NOW, THEREFORE, IT IS AGREED:

        Section 1.      Amendment. Subject to the limitations contained in Section 2 hereof, the Credit Agreement is hereby amended as follows:

        The definition of “Plant Aging Allowance Amount” in Exhibit X is hereby amended and restated in its entirety as follows:

1

         “Plant Aging Allowance Amount” means, for any calendar year, the amount set forth below under the column “Allowance for Plant Aging” opposite such calendar year:

Calendar Year	Allowance for Plant Aging
Through 1998	$              0
1999	$   366,000
2000	$     57,000
2001	$     89,000
2002	$   123,000
2003	$   160,000
2004	$   295,000
2005	$   242,000
2006	$   288,000
2007	$   338,000
2008	$   389,000
2009	$1,746,000
2010	$   764,000
2011	$1,103,000
2012	$1,472,000
2013	$1,866,000
2014	$              0
2015	$              0

        Section 2.     Limitations. Except as expressly stated hereby, all of the representations, warranties, terms, covenants and conditions of the Credit Agreement shall remain unamended and shall continue to be, and shall remain, in full force and effect in accordance with their respective terms. This Amendment No. 4 shall be limited precisely as provided for herein, and shall not be deemed to be a waiver of, amendment of, consent to or modification of any other term or provision of the Credit Agreement.

        Section 3.      Miscellaneous.

        (a)     On and after the effective date of this Amendment No. 4, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof” or words of like import, and each reference to the Credit Agreement by the words “thereunder”, “thereof” or words of like import in any Project Document, Loan Instrument or other document executed in connection with the credit Agreement, shall mean and be a reference to the Credit Agreement, as amended or otherwise modified by this Amendment No. 4.

        (b)     This Amendment No. 4 may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

        (c)     This Amendment No. 4 shall be governed by and construed and interpreted in accordance with the laws of the State of New York without regard to the principles of conflict of laws.

        (d)     All agreements, covenants, conditions and provisions of this Amendment No. 4 shall be binding upon and inure to the benefit of the successors and assigns of each of the parties hereto.

2

        IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to execute and deliver this Amendment No. 4 as of the date first above written.

BORROWER:

WESTMORELAND-LG&E PARTNERS

By: WESTMORELAND-ROANOKE VALLEY, L.P.,
as general partner

By: WEI-ROANOKE VALLEY, INC.,
as general partner

By: /s/ Robert J. Jaeger
Name: Robert J. Jaeger
Title: Vice President

By: LG&E ROANOKE VALLEY L.P.,
as general partner

By: LG&E POWER 16 INCORPORATED,
as general partner

By: /s/ S. Bradford Rives
Name: S. Bradford Rives
Title: Vice President And Controller

3

AGENT, CO-AGENTS, AND LENDERS:

CREDIT SUISSE, as Agent, Co-Agent and Lender

By: /s/ p.p. Roland Pfeuti
Name:
Title:

By: /s/ [illegible]
Name: Suzanne Leon
Title: Associate

NATIONAL WESTMINSTER BANK PLC,
as Co-Agent and Lender

By: /s/ Brian T. Caldwell
Name: Brian T. Caldwell
Title: Vice President

THE BANK OF NOVA SCOTIA, as Co-Agent and Lender

By: /s/ Bruce Matheson
Name: Bruce Matheson
Title: Project Finance

THE SUMITOMO BANK, LIMITED, New York Branch, as Co-Agent and Lender

By: /s/ Hidetaka Itahashi
Name: Hidetaka Itahashi
Title: Joint General Manager

THE SUMITOMO TRUST AND BANKING CO., LTD
New York Branch, as Lender

By: /s/ Suraj P. Bhatia
Name: Suraj P. Bhatia
Title: Senior Vice PresidentManager, Project Finance Dept.

4

THE INDUSTRIAL BANK OF JAPAN, LTD., New York Branch, as Lender

By: /s/ [illegible]
Name:
Title:

UNION BANK, as Lender

By: /s/ [illegible]
Name:
Title:

UNION BANK OF SWITZERLAND, as Lender

By: /s/ Paul Brink
Name: Paul J. Brink
Title: Assistant Treasurer

By: /s/ James O. Shaver
Name: James O. Shaver
Title: Assistant Vice President

THE FUJI BANK LIMITED, Los Angeles Agency, as Lender

By: /s/ Nobuhiro Umemura
Name: Nobuhiro Umemura
Title: Joint General Manager

CREDIT LYONNAIS, New York Branch, as Lender

By: /s/ James F. Guidera
Name: James F. Guidera
Title: Vice President

5

CREDIT LYONNAIS, Cayman Island Branch, as Lender

By: /s/ James F. Guidera
Name: James F. Guidera
Title: Vice President

THE TORONTO DOMINION BANK, as Lender

By: /s/ Richard E. Demmer
Name: Richard E. Demmer
Title: Director

INSTITUTIONAL LENDER:

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, as Institutional Lender and Institutional Agent

By: /s/ Joseph J. Lemanowicz
Name: Joseph J. Lemanowicz
Title: Vice President

ISSUING BANK:

CREDIT SUISSE, New York Branch, as Issuing Bank

By: /s/ [illegible]
Name: Suzanne Leon
Title: Associate

By: /s/ p.p. Roland Pfeuti
Name:
Title:

6

EX-10

Exhibit 10.9

AMENDMENT NO. 5 TO AMENDED AND RESTATED
CONSTRUCTION AND TERM LOAN AGREEMENT

        THIS AMENDMENT NO. 5 TO AMENDED AND RESTATED CONSTRUCTION AND TERM LOAN AGREEMENT, dated as of December 15, 1996, is made by and among (i) WESTMORELAND-LG&E PARTNERS, a Virginia general partnership, as Borrower, (ii) CREDIT SUISSE, NATIONAL WESTMINSTER BANK Plc, THE BANK OF NOVA SCOTIA, THE SUMITOMO BANK, LIMITED, New York Branch, THE SUMITOMO TRUST AND BANKING CO., LTD., New York Branch, THE INDUSTRIAL BANK OF JAPAN, LTD., New York Branch, UNION BANK, UNION BANK OF SWITZERLAND, THE FUJI BANK LIMITED, Los Angeles Agency, CREDIT LYONNAIS, New York Branch, CREDIT LYONNAIS, Cayman Island Branch, THE TORONTO-DOMINION BANK and each Purchasing Lender, as Lenders, (iii) THE PRUDENTIAL INSURANCE COMPANY OF AMERICA and each Purchasing Institutional Lender, as Institutional Lenders, (iv) CREDIT SUISSE, New York Branch, as the Issuing Bank, (v) CREDIT SUISSE, NATIONAL WESTMINSTER BANK Plc, THE BANK OF NOVA SCOTIA and THE SUMITOMO BANK, LIMITED, New York Branch, as Co-Agents, and (vi) CREDIT SUISSE, as Agent for the Lenders, the Institutional Lenders and the Issuing Bank.

W I T N E S S E T H :

        WHEREAS, the Amended and Restated Construction and Term Loan Agreement, dated as of December 1, 1993, as amended by Amendment No. 1 dated as of November 4, 1994, Amendment No. 2 dated as of December 30, 1994, Amendment No. 3 dated as of January 31, 1995 and Amendment No. 4, dated as of October 19, 1995 (the “Credit Agreement”), among Borrower, the Lenders, the Institutional Lenders, the Issuing Bank, the Co-Agents and Agent sets forth, among other things, the terms and conditions upon which Borrower may make Permitted Investments (unless otherwise defined herein, terms used herein and defined in the Credit Agreement shall have the meanings indicated in the Credit Agreement, and unless otherwise specified herein, references to any “Article” or “Section” shall refer to the appropriate article or section of the Credit Agreement);

        WHEREAS, the Credit Agreement sets forth the Borrower’s minimum insurance maintenance requirements for the Rova I Facility and the Rova II Facility; and

        WHEREAS, Borrower, the Lenders, the Institutional Lenders, the Issuing Bank, the Co-Agents and Agent desire to amend the Credit Agreement as provided herein;

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

        Section 1.   Amendments. Subject to the limitations contained in Section 2 hereof, the Credit Agreement is hereby amended as follows:

1

        1.1.     The definition of “Permitted Investments” in Exhibit X is hereby amended by deleting the words “or (e)” in the nineteenth line thereof and inserting in their place:

“ (e) time deposits with banks rated “Aal” or better by Moody’s or “AA” or better by S&P and having capital, surplus and undivided profits of at least $1,000,000,000, including but not limited to Eurodollar time deposits, provided that any Eurodollar time deposits shall be held only by Agent, and any such time deposits shall have a maturity of not longer than 90 days; or (f)"

        1.2.     The definition of “Permitted Contract” in Exhibit X is hereby amended in its entirety as follows:

“ ‘Permitted Contract’ means (a) any agreement of Borrower entered into after the Closing Date with respect to the operation, maintenance, repair or renovation of the Rova I Facility and/or the Rova II Facility, as applicable, other than those agreements referred to in clause (b) hereto, requiring payments (including contingent payments such as indemnities, guaranties or similar obligations) by any party thereto of not more than $900,000 per year; provided that at no time shall all payments (including any such contingent payments) required to be made by all parties under all Permitted Contracts specified in this clause (a) then in effect in the aggregate exceed $1,500,000 per year without the consent of Agent and Institutional Agent; and provided, further, that Agent and Institutional Agent shall receive notice of the execution of any such agreements, shall receive a copy thereof and, upon the reasonable request of Agent, shall be granted a security interest therein (with the consent of the non-assigning party, if reasonably obtainable), and (b) all purchase orders of other agreements entered into pursuant to Section 5.11 of the Operating Agreement to the extent such obligations are reflected in the then current Rova I Operating Budget and/or the Rova II Operating Budget; provided that in the case of any such purchase orders or other agreements requiring payments (including any contingent payments set forth above) of more than $300,000, Agent and Institutional Agent shall receive notice of the execution of any such purchase orders or other agreements, shall receive a copy thereof and, upon the reasonable request of Agent, shall be granted a security interest therein (with the consent of the non-assigning party, if reasonably obtainable). The aforesaid dollar limits shall be increased or decreased from time to time by the same percentage as the “Fuel Compensation Price” (as defined in the Rova I Power Purchase Agreement) is then increased or decreased pursuant to Section 10.3 through 10.7 of the Rova I Power Purchase Agreement; provided that no decrease shall cause an existing Permitted Contract to cease being a Permitted Contract under the Credit Agreement.”

2

        1.3.     Section 6.6(a) is hereby amended by restating the fourth sentence thereof as follows:

“Borrower shall not contract and shall not permit Operator to subcontract (except to the extent Borrower itself could have contracted by means of a Permitted Contract) for any material work without the prior written consent of Agent and Institutional Agent, which consent shall not unreasonably be withheld.”

        1.4.     Section 6.19(a) is hereby amended by inserting the following words after the words “Additional Contracts” in the first line thereof:

“Subject to the provisions of Section 6.6(a),”

        1.5.     Section (II) (2.1) (b) of Schedule 6.15 is hereby amended by deleting the words “and extra expenses with a sublimit of $20,000,000 in the sixteenth and seventeenth lines thereof and inserting in their place;

“with a sublimit of $2,000,000 and coverage for extra expense with a sublimit of $5,000,000.”

        Section 2.   Limitations. Except as expressly stated hereby, all of the representations, warranties, terms, covenants and conditions of the Credit Agreement shall remain unamended and shall continue to be, and shall remain, in full force and effect in accordance with their respective terms. This Amendment No. 5 shall be limited precisely as provided for herein, and shall not be deemed to be a waiver of, amendment of, consent to or modification of any other term or provision of the Credit Agreement. Notwithstanding the foregoing, this Amendment No. 5 is not intended, and nothing herein shall be interpreted, to update, bring-down, or otherwise expand any representations or warranties set forth in the Credit Agreement, as amended.

        Section 3.   Credit Agreement References. On and after the effective date of this Amendment No. 5, each reference in the Credit Agreement to “this Agreement,” “hereunder,”“hereof” or words of like import, and each reference to the Credit Agreement by the words “thereunder,” “thereof or words of like import in any Project Document, Loan Instrument or other document executed in connection with the Credit Agreement, shall mean and be a reference to the Credit Agreement, as amended or otherwise modified by this Amendment No. 5.

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        Section 4.   Counterparts. This Amendment No. 5 may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

        Section 5.   Conditions to Effectiveness. This Amendment No. 5 shall become effective as of the date first above written, on the date of which all of the counterparts of this Amendment No. 5 shall have been duly executed and shall have been delivered to Agent.

        Section 6.   Governing Law. This Amendment No. 5 shall be governed by and construed and interpreted in accordance with the laws of the State of New York without regard to the principles of conflict of laws.

        Section 7.   Successors and Assigns. All agreements, covenants, conditions and provisions of this Amendment No. 5 shall be binding upon and inure to the benefit of the successors and assigns of each of the parties hereto.

        IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to execute and deliver this Amendment No. 5 as of the date first above written.

BORROWER:

WESTMORELAND-LG&E PARTNERS

By: WESTMORELAND-ROANOKE VALLEY, L.P.,
as general partner

By: WEI-ROANOKE VALLEY, INC.,
as general partner

By: /s/ Gregory S. Woods
Name: Gregory S. Woods
Title: Vice President - - Finance/Asset Management

By: LG&E ROANOKE VALLEY L.P.,
as general partner

By: LG&E POWER 16 INCORPORATED,
as general partner

By: /s/ George Basinger
Name: George Basinger
Title: President

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AGENT, CO-AGENTS AND LENDERS:

CREDIT SUISSE, as Agent, Co-Agent and Lender

By: /s/ [illegible]
Name: Suzanne Leon
Title: Associate

By: /s/ p.p. Leon
Name: Andrew B. Leon
Title: Associate

NATIONAL WESTMINSTER BANK PLC, as Co-Agent and Lender

By: /s/ David Tang
Name: David Tang
Title: Vice President

THE BANK OF NOVA SCOTIA, as Co-Agent and Lender

By: /s/ B. T. Portis
Name: B. T. Portis
Title: [illegible] Manager

THE SUMITOMO BANK, LIMITED, New York Branch, as Co-Agent and Lender

By: __________________
Name:
Title:

THE SUMITOMO TRUST AND BANKING CO., LTD., New York Branch, as Lender

By: /s/ Joseph M. Kelley
Name: Joseph M. Kelley
Title: Senior Vice President

THE INDUSTRIAL BANK OF JAPAN, LTD., New York Branch, as Lender

By: /s/ William Chin
Name: William Chin
Title: SVP

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UNION BANK, as Lender

By: /s/ Allan Majutra
Name: Allan Majutra
Title: Investment Banking Officer

UNION BANK OF SWITZERLAND, as Lender

By: /s/ Thomas C. Powers
Name: Thomas C. Powers
Title: Assistant Vice President

By: /s/ Kathleen Morris
Name: Kathleen Morris
Title: Vice President

THE FUJI BANK LIMITED, Los Angeles Agency, as Lender

By: /s/ Nobuhiro Umemura
Name: Nobuhiro Umemura
Title: Joint General Manager

CREDIT LYONNAIS, New York Branch, as Lender

By: /s/ James F. Guidera
Name:James F. Guidera
Title: Vice President

CREDIT LYONNAIS, Cayman Island Branch, as Lender

By: /s/ James F. Guidera
Name: James F. Guidera
Title: Vice President

THE TORONTO-DOMINION BANK, as Lender

By: /s/ Linda A. Lavin
Name: Linda A. Lavin
Title: Director

INSTITUTIONAL LENDER:

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, as Institutional Lender and Institutional Agent

By: /s/ Joseph J. Lemanowicz
Name: Joseph J. Lemanowicz
Title: Vice President

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ISSUING BANK:

CREDIT SUISSE, New York Branch, as Issuing Bank

By: /s/ [illegible]
Name: Suzanne Leon
Title: Associate

By: /s/ p.p. Leon
Name: Andrew B. Leon
Title: Associate

7

EX-10

Exhibit 10.10

EXECUTION COPY

AMENDMENT NO.5 TO AMENDED AND RESTATED
CONSTRUCTION AND TERM LOAN AGREEMENT

        This AMENDMENT NO. 5 TO AMENDED AND RESTATED CONSTRUCTION AND TERM LOAN AGREEMENT, dated as of August 23, 2000 (this “Amendment”), is made by and among (i) WESTMORELAND-LG&E PARTNERS, a Virginia general partnership, as Borrower, (ii) CREDIT SUISSE FIRST BOSTON, NIB CAPITAL BANK N.V., THE BANK OF NOVA SCOTIA, THE SUMITOMO BANK, LIMITED, New York Branch, THE SANWA BANK LIMITED, UNION BANK, THE FUJI BANK LIMITED, New York Branch, CREDIT LYONNAIS, New York Branch, CREDIT LYONNAIS, Cayman Island Branch, LANDESBANK HESSEN-THURINGEN GIROZENTRALE and each Purchasing Lender, as Lenders, (iii) THE PRUDENTIAL INSURANCE COMPANY OF AMERICA as Institutional Lender and as Institutional Agent (together with its successors in each such capacity) and each Purchasing Institutional Lender, (iv) CREDIT SUISSE FIRST BOSTON, New York Branch, as the Issuing Bank, (together with its successors in each such capacity) (v) CREDIT SUISSE FIRST BOSTON, NIB CAPITAL BANK N.V., THE BANK OF NOVA SCOTIA and THE SUMITOMO BANK, LIMITED, New York Branch, as Co-Agents (together with their successors in such capacity) and (vi) CREDIT SUISSE FIRST BOSTON, as Agent for the Lenders, the Institutional Lenders and the Issuing Bank (together with its successors in such capacity).

W I T N E S S E T H :

        WHEREAS, the Amended and Restated Construction and Term Loan Agreement, dated as of December 1, 1993 as amended by Amendment No. 1 dated as of November 4, 1994, Amendment No. 2 dated as of December 30, 1994, Amendment No. 3 dated as of January 31, 1995, Amendment No. 4 dated as of October 19, 1995 each among Borrower, the Lenders, the Institutional Lenders, the Issuing Bank, the Co-Agents and Agent and the letter agreement, dated July 20, 1999, from Credit Suisse First Boston as Agent, as Issuing Bank, as Co-Agent and as Securities Intermediary, and acknowledged and agreed to by the Borrower, the Lenders, the Institutional Lenders and the Institutional Agent (the “Credit Agreement”) sets forth, among other things, the terms and conditions upon which the Lenders and the Institutional Lenders are willing to make available to Borrower certain Loans and Institutional Loans (unless otherwise defined herein, capitalized terms used herein and defined in the Credit Agreement (including Exhibit X thereto) shall have the meanings indicated therein); and

        WHEREAS, Borrower, the Lenders, the Institutional Lenders, the Issuing Bank, the Co-Agents and Agent desire to amend the Credit Agreement as provided herein;

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        NOW, THEREFORE, it is agreed:

        Section 1. .   Amendments. Subject to the limitations contained in Section 2 hereof, Exhibit X of the Credit Agreement is hereby amended as follows:

        (a)     The definition of “Lime Supplier” is hereby amended by inserting the words “Global Stone” immediately before the word “Chemstone” therein.

        (b)     The definition of “Rova I Lime Supply Agreement” is amended and restated in its entirety as follows:

““Rova I Lime Supply Agreement” means the Agreement between Westmoreland-LG&E Partners and Global Stone Chemstone Corporation for the Sale and Purchase of Lime, Roanoke Valley I, dated as of August 23, 2000, between Borrower and Lime Supplier, and any renewal or replacement thereof entered into pursuant to Section 6.18 of the Credit Agreement, in each case, as amended, modified or supplemented from time to time.” 

        (c)     The definition of “Rova II Lime Supply Agreement” is amended and restated in its entirety as follows:

““Rova II Lime Supply Agreement” means the Agreement between Westmoreland-LG&E Partners and Global Stone Chemstone Corporation for the Sale and Purchase of Lime, Roanoke Valley II, dated as of August 23, 2000, between Borrower and Lime Supplier, and any renewal or replacement thereof entered into pursuant to Section 6.18 of the Credit Agreement, in each case, as amended, modified or supplemented from time to time.”

        Section 2.   Limitation. Except as expressly stated herein, all of the representations, warranties, terms, covenants and conditions of the Credit Agreement shall remain unamended and shall continue to be, and shall remain, in full force and effect in accordance with their respective terms. This Amendment shall be limited precisely as provided for herein, and shall not be deemed to be a waiver of, amendment of, consent to or modification of any other term or provision of the Credit Agreement.

        Section 3.   Credit Agreement References. On and after the effective date of this Amendment, each reference in the Credit Agreement to “this Agreement”, “hereunder^”, “hereof” or words of like import, and each reference to the Credit Agreement by the words “thereunder^”, “thereof^’ or words of like import in any Project Document, Loan Instrument or other document executed in connection with the Credit Agreement, shall mean and be a reference to the Credit Agreement, as amended or otherwise modified by this Amendment.

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        Section 4.   Successors and Assigns. This Amendment shall be binding upon and inure to the benefit of each of the parties hereto and their respective successors and assigns and all future parties to the Credit Agreement.

        Section 5.   Counterparts. This Amendment may be signed in any number of counterparts, each of which shall be original, with the same effect as if the signatures hereto and thereto were upon the same instrument. This Amendment shall become effective upon the execution of a counterpart by each of Borrower, Agent and the Lenders and Institutional Lenders representing the Majority Lenders.

        Section 6.   Governing Law. This Amendment shall for all purposes be considered a Loan Instrument and shall be governed by; construed and interpreted in accordance with, the laws of the State of New York without regard to principles of conflict of laws (except for Section 5-1401 of the General Obligations Law of the State of New York).

        IN WITNESS WHEREOF, the parties hereto have executed and delivered this Amendment through their duly authorized representatives as of date first written above.

WESTMORELAND — LG&E PARTNERS,
as Borrower

By: WESTMORELAND-ROANOKE VALLEY, L.P.,
as general partner

By: WEI-- ROANOKE VALLEY, INC.,
as general partner

By: /s/ Gregory S. Woods
Name: Mr. Gregory S. Woods
Title: Executive Vice President

By: LG&E ROANOKE VALLEY L.P.,
as general partner

By: LG&E POWER 16 INCORPORATED,
as general partner

By: /s/ C. A. Markel
Name: Charles A. Markel
Title: Vice President And Treasurer

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CREDIT SUISSE FIRST BOSTON, as Agent, Co-Agent, Lender and Issuing Bank

By: /s/ p.p. Hughes
Name: Stephen Hughes
Title: Asst. Vice President

By: /s/ p.p. Naval
Name: Pilarcita V. Naval
Title: Associate

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, as Institutional Agent and Institutional Lender

By: /s/ Ric E. Abel
Name: Ric E. Abel
Title: Vice President

THE BANK OF NOVA SCOTIA, as Co-Agent and Lender

By: /s/ B. Portis
Name: B. Portis
Title: Director

CREDIT LYONNAIS, Cayman Island Branch, as Lender

By: /s/ James F. Guidera
Name: James F. Guidera
Title: Senior Vice President

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CREDIT LYONNAIS, New York Branch, As Lender

By: /s/ James F. Guidera
Name: James F. Guidera
Title: Senior Vice President

THE FUJI BANK LIMITED, New York Branch, as Lender

By: /s/ Thomas W. Boylan
Name: Thomas W. Boylan
Title: Vice President & Team Leader

LANDESBANK HESSEN-THURINGEN GIROZENTRALE, as Lender

By: ___________________________________
Name:
Title:

NIB CAPITAL BANK N.V., as Co-Agent and Lender

By: /s/ Dennis van Alphen
Name: Dennis van Alphen
Title: Vice President

By: /s/ Bas Kolenburg
Name: Bas Kolenburg
Title: Vice President

THE SANWA BANK LIMITED, as Lender

By: /s/ Ken Nakahira
Name: Ken Nakahira
Title: Vice President

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THE SUMITOMO BANK, LIMITED, New York Branch, as Co-Agent and Lender

By: /s/ Hiroyuki Obata
Name: Hiroyuki Obata
Title: General Manager

UNION BANK, as Lender

By: ___________________________________
Name:
Title:

6

EX-10

Exhibit 10.11

EXECUTION COPY

AMENDMENT NO. 6 TO AMENDED AND RESTATED
CONSTRUCTION AND TERM LOAN AGREEMENT
AND UNANIMOUS CONSENT

               THIS AMENDMENT NO. 6 TO AMENDED AND RESTATED CONSTRUCTION AND TERM LOAN AGREEMENT AND UNANIMOUS CONSENT (this “Amendment”), dated as of November 21, 2000, is made by and among (i) WESTMORELAND-LG&E PARTNERS, a Virginia general partnership, as Borrower (the “Borrower”), (ii) CREDIT SUISSE FIRST BOSTON, NIB CAPITAL BANK N.V., THE BANK OF NOVA SCOTIA, THE SUMITOMO BANK, LIMITED, New York Branch, THE SANWA BANK LIMITED, UNION BANK OF CALIFORNIA, N.A., THE FUJI BANK LIMITED, New York Branch, CREDIT LYONNAIS, New York Branch, CREDIT LYONNAIS, Cayman Island Branch, LANDESBANK HESSEN-THURINGEN GIROZENTRALE and each Purchasing Lender, as Lenders, (iii) THE PRUDENTIAL INSURANCE COMPANY OF AMERICA as Institutional Lender and as Institutional Agent (together with its successors in each such capacity) and each Purchasing Institutional Lender, (iv) CREDIT SUISSE FIRST BOSTON, New York Branch, as the Issuing Bank, (together with its successors in such capacity), (v) CREDIT SUISSE FIRST BOSTON, NIB CAPITAL BANK N.V., THE BANK OF NOVA SCOTIA and THE SUMITOMO BANK, LIMITED, New York Branch, as Co-Agents (together with their successors in such capacity) and (vi) CREDIT SUISSE FIRST BOSTON, as Agent for the Lenders, the Institutional Lenders and the Issuing Bank (together with its successors in such capacity).

W I T N E S S E T H :

               WHEREAS, the Amended and Restated Construction and Term Loan Agreement, dated as of December 1, 1993 as amended by Amendment No. 1 dated as of November 4, 1994, Amendment No. 2 dated as of December 30, 1994, Amendment No. 3 dated as of January 31, 1995, Amendment No. 4 dated as of October 19, 1995, and Amendment No. 5 dated as of August 23, 2000 each among Borrower, the Lenders, the Institutional Lenders, the Issuing Bank, the Co-Agents and Agent and the letter agreement, dated July 20, 1999, from Credit Suisse First Boston as Agent, as Issuing Bank, as Co-Agent and as Securities Intermediary, and acknowledged and agreed to by the Borrower, the Lenders, the Institutional Lenders and the Institutional Agent (collectively, the “Credit Agreement”) sets forth, among other things, the terms and conditions upon which the Lenders and the Institutional Lenders are willing to make available to Borrower certain Loans and Institutional Loans (unless otherwise defined herein, capitalized terms used herein and defined in the Credit Agreement (including Exhibit X thereto) shall have the meanings indicated therein); and

               WHEREAS, Borrower, the Lenders, the Institutional Lenders, Institutional Agent, the Issuing Bank, the Co-Agents and Agent desire to amend the Credit Agreement as provided herein;

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               WHEREAS, the letter agreement referred to in the first paragraph of this preamble, dated as of July 20, 1999 (the “Letter Agreement”), established the CSFB-Westmoreland-LG&E Roanoke I & II Account as defined therein (the “Roanoke Account”);

               WHEREAS, (a) Borrower and Virginia Power desire to amend and restate the Rova I Power Purchase Agreement and the Rova fi Power Purchase Agreement (collectively, the “Rova Power Purchase Agreements”) and (b) Borrower desires to apply the Settlement Proceeds (as defined below) in the manner set forth herein, and Borrower has requested the consent of the Lenders, Institutional Lenders, Institutional Agent, Issuing Bank, Co-Agents and Agent thereto; and

               WHEREAS, Borrower, the Lenders, Institutional Lenders, Institutional Agent, Issuing Bank, Co-Agents and Agent desire to amend the Credit Agreement as provided herein in connection with the granting of such consent to Borrower.

               NOW, THEREFORE, it is agreed:

               Section 1. Amendments. Subject to the limitations contained in Section 4 hereof, the Credit Agreement is hereby amended as follows:

               (a)     Exhibit X is hereby amended by inserting the following definition in the appropriate alphabetical order:

                        (i)     “Amendment No. 6 to Credit Agreement” means Amendment No. 6 to the Amended and Restated Construction and Term Loan Agreement and Unanimous Consent, dated as of November 21, 2000, among Borrower, the Lenders, the Institutional Lenders, Institutional Agent, the Issuing Bank, the Co-Agents and Agent.

               (b)     Exhibit X is hereby further amended as follows:

                        (i)     The definition of “Combined Debt Service Coverage Ratio” is amended and restated in its entirety as follows:

        “Combined Debt Service Coverage Ratio” means, for any period with respect to which a calculation is to be delivered to Agent under the Credit Agreement, (i) if the Calculation Delivery Date therefor occurs (x) prior to June 15, 2009 or (y) after June 15, 2011, the ratio of (a) the sum of Rova I Net Revenues for such period plus Rova U Net Revenues for such period to (b) the sum for such period of the items referred to in clauses (a), (b), (c) and (d) of the definitions of “Tranche A Debt Service” and “Tranche B Debt Service” set forth in the Credit Agreement, as calculated by Borrower and approved as set forth in the definitions of “Tranche A Debt Service Coverage Ratio” and of “Tranche B Debt Service Coverage Ratio”, respectively, and (ii) if the Calculation Delivery Date therefor occurs (x) on or after June 15, 2009 but on or prior to June 15, 2011, a ratio to be calculated in the same manner as in clause (i) of this definition except that when making such calculation, the appropriate amount indicated below shall be added to the sum obtained pursuant to sub-clause (a) of clause (i) above for such ratio delivered by Borrower to Agent on each of the following Calculation Delivery Dates:

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June 15, 2009	$3,350,000
December 15, 2009	$6,700,000
June 15, 2010	$4,850,000
December 15, 2010	$3,000,000
June 15, 2011	$1,500,000;

provided, however that if any Event of Default has occurred and is continuing on any Calculation Delivery Date, such ratio shall be calculated in the same manner as in clause (i) of this definition.”

                        (ii)     The definition of “Combined Projected Debt Service Coverage Ratio” is amended and restated in its entirety as follows:

        “Combined Projected Debt Service Coverage Ratio” means, for any period with respect to which a calculation is to be delivered to Agent under the Credit Agreement, (i) if the Calculation Delivery Date therefor occurs (x) prior to December 15, 2008 or (y) after June 15, 2010, the ratio of (a) the sum of Projected Rova I Net Revenues during such period plus Projected Rova II Net Revenues during such period to (b) the sum of Projected Tranche A Debt Service for such period plus Projected Tranche B Debt Service for such period, as calculated by Borrower and approved as set forth in the definitions of “Projected Tranche A Debt Service Coverage Ratio” and “Projected Tranche B Debt Service Coverage Ratio”, respectively, and (ii) if the Calculation Delivery Date therefor occurs (x) on or after December 15, 2008 but on or prior to June 15, 2010, a ratio calculated in the same manner as in clause (i) of this definition except that when making such calculation, the appropriate amount indicated below shall be added to the sum obtained pursuant to sub-clause (a) of clause (i) above for such ratio delivered by Borrower to Agent on each of the following Calculation Delivery Dates:

December 15, 2008	$3,350,000
June 15, 2009	$3,350,000
December 15, 2009	$1,500,000
June 15, 2010	$1,500,000;

provided, however that if any Event of Default has occurred and is continuing on any Calculation Delivery Date, such ratio shall be calculated in the same manner as in clause (i) of this definition.”

               (c)     Section 6.1(c)(vi) is hereby amended by inserting the following proviso at the end thereof:

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“provided, however, that on the first Repayment Date in each of the calendar years 2004 and 2009, the amount withdrawn and transferred for deposit in the Repair and Maintenance Account shall be an amount equal to the difference between (x) the Required Maintenance Balance less (y) the then-current balance in the Repair and Maintenance Account;"

               (d)     Section 6.1(c)(vii) is hereby amended by inserting the following clause (C) immediately after the semicolon at the end of clause (B) appearing in such Section:

“and (C) third, on each Repayment Date that is a Quarterly Date in January and each Repayment Date that is a Quarterly Date in July, commencing on January 1, 2002 through and including July 31, 2008, withdraw an amount equal to $550,000 to be deposited into the Debt Protection Account, except that on any such Repayment Date no such withdrawal shall be made if Borrower has, pursuant to this Section 6. l(c)(vii)(C), delivered to Agent a Debt Protection Letter of Credit in a face amount of $550,000 (or amended an existing Debt Protection Letter of Credit so as to increase it by such an amount) which shall satisfy all of the requirements and afford Agent all of the rights applicable to Debt Protection Letters of Credit set forth in Section 6.1(f) hereof, together with such corporate documents, legal opinions and other documents and information which the Agent may reasonably request; provided, that, the provision of Section 6.1(f) limiting the number of Debt Protection Letters of Credit that may be outstanding to three such letters of credit at any one time shall not apply to Debt Protection Letters of Credit delivered pursuant to this Section 6.1(c)(vii)(C);".

               (e)     Section 6.1(d) (Ash Reserve Account) is hereby amended by inserting the parenthetical “(i)” immediately after the title to such Section and prior to the first sentence thereof and by inserting a new sub-clause (ii) immediately prior to the period appearing at the end of such Section as follows:

        “and (ii) Notwithstanding any provision in this Agreement or any of the Loan Instruments to the contrary, including Section 6.1(d)(i) hereof, commencing upon the effective date of Amendment No. 6 to Credit Agreement:

        (A)        the Ash Reserve Account shall be funded pursuant to Section 6.1(c)(ii) hereof up to a maximum amount of $600,000 and such amount shall be considered the “Required Ash Reserve Balance”, provided, that, in the event that any of the funds held in the Ash Reserve Account are used pursuant to Section 6.1(d)(ii)(B) below, such maximum amount shall immediately increase to $ 1,000,000 and the term “Required Ash Reserve Balance” shall revert to the meaning given such term in Section 6.1(d)(i) above; and

        (B)        The Lenders and Institutional Lenders shall be entitled to use the funds in the Ash Reserve Account to satisfy payment obligations of Borrower under the Loan Instruments after (1) distributing funds from the Additional Collateral Account for such purpose pursuant to Section 6.1(g) below; and (2) using the funds in the Debt Protection Account for such purpose pursuant to Section 6.1(f) below; provided, that, in the event that the Borrower receives written notice from the Independent Engineer that a new Ash Monofill (as defined in the Ash Disposal Agreement) will be required for the Facilities, immediately upon the receipt of such notice by Borrower, and thereafter, (x) the funds in the Ash Reserve Account shall no longer be used as provided in this Section 6.1(d)(ii)(B), (y) the maximum amount to which the Ash Reserve Account shall be funded shall increase to $1,000,000, and (z) the term “Required Ash Reserve Balance” shall revert to the meaning given such term in Section 6.1(d)(i) above.”

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               (f)     Section 6.1(e) (Repair and Maintenance Account) is hereby amended by deleting the second sentence thereof and replacing it with the following sentence:

               “The Repair and Maintenance Account shall be funded pursuant to Section 6.1(c)(vi) hereof up to a maximum amount of (x) $2,200,000 on or prior to January 31, 2004 and after January 31, 2010 and (y) $2,600,000 after January 31, 2004 through and including January 31, 2010 (such amount the “Required Maintenance Balance”).”

               (g)     Section 6. l(f) (Debt Protection Account) is hereby amended by (i) inserting the parenthetical “(aa)” immediately after the title to such Section and prior to the first sentence thereof, (ii) deleting the number “$10,000,000” in the first sentence of the second paragraph thereof and replacing such number with the number “$19,700,000” and (iii) by inserting a new subclause (bb) immediately prior to the period appearing at the end of such section as follows:

               “(bb) Notwithstanding the provisions of Section 6.1 (f)(aa) above, (A) commencing on the effective date of Amendment No. 6 to Credit Agreement and ending on January 31, 2010, (x) the maximum amount to which the Debt Protection Account shall be funded shall be increased by $550,000 on each Repayment Date that is a Quarterly Date in January and each Repayment Date that is a Quarterly Date in July, commencing on January 1, 2002 through and including July 31, 2008 and (y) the term “Required Debt Protection Balance” shall mean, at any given time, the maximum amount to which the Debt Protection Account shall be funded in accordance with this Section 6.1(f)(bb); and (B) as long as no Event of Default has occurred and is continuing, (1) on January 31, 2009, any amounts on deposit in the Debt Protection Account in excess of $26,350,000, (2) on July 31, 2009, any amounts on deposit in the Debt Protection Account in excess of $23,000,000, (3) on January 31, 2010, any amounts on deposit in the Debt Protection Account in excess of $21,500,000 and (4) on July 31, 2010, any amounts on deposit in the Debt Protection Account in excess of $20,000,000 shall be distributed to the Borrower to such account as Borrower shall direct and simultaneously with the last such distribution, the provisions of this Section 6.1(f)(bb) shall cease to have any force or effect.”

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               Section 2. Consents. (a) In accordance with Section 6.19(c) and Section 9.4 of the Credit Agreement and subject to the observance and performance of the covenants set forth in Section 2(b) hereof, the Lenders, Institutional Lenders, Institutional Agent, Issuing Bank, Co-Agents and Agent hereby consent to:

                        (i)       the Borrower’s execution of the amendment and restatement of each of the Rova I Power Purchase Agreement and the Rova II Power Purchase Agreement in the form attached hereto as Exhibit A and Exhibit B, respectively;

                        (ii)       notwithstanding anything in any of the Loan Instruments to the contrary, the amount of all settlement proceeds payable to Borrower from Virginia Power on or prior to December 31, 2000 in connection with litigation regarding the Rova I Power Purchase Agreement being delivered by Virginia Power to Agent (the “Settlement Proceeds”) and forthwith being applied by Agent as follows (such application by Agent being hereby irrevocably authorized by Borrower):

(A) first, deposit the Settlement Proceeds into the Roanoke Account, to be effected with funds that would otherwise have been deposited into the Project Control Account but for the transactions contemplated under the Letter Agreement;

(B) second, segregate a portion of such Settlement Proceeds deposited in the Roanoke Account in an amount equal to $2,000,000 to be effected with funds that would otherwise have been deposited into the Debt Protection Account but for the transactions contemplated under the Letter Agreement; and

(C) third, after having segregated the funds in accordance with Section 2(a)(ii)(A) above, withdraw and transfer the remaining balance of such Settlement Proceeds to any account that Borrower may direct in writing to Agent; and

                        (iii)       notwithstanding anything in any of the Loan Instruments to the contrary, the withdrawal by the Agent, for the account of” the Lenders and Institutional Lenders, of an amount equal to $100,000 on the date hereof from the Roanoke Account to the extent amounts held in the Roanoke Account were to be held in the Project Control Account but for the transactions contemplated under the Letter Agreement (such withdrawal by Agent being hereby irrevocably authorized by Borrower).

               (b)   The consents contained in Section 2(a) hereof are expressly conditioned upon the following:

                        (i)       Agent shall receive Settlement Proceeds from Virginia Power in an amount greater than or equal to $2,000,000 on or before December 31, 2000;

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                        (ii)       Borrower shall deliver to Agent and Institutional Agent a major maintenance schedule, in form and substance satisfactory to the Independent Engineer and to Agent, in consultation with the Independent Engineer, on or prior to December 31, 2000;

                        (iii)       Borrower shall, in accordance with Section 6.1(c)(vii)(C) of the Credit Agreement, either (A) cause an amount equal to $550,000 to be deposited into the Roanoke Account (to be effected with funds that would otherwise have been deposited in the Debt Protection Account but for the transactions contemplated under the Letter Agreement) or (B) deliver to Agent a Debt Protection Letter of Credit in a face amount of $550,000, which shall satisfy all of the requirements and afford Agent all of the rights applicable to Debt Protection Letters of Credit set forth in Section 6.1(f) of the Credit Agreement, together with such corporate documents, legal opinions and other documents and information which the Agent may reasonably request; in either case, on each Repayment Date that is a Quarterly Date in January and each Repayment Date that is a Quarterly Date in July, commencing on January 1, 2002 through and including July 31, 2008;

                        (iv)       Borrower shall pay an amendment and work fee in the amount of $100,000 to the Agent on the date hereof (to be distributed by Agent to the Lenders and Institutional Lenders pro rata) in accordance with Section 2(a)(iii) hereof;

                        (v)       Borrower shall cause an amount equal to the difference between (x) the Required Maintenance Balance less (y) the then-current balance in the Repair and Maintenance Account to be deposited into the Roanoke Account (to be effected with funds that would otherwise have been deposited in the Repair and Maintenance Account but for the transactions contemplated under the Letter Agreement) on the first Repayment Date of each of the calendar years 2004 and 2009 in accordance with Section 6.1(c)(vi) of the Credit Agreement;

                        (vi)       the Agent and Institutional Agent shall receive by December 31, 2000, and by December 31 of each year thereafter, a report in form and substance reasonably satisfactory to the Agent and Institutional Agent (after consultation with the Independent Engineer) describing the location, type and capacity of disposal, reuse or storage sites for the Ash (as such term is defined in the Ash Disposal Agreement) produced by the Facilities and the quantity of Ash produced by the Facilities in each such year then ended and (A) the quantity of Ash estimated to be produced by the Facilities in the following year, (B) the location, type and capacity of available ash disposal, reuse, and storage sites then owned, leased or otherwise under contract by the Borrower and (C) any alternative sites not then owned, leased or otherwise under contract by the Borrower proposed to be used for disposing of, reusing, or storing the Ash to be produced by the Facilities for the five year period following the date of such report, the costs necessary to implement the use of such alternative sites, and any additional contracts, agreements or Governmental Approvals necessary for the disposal, reuse and/or storage of the Ash at such alternative sites; and

                        (vii)       the Borrower shall (x) promptly deliver to the Agent a schedule and plan for the construction of an additional Ash Monofill Cell (as defined in the Ash Disposal Agreement), if, at any time, Borrower fails to own a minimum quantity of available Ash storage capacity in existing Ash Monofill Cells equal to 600,000 tons of Ash, (y) promptly cause an additional Ash Monofill Cell to be constructed in accordance with all applicable Governmental Requirements and all applicable requirements set forth in the Credit Agreement and Ash Disposal Agreement and within a time frame satisfactory to the Agent (after consultation with the Independent Engineer) if, at any time, Borrower fails to own a minimum quantity of available Ash storage capacity in existing Ash Monofill Cells equal to 300,000 tons of Ash and (z) deliver to the Agent, within thirty (30) days after receipt of a written request by the Agent therefor, evidence, in form and substance reasonably satisfactory to the Agent (after consultation with the Independent Engineer), that the Borrower owns, leases or has under contract the minimum quantity of available Ash storage capacity set forth in (x) or (y).

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The failure by the Borrower to comply with any of the covenants set forth in this Section 2(b) shall constitute an Event of Default under the Credit Agreement.

               3.  Letter Agreement. The Lenders, Institutional Lenders, Institutional Agent, Issuing Bank, Co-Agents and Agent hereby accept and acknowledge the Letter Agreement and all provisions contained therein.

               4.  Limitations. Except as expressly stated herein, all of the representations, warranties, terms, covenants and conditions of the Credit Agreement shall remain unamended and shall continue to be, and shall remain in full force and effect in accordance with their respective terms. The consents and authorizations granted in Section 2 hereof are only effective in the specific instance and for the specific purpose for which each is given (and subject to the conditions therein stated) and shall not be effective for any other purpose. Nothing herein shall be construed as consent by any of the Lenders or Institutional Lenders to performance by the Borrower or any of its Affiliates of any obligation under the Rova Power Purchase Agreements to the extent such performance would violate the terms of any Loan Instrument. This Amendment shall be limited precisely as provided for herein, and shall not be deemed to be a waiver of, amendment of, consent to or modification of any other term or provision of the Credit Agreement nor any other Loan Instrument.

               5.  Credit Agreement References. On and after the effective date of this Amendment, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof or words of like import, and each reference to the Credit Agreement by the words “thereunder”, “thereof or words of like import in any Project Document, Loan Instrument or other document executed in connection with the Credit Agreement, shall mean and be a reference to the Credit Agreement, as amended or otherwise modified by this Amendment.

               6.  Successors and Assigns. This Amendment shall be binding upon and inure to the benefit of each of the parties hereto and their respective successors and assigns and all future parties to the Credit Agreement.

               7.  Counterparts. This Amendment may be signed in any number of counterparts, each of which shall be original, with the same effect as if the signatures hereto and thereto were upon the same instrument. This Amendment shall become effective as of the date hereof upon the execution of a counterpart by each of Borrower, Agent, the Issuing Bank, the Co-Agents, the Lenders and Institutional Lenders.

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               8.  Governing Law. This Amendment shall for all purposes be considered a Loan Instrument and shall be governed by, construed and interpreted in accordance with, the laws of the State of New York without regard to principles of conflict of laws (other than Section 5-1401 of the General Obligations Law of the State of New York).

               IN WITNESS WHEREOF, the parties hereto have executed this Amendment through their duly authorized representatives as of the date first above written.

WESTMORELAND-- LG&E PARTNERS,
as Borrower

By: WESTMORELAND-ROANOKE VALLEY, L.P.,
as general manager

By: WEI-- ROANOKE VALLEY, INC.,
as general partner

By: /s/ Gregory S. Woods
Name: Mr. Gregory S. Woods
Title: Executive Vice President

By: LG&E ROANOKE VALLEY L.P.,
as general partner

By: LG&E POWER 16 INCORPORATED,
as general partner

By: /s/ C. A. Markel
Name:
Title:

CREDIT SUISSE FIRST BOSTON, as Agent, Co-Agent, Lender and Issuing Bank

By: /s/ p.p. Hughes
Name: Stephen Hughes
Title: Asst. Vice President

By: /s/ Ryan
Name: Peter A. Ryan
Title: Vice President

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THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, as Institutional Agent and Institutional Lender

By: /s/ Randall M. Kob
Name: Randall M. Kob
Title: Vice President

THE BANK OF NOVA SCOTIA, as Co-Agent and Lender

By: /s/ Brian Portis
Name: Brian Portis
Title: Director

CREDIT LYONNAIS, Cayman Island Branch, as Lender

By: /s/ James F. Guidera
Name: James F. Guidera
Title: SVP

CREDIT LYONNAIS, New York Branch, as Lender

By: /s/ James F. Guidera
Name: James F. Guidera
Title: SVP

THE FUJI BANK LIMITED, New York Branch, as Lender

By: /s/ Thomas W. Boylan
Name: Thomas W. Boylan
Title: Vice President & Team Leader

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LANDESBANK HESSEN-THURINGEN GIROZENTRALE, as Lender

By: /s/ David A. Leech
Name: David A. Leech
Title: Vice President Corporate Finance Division Structured Finance Dept.

By: /s/ Michael D. Novack
Name: Michael D. Novack
Title: Vice President Corporate Finance Division Structured Finance Dept.

NIB CAPITAL BANK N.V., as Co-Agent and Lender

By: /s/ [illegible]
Name: J.C. Veeningen
Title: Legal Counsel

THE SANWA BANK LIMITED, as Lender

By: /s/ Ken Nakahira
Name: Ken Nakahira
Title: Vice President

THE SUMITOMO BANK, LIMITED, New York Branch, as Co-Agent and Lender

By: /s/ William M. Ginn
Name: William M. Ginn
Title: General Manager

UNION BANK OF CALIFORNIA, N.A., as Lender

By: /s/ Susan K. Johnson
Name: Susan K. Johnson
Title: Vice President

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EX-10

Exhibit 10.12

AMENDMENT NO. 7 TO AMENDED AND RESTATED CONSTRUCTION AND
TERM LOAN AGREEMENT AND
AMENDMENT TO CERTAIN SECURITY DOCUMENTS

               AMENDMENT NO. 7 TO AMENDED AND RESTATED CONSTRUCTION AND TERM LOAN AGREEMENT AND AMENDMENT TO CERTAIN SECURITY DOCUMENTS (this “Amendment No. 7”), dated as of November 15, 2000, among Westmoreland-LG&E Partners, a Virginia general partnership (the “Borrower”), the banks party to the Credit Agreement (as defined below) as “Lenders”, The Prudential Insurance Company of America and each Purchasing Institutional Lender, (The “Institutional Lenders”), The Prudential Insurance Company of America (the “Institutional Agent”), Credit Suisse First Boston, as Agent (together with its successors in such capacity, the “Agent”), Credit Suisse First Boston, NIB Capital Bank N.V., The Bank of Nova Scotia and The Sumitomo Bank, Limited, New York Branch, as Co-Agents (together with their successors in such capacity, each a “Co-Agent” and, collectively, the “Co-Agents”), and Credit Suisse First Boston, New York Branch as Issuing Bank (together with its successors in such capacity, the “Issuing Bank”).

W I T N E S S E T H :

               WHEREAS, the parties hereto desire to amend certain documents, including: (i) the Amended and Restated Construction and Term Loan Agreement, dated as of December 1, 1993, as amended by Amendment No. 1 to Amended and Restated Construction and Term Loan Agreement, dated as of November 4, 1994, Amendment No. 2 to Amended and Restated Construction and Term Loan Agreement, dated as of December 30, 1994, Amendment No. 3 to Amended and Restated Construction and Term Loan Agreement, dated as of January 31, 1993, Amendment No. 4 to Amended and Restated Construction and Term Loan Agreement, dated as of October 19, 1995, Amendment No. 5 to Amended and Restated Construction and Term Loan Agreement, dated as of December 15, 1996, Amendment No. 5 to Amended and Restated Construction and Term Loan Agreement, dated as of August 23, 2000, Amendment No. 6 to Amended and Restated Construction and Term Loan Agreement, dated November 21, 2000 among the Borrower, the Lenders, the Institutional Lenders, the Agent, the Co-Agents, and the Issuing Bank, and as further amended by a Letter Agreement dated as of July 30, 1999 between the Borrower, the Lenders, the Institutional Lenders, the Agent, the Co-Agents, and the Issuing Bank (as the same has been and may be further amended, supplemented or otherwise modified from time to time, the “Credit Agreement”); (ii) the Amended and Restated Account Pledge Agreement dated as of December 1, 1993 between the Borrower and the Agent (as may be amended, supplemented or modified from time to time, the “Account Pledge Agreement”); (iii) the Amended and Restated Assignment and Security Agreement dated as of December 1, 1993 between the Borrower and the Agent (as may be amended, supplemented or modified from time to time, the “Security Agreement”); and (iv) the Amended and Restated General Partner Security and Limited Guaranty Agreement dated as of December 1, 1993 between LG&E Roanoke Valley L.P. and Westmoreland-Roanoke Valley, L.P., as Partners and Agent (as may be amended, supplemented or modified from time to time, the “General Partner Security Agreement”);

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               WHEREAS, Credit Suisse First Boston (“CSFB”) and The Bank of New York (“BNY”), as depositary, have entered into a deposit agreement dated as of July 30, 1999 (as the same has been and may be further amended, supplemented or modified from time to time, the “Deposit Agreement”), pursuant to which CSFB has opened, and will from time to time open, accounts with BNY, including the Roanoke Account (as defined below); and

               WHEREAS, the parties hereto desire to amend certain provisions of the Credit Agreement and certain Security Documents as provided herein.

               NOW, THEREFORE, in consideration of the premises contained herein and for other good and valuable consideration receipt of which is hereby acknowledged, the parties hereto hereby agree as follows:

        1.       Definitions. For all purposes of this Amendment No. 7, capitalized terms used (including in the preamble and recitals hereof) but not otherwise defined herein, shall have the meanings set forth in the Credit Agreement.

               2.  Amendment of Article 1 of the Credit Agreement. Article 1 of the Credit Agreement is hereby amended by:

               (a)   inserting the following definitions in the appropriate alphabetical order therein:

               ““Additional Collateral Ledger” shall have the meaning specified in Section 6.1(g) hereof.”

               ““Ash Reserve Ledger” shall have the meaning specified in Section 6.1(d) hereof.”

               ““BNY” shall mean The Bank of New York, a banking corporation organized under the laws of the State of New York.”

               ““Checking Sub-Ledger” shall have the meaning specified in Section 6.1(b) hereof.”

               ““Contingency Ledger” shall have the meaning set forth in Section 6.1(i) hereof.”

               ““Debt Protection Ledger” shall have the meaning specified in Section 6.1(f) hereof.”

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               ““Deposit Agreement” means the deposit agreement dated as of July 30, 1999, between Credit Suisse First Boston and BNY, concerning various accounts (including, without limitation the Roanoke Account), as the same has been and may be further amended, supplemented or modified from time to time.”

               ““Disallowance Reserve Ledger” shall have the meaning specified in Section 6.1(h) hereof.”

               ““Ledger” and “Ledgers” shall mean individually and collectively, the Additional Collateral Ledger, Ash Reserve Ledger, Debt Protection Ledger, Disallowance Reserve Ledger, Project Control Ledger (including the Checking Sub-Ledger, the Rate Sub-Ledger and the Rova II Sub-Ledger), Repair and Maintenance Ledger, Rova I Contingency Ledger, Rova II Contingency Ledger, Rova I Special Disbursement Ledger, Rova II Special Disbursement Ledger, Tranche A Repayment Ledger and Tranche B Repayment Ledger.”

               ““Letter Agreement” means the letter agreement dated as of July 20, 1999 among Borrower, the Lenders, the Institutional Lenders, the Agent, the Co-Agents and the Issuing Bank.”

               ““Project Control Ledger” shall have the meaning specified in Section 6.1(b) hereof.”

               ““Rate Sub-Ledger” shall have the meaning specified in Section 6.1(c)(xi) hereof.”

               ““Repair and Maintenance Ledger” shall have the meaning specified in Section 6.1(e) hereof.”

               ““Repayment Ledgers” shall have the meaning specified in Section 6.1(j) hereof.”

               ““Roanoke Account” shall mean the account entitled “CSFB, as Agent, CSFB-Westmoreland — LG&E ROVA I & II” (account No. 890-0410-639) established and maintained by the Agent with The Bank of New York pursuant to the Deposit Agreement, and all renewals or replacements thereof. “

               ““Rova I Contingency Ledger” shall have the meaning specified in Section 6.1(i) hereof.”

               ““Rova I Special Disbursement Ledger” shall have the meaning specified in Section 6.1(a) hereof.”

               ““Rova II Contingency Ledger” shall have the meaning specified in Section 6.1(i) hereof.”

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               ““Rova II Special Disbursement Ledger” shall have the meaning specified in Section 6.1(a) hereof.”

               ““Rova II Sub-Ledger” shall have the meaning specified in Section 6.1(b) hereof.”

               ““Special Disbursement Ledger” shall have the meaning set forth in Section 6.1(a) hereof.”

               ““Tranche A Repayment Ledger” shall have the meaning specified in Section 6.1(j) hereof.”

               ““Tranche B Repayment Ledger” shall have the meaning specified in Section 6.1(j) hereof.”

               (b)   deleting the words “Project Control Accounts” in lines 4, 5, 6 and 7 of the definition for “Cash Revenues”, the words “Project Control Account” in line 2 of the definition for “Discretionary Cash Flow”, lines 13 and 14 of the definition for “Rova I Project Savings”, line 14 of the definition for “Rova II Project Savings”, and inserting the words “Roanoke Account (for the sole account of the Project Control Ledger)" in their place and stead;

               (c)   deleting the words “Rova II Sub-Account” in lines 4 and 5 of the definition for “Discretionary Cash Flow” and line 14 of the definition for “Rova I Project Savings”, and inserting the words “Roanoke Account (for the sole account of the Rova II Sub-Ledger)” in their place and stead;

               (d)   deleting the words “Debt Protection Account” in lines 15 and 16 of the definition for “Rova I Project Costs”, in line 5 of the definition for “Rova I Project Savings”, lines 15 and 16 of the definition for “Rova II Project Costs”, line 5 of the definition for “Rova II Project Savings” and inserting the words “Roanoke Account (for the sole account of the Debt Protection Ledger)” in their place and stead;

               (e)   deleting the words “Rova I Special Disbursement Account” in lines 5 and 6 of the definition for “Tranche A Overfunded Amount”, and inserting the words “Roanoke Account (for the sole account of the Rova I Special Disbursement Ledger)” in their place and stead;

               (f)   deleting the words “sub-account” in line 5 of the definition for “Tranche A Overfunded Amount”, and inserting the words “sub-ledger” in their place and stead;

               (g)   deleting the words “sub-account of the Tranche A Special Disbursement Account” in lines 6 and 7 of paragraph (a) in the definition for “Tranche A Application for Borrowing”, and inserting the words “Roanoke Account (for the sole account of the sub-ledger of the Tranche A Special Disbursement Ledger)” in their place and stead;

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               (h)   deleting the words “sub-account of the Tranche B Special Disbursement Account” in lines 6 and 7 of paragraph (a) in the definition for “Tranche B Application for Borrowing”, and inserting the words “Roanoke Account (for the sole account of the sub-ledger of the “Tranche B Special Disbursement Ledger)” in their place and stead;

               (i)   deleting the word “Accounts” in line 6 of the definition for “Cash Revenues”, line 6 of the definition for “Gross Revenues”, line 17 of the definition for “Tranche B Debt Service”, and inserting the words “Roanoke Account” in their place and stead;

               (j)   deleting the word “Account” in line 23 of the definition for “Permitted Investments”, and inserting the words “Ledger of the Roanoke Account” in their place and stead.

               3.  Other Amendments of the Credit Agreement. The following sections of the Credit Agreement shall be amended as follows:

               (a)   the words “Additional Collateral Account” in line 25 of Section 9.4 shall be deleted, and the words “Roanoke Account (for the sole account of the Additional Collateral Ledger)” be inserted in their place and stead;

               (b)   the words “Debt Protection Account” in lines 11 and 12 of each of the sixth and seventh paragraphs in Section 2.1(a), in lines 16 and 33 of Section 3.1(d)(i) and in lines 23 and 24 of Section 9.4 shall be deleted, and the words “Roanoke Account (for the sole account of the Debt Protection Ledger)” shall be inserted in their place and stead;

               (c)   the words “Disallowance Reserve Account” in lines 1 and 2 of Section 7.1(t) and lines 24 and 25 of Section 9.4 shall be deleted, and the words “Roanoke Account (for the sole account of the Disallowance Reserve Ledger)” shall be inserted in their place and stead;

               (d)   the words “Project Control Account” in line 3 of Section 6.16(f)(ii) and in each of lines 45 and 46, 47 and 49 in Section 6.26(iii) shall be deleted, and the words “Roanoke Account (for the sole account of the Project Control Ledger)” shall be inserted in their place and stead;

               (e)   the words “Rova I Contingency Account” in lines 4 and 5 of Section 2.5(b)(i)(A), lines 7 and 8 of Section 2.5(b)(ii) and lines 10 and 11 in Section 6.5(c) shall be deleted, and the words “Roanoke Account (for the sole account of the Rova I Contingency Ledger)” shall be inserted in their place and stead;

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               (f)   the words “Rova I Special Disbursement Account” in line 9 of Section 2.1(b)(i) shall be deleted, and the words “Roanoke Account (for the sole account of the Rova I Special Disbursement Ledger)" shall be inserted in their place and stead;

               (g)   the words “subaccount of the Rova I Special Disbursement Account” in lines 2 and 3 of Section 2.1(f)(i) shall be deleted, and the words “sub-ledger of the Rova I Special Disbursement Ledger in the Roanoake Account” shall be inserted in their place and stead;

               (h)   the words “Rova II Contingency Account”, in line 5 of Section 2.5(b)(i)(A), line 4 of Section 2.5(b)(i)(H), lines 26 and 27 of Section 2.5(b)(ii) and line 11 in Section 6.5(c) shall be deleted, and the words “Roanoke Account (for the sole account of the Rova II Contingency Ledger)” shall be inserted in their place and stead;

               (i)   the words “Rova II Special Disbursement Account” in line 10 of Section 2.1(b) shall be deleted, and the words “Roanoke Account (for the sole account of the Rova II Special Disbursement Ledger)” shall be inserted in their place and stead;

               (j)   the words “sub-account established within the Rova II Special Disbursement Account” in lines 10 and 11 of Section 2.1(f)(ii) shall be deleted, and the words “sub-ledger of the Rova II Special Disbursement Ledger in the Roanoke Account” shall be inserted in their place and stead;

               (k)   the words “sub-account into the Rova II Special Disbursement Account” in lines 13 and 14 of Section 2.1(f)(ii) shall be deleted, and the words “sub-ledger of the Rova II Special Disbursement Ledger into the Rova II Special Disbursement Ledger in the Roanoke Account” shall be inserted in their place and stead;

               (l)   the words “Rova II Sub-Account of the Contingency Account” in line 22 of Section 3.1(d)(i) shall be deleted, and the words “Roanoke Account (for the sole account of the Rova II Sub-Ledger of the Contingency Ledger)” be inserted in their place and stead;

               (m)   the words “various Accounts” in line 11 of Section 8.7 shall be deleted, and the words “various Accounts and the Roanoke Account” be inserted in their place and stead;

               (n)   the word “Accounts” in line 8 of Section 7.2(c), line 15 of Section 7.2(d) and line 18 of Section 9.20 shall be deleted, and the words ” Accounts and the Roanoke Account” inserted in its place and stead; and

               (o)   deleting all words commencing from “Credit Suisse” in line 6 of Section 2.6(a) until the end of that Section and inserting in their place and stead the words “The Bank of New York, ABA No. 021 000 018 (for credit to the account of Credit Suisse First Boston, “CSFB-Project Finance Funds Clearing” (account no. 890-0410-701) for subsequent credit to “CSFB-Rova I and II” (account no. 890-0410-639).”

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               4.   Amendment of Section 6.1 of the Credit Agreement. Section 6.1 of the Credit Agreement is hereby amended and restated as follows:

               6.1    The Roanoke Account and the Ledgers.

               The Agent shall establish and maintain at The Bank of New York, in the name of the Agent, the Roanoke Account pursuant to the Deposit Agreement, and the Agent shall establish and maintain the ledgers referred to in Sections 6.1(a) through 6.1(j) hereof (collectively, the “Ledgers”) for the purpose of maintaining a record of all amounts in, and all deposits, withdrawals, investments and transfers into or from, the Roanoke Account, from time to time, in accordance with the following provisions of this Section 6.1 and the Loan Instruments. Any reference to “the balance on”, “payments from”, “deposits into”, “withdrawals from”, “transfers into” or “transfers from”, or to funds or amounts being “applied”, “held in”, “on deposit in” or “released from”, the Roanoke Account or any Ledger (and all correlative or similar terms) or to any other act with respect to the Roanoke Account or any Ledger in this Section 6.1, any other provision of this Agreement or any other Loan Instruments shall, in all such cases, be read and construed as a reference to the relevant matter or act with respect to the Roanoke Account but only with respect to, and only to the extent of, the relevant Ledger or Ledgers or funds in such Ledger or Ledgers (as applicable). To the extent any withdrawal shall be made for the account of any Ledger from the Roanoke Account, such withdrawal shall in no event exceed the amount actually reflected in such Ledger. Notwithstanding anything contained herein or in any other Loan Instruments to the contrary, to the extent any provision hereof or in any other Loan Instruments recites that funds shall be withdrawn or transferred from the Roanoke Account for the sole account of any Ledger to the Roanoke Account for the sole account of any other Ledger, no actual transfer of funds need occur, but the relevant Ledgers shall be adjusted accordingly.

               (a)       Rova I Special Disbursement Account and Rova II Special Disbursement Ledger. The Borrower shall maintain two special accounts (the “Rova I Special Disbursement Account” and the “Rova II Special Disbursement Account”) at Credit Suisse First Boston, New York, New York and such accounts shall be titled “Rova I Special Disbursement Account” and “Rova II Special Disbursement Account”). The Agent shall have exclusive possession of and sole dominion and control over the Rova I Special Disbursement Account and the Rova II Special Disbursement Account in accordance with the terms of this Agreement. In addition, The Agent shall maintain two ledgers (the “Rova I Special Disbursement Ledger” and the “Rova II Special Disbursement Ledger”) with respect to the Roanoke Account. All Tranche A Advances shall be deposited by Agent into the Roanoke Account (for the sole account of the Rova I Special Disbursement Ledger or a sub-account thereof, in the case of any Advance of a Tranche A Overfunded Amount, as specified below in this Section 6.1(a)). Borrower shall direct the Series 1991 Trustee to deposit all Series 1991 Bond Borrowings into the Roanoke Account (for the sole account of the Rova I Special Disbursement Ledger). Borrower shall maintain a sub-ledger of the Roanoke Account (for the sole account of the Rova I Special Disbursement Ledger) into which all Advances of any Tranche A Overfunded Amount shall be deposited. Releases of Tranche A Overfunded Amounts on deposit in the sub-ledger within the Rova I Special Disbursement Ledger of the Roanoke Account into the Roanoke Account (for the sole account of the Rova I Special Disbursement Ledger) shall be made in accordance with Section 2.1(f) hereof. Borrower may draw checks against funds on deposit in the Roanoke Account (for the sole account of the Rova I Special Disbursement Ledger), including funds released from the sub-ledger into the Roanoke Account (for the sole account of the Rova I Special Disbursement Ledger), but excluding funds constituting Tranche A Overfunded Amounts on deposit in the sub-ledger, for payment only of Rova I Project Costs specified in the Rova I Approved Budget, in each case strictly in accordance with the Tranche A Applications for Borrowing in respect thereof approved by Agent. In addition, all payments to Contractor from proceeds of any Tranche A Advance or any Series 1991 Bond Borrowing shall be made directly by Agent, pursuant to instructions in a Tranche A Application for Borrowing.

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               All Tranche B Advances shall be deposited by Agent into the Roanoke Account (for the sole account of the Rova II Special Disbursement Ledger (or a sub-account thereof, in the case of any Advance of a Tranche B Overfunded Amount, as specified below in this Section 6.1(a)). Borrower shall direct the Series 1993 Trustee to deposit all Series 1993 Bond Borrowings into the Roanoke Account (for the sole account of the Rova II Special Disbursement Ledger). Borrower shall maintain a sub-ledger of the Roanoke Account (for the sole account of the Rova II Special Disbursement Ledger) into which all Advances of any Tranche B Overfunded Amount shall be deposited. Releases of Tranche B Overfunded Amounts on deposit in the sub-ledger within the Rova II Special Disbursement Ledger of the Roanoke Account into the Roanoke Account (for the sole account of the Rova II Special Disbursement Ledger) shall be made in accordance with Section 2.1(f) hereof. Borrower may draw checks against funds on deposit in the Roanoke Account (for the sole account of the Rova II Special Disbursement Ledger), including funds released from the sub-ledger into the Roanoke Account (for the sole account of the Rova II Special Disbursement Ledger), but excluding funds constituting Tranche B Overfunded Amounts on deposit in the sub-ledger, for payment only of Rova II Project Costs specified in the Rova II Approved Budget, in each case strictly in accordance with the Tranche B Applications for Borrowing in respect thereof approved by Agent. In addition, all payments to Contractor from proceeds of any Tranche B Advance or any Series 1993 Bond Borrowing shall be made directly by Agent, pursuant to instructions in a Tranche B Application for Borrowing.

               Borrower shall maintain a sub-ledger of the Roanoke Account (for the sole account of the Rova II Special Disbursement Ledger) into which the proceeds of the Westmoreland Subordinated Loan shall be deposited on the Amendment Execution Date. Such funds shall be used for payment of the Rova II Project Costs specified in the Rova II Approved Budget strictly in accordance with the Tranche B Application for Borrowing submitted on the Amendment Execution Date and in accordance with Section 3(f) of the Equity Agreement.

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               (b)       Project Control Account and Project Control Ledger. The Borrower shall maintain a special account (the “Project Control Account”) at Credit Suisse First Boston, New York, New York and such account shall be titled “Project Control Account”. The Agent shall have exclusive possession of and sole dominion and control over the Project Control Account in accordance with the terms of this Agreement. The Agent shall maintain a ledger (the “Project Control Ledger”) with respect to the Roanoke Account and such ledger shall be titled “Project Control Ledger”. The Roanoke Account (for the sole account of the Project Control Ledger) shall be maintained so long as there exists any amount in any of the funds or accounts created under the Series 1991 Indenture or the Series 1993 Indenture. Until the Tranche B Conversion Date, Borrower shall maintain a sub-ledger within the Project Control Ledger of the Roanoke Account (the “Rova II Sub-Ledger”) into which all Cash Revenues from the Rova II Facility shall be deposited. All Cash Revenues (and insurance proceeds not required to be deposited in the Roanoke Account (for the sole account of the Contingency Ledger) pursuant to Section 6.1(i) hereof) shall be deposited in the Roanoke Account (for the sole account of the Project Control Ledger), except that prior to the Tranche B Conversion Date, all Cash Revenues from the Rova II Facility shall be deposited into the Roanoke Account (for the sole account of the Rova II Sub-Ledger). Borrower has irrevocably instructed all parties paying Cash Revenues to Borrower, and shall so instruct all other parties at any time paying Cash Revenues to Borrower, to make such payments into the Roanoke Account (for the sole account of the Project Control Ledger) and, until the Tranche B Conversion Date, Cash Revenues from the Rova II Facility to be deposited into the Roanoke Account (for the sole account of the Rova II Sub-Ledger). In addition, Borrower shall maintain a second sub-ledger within the Project Control Ledger of the Roanoke Account (the “Checking Sub-Ledger”) against which checks may be drawn by Borrower for the payment of Cash Expenses. The balance in the Roanoke Account (for the sole account of the Checking Sub-Ledger) shall not exceed the aggregate amount of all checks outstanding and to be drawn against such ledger. Borrower shall not make transfers from the Roanoke Account (for the sole account of the Project Control Ledger) to the Roanoke Account (for the sole account of the Checking Sub-Ledger) more than three times in any month (or such other amount as may be permitted by law).

               (c)       Withdrawals from Roanoke Account (for the sole account of the Project Control Ledger). Borrower hereby irrevocably authorizes Agent to make withdrawals from the Roanoke Account (for the sole account of the Project Control Ledger) (except to the extent Borrower makes withdrawals by check from the Roanoke Account (for the sole account of the Checking Sub-Ledger) as set forth in Section 6.1(b) hereof) and, until the Tranche B Conversion Date, from the Roanoke Account (for the sole account of the Rova II Sub-Ledger), pursuant to the terms of this Agreement and for the purposes of satisfying the provisions of this Section 6.1, as follows:

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                (i)       Payment of Cash and Other Expenses; Application of Conversion Date Balances:

        (A)        on any day prior to the Tranche A Conversion Date, withdraw and transfer from the Roanoke Account (for the sole account of the Project Control Ledger (excluding the Rova II Sub-Ledger)) such amount as Borrower requests in order to pay (x) Rova I Cash Expenses and for fuel for start-up and initial operation of the Rova I Facility until the Tranche A Conversion Date (directly to such payees as Borrower specifies or through funds transferred to a Local Bank Account or to the Roanoke Account (for the sole account of the Checking Sub-Ledger) as specified in Section 6.1(b) hereof) and (y) interest and Rova I L/C Fees accruing after the Rova I Commercial Operations Date but prior to the Tranche A Conversion Date (directly to such payees as Borrower specifies); and in no event shall any such withdrawal be used to pay other Rova I Project Costs or Rova II Project Costs (except as expressly set forth above or with Agent’s approval, given in its sole discretion);

        (B)        on any day prior to the Tranche B Conversion Date, withdraw and transfer from the Roanoke Account (for the sole account of Rova II Sub-Ledger within the Project Control Ledger) such amount as Borrower requests in order to pay (x) Rova II Cash Expenses and for fuel for start-up and initial operation of the Rova II Facility until the Tranche B Conversion Date (directly to such payees as Borrower specifies or through funds transferred to a Local Bank Account or to the Roanoke Account (for the sole account of the Checking Sub-Ledger), as specified in Section 6.1(b) hereof) and (y) interest and Rova II L/C Fees accruing after the Rova II Commercial Operations Date but prior to the Tranche B Conversion Date (directly to such payees as Borrower specifies); and in no event shall any such withdrawal be used to pay other Rova II Project Costs or any Rova I Project Costs (except as expressly set forth above or with Agent’s approval, given in its sole discretion);

        (C)        on any day after the Tranche A Conversion Date but prior to the Tranche B Conversion Date, upon the request of Borrower, withdraw and transfer from the Roanoke Account (for the sole account of the Project Control Ledger (excluding the Rova II Sub-Ledger)) such amount as Borrower requests in order to pay Rova I Cash Expenses (directly to such payees as Borrower specifies or through funds transferred to the Local Bank Account or to the Roanoke Account (for the sole account of the Checking Sub-Ledger) as specified in Section 6.1(b) hereof); provided that in the event the Tranche A Debt Service Coverage Ratio or the Projected Tranche A Debt Service Coverage Ratio as calculated on the most recent Calculation Delivery Date is less than 1.1 to 1.0, then until such condition no longer exists, any withdrawals and transfers of funds for Rova I Cash Expenses that would cause the aggregate withdrawals in such month for Rova I Cash Expenses to exceed the Rova I Operating Costs allocated for such month in the Rova I Operating Budget shall require (except for withdrawals needed to fund emergency measures) the prior written consent of Agent not to be unreasonably withheld or delayed and provided, further, that there shall be no more than three such withdrawals in any month; and

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        (D)        on any day after the Tranche B Conversion Date, upon the request of Borrower, withdraw and transfer from the Roanoke Account (for the sole account of the Project Control Ledger) such amount as Borrower requests in order to pay Cash Expenses (directly to such payees as Borrower specifies or through funds transferred to the Local Bank Account or to the Roanoke Account (for the sole account of the Checking Sub-Ledger) as specified in Section 6.1(b) hereof); provided that in the event the Combined Debt Service Coverage Ratio or the Combined Projected Debt Service Coverage Ratio as calculated on the most recent Calculation Delivery Date is less than 1.1 to 1.0, then until such condition no longer exists, any withdrawals and transfers of funds for Cash Expenses that would cause the aggregate withdrawals in such month for Cash Expenses to exceed the aggregate Operating Costs allocated for such month in the Rova I Operating Budget and the Rova II Operating Budget shall require (except for withdrawals needed to fund emergency measures) the prior written consent of Agent and, commencing on the 12th anniversary of the Tranche A Conversion Date, Institutional Agent, in each case not to be unreasonably withheld or delayed);

                (ii)       Payments to Roanoke Account (for the sole account of the Ash Reserve Ledger): After making the withdrawals specified in clause (i) above, on each Repayment Date, withdraw and transfer for deposit in the Roanoke Account (for the sole account of the Ash Reserve Ledger), to the extent funds are available, an amount equal to the lesser of (A) the excess of the Required Ash Reserve Balance over the then-current balance in the Roanoke Account (for the sole account of the Ash Reserve Ledger) and (B) the sum of (1) $1.35 (in 1991 U.S. dollars) per ton of ash disposed of during the six month period immediately preceding such Repayment Date (such dollar amount subject to increase promptly after the end of each calendar year to reflect changes in the GNP Deflator during the immediately preceding calendar year) and (2) any amounts not previously deposited in the Roanoke Account (for the sole account of the Ash Reserve Ledger) due to unavailability;

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                (iii)       Payment of Agency Fee: After making the withdrawals specified in clauses (i) and (ii) above, on each date on and after the Tranche A Conversion Date on which such fee is payable, and on each date on and after the Tranche B Conversion Date on which such fee is payable, withdraw and pay the Agency Fees referred to in Section 2.2(d)(i) hereof to Agent;

                (iv)       Payments of Interest, L/C Fees and Interest Rate Hedge Costs: After making the withdrawals specified in clauses (i) through (iii) above, (x) on each Interest Payment Date occurring on and after the Tranche A Conversion Date and on each date occurring on and after the Tranche A Conversion Date upon which payment is required under any Interest Rate Hedge Agreement, withdraw and transfer accordingly for the payment of any interest on the Tranche A Loans, Tranche A Institutional Loans, Rova I L/C Fees, Yield-Maintenance Premiums on the Tranche A Institutional Loans and other fees due under any of the Loan Instruments in connection with the Tranche A Loans, and the Series 1991 Letter of Credit, including any Interest Rate Hedge Agreement and (y) on each Interest Payment Date occurring on and after the Tranche B Conversion Date, withdraw and transfer accordingly for the payment of any interest on the Tranche B Loans, Tranche B Institutional Loans, Rova II L/C Fees, Yield-Maintenance Premiums on the Tranche B Institutional Loans and other fees due under any of the Loan Instruments in connection with the Tranche B Loans;

                (v)       Payments of Debt Service: After making the withdrawals specified in clauses (i) through (iv) above, on each Repayment Date and on each date occurring on and after the Tranche A Conversion Date that Borrower incurs a Rova I L/C Reimbursement Obligation that cannot be automatically converted into a Loan and on each Repayment Date on and after the Tranche B Conversion Date that Borrower incurs a Rova II L/C Reimbursement Obligation that cannot be automatically converted into a Tranche B Loan, withdraw and transfer accordingly amounts for the payment of Debt Service (after taking into account payments made pursuant to clauses (iii) and (iv) above) due and payable on such date;

                (vi)       Payments to Roanoke Account (for the sole account of the Repair and Maintenance Ledger): After making the withdrawals specified in clauses (i) through (v) above, on each Repayment Date, withdraw and transfer for deposit in the Roanoke Account (for the sole account of the Repair and Maintenance Ledger), to the extent funds are available, an amount equal to the lesser of (A) the excess of the Required Maintenance Balance over the then-current balance in the Roanoke Account (for the sole account of the Repair and Maintenance Ledger) and (B) the sum of (1) $110,000 (in 1992 U.S. dollars) such dollar amount subject to increase promptly after the end of each calendar year to reflect changes in the GNP Deflator during the immediately preceding calendar year plus (2) 50% of the Plant Aging Allowance Amount for the calendar year in which such Repayment Date occurs plus (3) any amounts not previously deposited in the Roanoke Account (for the sole account of the Repair and Maintenance Ledger) due to unavailability;

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                (vii)       Payments to Roanoke Account (for the sole account of the Debt Protection Ledger): After making the withdrawals specified in clauses (i) through (vi) above, on each Repayment Date or such other date as requested by Borrower and approved by Agent in its sole discretion, withdraw and transfer for deposit in the Roanoke Account (for the sole account of the Debt Protection Ledger) up to a maximum amount of $18,000,000 prior to the Tranche B Conversion Date and thereafter to the extent necessary to fund the full amount of the Required Debt Protection Balance, as follows: (A) first, 50% of Discretionary Cash Flow; and (B) second, 100% of remaining Discretionary Cash Flow as of such Repayment Date in an amount equal to the difference between (x) the sum of all amounts previously withdrawn from such account or drawn under the Debt Protection Letter of Credit to satisfy Borrower’s obligations under the Loan Instruments less (y) the sum of all amounts previously deposited in such account pursuant to this clause (B);

                (viii)       Capital Expenditures: After making the withdrawals specified in clauses (i) through (vii) above, on any date withdraw such amounts as are permitted under or consented to by Agent pursuant to Section 6.6(c) hereof for capital expenditures;

                (ix)       Payments to Roanoke Account (for the sole account of the Additional Collateral Ledger): After making the withdrawals specified in clauses (i) through (viii) above, on each Repayment Date, withdraw and transfer amounts for deposit in the Roanoke Account (for the sole account of the Additional Collateral Ledger) to the extent necessary to fund the full amount of the Required Additional Collateral Balance, as follows: (A) if on any Repayment Date the Combined Debt Service Coverage Ratio or the Combined Projected Debt Service Coverage Ratio, in each case as of the immediately preceding Calculation Delivery Date, is less than 1.20 to 1.00 and greater than or equal to 1.15 to 1.00, an amount equal to 50% of Residual Cash Flow; (B) if on any Repayment Date the Combined Debt Service Coverage Ratio or the Combined Projected Debt Service Coverage Ratio, in each case as of the immediately preceding Calculation Delivery Date, is less than 1.15 to 1.00 and greater than or equal to 1.10 to 1.00, an amount equal to 75% of Residual Cash Flow; and (C) if on any Repayment Date the Combined Debt Service Coverage Ratio or the Combined Projected Debt Service Coverage Ratio, in each case as of the immediately preceding Calculation Delivery Date, is less than 1.10 to 1.00, an amount equal to 100% of Residual Cash Flow. “Residual Cash Flow” means, as of any Repayment Date, the Discretionary Cash Flow as calculated for such Repayment Date less the sum of all amounts to be deposited on such Repayment Date in the Roanoke Account (for the sole account of the Debt Protection Ledger) and all payments made as of such Repayment Date pursuant to Section 6.1(c) (viii) hereof since the Repayment Date immediately preceding such Repayment Date;

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                (x)       Payments to Roanoke Account (for the sole account of the Disallowance Reserve Ledger): After making the withdrawals specified in clauses (i) through (ix) above, if a Disallowance (except where such Disallowance is due to certain actions or inactions of Virginia Power that will not result, pursuant to the Rova I Power Purchase Agreement or the Rova II Power Purchase Agreement, as applicable, in reductions in the revenue stream thereunder) has occurred, on each Repayment Date after such Disallowance has first occurred, withdraw and transfer amounts for deposit in the Roanoke Account (for the sole account of the Disallowance Reserve Ledger), to the extent necessary to fund the full amount of the Required Disallowance Balance, as follows: (A) during the period commencing on the Closing Date and ending on the last day of the fifth year following the Rova I Commercial Operations Date, 10% of Remaining Cash Flow, (B) during the period commencing on the first day of the sixth year and ending on the last day of the tenth year following the Rova I Commercial Operations Date, 50% of Remaining Cash Flow; and (C) during the period commencing on the first day of the eleventh year following the Rova I Commercial Operations Date and ending on the Tranche B Institutional Maturity Date, 100% of Remaining Cash Flow. “Remaining Cash Flow” means, as of any Repayment Date, the Residual Cash Flow for such Repayment Date less all amounts to be deposited on such Repayment Date in the Roanoke Account (for the sole account of the Additional Collateral Ledger); and

                (xi)       Transfers or Distributions by Borrower: After making the withdrawals specified in clauses (i) through (x) above, Agent may retain in a sub-ledger of the Roanoke Account (for the sole account of the Project Control Ledger) (which sub-ledger shall not be available for the uses contemplated in (i) above) (hereinafter, the “Rate Sub-Ledger”) an amount equal to the Rate Redetermination Amount upon (x) the issuance of an initial decision (as defined in 18 C.F.R. § 385.702(a), or any successor provision thereof, hereinafter referred to as an “Initial Decision”) that recommends a reduction in the rates payable to Borrower under the Rova I Power Purchase Agreement or (y) the issuance by FERC or any other regulatory body having jurisdiction over the rates under the Rova I Power Purchase Agreement of an order setting for hearing the issue of the reasonableness of such rates. The Rate Redetermination Amount shall no longer be retained after the earlier to occur of (1) the satisfaction of Borrower’s obligation under clauses (x) or (y) of Section 6.26 hereof; (2) the issuance of a final order by the FERC or such other regulatory body affirming the reasonableness of such rates, or (3) the date on which it shall otherwise be evident (to the reasonable satisfaction of the Agent) that no action is reasonably likely to be taken by FERC or such other regulatory body with respect to such Initial Decision, order or hearing, and if such retention ceases, then on the next succeeding Repayment Date Agent shall withdraw and transfer to Borrower all funds so retained as set forth in the last paragraph of this clause (xi); provided further, that if the applicable FERC (or other such regulatory body) proceeding has not resulted in a final order on the merits within 15 months after the applicable “refund effective date” within the meaning of section 205 (b) of the FPA, then retention under this section shall not be made with respect to Cash Revenues derived from electricity sold from the Facilities after such 15 months have expired, unless Agent shall have reasonably determined that the primary reason that such proceeding shall not have been resolved is the dilatory conduct of the Borrower. In addition, immediately upon the issuance of a final order on the merits by the FERC (or such other regulatory body) reducing the rates payable to Borrower under the Rova I Power Purchase Agreement, (x) all funds in the Roanoke Account (for the sole account of the Rate Sub-Ledger) shall be applied to prepay the Loans and the Institutional Loans in accordance with Section 2.5(b) (vi) hereof and (y) funds in the Roanoke Account (for the sole account of the Project Control Ledger) shall be retained in amounts as Agent shall reasonably determine to be required to satisfy the unpaid portion of the Rate Redetermination Amount. In addition, the Agent, in its discretion, may use such funds at any time to pay costs and expenses incurred in connection with the Substitute Steam Arrangements and not previously paid for by Borrower.

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               After any such amounts are retained in the Roanoke Account (for the sole account of the Rate Sub-Ledger) and after retaining in the Roanoke Account (for the sole account of the Project Control Ledger) (A) a minimum balance of at least $900,000, plus (B) an amount (the “Retained Amount”) equal to the lesser of (i) 50% of the monies remaining in the Roanoke Account (for the sole account of the Project Control Ledger) and available for distribution to Borrower on each Repayment Date to occur prior to the Tranche B Conversion Date, together with interest thereon at prevailing market rates, up to a maximum aggregate amount (including interest) of $3,550,000 and (ii) the difference (if a positive number and a negative number shall be construed to be zero) between $3,550,000 and the amount equal to 50% of the Unused Tranche A Equity Funding Amount (as defined in the Equity Agreement) on the Tranche A Conversion Date, plus (C) such amounts as Agent reasonably determines (based on current indications of operations and taking account of anticipated accumulations of funds in subsequent months) are reasonably necessary to anticipate any payments that Borrower may be required to make to Virginia Power pursuant to the Rova I Power Purchase Agreement or the Rova II Power Purchase Agreement prior to the next succeeding Repayment Date, and subject to Section 6.18(b) hereof, then, on each Repayment Date, withdraw and transfer the monies remaining in the Roanoke Account (for the sole account of the Project Control Ledger) to such account as Borrower shall direct, including any account permitted pursuant to Section 6.10(b) hereof; provided that within three years after the Tranche A Conversion Date, Borrower, Agent, Co-Agents and Institutional Agent shall negotiate in good faith a procedure that will permit withdrawals to be made under this clause (xi) on a quarterly rather than a semi-annual basis, while preventing, in the reasonable judgment of Agent, Co-Agents and Institutional Agent, any increase in the risk to the Lenders, the Institutional Lenders and the Issuing Bank of non-payment of any obligation under the Loan Instruments. Borrower may from time to time withdraw funds then on deposit in the Roanoke Account (for the sole account of the Project Control Ledger) as Retained Amounts upon delivery to Agent of an unconditional, absolute and irrevocable letter of credit or third party guaranty in each case in form and substance and from an issuer or third party, as the case may be, satisfactory to Agent and Co-Agents in their sole discretion. In the event the Tranche B Conversion Date does not occur on or prior to the Tranche B Date Certain or an Event of Default shall occur prior to the Tranche B Conversion Date, then on the Tranche B Date Certain or upon the occurrence of such Event of Default, as the case may be, funds held in the Roanoke Account (for the sole account of the Project Control Ledger) as Retained Amounts up to $2,500,000 shall be applied to prepay the Loans and the Institutional Loans in the manner provided for in Section 2.5(b) (vii) hereof; in the event Rova II Commercial Operation Date has not occurred on or prior to August 15, 1995, then upon the occurrence of Substantial Completion under the Rova II Turnkey Contract, funds held in the Roanoke Account (for the sole account of the Project Control Ledger) as Retained Amounts up to $1,050,000 shall be deposited into the Roanoke Account (for the sole account of the Rova II Contingency Ledger) and shall be applied pursuant to Section 6.1(i) hereof. If the Retained Amounts could not be so applied on or prior to the Tranche B Conversion Date and no Default or Event of Default shall have occurred and be continuing, funds held in the Roanoke Account (for the sole account of the Project Control Ledger) as Retained Amounts shall be distributed to Borrower on the Tranche B Conversion Date and any letters of credit or guarantees delivered to Agent in substitution for such funds shall be canceled and delivered to Borrower.

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                (xii)        Notwithstanding anything contained herein, Borrower shall not make any distributions to Partners prior to the Tranche A Conversion Date.

               (d)       Ash Reserve Account and Ash Reserve Ledger. (i) Borrower shall maintain a special account (the “Ash Reserve Account”) at Credit Suisse First Boston, New York, New York and such account shall be titled “Ash Reserve Account”. The Agent shall have exclusive possession of and sole dominion and control over the Ash Reserve Account in accordance with the terms of this Agreement. The Agent shall maintain a ledger (the “Ash Reserve Ledger”) with respect to the Roanoke Account and such ledger shall be titled “Ash Reserve Ledger”. The Roanoke Account (for the sole account of the Ash Reserve Ledger) shall be funded pursuant to Section 6.1(c)(ii) hereof up to a maximum amount of $1,000,000 (the “Required Ash Reserve Balance”). Borrower shall use funds in the Roanoke Account (for the sole account of the Ash Reserve Ledger) for payment of the “Capacity Charges” described in Section 6(b) of the Ash Disposal Agreement. So long as no Event of Default has occurred and is continuing, on each Repayment Date, Agent shall transfer on instruction by Borrower any amount in excess of the Required Ash Reserve Balance for deposit in the Roanoke Account (for the sole account of the Project Control Ledger) as an item of Cash Revenues and such amount shall be applied on such date pursuant to the provisions of Section 6.1(c) hereof and shall be available for withdrawal by Borrower from the Roanoke Account (for the sole account of the Project Control Ledger) pursuant to Section 6.1(c)(xi) above on such date, subject to any prior applications pursuant to Section 6.1(c) hereof; and

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               (ii)        Notwithstanding any provision in this Agreement or any of the Loan Instruments to the contrary, including Section 6.1(d)(i) hereof, commencing upon the effective date of Amendment No. 6 to the Credit Agreement:

               (A)        the Roanoke Account (for the sole account of the Ash Reserve Ledger) shall be funded pursuant to Section 6.1(c)(ii) hereof up to a maximum amount of $600,000 and such amount shall be considered the “Required Ash Reserve Balance”, provided, that, in the event that any of the funds held in the Roanoke Account (for the sole account of the Ash Reserve Ledger) are used pursuant to section 6.1(d)(ii)(B) below, such maximum amount shall immediately increase to $1,000,000 and the term “Required Ash Reserve Balance” shall revert to the meaning given such term in Section 6.1(d)(i) above; and

               (B)        The Lenders and Institutional Lenders shall be entitled to use the funds in the Roanoke Account (for the sole account of the Ash Reserve Ledger) to satisfy payment obligation of Borrower under the Loan Instruments after (1) distributing funds from the Roanoke Account (for the sole account of the Additional Collateral Ledger) for such purpose pursuant to Section 6.1(g) below; and (2) using funds in the Roanoke Account (for the sole account of the Debt Protection Ledger) for such purpose pursuant to Section 6.1(f) below; provided, that, in the event that the Borrower receives written notice from the Independent Engineer that a new Ash Monofill (as defined in the Ash Disposal Agreement) will be required for the Facilities, immediately upon the receipt of such notice by Borrower, and thereafter, (x) the funds in the Roanoke Account (for the sole account of the Ash Reserve Ledger) shall no longer be used as provided in this Section 6.1(d)(ii)(B), (y) the maximum amount to which the Roanoke Account (for the sole account of the Ash Reserve Ledger) shall be funded shall increase to $1,000,000, and (z) the term “Required Ash Reserve Balance” shall revert to the meaning given such term in Section 6.1(d)(i) above.

               (e)       Repair and Maintenance Account and Repair and Maintenance Ledger. Commencing on or prior to the Tranche A Conversion Date, the Borrower shall maintain a special account (the “Repair and Maintenance Account”) at Credit Suisse First Boston, New York, New York and such account shall be titled “Repair and Maintenance Account”. The Agent shall have exclusive possession of and sole dominion and control over the Repair and Maintenance Account in accordance with the terms of this Agreement. The Agent shall maintain a ledger (the “Repair and Maintenance Ledger”) with respect to the Roanoke Account and such ledger shall be titled “Repair and Maintenance Ledger”. The Roanoke Account (for the sole account of the Repair and Maintenance Ledger) shall be funded pursuant to Section 6.1(c)(vi) hereof up to a maximum amount of (x) $2,200,000 on or prior to January 31, 2004 and after January 31, 2010 and (y) $2,600,000 after January 31, 2004 through and including January 31, 2010 (such amount the “Required Maintenance Balance). Borrower may only use funds in the Roanoke Account (for the sole account of the Repair and Maintenance Ledger) from time to time to pay prudent expenses associated with major equipment inspection, major overhaul, major repair and major component replacement with respect to the Facilities. So long as no Event of Default has occurred and is continuing, on each Repayment Date, Agent shall transfer on instruction by Borrower any amount in excess of the Required Maintenance Balance for deposit in the Roanoke Account (for the sole account of the Project Control Ledger) as an item of Cash Revenues and such amount shall be applied on such date pursuant to the provisions of Section 6.1(c) hereof and shall be available for withdrawal by Borrower from the Roanoke Account (for the sole account of the Project Control Ledger) pursuant to Section 6.1(c)(xi) above on such date, subject to any prior applications pursuant to Section 6.1(c) hereof.

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               (f)       Debt Protection Account and Debt Protection Ledger. (aa) Commencing on or prior to the Tranche A Conversion Date, the Borrower shall maintain a special account (the “Debt Protection Account”) at Credit Suisse First Boston, New York, New York and such account shall be titled “Debt Protection Account”. The Agent shall have exclusive possession of and sole dominion and control over the Debt Protection Account in accordance with the terms of this Agreement. The Agent shall maintain a ledger (the “Debt Protection Ledger”) with respect to the Roanoke Account and such ledger shall be titled “Debt Protection Ledger”. The Roanoke Account (for the sole account of the Debt Protection Ledger) shall be funded pursuant to Section 6.1(c)(vii) hereof and as set forth in this Section 6.1(f) up to a maximum amount of $20,000,000 (the “Required Debt Protection Balance”). On the Tranche A Conversion Date, the Roanoke Account (for the sole account of the Debt Protection Ledger) shall be funded with the proceeds of the final Advance under the Tranche A Construction Loan to be made on such date (and which shall be made by Agent even if a proper Tranche A Application for Borrowing has not been submitted by Borrower) in an amount equal to the sum of (i) $8,000,000 plus (ii) 50% of all Rova I Project Savings in excess of $2,000,000; provided that in no event shall the sum of the amounts set forth in clauses (i) and (ii) exceed $16,000,000. In addition, on the Tranche B Conversion Date the Roanoke Account (for the sole account of the Debt Protection Ledger) shall be funded (to the extent necessary to reach the Required Debt Protection Balance) with the proceeds of the final Advance under the Tranche B Construction Loan to be made on such date (and which shall be made by Agent even if a proper Tranche B Application for Borrowing has not been submitted by Borrower) in an amount equal to the sum of (i) 2,000,000 plus (ii) an amount (up to $1,000,000) equal to 50% of all Rova II Project Savings. The Lenders and the Institutional Lenders shall be entitled to use the funds in the Roanoke Account (for the sole account of the Debt Protection Ledger) to satisfy payment obligations of Borrower under the Loan Instruments after distributing funds from the Roanoke Account (for the sole account of the Additional Collateral Ledger) for such purpose pursuant to Section 6.1(g) below. So long as no Event of Default has occurred and is continuing, on each Repayment Date, Agent shall transfer on instruction by Borrower any amount in excess of the Required Debt Protection Balance for deposit in the Roanoke Account (for the sole account of the Project Control Ledger) as an item of Cash Revenues and such amount shall be applied on such date pursuant to the provisions of Section 6.1(c) hereof and shall be available for withdrawal by Borrower from the Roanoke Account (for the sole account of the Project Control Ledger) pursuant to Section 6.1(c)(xi) above on such date, subject to any prior applications pursuant to Section 6.1(c) hereof.

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               Borrower may from time to time withdraw funds then on deposit in the Roanoke Account (for the sole account of the Debt Protection Ledger) up to an aggregate maximum amount of $19,700,000 upon delivery to Agent of one or more (but no more than three at any one time outstanding) unconditional, absolute and irrevocable letters of credit in form and substance and from an issuer whose senior unsecured debt is rated “Aal” or better by Moody’s or “AA+” or better by S&P or possessing an equivalent rating from another nationally recognized credit rating agency of similar standing acceptable to Agent (such letters of credit as each may be amended, supplemented, renewed or replaced (with the consent of Majority Lenders) is hereinafter referred to as the “Debt Protection Letter of Credit”) together with such corporate documents, legal opinions and other documents and information, all as Agent may reasonably request. The amount of any Debt Protection Letter of Credit shall equal the amount of cash withdrawn from the Roanoke Account (for the sole account of the Debt Protection Ledger). Each Debt Protection Letter of Credit shall provide that Agent may draw down the amount of any such Debt Protection Letter of Credit and apply the same to satisfy payment obligations for which funds in the Roanoke Account (for the sole account of the Debt Protection Ledger) may be used, and upon any such drawing Agent shall draw down the full amount of all such Debt Protection Letters of Credit and deposit the amount of such drawdowns in the Roanoke Account (for the sole account of the Debt Protection Ledger). After Agent shall have so drawn down on any Debt Protection Letter of Credit, Borrower shall not be entitled to deliver additional Debt Protection Letters of Credit until and unless the Roanoke Account (for the sole account of the Debt Protection Ledger) is funded in the full amount of the Required Debt Protection Balance. Each Debt Protection Letter of Credit shall provide that Agent may draw on such Debt Protection Letter of Credit if (x) Borrower shall fail to deliver to Agent a further renewal or replacement of such Debt Protection Letter of Credit then in effect not less than 30 days prior to its expiration date or (y) upon five days notice to Borrower if the rating of the senior unsecured debt of the issuer of such Debt Protection Letter of Credit is downgraded to below “Aal” by Moody’s or “AA+” by S&P (or the equivalent thereof by another nationally recognized credit agency of similar standing). Each Debt Protection Letter of Credit shall be (i) for a minimum of 364 days and (ii) in the case of a renewal or replacement, in an amount equal to the stated amount of such Debt Protection Letter of Credit being replaced (with provisions providing for increases thereof identical to the Debt Protection Letter of Credit being replaced) or with other substantially similar provisions (other than as to the stated amount thereof) acceptable to Agent in its sole discretion. Borrower agrees that if any dispute shall arise as to the right of Agent to submit any Debt Protection Letter of Credit for payment or to draw thereunder, Borrower will not join the issuer thereof in any action or proceeding seeking to enjoin or stop payment on such Debt Protection Letter of Credit. Nothing contained in this paragraph shall affect Borrower’s continuing obligations to deposit funds in the Roanoke Account (for the sole account of the Debt Protection Ledger) as provided in this Section 6.1 unless and until such obligations have been satisfied by delivery to Agent of a Debt Protection Letter of Credit or an increase in the amount available under any Debt Protection Letter of Credit then held by Agent. The amount of any Debt Protection Letter of Credit shall be deemed to be included in the balance of the Roanoke Account (for the sole account of the Debt Protection Ledger) for purposes of determining the balance of the Roanoke Account (for the sole account of the Debt Protection Ledger) where required to do so in this Agreement. Each Debt Protection Letter of Credit shall constitute a Loan Instrument. Costs and expenses incurred by or on behalf of Borrower in connection with any Debt Protection Letter of Credit shall not constitute Cash Operating Costs.

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               (bb)   Notwithstanding the provisions of Section 6.1(f)(aa) above, (A) commencing on the effective date of Amendment No. 6 to Credit Agreement and ending on January 31, 2010, (x) the maximum amount to which the Roanoke Account (for the sole account of the Debt Protection Ledger) shall be funded shall be increased by $550,000 on each Repayment Date that is a Quarterly Date in January and each Repayment Date that is a Quarterly Date in July, commencing on January 1, 2002 through and including July 31, 2008 and (y) the term “Required Debt Protection Balance” shall mean, at any given time, the maximum amount to which the Roanoke Account (for the sole account of the Debt Protection Ledger) shall be funded in accordance with this section 6.1(f)(bb); and (B) as long as no Event of Default has occurred and is continuing, (1) on January 31, 2009, any amounts on deposit in the Roanoke Account (for the sole account of the Debt Protection Ledger) in excess of $23,000,000, (3) on January 31, 2010, any amounts on deposit in the Roanoke Account (for the sole account of the Debt Protection Ledger) in excess of $20,000,000 shall be distributed to the Borrower to such account as Borrower shall direct and simultaneously with the last such distribution, the provisions of this Section 6.1(f)(bb) shall cease to have any force or effect.

               (g)       Additional Collateral Account and Additional Collateral Ledger. Commencing on or prior to the Tranche A Conversion Date, the Borrower shall maintain a special account (the “Additional Collateral Account”) at Credit Suisse First Boston, New York, New York and such account shall be titled “Additional Collateral Account”). The Agent shall have exclusive possession of and sole dominion and control over the Additional Collateral Account in accordance with the terms of this Agreement. The Agent shall maintain a ledger (the “Additional Collateral Ledger”) with respect to the Roanoke Account and such ledger shall be titled “Additional Collateral Ledger”. The Roanoke Account (for the sole account of the Additional Collateral Ledger) shall be funded pursuant to Section 6.1(c)(ix) hereof up to a maximum amount of $20,000,000 or, in the event that Virginia Power’s withholding of capacity payments on the basis of forced outages is upheld by a non-appealable decision of a court of competent jurisdiction, $[25,000,000] (the “Required Additional Collateral Balance”). The Lenders and the Institutional Lenders shall be entitled to use the funds in the Roanoke Account (for the sole account of the Additional Collateral Ledger) to satisfy payment obligations of Borrower under the Loan Instruments. If on any Calculation Delivery Date the Combined Debt Service Coverage Ratio and the Combined Projected Debt Service Coverage Ratio then delivered pursuant to Section 6.2 hereof are equal to or greater than 1.25 to 1.00, so long as no Event of Default has occurred and is continuing, then Agent shall transfer on instruction by Borrower the monies in the Roanoke Account (for the sole account of the Additional Collateral Ledger) for deposit in the Roanoke Account (for the sole account of the Project Control Ledger) as an item of Cash Revenues. Funds in the Roanoke Account (for the sole account of the Additional Collateral Ledger) may, upon three Banking Days’ prior written notice from Borrower to Agent, be used to prepay Agreement Term Loans (including a reduction in the Bond Letter of Credit Facilities) and Institutional Term Loans (together with the Yield-Maintenance Premium with respect to the principal amount of the Institutional Term Loans being prepaid) on a pro rata basis (such prepayments to be applied to whichever is the last maturing principal repayment as between the Tranche A Term Loan and the Tranche B Term Loan and to whichever is the last maturing principal repayment as between the Tranche A Institutional Term Loan and the Tranche B Institutional Term Loan). So long as no Event of Default has occurred and is continuing, on each Repayment Date, Agent shall transfer on instruction by Borrower any amount in excess of the Required Additional Collateral Balance for deposit in the Roanoke Account (for the sole account of the Project Control Ledger) as an item of Cash Revenues and such amount shall be applied on such date pursuant to the provisions of Section 6.1(c) hereof and shall be available for withdrawal by Borrower from the Roanoke Account (for the sole account of the Project Control Ledger) pursuant to Section 6.1(c)(xi) above on such date, subject to any prior applications pursuant to Section 6.1(c) hereof.

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               (h)       Disallowance Reserve Account and Disallowance Reserve Ledger. Commencing on or prior to an event of Disallowance that requires deposits to be made pursuant to Section 6.1(c)(x) hereof, the Borrower shall maintain a special account (the “Disallowance Reserve Account”) at Credit Suisse First Boston, New York, New York and such account shall be titled “Disallowance Reserve Account”. The Agent shall have exclusive possession of and sole dominion and control over the Disallowance Reserve Account in accordance with the terms of this Agreement. The Agent shall maintain a ledger (the “Disallowance Reserve Ledger”) with respect to the Roanoke Account and such ledger shall be titled “Disallowance Reserve Ledger”. The Roanoke Account (for the sole account of the Disallowance Reserve Ledger) shall be funded from time to time pursuant to Section 6.1(c)(x) hereof up to a maximum amount, calculated as the aggregate of all such fundings (the “Required Disallowance Funding”), equal to the least of (“Required Disallowance Balance”) (i) $34,500,000, (ii) the aggregate amount, as determined by Institutional Agent and Agent, that will be due and owing to Virginia Power (whether by direct payment or as set-offs or deductions from payments due from Virginia Power) pursuant to the terms of Article 18 of each of the Power Purchase Agreements (including any interest) for the period commencing (a) with respect to the Rova I Power Purchase Agreement, on the 18th anniversary of the Rova I Commercial Operations Date and ending on the Tranche B Institutional Maturity Date and (b) with respect to the Rova II Power Purchase Agreement, or in the event the Rova II Power Purchase Agreement has been terminated, with respect to the Rova I Power Purchase Agreement, on the 15th anniversary of the Rova II Commercial Operations Date and ending on the Tranche B Institutional Maturity Date and (iii) until all Obligations to the Accounts and Lenders have been satisfied in full, the Total Outstanding Extensions of Credit on the date of the applicable funding and thereafter the difference (if a positive number) between the aggregate unpaid principal amount of the Institutional Loans outstanding on the date of the applicable funding and the balance of the Roanoke Account (for the sole account of the Debt Protection Ledger) on such date. Funds in the Roanoke Account (for the sole account of the Disallowance Reserve Ledger) shall be used only as follows: (x) at any time the Institutional Lenders shall be entitled to use the funds in the Roanoke Account (for the sole account of the Disallowance Reserve Ledger) to satisfy payment obligations of Borrower under the Loan Instruments upon any declaration that Obligations are due and payable pursuant to Section 7.2(a) hereof, and (y) from and after the earlier of the 18th anniversary of the Rova I Commercial Operations Date or the 15th anniversary of the Rova II Commercial Operations Date, the Institutional Lenders shall also be entitled to use the funds in the Roanoke Account (for the sole account of the Disallowance Reserve Ledger) to satisfy payment obligations of Borrower under the Loan Instruments upon any Event of Default under Section 7.1(a) hereof, provided, that any application of funds pursuant to clause (x) or (y) hereof to any Obligations to the Institutional Agent or Institutional Lenders shall be made only as part of a pro rata application to the Obligations of all the Secured Parties, based on each Secured Party’s share of the Total Outstanding Extensions of Credit as of the date of such application and any prepayments of principal shall be applied to whichever is the last maturing principal repayment as between the Tranche A Term Loan and the Tranche B Term Loan, and to whichever is the last maturing principal repayment as between the Tranche A Institutional Term Loan and the Tranche B Institutional Term Loan. In addition, commencing on the earlier of the 18th anniversary of the Rova I Commercial Operations Date or the 15th anniversary of the Rova II Commercial Operations Date, and so long as no Default or Event of Default has occurred and is continuing, on each Repayment Date, Borrower may use funds in the Roanoke Account (for the sole account of the Disallowance Reserve Ledger) to prepay the Institutional Term Loan, together with the Yield-Maintenance Premium with respect to the principal amount of the Institutional Term Loan being prepaid, such prepayments to be applied to whichever is the last maturing principal repayment as between the Tranche A Institutional Term Loan and the Tranche B Institutional Term Loan. So long as no Event of Default has occurred and is continuing, on each Repayment Date, Agent shall transfer on instruction by Borrower any amount in excess of the Required Disallowance Funding for deposit in the Roanoke Account (for the sole account of the Project Control Ledger) as an item of Cash Revenues and such amount shall be applied on such date pursuant to the provisions of Section 6.1(c) hereof and shall be available for withdrawal by Borrower from the Roanoke Account (for the sole account of the Project Control Ledger) pursuant to Section 6.1(c)(xi) above on such date, subject to any prior applications pursuant to Section 6.1(c) hereof. The Roanoke Account (for the sole account of the Disallowance Reserve Ledger) and the funds therein shall be held by a collateral agent designated by Institutional Agent and said collateral agent shall hold a perfected prior security interest therein for the benefit of Institutional Agent and Institutional Lenders only, provided that disbursements from the Roanoke Account (for the sole account of the Disallowance Reserve Ledger) shall be made in accordance with this Section 6.1(h), where required, for the benefit of the Secured Parties. Documentation reflecting the arrangement contemplated in this Section 6.1(h) shall be satisfactory to the Institutional Agent and Agent.

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               (i)       Contingency Account and Contingency Ledger. The Borrower shall maintain two special accounts (the “Rova I Contingency Account” and the “Rova II Contingency Account”) at Credit Suisse First Boston, New York, New York and such accounts shall be titled “Roanoke Rova I Contingency Account” and “Rova II Contingency Account”. The Agent shall have exclusive possession of and sole dominion and control over the Rova I Contingency Account and Rova II Contingency Account in accordance with the terms of this Agreement. The Agent shall maintain two ledgers (the “Rova I Contingency Ledger” and the “Rova II Contingency Ledger”, and, collectively, the “Contingency Ledgers”) with respect to the Roanoke Account and such ledgers shall be titled “Rova I Contingency Ledger” and “Rova II Contingency Ledger”. All of the monies specified below shall be deposited in the Roanoke Account (for the sole account of the Contingency Ledgers) as set forth below, and Borrower has irrevocably instructed Contractor to make all of the payments by Contractor described below into the Contingency Ledgers as set forth below. Borrower hereby irrevocably authorizes Agent to open sub-ledgers within the Roanoke Account (for the sole account of the Contingency Ledgers) for ease of administration, and to make withdrawals from the Roanoke Account (for the sole account of the Contingency Ledgers) pursuant to this Agreement for the purposes set forth below, or, where not specified or determinable, as Agent shall reasonably deem necessary or advisable:

        (i)       Casualty Proceeds: All proceeds of Insurance Policies (other than such proceeds aggregating less than $2,000,000 in any fiscal year of Borrower, which shall be released directly to Borrower for use in restoration of the Facility to which the proceeds relate in accordance with Section 6.16 hereof), condemnation awards and similar payments, to be applied pursuant to Section 6.16 hereof, or, to the extent such proceeds are not to be used for restoration pursuant to Section 6.16, to be deposited into the Roanoke Account (for the sole account of the Rova I Contingency Ledger) to the extent such proceeds relate to the Rova I Facility and into the Roanoke Account (for the sole account of the Rova II Contingency Ledger) to the extent such proceeds relate to the Rova II Facility and to the extent such proceeds cannot be so allocated, then, as the Agent and the Institutional Agent shall in their sole discretion determine to be applied to prepay the Agreement Term Loans and the Institutional Term Loans pursuant to Section 2.5(b) (ii) hereof;

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                (ii)       Letter of Credit Proceeds: Proceeds upon the drawdown of any letter of credit exchanged for any retainage withheld, if under the Rova I Turnkey Contract to be deposited into the Roanoke Account (for the sole account of the Rova I Contingency Ledger) and if under the Rova II Turnkey Contract to be deposited into the Roanoke Account (for the sole account of the Rova II Contingency Ledger), and to be applied as follows, if the proceeds are drawn in respect of:

        (A)        non-renewal of the letter of credit for failure to satisfy requirements for payment of retainage, termination of the Rova I Turnkey Contract or of the Rova II Turnkey Contract under specified circumstances, acceleration or non-funding under this Agreement or disputed amounts, indemnities and the like, such proceeds shall be applied to the payment of Rova I Project Costs or Rova II Project Costs, as applicable;

        (B)        liquidated damages for delay, such proceeds shall be applied in accordance with Section 6.1(i)(iii) of this Agreement;

        (C)        failure of Contractor to reimburse Borrower for liquidated damages collected by Virginia Power, such proceeds shall be applied in accordance with Section 6.1(i)(iv) of this Agreement; and

        (D)        liquidated damages for failure to meet performance guaranties, such proceeds shall be applied in accordance with Section 6.1(i)(v) of this Agreement. Such payments shall be made pursuant to Applications for Borrowing and the procedures contemplated in Section 2.1(a) hereof; and any such payments remaining unused, in respect of the Roanoke Account (for the sole account of the Rova I Contingency Ledger) on the Tranche A Conversion Date, and in respect of the Roanoke Account (for the sole account of the Rova II Contingency Ledger) on the Tranche B Conversion Date, shall on such date be deposited in the Roanoke Account (for the sole account of the Project Control Ledger);

                (iii)       Contractor’s Payments and Equity Proceeds: Payments made by Contractor pursuant to Section 10.2.1 of the Rova I Turnkey Contract for not achieving Rova I Final Completion by the Rova I Required Completion Date to be applied from time to time for payment of Tranche A Debt Service (to the extent such Tranche A Debt Service exceeds the amounts allotted thereto pursuant to the Approved Rova I Budget) until the Tranche A Conversion Date. Such payments shall be made pursuant to Tranche A Applications for Borrowing and the procedures contemplated in Section 2.1(a) hereof; and any such payments remaining unused on the Tranche A Conversion Date shall on such date be used to repay Tranche A Agreement Term Loans and Tranche A Institutional Term Loans then outstanding pursuant to Section 2.5(b)(ii) hereof;

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                           Payments made by Contractor pursuant to Section 10.2.1 of the Rova II Turnkey Contract for not achieving Rova II Final Completion by the Rova II Required Completion Date, payments of that portion of the equity pursuant to Section 2(d) and the last sentence of Section 2(j) of the Equity Agreement which, in Agent’s determination, is to be allocated to Tranche B Debt Service and payment of the Retained Amount pursuant to Section 6.1(c)(xi) hereof if the Rova II Commercial Operations Date does not occur on or prior to August 15, 1995 which, in Agent’s determination, is to be allocated to Tranche B Debt Service to be deposited into the Roanoke Account (for the sole account of the Rova II Contingency Ledger) and to be applied from time to time for payment of Tranche B Debt Service (to the extent such Tranche B Debt Service exceeds the amounts allotted thereto pursuant to the Approved Rova II Budget) until the Tranche B Conversion Date. Such payments shall be made pursuant to Tranche B Applications for Borrowing and the procedures contemplated in Section 2.1(a) hereof; and any such payments remaining unused on the Tranche B Conversion Date shall on such date be used to repay Tranche B Agreement Term Loans and Tranche B Institutional Term Loans then outstanding pursuant to Section 2.5(b)(ii) hereof;

                (iv)       Payments for Draw on Virginia Power Letter of Credit: Payments made by Contractor pursuant to Section 10.2.2 of the Rova I Turnkey Contract, payments of equity pursuant to Section 2(c) of the Equity Agreement to be deposited into the Roanoke Account (for the sole account of the Rova I Contingency Ledger) and to be applied to satisfy any Rova I Virginia Power L/C Reimbursement Obligations then outstanding; any such payments remaining unused on the Tranche A Conversion Date shall be deposited on such date in the Roanoke Account (for the sole account of the Project Control Ledger);

                           Payments made by Contractor pursuant to Section 10.2.2 of the Rova II Turnkey Contract, payments of equity pursuant to Section 2(c), Sections 2(d) and the last sentence of Section 2(j) of the Equity Agreement which, in Agent’s determination, is to be allocated to Rova II Virginia Power L/C Reimbursement Obligations and payments of the Retained Amount pursuant to Section 6.1(c)(xi) if the Rova II Commercial Operations Date does not occur on or prior to August 15, 1995 which, in Agent’s determination, is to be allocated to Rova II Virginia Power L/C Reimbursement Obligations, to be deposited into the Roanoke Account (for the sole account of the Rova II Contingency Ledger) and to be applied to satisfy any Rova II Virginia Power L/C Reimbursement Obligations then outstanding; any such payments remaining unused on the Tranche B Conversion Date shall be deposited on such date in the Roanoke Account (for the sole account of the Project Control Ledger); and

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                (v)       Contractor’s Guaranteed Performance Damages: Payments made by Contractor pursuant to Section 12.3 of the Rova I Turnkey Contract for failure of the Rova I Facility to meet performance guarantees, to be deposited into the Roanoke Account (for the sole account of the Rova I Contingency Ledger) and to be held until the Tranche A Construction Loan Repayment Date, and (i) on such date, 40% of which shall be applied to prepay the Tranche A Agreement Term Loan and the Tranche A Institutional Term Loan pursuant to Section 2.5(b)(ii) hereof and (ii) the remaining 60% of which shall be held until such time as Borrower is required to make payment to Contractor pursuant to Section 12.3.8 of the Rova I Turnkey Contract, at which time an appropriate amount shall be released for payment to Contractor (unless an Event of Default then exists). At such time as such funds are no longer subject to payment pursuant to Section 12.3.8 of the Rova I Turnkey Contract, such funds shall be applied to prepay the Tranche A Agreement Term Loan and the Tranche A Institutional Term Loan pursuant to Section 2.5(b) (ii) hereof.

                           Payments made by Contractor pursuant to Section 12.3 of the Rova II Turnkey for failure of the Rova II Facility to meet performance guarantees, to be applied to prepay the Tranche B Agreement Term Loan and the Tranche B Institutional Term Loan pursuant to Section 2.5(b)(ii) hereof.

                (vi)       Substitute Steam Costs: Payments under clause (x) of Section 2(h) of the Equity Agreement in respect of the Substitute Steam Arrangements shall be deposited into the Roanoke Account (for the sole account of the Rova I Contingency Ledger) to be applied by Agent for the costs and expenses incurred in connection with the Substitute Steam Arrangements.

                (vii)       Indemnification Payments: Payments under indemnification agreements referred to in Section 2(g) of the Equity Agreement shall be deposited into the Roanoke Account (for the sole account of the Contingency Ledger) and shall be applied by Agent to make the payments owing under the Project Contracts in accordance with the terms thereof.

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               (j)       Repayment Accounts and Repayment Ledgers. Borrower shall maintain two special depository accounts (the “Tranche A Repayment Account” and the “Tranche B Repayment Account”) at Credit Suisse First Boston, New York, New York and such accounts shall be titled “Tranche A Repayment Account” and “Tranche B Repayment Account”. The Agent shall have exclusive possession of and sole dominion and control over the Tranche A Repayment Account and Tranche B Repayment Account in accordance with the terms of this Agreement. The Agent shall maintain two ledgers (the “Tranche A Repayment Ledger” and “Tranche B Repayment Ledger”, and, collectively, the “Repayment Ledgers”) with respect to the Roanoke Account and such ledgers shall be titled “Tranche A Repayment Ledger” and “Tranche B Repayment Ledger”. All of the Tranche A Repayment Amounts shall be deposited in the Roanoke Account (for the sole account of the Tranche A Repayment Ledger) and all of the Tranche B Repayment Amounts shall be deposited in the Roanoke Account (for the sole account of the Tranche B Repayment Ledger). Borrower hereby irrevocably authorizes Agent to make withdrawals from the Roanoke Account (for the sole account of the Tranche A Repayment Ledger) to the extent necessary to permit Agent to apply all or any portion of such sums as are in the Roanoke Account (for the sole account of the Tranche A Repayment Ledger) against (i) L/C Reimbursement Obligations relating to the redemption of the Series 1991 Bonds as set forth in Section 2.4(c) hereof and Section 3.2(f)(ii) hereof, (ii) the Term Loan arising from the conversion of the Drawings relating to the payment of the Series 1991 Bonds upon the acceleration thereof or (iii) against such other Obligations of Borrower as permitted under the Series 1991 Account Pledge Agreement. Borrower hereby irrevocably authorizes Agent to make withdrawals from the Roanoke Account (for the sole account of the Tranche B Repayment Ledger) to the extent necessary to permit Agent to apply all or any portion of such sums as are in the Roanoke Account (for the sole account of the Tranche B Repayment Ledger) against (i) L/C Reimbursement Obligations relating to the redemption of the Series 1993 Bonds as set forth in Section 2.4(c) hereof and Section 3.2(f) (ii) hereof, (ii) the Term Loan arising from the conversion of the Drawings relating to the payment of the Series 1993 Bonds upon the acceleration thereof or (iii) against such other Obligations of Borrower as permitted under the Series 1993 Account Pledge Agreement.

               (k)       Permitted Investments. Following execution of a securities account control agreement among the Borrower, BNY and the Agent (in form and substance satisfactory to BNY and the Agent), funds in the Roanoke Account (for the sole account of any of Ash Reserve Ledger, Repair and Maintenance Ledger, Debt Protection Ledger, Disallowance Reserve Ledger and Additional Collateral Ledger only) may be invested and reinvested only in Permitted Investments and liquidated (at the risk and expense of Borrower) in accordance with instructions given to Agent by Borrower (prior to the occurrence of an Event of Default and, thereafter, as determined by Agent). Agent shall not be required to take any action with respect to investing the funds in the Roanoke Account (for the sole account of any of the Ash Reserve Ledger, the Repair and Maintenance Ledger, the Debt Protection Ledger, the Disallowance Reserve Ledger or the Additional Collateral Ledger) in the absence of written instructions by Borrower. Agent shall not be liable for any loss resulting from any Permitted Investment or the sale or redemption thereof. If and when cash is required for disbursement in accordance with this Section 6.1, Agent is authorized, without instructions from Borrower, to the extent necessary to make payments required pursuant to this Section 6.1 in the event Borrower fails to do so in a timely manner, to cause Permitted Investments to be sold or otherwise liquidated into cash (without regard to maturity) in such manner as Agent shall deem reasonable and prudent under the circumstances.

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               All funds in the Roanoke Account (for the sole account of any of the Ash Reserve Ledger, the Repair and Maintenance Ledger, the Debt Protection Ledger, the Disallowance Reserve Ledger or the Additional Collateral Ledger) and all Permitted Investments made in respect thereof, shall be held by Agent and the interests of Borrower therein shall constitute part of the security subject to the pledge and security interests created by the Security Documents; provided, that if at any time any funds are to be invested in Permitted Investments in accordance with this paragraph (k) but Agent is unable or unwilling at such time to purchase or hold the Permitted Investments selected, then such funds shall be transferred to Swiss American Securities, Inc. (“SASI”), a subsidiary of Credit Suisse (or any successor custodian thereto requested by Borrower and approved by Agent and Institutional Agent), so that the selected investments may be made and held while permitting the Secured Parties to maintain their perfected and prior security interests in the funds and/or investments in a manner and pursuant to documentation satisfactory to Agent and Institutional Agent. Borrower shall pay Agent or SASI (or its successor) the published fees applicable at the time to the transactions then effected pursuant to this paragraph (k). Upon the instructions of Borrower, to be issued at its option, Agent shall transfer such funds from any one or more of the Roanoke Account (for the sole account of the Project Control Ledger) (excluding the Rova II Sub-Ledger)), the Roanoke Account (for the sole account of the Rova I Contingency Ledger), the Roanoke Account (for the sole account of the Rova II Contingency Ledger), the Roanoke Account (for the sole account of the Tranche A Repayment Ledger) or the Roanoke Account (for the sole account of the Tranche B Repayment Ledger) to an Investment Institution for investment by such Investment Institution into Permitted Investments; provided, that no such transfers shall be made by Agent to an Investment Institution until (i) such Investment Institution has acknowledged and agreed in writing that it is holding such funds and Permitted Investments in its capacity as collateral agent for Agent on behalf of the Secured Parties in order to maintain Agent’s first priority lien and security interest therein, that it will maintain continuous possession of such funds at all times in accordance with the provisions of this Section 6.1(k) and that it shall release such funds to Agent and only upon the written instructions thereof and (ii) Borrower and any such Investment Institution have executed all security agreements and financing statements that Agent deems necessary in order to maintain a first priority security interest in the funds and Permitted Investments held by the Investment Institution. All such funds held by Agent or the Investment Institution, as the case may be, and all such Permitted Investments made in respect thereof, shall be held by Agent or the Investment Institution, as the case may be, and the interest of Borrower therein shall constitute part of the security subject to the pledge and security interests created by this Agreement and the other Security Documents. Agent’s remedies and rights under this Section 6.1 or Section 7.2 hereof with respect to any funds transferred from the Roanoke Account to an Investment Institution shall remain unchanged, notwithstanding such transfer. The term “Investment Institution” means a brokerage, investment or similar firm selected by Borrower and approved (and not subsequently disapproved) by Agent, for the purpose of making Permitted Investments on behalf of Borrower pursuant to Section 6.1(k) hereof, provided, that Agent’s approval or disapproval shall not be unreasonably conditioned, withheld or given, respectively.

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               (l)       Roanoke Account and Ledgers, Generally. Borrower shall not make, attempt to make or consent to the making of any withdrawal or transfer from the Roanoke Account or any Ledger thereof except in strict adherence to the provisions of this Agreement. The Agent reserves its right at any time and from time to time to create separate accounts and ledgers in respect of the Rova I Facility and the Rova II Facility and Borrower shall execute such documentation as Agent requests in connection with the creation of any such accounts and ledgers and the continuation of the Lien created pursuant to the Account Pledge Agreement as to such new accounts and ledgers.

               5.  Amendments to Security Agreement. The Security Agreement is hereby amended as follows:

               (a)        the word “Accounts” in line 1 of Section 2(a)(E) shall be deleted and the words “Roanoke Account (and all Ledgers thereof)” be inserted in its place and stead.

               6.  Amendments to Account Pledge Agreement. The Account Pledge Agreement is hereby amended as follows:

               (a)        the word “Accounts” in line 1 of Section 4(a), line 4 of Section 5(b) and line 7 of Section 5(b) shall be deleted and the words “Accounts and the Roanoke Account” be inserted in its place and stead;

               (b)        inserting the words “Roanoke Account (and all Ledgers thereof)” after the words “Tranche B Repayment Account”, in line 9 of the definition of “Accounts”;

               (c)        the words “Tranche A Repayment Account” in lines 14 and 15 of Section 5(b), lines 3, 4, 17, 21 and 29 of Section 5(c)(i), lines 3, 4 and 6 of Section 5(c)(ii), lines 3 and 4 of Section 5(c)(iii), line 4 of Section 7(a) and line 3 of Section 7(b) shall be deleted and the words “Roanoke Account (for the sole account of the Tranche A Repayment Ledger)” inserted in their place and stead; and

               (d)        the words “Tranche B Repayment Account” in line 16 of Section 5(b), lines 31,32, 33, 46, 49, 50 and 59 of Section 5(c)(i), lines 4 and 7 of Section 5(c)(ii), lines 8, 9 and 10 of Section 5(c)(iii), lines 4 and 5 of Section 7(a) and lines 3 and 4 of Section 7(b) shall be deleted and the words “Roanoke Account (for the sole account of the Tranche B Repayment Ledger)” inserted in their place and stead.

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               (e)       Amendment of Section 2. Section 2 of the Account Pledge Agreement is hereby amended and restated as follows:

               (i)        a new clause 2(b-1) be inserted, after clause (b), in the form set out below:

               “(b-1)        the Agent has established with BNY a special, segregated and irrevocable cash collateral account entitled “CSFB, as Agent, CSFB-Westmoreland-LG &E ROVA I & II” (account number 890-0410-639) (and ledgers and sub-ledgers thereof) which shall be maintained at all times until the termination of this Pledge Agreement.”

               (f)        amending and restating Section 2(c) in its entirety as follows:

               “(c)        As security for the full payment or performance when due (whether at stated maturity, by acceleration or otherwise) of (i) in the case of the Rova I Special Disbursement Account, the Rova II Special Disbursement Account, the Project General Account (including the Checking Sub-Account, the Rate Sub-Account and the Rova II Sub-Account), the Rova I Contingency Account, the Rova II Contingency Account, the Debt Protection Account, the Additional Collateral Account, the Ash Reserve Account, the Repair and Maintenance Account, the Roanoke Account (for the sole account of the Rova I Special Disbursement Ledger, Rova II Special Disbursement Ledger, Project Control Ledger (including the Checking Sub-Ledger, the Rate Sub-Ledger and Rova II Sub-Ledger), Rova I Contingency Ledger, Rova II Contingency Ledger, Debt Protection Ledger, Additional Collateral Ledger, Ash Reserve Ledger and Repair and Maintenance Ledger) and any Subsequent Collateral Account, the Obligations (defined below) now existing or hereafter arising; (ii) in the case of the Tranche A Repayment Account and the Roanoke Account (for the sole account of the Tranche A Repayment Ledger), the Series 1991 L/C Reimbursement Obligations arising from the redemptions contemplated by Section 3.2(f)(ii) of the Credit Agreement in respect of the Series 1991 Bonds and the Obligations referred to in Section 5(c) hereof; and (iii) in the case of the Tranche B Repayment Account and the Roanoke Account (for the sole account of the Tranche B Repayment Ledger), the Series 1993 L/C Reimbursement Obligations arising from the redemptions contemplated by Section 3.2(f)(ii) of the Credit Agreement in respect of the Series 1993 Bonds and the Obligations referred to in Section 5(c) hereof, Pledgor hereby confirms the grant, pledge and collateral assignment made by Pledgor on the Closing Date pursuant to the terms of the Original Account Pledge Agreement, and hereby grants, pledges and collaterally assigns, in favor of Agent for the equal and ratable benefit of the Secured Parties of a lien on and first priority security interest (the “Security Interest”) in all of its right, title and interest in and to the following collateral, whether now existing or hereinafter arising (the “Pledged Collateral”):

        (i)        all sums of money, from any source whatsoever, now or hereafter transferred to and comprising the Accounts and the Roanoke Account, any and all investments and securities at any time on deposit in the Accounts and the Roanoke Account, and any and all interest and dividends or other income derived from any such monies, investments and securities; and

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        (ii)        all statements, certificates, passbooks and instruments representing the Accounts and the Roanoke Account and all other property from time to time received, receivable or otherwise distributed in respect of or in exchange for the Accounts and the Roanoke Account; and

        (iii)        to the extent not otherwise included, all proceeds, products or accessions of and to any and all of the foregoing, including, without limitation, “proceeds” as defined in Section 9-306(1) of the Code, including whatever is received upon any collection, exchange, sale or other disposition of any of the Pledged Collateral, and any property into which any of the Pledged Collateral is converted, whether cash or noncash proceeds, and any and all other amounts paid or payable under or in connection with any of the Pledged Collateral.

Pledgor hereby relinquishes to Agent all right, title and interest which it has in the Pledged Collateral. For the purpose of perfecting the Security Interest of the Secured Parties in and to the Accounts and the Roanoke Account and all cash, investments and securities at any time on deposit in the Accounts and the Roanoke Account, Agent shall be deemed to be holding the Accounts and the Roanoke Account and all such cash, investments and securities as agent solely for the Secured Parties, other than the Local Bank Accounts and all cash, investments and securities therein, which shall be held by the banks at which such accounts are established (“Local Banks”) as agents for Agent and the Secured Parties.

               (g)       Amendment of Section 5(a). Section 5(a) of the Account Pledge Agreement is hereby amended and restated as follows:

               “(a)        The Agent shall have exclusive possession of and sole dominion and control of the Accounts and the Roanoke Account (with respect to each of the Local Bank Accounts, such possession, dominion and control shall be exercised through the relevant Local Bank, as agent for Agent and Secured Parties); provided that if no Event of Default (defined below) shall have occurred and be continuing, Agent shall disburse, and permit the disbursement by each of the Local Banks (if applicable) of, funds from the Accounts and the Roanoke Account in accordance with the terms providing for the use of the Accounts and the Roanoke Account set forth in the Loan Instruments. All funds properly disbursed from the Accounts and the Roanoke Account and not deposited in another Account or Ledger of the Roanoke Account, in accordance with the Credit Agreement, shall be released from the Security Interest therein.”

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               7.  Amendment to General Partner Security Agreement. The Amendment to the General Partner Security is hereby amended as follows:

               (a)        the words “Project Control Account” in line 2 of the fifth paragraph of Section 3(a) shall be deleted and the words “Roanoke Account (for the sole account of the Project Control Ledger)” inserted in their place and stead.

               8.  Project Secured Parties’ Security Interest. The Borrower has granted and pledged and hereby grants and pledges to the Secured Parties, and the Borrower hereby confirms the continuation of such grant and pledge to the Secured Parties of, a first-priority perfected lien and security interest in any right, title or interest it may have or come to have in the Accounts and the Roanoke Account and the related funds, instruments and other assets held therein or credited thereto as well as all income or gain earned on any of the foregoing and all proceeds of the foregoing. The Borrower hereby acknowledges that all of Borrower’s right, title and interest in and to the Accounts and the Roanoke Account and all sums of money, Permitted Investments and other property and proceeds thereof at any time held in the Accounts and the Roanoke Account, is held by the Agent and in the name of the Agent, as agent of the Secured Parties, in accordance with the provisions of the Loan Instruments. Notwithstanding anything contained in the Letter Agreement to the contrary, amounts deposited in the Accounts and the Roanoke Account with respect to the Ledgers will be applied as directed by Credit Suisse First Boston acting in its capacity as Agent, as provided in the Loan Instruments, as applicable, and Credit Suisse First Boston, acting in its capacity as Agent will be empowered to hold, endorse, cancel, collect and execute such acts which may be necessary or advisable to carry out its respective duties under the Loan Instruments.

               9.  Dominion and Control Over the Accounts and the Roanoke Account. The Accounts and the Roanoke Account will be deemed to be in the exclusive possession of, and under the exclusive dominion and control of, the Secured Parties, which they maintain through their agent, the Agent. For purposes only of perfecting any lien or security interest in and to the Roanoke Account, BNY is, with respect to the Roanoke Account, the agent of the Agent. The Agent will act as the representative and agent of the Secured Parties with respect to the Accounts and the Roanoke Account and will have the exclusive authority to give instructions and directions to BNY with respect to the Roanoke Account on behalf of the Secured Parties. Notwithstanding anything to the contrary in this Amendment No. 7 or in any other Loan Instruments, the Agent shall have sole dominion and control of the Accounts and the Roanoke Account and no other party shall have any rights of withdrawal with respect thereto, except as expressly provided otherwise in this Amendment No. 7 or any Security Document.

               10.  Right of Setoff. All references in the Credit Agreement and the other Loan Instruments to funds or deposits “held by the Agent or any Lender” or to “deposits with the Agent or any Lender” in any Account or “held by the Agent or any Lender” will include all funds or deposits held by BNY pursuant to the Deposit Agreement, in connection with any right of setoff or similar right, including, without limitation, such rights as set forth in Section 9.3 of the Credit Agreement.

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               11.  Ledgers Generally. Each of the parties hereto agrees that any reference to “the balance on”, “payments from”, “deposits into”, “withdrawals from”, “transfers into” or “transfers from”, or to funds or amounts being “applied”, “held in”, “on deposit in” or “released from”, the Roanoke Account or any Ledger (and all correlative or similar terms) or to any other act with respect to the Roanoke Account or any Ledger in any Loan Instrument shall, in all such cases, be read and construed as a reference to the relevant matter or act with respect to the Roanoke Account but only with respect to, and only to the extent of, the relevant Ledger or Ledgers or funds in such Ledger or Ledgers (as applicable). To the extent any withdrawal shall be made for the account of any Ledger from the Roanoke Account, such withdrawal shall in no event exceed the amount actually reflected in such Ledger. Notwithstanding anything contained in any Loan Instrument to the contrary, to the extent any provision in any Loan Instrument recites that funds shall be withdrawn or transferred from the Roanoke Account for the sole account of any Ledger to the Roanoke Account for the sole account of any other Ledger, no actual transfer of funds need occur, but the relevant Ledgers shall be adjusted accordingly.

               12.  Acknowledgment Regarding Amendments. The parties hereto acknowledge that there are two (2) Amendments, each titled Amendment No. 5 to Amended and Restated Construction and Term Loan Agreement: Amendment No. 5 to Amended and Restated Construction and Term Loan Agreement, dated as of December 15, 1996 and Amendment No. 5 to Amended and Restated Construction and Term Loan Agreement, dated as of August 23, 2000. Each such Amendment is and shall continue to remain in full force and effect until and unless otherwise agreed to by the parties hereto.

               13.  Representations and Warranties. The Borrower represents and warrants to each of the Lenders, the Agent, the Institutional Lenders, the Co-Agents and the Issuing Bank that:

               (a)               it has full power, authority and legal right to enter into and engage in the transactions contemplated by this Amendment No. 7 and has taken or obtained all necessary partnership and other action to authorize the execution, delivery and performance of this Amendment No. 7 and the amendments to the documents amended hereby;

               (b)               this Amendment No. 7 constitutes its legal, valid and binding obligations enforceable against it in accordance with the terms hereof;

               (c)               neither the execution of this Amendment No. 7 nor the performance by it of any of its obligations or the exercise of any of its rights hereunder will conflict with or result in a breach of any law, regulation, judgment, order, authorization, agreement or obligation applicable to it or cause any limitation placed on it or the powers of its officers to be exceeded or result in the creation of or oblige it to create a Lien in respect of any of its property or assets except in favor of the Secured Parties; and

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               (d)               all authorizations required from any governmental or other authority or from any of its partners or creditors for or in connection with the execution, validity and performance of this Amendment No. 7 have been obtained and are in full force and effect.

               14.  Acknowledgment of Reliance. The Borrower acknowledges that each of Lenders, the Agent, the Institutional Lenders, the Co-Agents and the Issuing Bank has entered into this Amendment No. 7 in reliance upon the representations and warranties contained in this Article.

               15.  Limited Effect. Except as expressly amended hereby, all of the provisions of the documents amended hereby shall continue to be, and shall remain, in full force and effect in accordance with their terms. The Borrower further confirms that its obligations under and the security created by the Security Documents to which it is a party continue in full force and effect and are not and will not be affected, discharged or varied by the execution of this Amendment No. 7 or the amendment of the Credit Agreement or any Security Document on the date hereof save that, with effect from the date hereof, references to the Credit Agreement, the Security Agreement, the Account Pledge Agreement and the General Partner Security Agreement in any Loan Instrument to which it is a party shall be deemed to be references to the Credit Agreement, the Security Agreement and the General Partner Security Agreement or the Account Pledge Agreement (as applicable), as amended by this Amendment No. 7. The Borrower further confirms that its obligations under and the security created by the Security Documents to which it is a party will, with effect from the date hereof, extend in all respects to the Credit Agreement, as amended by this Amendment No. 7.

               16.  Construction as One Instrument. This Amendment No. 7 shall be construed as supplementing and forming part of the Credit Agreement, the Security Agreement, the Account Pledge Agreement and the General Partner Security Agreement, and shall be read accordingly.

               17.  Severability. If at any time any one or more of the provisions hereof is or becomes illegal, invalid or unenforceable in any respect under the applicable law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions hereof nor the legality, validity or enforceability of such provisions under the applicable law of any other jurisdiction shall in any way be affected or impaired thereby.

               18.  Counterparts.        This Amendment No. 7 may be executed in any number of counterparts and by different parties on separate counterparts, all of which shall constitute one and the same instrument.

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               19.  GOVERNING LAW. THIS AMENDMENT NO. 7 SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK DETERMINED WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAWS (OTHER THAN SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK).

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               IN WITNESS WHEREOF, the parties have caused this Amendment No. 7 to be executed and delivered by their proper and duly authorized officers as of the date first above written.

WESTMORELAND-- LG&E PARTNERS,
   as Borrower

By: WESTMORELAND — ROANOKE VALLEY, LP,
  a general partner

By: WEI-- ROANOKE VALLEY, INC.,
   a general partner

By: /s/ Gregory S. Woods
Name: Gregory S. Woods
Title: Executive Vice President

By: LG&E ROANOKE VALLEY L.P.,
   a general partner

By: LG&E POWER 16 INCORPORATED,
  as general partner

By: /s/ Daniel K. Arbough
Name: Daniel K. Arbough
Title: Treasurer

CREDIT SUISSE FIRST BOSTON, as
Agent, Co-Agent, Lender and Issuing Bank

By: /s/ p.p. Hughes
Name: Stephen Hughes
Title: Asst. Vice President

By: /s/ p.p. Naval
Name: Pilarcita V. Naval
Title: Asst. Vice President

36

THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA,
   as Institutional Lender and Institutional Agent

By: /s/ Brian N. Thomas
Name: Brian N. Thomas
Title: Vice President

THE BANK OF NOVA SCOTIA,
  as Co-Agent and Lender

By: _______________________________________
Name:
Title:

CREDIT LYONNAIS, Cayman Island Branch,
   as Lender

By: /s/ James F. Guidera
Name: James F. Guidera
Title: SVP

CREDIT LYONNAIS, New York Branch,
   as Lender

By: /s/ James F. Guidera
Name: James F. Guidera
Title: SVP

37

THE FUJI BANK LIMITED, New York Branch,
  as Lender

By: /s/ Thomas W. Boylan
Name: Thomas W. Boylan
Title: Vice President & Team Leader

LANDESBANK HESSEN-THURINGEN GIROZENTRALE, as Lender

By: /s/ David A. Leech
Name: David A. Leech
Title: Vice President, Corporate Finance Division, Structure Finance Dept.

By: /s/ Marc Bruening
Name: Marc Bruening
Title: Asst. Vice President, Corporate Finance Division, Structured Finance Dept.

NIB CAPITAL BANK N.V.,
  as Co-Agent and Lender

By: /s/ Halbart Völker
Name: Halbart Völker
Title: Head of Energy and Environment

By: /s/ Jan Veeningen
Name: Jan Veeningen
Title: Legal Counsel

THE SANWA BANK LIMITED,
   as Lender

By: /s/ Laurance J. Bressler
Name: Laurance J. Bressler
Title: SVP and Group Co-Head

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SUMITOMO MITSUI BANKING CORPORATION (as successor to The Sumitomo Bank, Ltd.),
  as Co-Agent and Lender

By: /s/ William M. Ginn
Name: William M. Ginn
Title: General Manager

UNION BANK OF CALIFORNIA, N.A.
  as Lender

By: /s/ Susan K. Johnson
Name: Susan K. Johnson
Title: Vice President

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EX-10

Exhibit 10.13

Execution Copy

AMENDMENT NO. 8 TO AMENDED AND
RESTATED CONSTRUCTION AND TERM LOAN AGREEMENT

THIS AMENDMENT NO. 8 TO AMENDED AND RESTATED CONSTRUCTION AND TERM LOAN AGREEMENT (this “Amendment”), dated as of November___, 2001, is made by and among (i) WESTMORELAND-LG&E PARTNERS, a Virginia general partnership, as Borrower (the “Borrower”), (ii) CREDIT SUISSE FIRST BOSTON, NIB CAPITAL BANK N.V., THE BANK OF NOVA SCOTIA, SUMITOMO MITSUI BANKING CORPORATION (formerly known as The Sumitomo Bank Limited), New York Branch, THE SANWA BANK LIMITED, UNION BANK OF CALIFORNIA, N.A., THE FUJI BANK LIMITED, New York Branch, CREDIT LYONNAIS, New York Branch, CREDIT LYONNAIS, Cayman Island Branch, LANDESBANK HESSEN-THURINGEN GIROZENTRALE and each Purchasing Lender, as Lenders, (iii) THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, as Institutional Lender and as Institutional Agent and each Purchasing Institutional Lender, (iv) CREDIT SUISSE FIRST BOSTON, New York Branch, as the Issuing Bank, (v) CREDIT SUISSE FIRST BOSTON, NIB CAPITAL BANK N.V., THE BANK OF NOVA SCOTIA and THE SUMITOMO BANK, LIMITED, New York Branch, as Co-Agents (together with their successors in such capacity) and (vi) CREDIT SUISSE FIRST BOSTON, as Agent for the Lenders, the Institutional Lenders and the Issuing Bank (together with its successors in such capacity).

               Reference is made to the Amended and Restated Construction and Term Loan Agreement, dated as of December 1, 1993, as amended by Amendment No. 1 dated as of November 4, 1994, Amendment No. 2 dated as of December 30, 1994, Amendment No. 3 dated as of January 31, 1995, Amendment No. 4 dated as of October 19, 1995, Amendment No. 5 dated as of December 15, 1996, Amendment No. 5 dated as of August 23, 2000, Amendment No. 6 dated as of November 21, 2000 and Amendment No. 7 dated as of November 15, 2001, each among Borrower, the Lenders, the Institutional Lenders, the Issuing Bank, the Co-Agents and Agent (each, as defined therein) and the letter agreement, dated July 20, 1999 from Credit Suisse First Boston as Agent, as Issuing Bank, as Co-Agent and as Securities Intermediary, and acknowledged and agreed to by the Borrower, the Lenders, the Institutional Lenders and the Institutional Agent (collectively, the “Credit Agreement”).

W I T N E S S E T H:

               WHEREAS, the Bond Letters of Credit will expire on December 20, 2001 and Borrower does not expect the Issuing Bank to renew or extend the terms of the Bond Letters of Credit;

               WHEREAS, Borrower desires to provide a Series 1991 Substitute Letter of Credit and a Series 1993 Substitute Letter of Credit after the expiration of the Bond Letters of Credit;

               WHEREAS, Credit Suisse First Boston is the issuer of the Rova I Virginia Power Letter of Credit, the Rova II Virginia Power Letter of Credit (collectively, the “Virginia Power Letters of Credit”) and the Bond Letters of Credit;

-1-

               WHEREAS, Borrower desires to arrange for a Series 1991 Substitute Letter of Credit to be in effect in accordance with Section 5.2(b) of the Series 1991 Loan Agreement and for a Series 1993 Substitute Letter of Credit to be in effect in accordance with Section 5.2(b) of the Series 1993 Loan Agreement (the “Substitute Bond Letters of Credit”);

               WHEREAS, pursuant to Section 3.4(e) of the Credit Agreement, the term “Lender” or “Lenders” includes the Issuing Bank, in its individual capacity, with respect to any Advances and any Note issued to the Issuing Bank or for its benefit;

               WHEREAS, pursuant to Section 9.2 of the Credit Agreement, any Lender may sell to one or more first-class financial institutions, with the consent of Agent, Issuing Bank and the Borrower, its rights or obligations with respect to a Letter of Credit;

               WHEREAS, the parties to this Amendment contemplate that the financial institution that issues the Substitute Bond Letters of Credit will assume the rights and obligations of Credit Suisse First Boston with respect to Bond Letters of Credit and all drawings made thereunder, including the participation and funding commitment of Credit Suisse First Boston as set forth in Section 3.2 of the Credit Agreement with respect to any Series 1991 Term Loan and Series 1993 Term Loan;

               WHEREAS, in the event that the Substitute Letters of Credit are issued by a financial institution other than Credit Suisse First Boston and Credit Suisse First Boston sells its rights and obligations with respect to Bond Letters of Credit to another financial institution (the effective date of such sale being referred to as the “Bond L/C Transfer Date”), Credit Suisse First Boston will not be the issuing bank with respect to the Substitute Bond Letters of Credit, but will continue to be the issuing bank with respect to the Virginia Power Letters of Credit until the expiration or substitution of the Virginia Power Letters of Credit;

               WHEREAS, Section 9.4 of the Credit Agreement requires the written consent of the Majority Lenders and the signature of the Borrower and the Agent in order to amend the Credit Agreement or any other Loan Instrument; and

               WHEREAS, the parties hereto desire to amend certain provisions of the Credit Agreement in the manner set forth below in order to (i) permit the substitution of Credit Suisse First Boston, in its capacity as issuer of the Bond Letters of Credit, with another first-class financial institution, (ii) eliminate the requirement of Section 3.2(c) of the Credit Agreement that (x) any issuer of a Series 1991 Substitute Letter of Credit agree to become a Purchasing Lender with pro rata extensions of credit or commitments of an amount at least equal to fifteen percent of the Outstanding Tranche A Extensions of Credit at such time, (y) any issuer of a Series 1993 Substitute Letter of Credit agree to become a Purchasing Lender with pro rata extensions of credit or commitments of an amount at least equal to fifteen percent of the Outstanding Tranche B Extensions of Credit at such time, and (z) the Lenders sell, assign or otherwise transfer, at par, to any such issuer, such portions of the Lenders’ Loans, L/C Reimbursement Obligations or Letter of Credit participations, or commitments therefor in such pro rata amounts as are necessary to provide such issuer with the aforesaid extensions of credit or commitments therefor, and (iii) permit the Borrower to provide a Series 1991 Substitute Letter of Credit and a Series 1993 Substitute Letter of Credit at any time after the expiration of the Bond Letters of Credit.

-2-

               NOW, THEREFORE, in consideration of the premises set forth above and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, each of the parties hereto hereby agrees as follows:

               1.       Definitions. For all purposes of this Amendment, capitalized terms used herein (including in the preamble and the recitals hereof) but not otherwise defined herein shall have the meanings set forth in the Credit Agreement including Exhibit X thereto.

               2.       Amendment to Exhibit X to the Credit Agreement. Exhibit X to the Credit Agreement is hereby amended as follows:

        (a)        The definition of “Cash Revenues” is hereby amended by deleting the words “Issuing Bank” in the twelfth line thereof and replacing such words with the words “Bond L/C Issuing Bank”.

        (b)        The definition of “Issuing Bank” is hereby amended by deleting such term and its corresponding definition in its entirety and replacing it with the following language: “Issuing Bank” means (i) Credit Suisse First Boston, New York Branch, and its successors and assigns, in its capacity as the issuer of the Rova I Virginia Power Letter of Credit, the Rova II Virginia Power Letter of Credit, any Rova I Trade Letter of Credit and any Rova II Trade Letter of Credit for so long as such letters of credit are in effect, or (ii) the issuer of any replacement Rova I Virginia Power Letter of Credit, Rova II Virginia Power Letter of Credit any Rova I Trade Letter of Credit and any Rova II Trade Letter of Credit then in effect, and its successors and assigns in such capacity.

        (c)        The definition of “Rova I L/C Reimbursement Obligation” is hereby amended by replacing the words “Issuing Bank” in the fifth line thereof with the words “Bond L/C Issuing Bank”.

        (d)        The definition of “Rova II L/C Reimbursement Obligation” is hereby amended by replacing the words “Issuing Bank” in the fifth line thereof with the words “Bond L/C Issuing Bank”.

        (e)        The definition of “Secured Parties” is hereby amended by inserting the words “the Bond L/C Issuing Bank” immediately after the words “the Issuing Bank,” in the first line thereof.

        (f)        The definition of “Series 1991 Letter of Credit” is hereby amended by deleting the words “Issuing Bank” in the second line thereof and replacing such words with the words “Bond L/C Issuing Bank and its successors and assigns”.

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        (g)        The definition of “Series 1991 Letter of Credit Facility” is hereby amended by deleting the words “Issuing Bank” and replacing such words with the words “Bond L/C Issuing Bank and its successors and assigns”.

        (h)        The definition of “Series 1993 Letter of Credit” is hereby amended by deleting the words “Issuing Bank” in the sixth line thereof and replacing such words with the words “Bond L/C Issuing Bank and its successors and assigns”.

        (i)        The definition of “Series 1993 Letter of Credit Facility” is hereby amended by deleting the words “Issuing Bank” and replacing such words with the words “Bond L/C Issuing Bank and its successors and assigns”.

        (j)        The definition of “Taxes” is hereby amended by inserting the words “or the branch of any Bond L/C Issuing Bank issuing any Bond Letters of Credit” immediately after the words “Letters of Credit,” in the eleventh line thereof.

        (k)        The definition of “Tranche A Advance” is hereby amended by inserting the words “or by the Bond L/C Issuing Bank, as applicable” in clause (d) thereof immediately after the words “Issuing Bank” in the ninth line thereof.

        (l)        The definition of “Tranche A Application for Borrowing” is hereby amended by deleting (i) the words “Issuing Bank” in the fifth line of clause (d) thereof and replacing such words with the words “Bond L/C Issuing Bank” and by inserting before the words “Rova I Letter of Credit” in clause (d) thereof the word “initial.”

        (m)        The definition of “Tranche B Advance” is hereby amended by inserting the words “or by the Bond L/C Issuing Bank, as applicable” in clause (d) thereof immediately after the words “Issuing Bank” in the ninth line thereof and by inserting before the words “Rova II Letter of Credit” in clause (d) of thereof the word “initial.”

        (n)        Exhibit X is further amended by inserting the following definition in the appropriate alphabetical order:

        “Bond L/C Issuing Bank” means Credit Suisse First Boston, New York Branch, and its successors and assigns, in its capacity as the issuer of, and for so long as it is the issuer of the Bond Letters of Credit then in effect or (ii) the issuer of any Series 1991 Substitute Letter of Credit and any Series 1993 Substitute Letter of Credit then in effect and its successors and assigns in such capacity.

               3.       Amendments to the Credit Agreement. The Credit Agreement is hereby amended as follows:

        (a)        Section 2.3(a)(i) is hereby amended by (i) inserting the words “, the Bond L/C Issuing Bank” immediately after the words “the Lenders” in the second, eighth, thirty-seventh, fortieth, forty-second and the forty-eighth lines thereof, (ii) inserting the words “, the Bond L/C Issuing Bank” immediately after the word “Lender” in the fourth, tenth, eleventh, nineteenth, twenty-fourth, twenty-sixth, forty-eighth and fifty-sixth lines thereof, (iii) inserting the words “, the Bond L/C Issuing Bank” immediately after the words “Issuing Bank” in the fourteenth, fifty-fourth and fifty-seventh lines thereof, and (iv) inserting the words “or Bond L/C Issuing Bank’s” immediately after the words “Issuing Bank’s” in the fiftieth line thereof.

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        (b)        Section 2.3(b) is hereby amended by (i) inserting the words “or the Bond L/C Issuing Bank” immediately after the words “Issuing Bank” in the seventh line thereof and in the fifth and ninth lines of the last paragraph thereof and (ii) inserting the words “or Bond L/C Issuing Bank’s” immediately after the word “Bank’s” in the sixth line of the last paragraph thereof.

        (c)        Section 2.3(c) is hereby amended by (i) inserting the words “or Bond L/C Issuing Bank” immediately after the words “Issuing Bank” in the sixth, seventeenth, and twenty-first lines thereof and (ii) inserting the words “or Bond L/C Issuing Bank’s” immediately after the words “Issuing Bank’s” in the seventeenth line thereof.

        (d)        Section 2.4(c) is hereby amended by (i) deleting the words “on the Tranche A Conversion Date” in the sixth, seventh and eighth lines of subparagraph (i)(B) thereof and replacing such words with the words “on such Tranche A Repayment Date”, (ii) deleting the words “on the Tranche B Conversion Date” in the sixth, seventh, and eighth lines of subparagraph (i)(D) thereof and replacing such words with the words “on such Tranche B Repayment Date” and (iii) inserting the words “Bond L/C” immediately before the words “Issuing Bank” in the third and seventh lines of subparagraph (ii)(C) thereof.

        (e)        Section 2.6(b) is hereby amended by inserting the words “, Bond L/C Issuing Bank” immediately after the words “Institutional Lender” in the second, fourth, seventh, twelfth, nineteenth, twenty-first and twenty-third lines thereof and immediately after the words “Institutional Lenders” in the fifteenth and seventeenth lines thereof.

        (f)        Section 2.6(c) is hereby amended by inserting the words “, Bond L/C Issuing Bank” immediately after the words “Institutional Lenders” in the third line thereof.

        (g)        Section 2.6(c)(i)(B) is hereby amended by (i) inserting the words “the Bond L/C Issuing Bank,” immediately after the words “Issuing Bank,” in the first line thereof and (ii) inserting the words “or to the Bond L/C Issuing Bank” immediately after the words “Issuing Bank” in the fourth line thereof.

        (h)        Section 2.6(c)(ii)(C) is hereby amended by (i) inserting the words “the Bond L/C Issuing Bank,” immediately after the words “Issuing Bank,” in the first line thereof, and (ii) inserting the words “or to the Bond L/C Issuing Bank” immediately after the words “Issuing Bank” in the fifth line thereof.

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        (i)        Sections 3.2(a) through 3.2(b) and Section 3.2(d) through Section 3.2(g) are hereby amended by (i) deleting the words “Issuing Bank” everywhere that such words appear in such sections and replacing such words with the words “Bond L/C Issuing Bank” and (ii) deleting the words “Issuing Bank’s” everywhere that such words appear in such sections and replacing such words with the words “Bond L/C Issuing Bank’s”.

        (j)        Section 3.2(b) is hereby amended by inserting the following at the end of the first paragraph thereof after the word “anniversary”:

;provided further that, in addition to the foregoing, in the case of any Series 1991 Substitute Letter of Credit issued on or after December 20, 1996, such Series 1991 Substitute Letter of Credit may provide either that the term thereof (i) may be renewed for additional periods of one year from each anniversary of the issuance date thereof if the Bond L/C Issuing Bank shall, at least ninety (90) days prior to any such anniversary, give written notice to Borrower that the Series 1991 Substitute Letter of Credit shall be extended beyond the day immediately preceding such anniversary or (ii) shall be automatically renewed for additional periods of one year from each anniversary of the issuance date thereof unless the Bond L/C Issuing Bank shall, at least six months prior to any such anniversary, give written notice to the Borrower that the Series 1991 Substitute Letter of Credit shall not be extended beyond the day immediately preceding such anniversary.

        (k)        Section 3.2(b) is hereby amended by inserting the following at the end of the second paragraph thereof after the word anniversary”:

;provided further that, in addition to the foregoing, in the case of any Series 1993 Substitute Letter of Credit issued on or after December 20, 1996, such Series 1993 Substitute Letter of Credit may provide either that the term thereof (i) may be renewed for additional periods of one year from each anniversary of the issuance date thereof if the Bond L/C Issuing Bank shall, at least six months prior to any such anniversary, give written notice to Borrower that the Series 1993 Substitute Letter of Credit shall be extended beyond the day immediately preceding such anniversary or (ii) shall be automatically renewed for additional periods of one year from each anniversary of the issuance date thereof unless the Bond L/C Issuing Bank shall, at least ninety (90) days prior to any such anniversary, give written notice to the Borrower that the Series 1993 Substitute Letter of Credit shall not be extended beyond the day immediately preceding such anniversary.

        (l)        Section 3.2(c) is hereby amended and restated as follows:

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“(c) Substitute Letters of Credit and Fixed Rate Credit Facilities. Borrower agrees that it shall not be entitled to provide a Series 1991 Substitute Letter of Credit or a Series 1991 Fixed Rate Credit Facility except (A) if the Bond/LC Issuing Bank shall have wrongfully dishonored a Series 1991 Drawing under the Series 1991 Letter of Credit and such wrongful dishonor shall be continuing or (B) if the Bond L/C Issuing Bank shall no longer be a Lender and no other Lender shall have issued a Series 1991 Substitute Letter of Credit or a Series 1991 Fixed Rate Credit Facility or (C) as otherwise provided below in this Section 3.2(c). After the Tranche A Conversion Date, to but not including the first anniversary of the Tranche A Conversion Date, Borrower shall be entitled to provide a Series 1991 Substitute Letter of Credit or a Series 1991 Fixed Rate Credit Facility with the prior written consent of the Bond L/C Issuing Bank and the Majority Lenders (including the Lenders and Institutional Lenders, and which consent shall be given or withheld in the sole discretion of the aforesaid parties) and upon payment to Agent for the account of the Lenders of an amount equal to 0.500% of the amount of the Series 1991 Letter of Credit then outstanding. If the Bond L/C Issuing Bank does not renew the Series 1991 Letter of Credit at the expiration thereof, and if no Lender shall replace the Bond L/C Issuing Bank as the issuer of the Series 1991 Letter of Credit should such replacement be necessary, then Borrower shall be entitled to provide a Series 1991 Substitute Letter of Credit or a Series 1991 Fixed Rate Credit Facility at any time on or after the expiration of the Series 1991 Letter of Credit (whether or not there are any Tranche A Loans then outstanding pursuant to Section 3.2(d)(i)); provided that (1) Borrower must obtain (A) any consent required under the Series 1991 Bond Documents and (B) the prior written consent of Institutional Agent if the issuer of the Series 1991 Substitute Letter of Credit or the provider of the Series 1991 Fixed Rate Credit Facility is (in the judgment of Institutional Agent) less creditworthy than the Issuing Bank, and (2) Borrower shall pay to each Secured Party all of such Secured Party’s administrative, legal and other costs and expenses associated with the transactions contemplated pursuant to this Section 3.2(c).

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Borrower agrees that it shall not be entitled to provide a Series 1993 Substitute Letter of Credit or a Series 1993 Fixed Rate Credit Facility for the Series 1993 Letter of Credit except (A) if the Bond L/C Issuing Bank shall have wrongfully dishonored a Series 1993 Drawing under the Series 1993 Letter of Credit and such wrongful dishonor shall be continuing or (B) if the Bond L/C Issuing Bank shall no longer be a Lender and no other Lender shall have issued a Series 1993 Substitute Letter of Credit or a Series 1993 Fixed Rate Credit Facility or (C) as otherwise provided below in this Section 3.2(c). After the Tranche B Conversion Date, to but not including the first anniversary of the Tranche B Conversion Date, Borrower shall be entitled to provide a Series 1993 Substitute Letter of Credit or a Series 1993 Fixed Rate Credit Facility with the prior written consent of the Bond L/C Issuing Bank and the Majority Lenders (including the Lenders and Institutional Lenders, and which consent shall be given or withheld in the sole discretion of the aforesaid parties) and upon payment to Agent for the account of the Lenders of an amount equal to 0.500% of the amount of the Series 1993 Letter of Credit then outstanding. If the Bond L/C Issuing Bank does not renew the Series 1993 Letter of Credit at the expiration thereof, and if no Lender shall replace the Bond L/C Issuing Bank as the issuer of the Series 1993 Letter of Credit should such replacement be necessary, then Borrower shall be entitled to provide a Series 1993 Substitute Letter of Credit or a Series 1993 Fixed Rate Credit Facility at any time on or after the expiration of the Series 1993 Letter of Credit (and whether or not there are any Tranche B Loans then outstanding pursuant to Section 3.2(d)(i)); provided that (1) Borrower must obtain (A) any consent required under the Series 1993 Bond Documents and (B) the prior written consent of Institutional Agent if the issuer of the Series 1993 Substitute Letter of Credit or the provider of the Series 1993 Fixed Rate Credit Facility is (in the judgment of Institutional Agent) less creditworthy than the Issuing Bank, (2) Borrower shall pay to each Secured Party all of such Secured Party’s administrative, legal and other costs and expenses associated with the transactions contemplated pursuant to this Section 3.2(c).”

        (m)        Sections 3.3 is hereby amended and restated as follows:

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“Nature of Issuing Bank’s and Bond L/C Issuing Bank’s Duties. As among Borrower, the Issuing Bank, the Bond L/C Issuing Bank, the Lenders and Agent, Borrower hereby assumes all risks of the acts, omissions or misuse of any Letter of Credit by its beneficiary or any successor thereto. The Issuing Bank, the Bond L/C Issuing Bank, the Lenders and Agent shall not be responsible: (i) for the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for and issuance of, or the making of any drawing under, any Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged, (ii) for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason, (iii) for failure of any beneficiary to comply fully with the conditions required in order to effect a drawing, (iv) for errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, (v) for any loss or delay in the transmission or otherwise of any document or draft required in order to make any drawing and (vi) for any consequences arising from causes beyond the control of the Issuing Bank, or the Bond L/C Issuing Bank, the Lenders or Agent, except only that Borrower shall have a claim against the Issuing Bank or the Bond L/C Issuing Bank, as applicable, and the Issuing Bank or the Bond L/C Issuing Bank, as applicable, shall be liable to Borrower, to the extent, but only to the extent, of any direct, as opposed to consequential, damages suffered by Borrower which Borrower proves were caused by (A) the Issuing Bank’s or the Bond L/C Issuing Bank’s, as the case may be, willful misconduct or gross negligence in determining whether documents presented under a Letter of Credit comply with the terms of such Letter of Credit or (B) the Issuing Bank’s or the Bond L/C Issuing Bank’s, as the case may be, failure to pay under a Letter of Credit in accordance with its terms after the presentation to it by the beneficiary of a sight draft and certificate strictly complying with the terms and conditions of such Letter of Credit. In furtherance and not in limitation of the foregoing, the Issuing Bank and the Bond L/C Issuing Bank may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary. None of the above shall affect, impair, or prevent the vesting of any of the Issuing Bank’s or the Bond L/C Issuing Bank’s rights or powers hereunder.

In furtherance and extension and not in limitation of the specific provisions hereinabove set forth, any action taken or omitted by the Issuing Bank or the Bond L/C Issuing Bank, under or in connection with a Letter of Credit or any related certificates or other documents, if taken or omitted in good faith and without gross negligence, shall be binding upon Borrower and shall not put the Issuing Bank or the Bond L/C Issuing Bank under any resulting liability to Borrower.”

        (n)        Section 3.4(a) is hereby amended by (i) inserting the number “(i)” immediately after the word “Appointment.” in the first line thereof, (ii) deleting the words “Letters of Credit” beginning in the third and seventeenth lines thereof and replacing such words with the words “each Virginia Power Letter of Credit and the Trade Letters of Credit”, and (iii) adding the following subsection as a new paragraph at the end of such section:

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“(ii) Each Lender hereby irrevocably designates and appoints the Bond L/C Issuing Bank as the Bond L/C Issuing Bank under this Agreement with respect to the Bond Letters of Credit, and each such Lender hereby irrevocably authorizes the Bond L/C Issuing Bank, as the Bond L/C Issuing Bank, to take such action under the provisions of this Agreement and to exercise such powers and perform such duties as are expressly delegated to the Bond L/C Issuing Bank by the terms of this Agreement, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Bond L/C Issuing Bank shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or otherwise exist against the Bond L/C Issuing Bank; provided that nothing contained in this Section 3.4 shall be deemed to limit or impair the rights and obligations of the Bond L/C Issuing Bank under the Bond Letters of Credit.”

        (o)        Section 3.4(b) is hereby amended by deleting the words “Neither the Issuing Bank nor any of its officers, directors, employees, agents, attorneys-in-fact shall be” in the first line thereof and replacing such words with the words “The Issuing Bank, the Bond L/C Issuing Bank and each of their officers, directors, employees, agents and attorneys-in-fact shall not be”.

        (p)        Section 3.4(b)(ii) is hereby amended (i) by deleting the words “Issuing Bank” in the eleventh line thereof and replacing such words with the words “Issuing Bank or Bond L/C Issuing Bank” and (ii) deleting the words “the Issuing Bank shall not” in the seventeenth line thereof and replacing such words with the words “Neither the Issuing Bank or the Bond L/C Issuing Bank shall”.

        (q)        Section 3.4(c) is hereby amended by (i) replacing the words “Letters of Credit” in the twelfth line thereof with the words “each Virginia Power Letter of Credit and the Trade Letters of Credit”, (ii) inserting the number “(i)” immediately before the words “Reliance by Issuing Bank.” in the first line thereof and (iii) inserting the following new subsection as a new paragraph at the end of such section:

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“(ii)  Reliance by Bond L/C Issuing Bank. The Bond L/C Issuing Bank shall be entitled to rely, and shall be fully protected in relying, upon any agreement (including this Agreement), note (including any Note), writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or telephone conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to Borrower), independent accountants and other experts selected by the Bond L/C Issuing Bank. Except for the issuance of the Bond Letters of Credit in accordance with the terms of this Agreement and the payment of drawings thereunder, the Bond L/C Issuing Bank shall be fully justified in failing or refusing to take any action under this Agreement unless the Bond L/C Issuing Bank shall first receive such advice or concurrence of the Majority Lenders as the Bond L/C Issuing Bank deems appropriate or the Bond L/C Issuing Bank shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Bond L/C Issuing Bank shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the Notes in accordance with a request of the Majority Lenders, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Notes.”

        (r)        Section 3.4(d) is hereby amended by (i) deleting the words “Issuing Bank in its capacity” in the second line thereof and replacing such words with the words “Issuing Bank and Bond L/C Issuing Bank in their capacity”, (ii) deleting the words “Issuing Bank” beginning in the twelfth and fifteenth lines thereof and replacing such words with the words “Issuing Bank or Bond L/C Issuing Bank”, and (iii) deleting the words “Issuing Bank’s” in the twentieth line thereof and replacing such words with the words “Issuing Bank’s or Bond L/C Issuing Bank’s”.

        (s)        Section 3.4(e) is hereby amended by (i) inserting the number “(i)” immediately before the words “Issuing Bank in its Individual Capacity” in the first line thereof and (ii) inserting the following subsection as a new paragraph at the end of such section:

“(ii) Bond L/C Issuing Bank in Its Individual Capacity. The Bond L/C Issuing Bank and its affiliates may make loans to accept deposits from and generally engage in any kind of business with Borrower as though the Bond L/C Issuing Bank were not the Bond L/C Issuing Bank hereunder. With respect to Advances made or renewed by the Bond L/C Issuing Bank or on their behalf and any Note issued to the Bond L/C Issuing Bank or for its benefit, the Bond L/C Issuing Bank shall have the same rights and powers under this Agreement as any Lender and may exercise the same as though it were not the Bond L/C Issuing Bank, and the terms ‘Lender’ and ‘Lenders’ shall include the Bond L/C Issuing Bank in its individual capacity.”

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        (t)        Section 3.5(a) is hereby amended by (i) deleting the words “Issuing Bank” beginning in the second, fifth, tenth, twelfth, thirty-second, thirty-fifth and thirty-ninth lines thereof and replacing such words with the words “Bond L/C Issuing Bank”, (ii) inserting the words (other than a Lender that has assigned any of its rights and obligations, including L/C Reimbursement Obligations, with respect to a Bond Letter of Credit pursuant to Section 9.2 of this Agreement and, then, only to the extent of such rights and obligations that it has assigned) immediately after the words “other Lenders” in the ninth line thereof and (iii) inserting the words “, the Bond L/C Issuing Bank,” immediately before the words “the Lenders” in the twenty-fifth line thereof.

        (u)        Section 3.5(b) is hereby amended by deleting the words “Issuing Bank” in the eighth, nineteenth, twenty-seventh, thirty-second, thirty-seventh, forty-first, forty-fifth, forty-eighth, fifty-third and sixty-second lines thereof and replacing such words with the words “Bond L/C Issuing Bank” and (ii) inserting the words “, the Bond L/C Issuing Bank and any Lender that has assigned any of its rights and obligations, including L/C Reimbursement Obligations, with respect to a Bond Letter of Credit pursuant to Section 9.2 of this Agreement (to the extent of such rights and obligations that it has assigned)” immediately after the words “other than the Issuing Bank” in the thirteenth and twenty-sixth lines thereof.

        (v)        Section 3.5(c) is hereby amended by deleting all references to “Issuing Bank” in the first and sixth lines thereof and replacing such references with the words “Bond L/C Issuing Bank”.

        (w)        Section 3.5(d) is hereby amended by (i) deleting the words “Issuing Bank” in the sixth line thereof and replacing such words with the words “Bond L/C Issuing Bank”, and (ii) inserting after the words “Lenders” in the sixth line thereof the words “(other than a Lender that has assigned any of its rights and obligations, including L/C Reimbursement Obligations, with respect to a Bond Letter of Credit pursuant to Section 9.2 of this Agreement and, then, only to the extent of such rights and obligations that it has assigned)".

        (x)        Section 3.5(e) is hereby amended by (i) deleting the words “Issuing Bank” in the first, third and eleventh lines thereof and replacing such words with the words “Bond L/C Issuing Bank” and (ii) inserting after the words “Each Lender” in the twelfth line thereof the words “(other than a Lender that has assigned any of its rights and obligations, including L/C Reimbursement Obligations, with respect to a Bond Letter of Credit pursuant to Section 9.2 of this Agreement and, then, only to the extent of such rights and obligations that it has assigned)".

        (y)        Section 3.5(f) is hereby amended by inserting after the words “Each Lender” in the first line thereof the words “(other than a Lender that has assigned any of its rights and obligations, including L/C Reimbursement Obligations, with respect to a Bond Letter of Credit pursuant to Section 9.2 of this Agreement and, then, only to the extent of such rights and obligations that it has assigned)".

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        (z)        Section 4.1(a)(i) is hereby amended by deleting the words “Rova I Letters of Credit” in the ninth line thereof and replacing such words with the words “Rova I Virginia Power Letter of Credit and the Rova I Trade Letter of Credit and the Bond L/C Issuing Bank commits to issue the Series 1991 Letter of Credit”.

        (aa)        Section 4.1(a)(ii) is hereby amended by deleting the words “Rova II Letters of Credit” in the ninth line thereof and replacing such words with the words “Rova II Virginia Power Letter of Credit and the Rova II Trade Letter of Credit and the Bond L/C Issuing Bank commits to issue the Series 1993 Letter of Credit”.

        (bb)        Section 4.2 is hereby amended by deleting the words “Rova II Letters of Credit” in the third line thereof and replacing such words with the words “initial Rova II Virginia Power Letter of Credit and the Rova II Trade Letter of Credit and the obligation of the Bond L/C Issuing Bank to Issue the Series 1993 Letter of Credit”.

        (cc)        Section 4.3 is hereby amended by (i) inserting the words “and the Bond L/C Issuing Bank” immediately after the words “Issuing Bank” in the fourth line thereof, (ii) by replacing the reference to “any Letter of Credit” in the fourth, fifth and seventh lines thereof with “the initial Series 1991 Letter of Credit and initial Series 1993 Letter of Credit”, and (iii) by replacing the words “Rova II Letter of Credit” in the thirteenth line thereof with the words “any initial Rova II Letter of Credit”.

        (dd)        Section 4.4 is hereby amended by (i) inserting the words “Bond L/C” immediately before the words “Issuing Bank” in the first line thereof and (ii) by replacing the words “the Series 1993 Letter of Credit” in the second and third lines thereof with the words “the initial Series 1993 Letter of Credit”.

        (ee)        Section 4.4(a) is hereby amended by deleting the words “Issuing Bank” in the second and third lines of subsection (iii) thereof and in the second line of subsection (x) thereof and replacing such words with the words “Bond L/C Issuing Bank”.

        (ff)        Section 4.5(a) is hereby amended by deleting the words “Issuing Bank” in the first and ninth lines thereof and replacing such words with the words “Bond L/C Issuing Bank”.

        (gg)        Section 4.6 is hereby amended by deleting the words “Rova I Letters of Credit” in the third line thereof and replacing such words with the words “Rova I Virginia Power Letter of Credit and the Rova I Trade Letter of Credit and the obligation of the Bond L/C Issuer (in accordance with Article 3 hereof) to issue the Series 1991 Letter of Credit”.

        (hh)        Section 4.7(a) is hereby amended by deleting the words “Rova II Letters of Credit” in the tenth line thereof and replacing such words with the words “Rova II Virginia Power Letter of Credit and the Rova II Trade Letter of Credit and the obligation of the Bond L/C Issuer (in accordance with Article 3 hereof) to issue the Series 1991 Letter of Credit”.

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        (ii)        Section 4.8 is hereby amended by deleting the words “Rova II Letters of Credit” in the third line thereof and replacing such words with the words “Rova II Virginia Power Letter of Credit and the Rova II Trade Letter of Credit and the obligation of the Bond L/C Issuer (in accordance with Article 3 hereof) to issue the Series 1993 Letter of Credit”.

        (jj)        Section 6.1(c)(xi) is hereby amended by inserting the words “, the Bond L/C Issuing Bank” immediately after the words “the Institutional Lenders” in the thirty-third line of the second paragraph thereof.

        (kk)        Section 6.8(a) is hereby amended by inserting the words “, the Bond L/C Issuing Bank” immediately after the words “the Institutional Lenders” in the nineteenth line thereof.

        (ll)        Section 6.8(c) is hereby amended by inserting the words “, the Bond L/C Issuing Bank” immediately after the words “the Institutional Lenders” in the seventh line thereof.

        (mm)        Section 6.15 is hereby amended by inserting the words “, the Bond L/C Issuing Bank” immediately after the words “the Institutional Lenders” in the fifteenth line thereof.

        (nn)        Section 6.25(a) is hereby amended by inserting the words “except during any period when the Bonds are held as Series 1991 Pledged Bonds or Series 1993 Pledged Bonds,” at the beginning of such Section before the word “Borrower.”

        (oo)        Section 6.25(c) is hereby amended by inserting the words “the Bond L/C” immediately before the words “Issuing Bank” in the second and sixth lines thereof.

        (pp)        Section 6.25(o) is hereby amended by deleting the word “At” at the beginning of such Section and replacing such word with the words “Unless the Interest Rate Period (as defined in the Series 1991 Indenture and Series 1993 Indenture) of the Bonds is a Term Interest Period (as defined in the Series 1991 Indenture and the Series 1993 Indenture) or the Bonds are held as Series 1991 Pledged Bonds or Series 1993 Pledged Bonds, at”.

        (qq)        Section 7.1(s) is hereby amended by inserting the words “Bond L/C” immediately before the words “Issuing Bank” in the fifth line thereof.

        (rr)        Section 7.2(a) is hereby amended by inserting the words “Bond L/C” immediately before the words “Issuing Bank” in the sixth line thereof.

-14-

        (ss)        Section 7.2(b)(ii)is hereby amended by inserting the words “, the L/C Bond Issuing Bank” immediately after the words “Issuing Bank” in the third line thereof.

        (tt)        Section 7.2(c) is hereby amended by inserting the words “, the L/C Bond Issuing Bank” immediately after the word “Lenders” in the nineteenth line thereof.

        (uu)        Section 8.1 is hereby amended by inserting the words “the Bond L/C Issuing Bank,” immediately after the words “each Institutional Lender,” in the first line thereof.

        (vv)        Section 8.2 is hereby amended by inserting the words “, the Bond L/C Issuing Bank” immediately after the words “Institutional Agent” in the third line thereof.

        (ww)        Section 8.4 is hereby amended by inserting the words “, the Bond L/C Issuing Bank” immediately after the words “Each of Agent” in the eighth line thereof.

        (xx)        Section 8.5 is hereby amended by (i) inserting the words “Bond L/C Issuing Bank,” immediately after the words “as a Lender,” in the first line thereof, (ii) inserting the words “, the Bond L/C Issuing Bank” immediately after the words “Institutional Agent” in the fourth line thereof, and (iii) inserting the words “, Bond L/C Issuing Bank” immediately after the words “In addition, Agent” in the thirteenth line thereof.

        (yy)        Section 9.1 is hereby amended by deleting the words “the Bond Letters of Credit,” beginning in the first line immediately after the Agent’s contact information for notices and by inserting the following language immediately after the Issuing Bank’s contact information for notices:

“If to the Bond L/C Issuing Bank (with respect to the Bond Letters of Credit):

So long as Credit Suisse First Boston is the Bond L/C Issuing Bank to:

[Credit Suisse First Boston
Tower 49
12 E. 49th Street
New York, New York 10017

Attention: Group Head, Portfolio Management
   Project Finance, Telex: 420149
Telecopy: (212) 238-5390]

        At such time, if any, as Credit Suisse First Boston is not the Bond L/C Issuing Bank, to such address as may be designated in writing by any Bond L/C Issuing Bank to the Agent, the Institutional Agent and the Borrower.

-15-

        (zz)        Section 9.2(a) is hereby amended by (i) deleting the words “a Letter of Credit” in the fifth line thereof and replacing such words with the words “either of the Bond Letters of Credit, the consent of the Bond L/C Issuing Bank, and with respect to a Virginia Power Letter of Credit or either of the Trade Letters of Credit” and (ii) inserting the words “the Bond L/C Issuing Bank or” immediately before the words “the Issuing Bank” in the eleventh line thereof.

        (aaa)        Section 9.4 is hereby amended by (i) inserting the words “the Bond L/C Issuing Bank,” immediately after the words “Issuing Bank” in the second line of clause (iv) thereof and (ii) inserting the words “, the Bond L/C Issuing Bank” immediately after the words “Institutional Lenders” in the eighth and twelfth lines of clause (v) thereof.

        (bbb)        Section 9.13(d) is hereby amended by inserting the words “THE BOND L/C ISSUING BANK,” immediately after the words “THE ISSUING BANK,” in the third line thereof.

               4.       Conditions of Amendment. The amendment to Section 3.2(c) of the Credit Agreement contained in Section 3(l) of this Amendment, permitting the Borrower to provide a Series 1991 Substitute Letter of Credit and a Series 1993 Substitute Letter of Credit after the expiration of the Bond Letters of Credit is expressly conditioned upon the satisfaction of the condition that Borrower obtain a waiver, modification or amendment, in accordance with Section 11.9 of each of the Series 1991 Loan Agreement and the Series 1993 Loan Agreement and Section 6.04 of each Indenture, from the Series 1991 Trustee and the Series 1993 Trustee of the requirements set forth in Section 5.2 of the Series 1991 Loan Agreement and Series 1993 Loan Agreement (i) to the effect that a Letter of Credit (as defined in the Indenture) or Substitute Letter of Credit (as defined in the Indenture) is not required pursuant to Section 5.2(a) of the Series 1991 Loan Agreement or the Series 1993 Loan Agreement if the Bonds have been purchased pursuant to Section 8.15(c) of the applicable Indenture such that they are Series 1991 Pledged Bonds or Series 1993 Pledged Bonds, as applicable, (ii) to permit the delivery of a Series 1991 Substitute Letter of Credit and a Series 1993 Substitute Letter of Credit on any Business Day, and (iii) to change the 45-day notice period in Section 5.2(b) of the Series 1991 Loan Agreement and the Series 1993 Loan Agreement from forty-five (45) days to ten (10) days, if a Substitute Letter of Credit is being delivered while the Bonds are held as Series 1991 Pledged Bonds or Series 1993 Pledged Bonds, as applicable.

               5.       Limitation. Except as expressly stated herein, all of the representations, warranties, terms, covenants and conditions of the Credit Agreement shall remain unamended and shall continue to be, and shall remain, in full force and effect in accordance with their respective terms. This Amendment shall be limited precisely as provided for herein, and shall not be deemed to be a waiver of, amendment of, consent to or modification of any other term or provision of the Credit Agreement.

               6.       Credit Agreement References. On and after the effective date of this Amendment, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof” or words of like import, and each reference to the Credit Agreement by the words “thereunder”, “thereof” or words of like import in any Project Document, Loan Instrument or other document executed in connection with the Credit Agreement, shall mean and be a reference to the Credit Agreement, as amended or otherwise modified by this Amendment.

-16-

               7.       Governing Law. This Amendment shall for all purposes be considered a Loan Instrument and shall be governed by, construed and interpreted in accordance with, the laws of the State of New York without regard to principles of conflict of laws (except for Section 5-1401 of the General Obligations Law of the State of New York).

               8.       Successors and Assigns. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns and all future parties to the Credit Agreement.

               9.       Counterparts. This Amendment may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all the counterparts shall together constitute one and the same instrument. A facsimile signature on a counterpart of this Amendment shall be binding to the same extent as an original signature by the signatory.

               10.       Effectiveness. This Amendment shall be effective when executed by the Agent, the Borrower and the Majority Lenders.

-17-

               IN WITNESS WHEREOF, the parties hereto have executed this consent through their duly authorized representatives as of              , 2001.

WESTMORELAND-LG&E PARTNERS,
as Borrower

By: WESTMORELAND-ROANOKE VALLEY, L.P.
as general partner

By: WEI-ROANOKE VALLEY, INC.,
as general partner

By: /s/ Gregory S. Woods
Name: Gregory S. Woods
Title: Executive Vice President

By: LG&E ROANOKE VALLEY, L.P.,
as general partner

By: LG&E POWER 16 INCORPORATED,
as general partner

By: /s/ Daniel K. Arbough
Name: Daniel K. Arbough
Title: Treasurer

CREDIT SUISSE FIRST BOSTON,
as Agent, Co-Agent, Lender and Issuing Bank

By: /s/ p.p. Hughes
Name: Stephen Hughes
Title: Associate

By: /s/ p.p. Naval
Name: Pilarcita V. Naval
Title: Associate

-18-

THE BANK OF NOVA SCOTIA,
as Co-Agent and Lender

By: /s/ Brian Portis
Name: Brian Portis
Title: Director

SUMITOMO MITSUI BANKING CORPORATION
(formerly known as THE SUMITOMO BANK, LIMITED),
NEW YORK BRANCH,
as Co-Agent and Lender

By: /s/ David A. Buck
Name: David A. Buck
Title: Senior Vice President

NIB CAPITAL BANK, N.V.,
as Co-Agent and Lender

By: /s/ Halbart Völker
Name: Halbart Völker
Title: Head of Energy and Environment

By: /s/ Dennis van Alphen
Name: Dennis van Alphen
Title: Vice President

UNION BANK OF CALIFORNIA, N.A.,
(AS SUCCESSOR IN INTEREST TO UNION BANK),
as Lender

By: /s/ Susan K. Johnson
Name: Susan K. Johnson
Title: Vice President

-19-

THE FUJI BANK LIMITED,
LOS ANGELES AGENCY,
as Lender

By: ________________________________
Name:
Title:

CREDIT LYONNAIS, NEW YORK BRANCH,
as Lender

By: /s/ James F. Guidera
Name: James F. Guidera
Title: SVP

CREDIT LYONNAIS,
CAYMAN ISLAND BRANCH,
as Lender

By: /s/ James F. Guidera
Name: James F. Guidera
Title: SVP

THE SANWA BANK LIMITED,
as Lender

By: ________________________________
Name:
Title:

LANDESBANK HESSEN THURINGEN GIROZENTRALE,
as Lender

By: /s/ David A. Leech
Name: David A. Leech
Title: Vice President, Corporate Finance Division, Structure Finance Dept.

-20-

By: /s/ Marc Bruening
Name: Marc Bruening
Title: Asst. Vice President, Corporate Finance Division, Structured Finance Dept.

THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA,
as Institutional Agent and Institutional Lender

By: /s/ [illegible]
Name:
Title:

-21-

EX-10

Exhibit 10.14

Execution Copy

AMENDMENT NO. 9 TO AMENDED AND
RESTATED CONSTRUCTION AND TERM LOAN AGREEMENT AND CONSENT

               THIS AMENDMENT NO. 9 TO AMENDED AND RESTATED CONSTRUCTION AND TERM LOAN AGREEMENT AND CONSENT (this “Amendment and Consent”), dated as of March 1, 2002 is made by and among (i) WESTMORELAND-LG&E PARTNERS, a Virginia general partnership, as Borrower (the “Borrower”), (ii) CREDIT SUISSE FIRST BOSTON, NIB CAPITAL BANK N.V., THE BANK OF NOVA SCOTIA, SUMITOMO MITSUI BANKING CORPORATION (formerly known as The Sumitomo Bank Limited), New York Branch, UFJ BANK LIMITED (formerly known as The Sanwa Bank Limited), UNION BANK OF CALIFORNIA, N.A., THE FUJI BANK LIMITED, New York Branch, CREDIT LYONNAIS, New York Branch, CREDIT LYONNAIS, Cayman Island Branch, LANDESBANK HESSEN-THURINGEN GIROZENTRALE and each Purchasing Lender, as Lenders, (iii) THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, as Institutional Lender and as Institutional Agent and each Purchasing Institutional Lender, (iv) CREDIT SUISSE FIRST BOSTON, New York Branch, as Issuing Bank (v) DEXIA CREDIT LOCAL, NEW YORK AGENCY (“Dexia”), as Bond L/C Issuing Bank (as defined below), (vi) CREDIT SUISSE FIRST BOSTON, NIB CAPITAL BANK N.V., THE BANK OF NOVA SCOTIA and SUMITOMO MITSUI BANKING CORPORATION (formerly known as The Sumitomo Bank Limited), New York Branch, as Co-Agents (together with their successors in such capacity) and (vii) CREDIT SUISSE FIRST BOSTON, as Agent for the Lenders, the Institutional Lenders and the Issuing Bank and the Bond L/C Issuing Bank (together with its successors in such capacity).

               Reference is made to the Amended and Restated Construction and Term Loan Agreement, dated as of December 1, 1993, as amended by Amendment No. 1 dated as of November 4, 1994, Amendment No. 2 dated as of December 30, 1994, Amendment No. 3 dated as of January 31, 1995, Amendment No. 4 dated as of October 19, 1995, Amendment No. 5 dated as of December 15, 1996, Amendment No. 5 dated as of August 23, 2000, Amendment No. 6 dated as of November 21, 2000, Amendment No. 7 dated as of November 15, 2001 and Amendment No. 8 dated as of November 28, 2001, among Borrower, the Lenders, the Institutional Lenders, the Issuing Bank, the Bond L/C Issuing Bank, the Co-Agents and Agent (each, as defined therein) and the letter agreement, dated July 20, 1999 from Credit Suisse First Boston as Agent, as Issuing Bank, as Co-Agent and as Securities Intermediary, and acknowledged and agreed to by the Borrower, the Lenders, the Institutional Lenders and the Institutional Agent (collectively, the “Credit Agreement”).

WITNESSETH:

               WHEREAS, the Series 1991 Letter of Credit, originally issued on the December 20, 1991, and the Series 1993 Letter of Credit, originally issued on December 27, 1993, expired on December 20, 2001 and Credit Suisse First Boston, as the original Bond L/C Issuing Bank did not renew or extend their terms;

1

               WHEREAS, Borrower desires to arrange for a Series 1991 Substitute Letter of Credit to be in effect in accordance with Section 5.2(b) of the Series 1991 Loan Agreement and for a Series 1993 Substitute Letter of Credit to be in effect in accordance with Section 5.2(b) of the Series 1993 Loan Agreement (the “Substitute Bond Letters of Credit”);

               WHEREAS, the parties to this Amendment and Consent desire to amend the Credit Agreement to provide that Dexia become a party to the Credit Agreement and issue the Substitute Bond Letters of Credit and in furtherance thereof desire to appoint Dexia to act as Bond L/C Issuing Bank under the Credit Agreement;

               WHEREAS, Dexia desires to assume the rights and obligations of the Bond L/C Issuing Bank under the Credit Agreement and to become a party to the Credit Agreement as a Lender with a commitment limited to the percentage of the Bond L/C Term Facility Commitment (as defined below) set forth in Exhibit A hereto and as Bond L/C Issuing Bank;

               WHEREAS, pursuant to Section 9.2 of the Credit Agreement, any Lender may sell to one or more first-class financial institutions, with the consent of Agent, Issuing Bank, Bond L/C Issuing Bank and the Borrower, its rights or obligations with respect to the Bond Letters of Credit;

               WHEREAS, concurrent with the execution and delivery of this Amendment and Consent, pursuant to a Commitment Transfer Supplement, a form of which is attached as Exhibit A hereto, Dexia is assuming the rights and obligations of Credit Suisse First Boston as a Lender with respect to Bond Letters of Credit and all drawings made thereunder, including the commitment of Credit Suisse First Boston, as a Lender, to (i) make Series 1991 Term Loans and to maintain Series 1991 Term Loans, and to maintain participation and funding commitments as set forth in Section 3.2 of the Credit Agreement with respect to the outstanding amount of the Series 1991 Letter of Credit and (ii) make Series 1993 Term Loans and to maintain Series 1993 Term Loans, and to maintain participation and funding commitments as set forth in Section 3.2 of the Credit Agreement with respect to the outstanding amount of the Series 1993 Letter of Credit (the commitments set forth in (i) and (ii) are collectively referred to as the “Bond L/C Term Facility Commitment”);

               WHEREAS, Section 9.4 of the Credit Agreement requires the written consent of the Majority Lenders and the signature of the Borrower and the Agent in order to amend the Credit Agreement and approve the use of a revised form of Commitment Transfer Supplement which varies from the form attached to the Credit Agreement as Schedule 9.2(a) thereof;

               NOW, THEREFORE, in consideration of the premises set forth above and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, each of the parties hereto hereby agrees as follows:

               1.       Definitions. For all purposes of this Amendment and Consent, capitalized terms used herein (including in the preamble and the recitals hereof) but not otherwise defined herein shall have the meanings set forth in the Credit Agreement including Exhibit X thereto.

2

               2.       Amendment to Exhibit X to the Credit Agreement. Exhibit X to the Credit Agreement is hereby amended as follows:

        (a)        The definition of “Bond L/C Issuing Bank” is hereby amended and restated as follows:

        “Bond L/C Issuing Bank” means (i) from December 1, 1993 Credit Suisse First Boston, New York Branch, and its successors and assigns, in its capacity as the issuer of, and for so long as it is the issuer of the Bond Letters of Credit then in effect, (ii) from, including and after the date that it issues a Series 1991 Substitute Letter of Credit and a Series 1993 Substitute Letter of Credit, Dexia Crédit Local, New York Agency and its successors and assigns, in its capacity as the issuer of, and for so long as it is the issuer of one or both of the Bond Letters of Credit then in effect or (iii) the issuer of any other Series 1991 Substitute Letter of Credit or any other Series 1993 Substitute Letter of Credit then in effect and its successors and assigns in such capacity.

        (b)        The definition of “Series 1991 Letter of Credit” is hereby amended and restated as follows:

        “Series 1991 Letter of Credit” means the irrevocable direct pay letter of credit or the Series 1991 Substitute Letter of Credit issued by the Bond L/C Issuing Bank in favor of the Series 1991 Trustee, for the benefit of the owners of the Series 1991 Bonds for the account of Borrower pursuant to this Agreement, as such Letter of Credit may be amended, supplemented or extended in accordance with its terms; provided for clarification that, upon the issuance and delivery of any other Series 1991 Substitute Letter of Credit in accordance with Section 3.2 of the Credit Agreement, “Series 1991 Letter of Credit” shall mean such other Series 1991 Substitute Letter of Credit.

        (c)        The definition of “Series 1993 Letter of Credit” is hereby amended and restated as follows:

        “Series 1993 Letter of Credit” means the irrevocable direct pay letter of credit or the Series 1993 Substitute Letter of Credit issued by the Bond L/C Issuing Bank in favor of the Series 1993 Trustee, for the benefit of the owners of the Series 1993 Bonds for the account of Borrower pursuant to this Agreement, as such Letter of Credit may be amended, supplemented or extended in accordance with its terms; provided for clarification that, upon the issuance and delivery of any other Series 1993 Substitute Letter of Credit in accordance with Section 3.2 of the Credit Agreement, “Series 1993 Letter of Credit” shall mean such other Series 1993 Substitute Letter of Credit.

        (d)        Exhibit X is further amended by inserting the following definitions in the appropriate alphabetical order:

        “Rova Bond L/C Fees” means the Series 1991 Rova Bond L/C Fees and the Series 1993 Rova Bond L/C Fees.

3

        “Series 1991 Rova Bond L/C Fees” means the fronting fees payable pursuant to Section 2.2(d)(ix) of the Credit Agreement with respect to a Series 1991 Letter of Credit.

        “Series 1993 Rova Bond L/C Fees” means the fronting fees payable pursuant to Section 2.2(d)(ix) of the Credit Agreement with respect to a Series 1993 Letter of Credit.

               3.       Appointment of Bond L/C Issuing Bank. The Agent, Institutional Agent, Lenders and Borrower party hereto hereby appoint Dexia as Bond L/C Issuing Bank under the Credit Agreement and Dexia hereby accepts such appointment. Upon the issuance of any Substitute Bond Letter of Credit, Dexia shall hereby be considered a party to the Credit Agreement and shall succeed to and become vested with all the rights, powers, privileges and duties of the Bond L/C Issuing Bank under the Credit Agreement.

               4.       Amendments to the Credit Agreement. The Credit Agreement is hereby amended as follows:

        (a)        The preamble of the Credit Agreement is hereby amended by (i) inserting the words “(v) DEXIA CREDIT LOCAL, NEW YORK AGENCY, as Bond L/C Issuing Bank,” immediately after the words “(the “Issuing Bank”)” in the fourteenth line thereof, (ii) deleting the word “(v)” in the fourteenth line thereof and replacing such word with the word “(vi)", (iii) deleting the word “(vi)” in the seventeenth line thereof and replacing such word with the word “(vii)” and (iv) deleting the words “and the Issuing Bank” in the eighteenth line thereof and replacing such words with the words “, the Issuing Bank and the Bond L/C Issuing Bank”.

        (b)        Section 2.2(d)(iii) is hereby amended by (i) inserting the words “(other than the Series 1991 Letter of Credit)” immediately after the words “Rova I Letters of Credit” in the sixth line thereof and (ii) inserting the words “(other than the Series 1993 Letters of Credit)” immediately after the words “Rova II Letters of Credit” in the sixteenth line thereof.

        (c)        Section 2.2(d)(ix) is hereby amended by (i) deleting the words “Issuing Bank” in the second, third and thirteenth lines thereof and replacing such words with the words “Bond L/C Issuing Bank” (ii) deleting the words “clause (e)” in the fourth line thereof and replacing such words with the words “clauses (e), (f) and (g)” (iii) deleting the words “and (e)” in the seventeenth line thereof and replacing such words with the words “, (e)” and (iv) inserting the following language at the end of the current paragraph thereof after the word “Date”:

, (f) a Bond Letter of Credit fronting fee for each Bond Letter of Credit at a rate equal to ..35% per annum on the daily average face amount of such Bond Letter of Credit computed on the basis of the actual number of days elapsed and a year of 365 or 366 days, as appropriate, and payable in arrears on the first Quarterly Date after the date of issuance of such Bond Letter of Credit and on each anniversary of such Quarterly Date thereafter.

4

        (d)        Section 6.1(c)(iv) is hereby amended by (i) inserting the words “Section 2.2(d)(ix) hereof or under” immediately after the words “upon which payment is required under” in the fifth line thereof, (ii) inserting the words “Series 1991 Rova Bond L/C Fees” immediately after the words “Rova I L/C Fees” in the seventh line thereof, (iii) inserting the words “and on each date occurring on and after the Tranche B Conversion Date upon which payment is required under Section 2.2(d)(ix) hereof” immediately after the words “Tranche B Conversion Date” in the twelfth line thereof and (iv) inserting the words “Series 1993 Rova Bond L/C Fees” immediately after the words “Rova II L/C Fees” in the thirteenth line thereof.

        (e)        Article 8 is hereby by amended by inserting the following section as a new section after Section 8.9:

“8.10 Party to Credit Agreement. Upon the issuance of any Series 1991 Substitute Letter of Credit or Series 1993 Substitute Letter of Credit in conformity with the requirements set forth in the Loan Instruments and with the prior written consent of the Agent and the Borrower and the acknowledgment and agreement of the issuer of any Series 1991 Substitute Letter of Credit or Series 1993 Substitute Letter of Credit, such issuer shall become a party to the Credit Agreement as Bond L/C Issuing Bank, with all rights and obligations thereof.”

        (f)        Section 9.1 is hereby amended by (i) deleting the words “Credit Suisse First Boston” in the first and tenth lines following the words “If to the Bond L/C Issuing Bank (with respect to the Bond Letters of Credit)” and replacing such words with the words “Dexia Crédit Local, New York Agency” and (ii) deleting the contact information for notices for the Bond L/C Issuing Bank and replacing such contact information with the following:

Dexia Crédit Local, New York Agency
445 Park Avenue
New York, NY 10022

Attention: [           ]
Telephone: [           ]
Facsimile: [           ]

               5.       Consent.

        (a)        The parties hereto hereby consent to the execution and delivery of a Commitment Transfer Supplement substantially in the form attached hereto as Exhibit A for the purpose of transferring the Bond L/C Term Facility Commitment or any subsequent transfer of the Bond L/C Term Facility Commitment.

5

        (b)        The Agent, the Issuing Bank, the Bond LC Issuing Bank and the Borrower hereby consent to the transfer by Credit Suisse First Boston to Dexia, as a Lender, of its rights and obligations with respect to the Bond Letters of Credit, including the Bond L/C Term Facility Commitment.

               6.       Consent of Institutional Agent. For purposes of Section 3.2(c) of the Credit Agreement, The Prudential Insurance Company of America, in its capacity as Institutional Agent under the Credit Agreement, hereby consents to the issuance by Dexia of the Bond Substitute Letters of Credit.

               7.       Limitation. Except as expressly stated herein, all of the representations, warranties, terms, covenants and conditions of the Credit Agreement shall remain unamended and shall continue to be, and shall remain, in full force and effect in accordance with their respective terms. This Amendment and Consent is only effective in the specific instance and for the specific purpose for which it is given and shall not be effective for any other purpose, and, except as expressly stated herein, no provision of any Loan Instrument is amended in any way.

               8.       Credit Agreement References. On and after the effective date of this Amendment and Consent, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof” or words of like import, and each reference to the Credit Agreement by the words “thereunder”, “thereof” or words of like import in any Project Document, Loan Instrument or other document executed in connection with the Credit Agreement, shall mean and be a reference to the Credit Agreement, as amended or otherwise modified by this Amendment and Consent.

               9.       Governing Law. This Amendment and Consent shall for all purposes be considered a Loan Instrument and shall be governed by, construed and interpreted in accordance with, the laws of the State of New York without regard to principles of conflict of laws (except for Section 5-1401 of the General Obligations Law of the State of New York).

               10.       Successors and Assigns. This Amendment and Consent shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns and all future parties to the Credit Agreement.

               11.       Counterparts. This Amendment and Consent may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all the counterparts shall together constitute one and the same instrument. A facsimile signature on a counterpart of this Amendment and Consent shall be binding to the same extent as an original signature by the signatory.

               12.       Effectiveness. This Amendment and Consent shall be effective when executed by the Agent, the Borrower, the Institutional Agent, the Issuing Bank and the Majority Lenders.

6

               IN WITNESS WHEREOF, the parties hereto have executed this Amendment and Consent through their duly authorized representatives as of the date first above written.

WESTMORELAND-LG&E PARTNERS,
as Borrower

By: WESTMORELAND-ROANOKE VALLEY, L.P.
as general partner

By: WEI-ROANOKE VALLEY, INC.,
as general partner

By: /s/ Gregory S. Woods
Name: Mr. Gregory S. Woods
Title: Executive Vice President

By: LG&E ROANOKE VALLEY, L.P.,
as general partner

By: LG&E POWER 16 INCORPORATED,
as general partner

By: /s/ Daniel K. Arbough
Name: Daniel K. Arbough
Title: Treasurer

CREDIT SUISSE FIRST BOSTON,
as Agent, Co-Agent, Lender and Issuing Bank

By: /s/ p.p. Hughes
Name: Stephen Hughes
Title: Associate

By: /s/ p.p. Dodd
Name: David J. Dodd
Title: Associate

7

THE BANK OF NOVA SCOTIA,
as Co-Agent and Lender

By: __________________________________
Name:
Title:

SUMITOMO MITSUI BANKING CORPORATION
(formerly known as THE SUMITOMO BANK, LIMITED),
NEW YORK BRANCH,
as Co-Agent and Lender

By: __________________________________
Name:
Title:

NIB CAPITAL BANK, N.V.,
as Co-Agent and Lender

By: /s/ [illegible]
Name:
Title:

8

UNION BANK OF CALIFORNIA, N.A.,
(AS SUCCESSOR IN INTEREST TO UNION BANK),
as Lender

By: /s/ Susan K. Johnson
Name: Susan K. Johnson
Title: Vice President

THE FUJI BANK LIMITED,
LOS ANGELES AGENCY,
as Lender

By: __________________________________
Name:
Title:

CREDIT LYONNAIS, NEW YORK BRANCH,
as Lender

By: /s/ James F. Guidera
Name: James F. Guidera
Title: Senior Vice President

9

CREDIT LYONNAIS,
CAYMAN ISLAND BRANCH,
as Lender

By: /s/ James F. Guidera
Name: James F. Guidera
Title: Senior Vice President

UFJ BANK LIMITED (formerly known as The Sanwa Bank Limited), as Lender

By: /s/ Laurance J. Bressler
Name: Laurance J. Bressler
Title: SVP and Group Co-Head

LANDESBANK HESSEN THURINGEN GIROZENTRALE,
as Lender

By: /s/ David A. Leech
Name: David A. Leech
Title: Vice President, Corporate Finance Division, Structure Finance Dept.

By: /s/ Marc Bruening
Name: Marc Bruening
Title: Asst. Vice President, Corporate Finance Division, Structured Finance Dept.

10

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA,
as Institutional Agent and Institutional Lender

By: /s/ Brian N. Thomas
Name: Brian N. Thomas
Title: Vice President

11

Agreed To And Acknowledged By:

DEXIA CREDIT LOCAL, NEW YORK AGENCY as Bond L/C Issuing Bank

By: __________________________________
Name:
Title:

12

EXHIBIT A

[Form of Commitment Transfer Supplement]

13

Exhibit A

COMMITMENT TRANSFER SUPPLEMENT

               COMMITMENT TRANSFER SUPPLEMENT, dated as of the date set forth in Item 1 of Schedule I hereto, among the Transferor Lender set forth in Item 2 of Schedule I hereto (the “Transferor Lender”), the Purchasing Lender set forth in Item 3 of Schedule I hereto (the “Purchasing Lender”), DEXIA CREDIT LOCAL, NEW YORK AGENCY as Bond L/C Issuing Bank and CREDIT SUISSE FIRST BOSTON, as Issuing Bank and as Agent under the Credit Agreement described below (in such capacity, “Agent”).

W I T N E S S E T H:

               WHEREAS, this Commitment Transfer Supplement is being executed and delivered in accordance with Section 9.2(a) of the Amended and Restated Construction and Term Loan Agreement, dated as of December 1, 1993, as amended by Amendment No. 1 dated as of November 4, 1994, Amendment No. 2 dated as of December 30, 1994, Amendment No. 3 dated as of January 31, 1995, Amendment No. 4 dated as of October 19, 1995, Amendment No. 5 dated as of December 15, 1996, Amendment No. 5 dated as of August 23, 2000, Amendment No. 6 dated as of November 21, 2000, Amendment No. 7 dated as of November 15, 2001, Amendment No. 8 dated as of November 28, 2001 and Amendment No. 9 dated as of January [ ], 2002, among (i) WESTMORELAND-LG&E PARTNERS, a Virginia general partnership, as Borrower (the “Borrower”), (ii) CREDIT SUISSE FIRST BOSTON, NIB CAPITAL BANK N.V., THE BANK OF NOVA SCOTIA, SUMITOMO MITSUI BANKING CORPORATION (formerly known as The Sumitomo Bank Limited), New York Branch, THE UFJ BANK LIMITED (formerly known as The Sanwa Bank Limited), UNION BANK OF CALIFORNIA, N.A., THE FUJI BANK LIMITED, New York Branch, CREDIT LYONNAIS, New York Branch, CREDIT LYONNAIS, Cayman Island Branch, LANDESBANK HESSEN-THURINGEN GIROZENTRALE and each Purchasing Lender, as Lenders, (iii) THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, as Institutional Lender and as Institutional Agent and each Purchasing Institutional Lender, (iv) CREDIT SUISSE FIRST BOSTON, New York Branch, as Issuing Bank, (v) DEXIA CREDIT LOCAL, NEW YORK AGENCY, as Bond L/C Issuing Bank, (vi) CREDIT SUISSE FIRST BOSTON, NIB CAPITAL BANK N.V., THE BANK OF NOVA SCOTIA and SUMITOMO MITSUI BANKING CORPORATION (formerly known as The Sumitomo Bank Limited), New York Branch, as Co-Agents (together with their successors in such capacity) and (viii) CREDIT SUISSE FIRST BOSTON, as Agent for the Lenders, the Institutional Lenders, the Bond L/C Issuing Bank and the Issuing Bank (together with its successors in such capacity) and the letter agreement, dated July 20, 1999 from Credit Suisse First Boston as Agent, as Issuing Bank, as Co-Agent and as Securities Intermediary, and acknowledged and agreed to by the Borrower, the Lenders, the Institutional Lenders and the Institutional Agent (collectively, the “Credit Agreement”; terms defined therein being used herein as therein defined); and

14

               WHEREAS, Transferor Lender desires to sell and Purchasing Lender desires to purchase and assume all of Transferor Lender’s rights and obligations (including L/C Reimbursement Obligations) with respect to the Bond Letters of Credit under the Credit Agreement and the Notes it being understood that Transferor Lender is solely selling to Purchasing Lender and Purchasing Lender is solely purchasing and assuming Transferor Lender’s commitment to (i) make Series 1991 Term Loans and to maintain Series 1991 Term Loans, and to maintain participation and funding commitments as set forth in Section 3.2 of the Credit Agreement with respect to the outstanding amount of the Series 1991 Letter of Credit and (ii) make Series 1993 Term Loans and to maintain Series 1993 Term Loans, and to maintain participation and funding commitments as set forth in Section 3.2 of the Credit Agreement with respect to the outstanding amount of the Series 1993 Letter of Credit (the commitments set forth in (i) and (ii) are collectively referred to as the “Bond L/C Term Facility Commitment”); and

               WHEREAS, pursuant to section 9.2(a) of the Credit Agreement any Lender may sell to one or more first-class financial institutions, with the consent of Agent, Issuing Bank, Bond L/C Issuing Bank and the Borrower, its rights or obligations with respect to the Bond Letters of Credit; and

               WHEREAS, the Purchasing Lender desires to become a Lender, party to the Credit Agreement with a commitment limited to the percentage of the Bond L/C Term Facility Commitment set forth in Exhibit A hereto;

               NOW, THEREFORE, the parties hereto hereby agree as follows:

               1.        Upon receipt by Agent of five (5) fully executed originals of this Commitment Transfer Supplement, to each of which is attached a fully completed Schedule I, Schedule II and Schedule III, and each of which has been executed by the Transferor Lender, the Purchasing Lender and any other Person required by the Credit Agreement to execute this Commitment Transfer Supplement, Agent will transmit to Borrower, the Transferor Lender and the Purchasing Lender a Transfer Effective Notice, substantially in the form of Schedule IV hereto (a “Transfer Effective Notice”). Such Transfer Effective Notice shall set forth, interalia, the date on which the transfer effected by this Commitment Transfer Supplement shall become effective (the “Transfer Effective Date”), which date shall be the date hereof. From and after the Transfer Effective Date the Purchasing Lender shall be a Lender, party to the Credit Agreement for all purposes thereof; provided that the participation and funding commitments of the Purchasing Lender shall be limited to the extent of the Bond L/C Term Facility Commitment.

               2.        The Purchasing Lender shall pay to the Transferor Lender an amount equal to the purchase price, as agreed between the Transferor Lender and the Purchasing Lender (the “Purchase Price”), of the portion being purchased (the “Purchased Percentage”) by the Purchasing Lender of the outstanding Series 1991 Term Loans and the Series 1993 Term Loans, unreimbursed L/C Reimbursement Obligations and other amounts, if any, owing to the Transferor Lender under the Credit Agreement and the Loan Notes relating to the outstanding Series 1991 Term Loans and the Series 1993 Term Loans and unreimbursed L/C Reimbursement Obligations (the “Outstanding Obligations”). The Purchasing Lender shall pay the appropriate Purchase Price to the Transferor Lender, in immediately available funds, at or before 12:00 noon, local time of the Transferor Lender on the first day of each Interest Period (including, if applicable, the Transfer Effective Date) applicable to such Outstanding Obligations. Effective upon the Transfer Effective Date, the Transferor Lender hereby irrevocably sells, assigns and transfers to the Purchasing Lender, without recourse, representation or warranty other than as set forth in Section 8 hereof, and the Purchasing Lender hereby irrevocably purchases, takes and assumes from the Transferor Lender, the Purchasing Lender’s Purchased Percentage of the Bond L/C Term Facility Commitment, presently outstanding amounts of the Series 1991 Term Loans and Series 1993 Term Loans and presently unreimbursed L/C Reimbursement Obligations and other amounts owing to the Transferor Lender under the Credit Agreement and the Loan Notes relating to the Series 1991 Term Loans, Series 1993 Term Loans and unreimbursed L/C Reimbursement Obligations, together with all instruments, documents and collateral security pertaining thereto.

15

               3.        The Transferor Lender has made arrangements with the Purchasing Lender with respect to (a) the portion, if any, to be paid, and the date or dates for payment, by the Transferor Lender to the Purchasing Lender of any fees heretofore received by the Transferor Lender pursuant to the Credit Agreement prior to the Transfer Effective Date and (b) the portion, if any, to be paid, and the date or dates for payment, by the Purchasing Lender to the Transferor Lender of fees or interest received by the Purchasing Lender pursuant to the Credit Agreement from and after the Transfer Effective Date. Any interest, accrued from and after the Transfer Effective Date, with respect to principal of the Series 1991 Term Loans, Series 1993 Term Loans and any unreimbursed L/C Reimbursement Obligation relating to the outstanding Series 1991 Term Loans and the Series 1993 Term Loans for which the Purchase Price has yet to be paid under Section 2 above, shall accrue for the benefit of the Transferor Lender to the extent of the Base Rate, CD Rate or LIBOR, as applicable, and shall accrue for the benefit of the Purchasing Lender to the extent of the Base Rate Margin, CD Rate Margin or LIBOR Margin, as applicable.

               4.        (a) All principal payments of the Series 1991 Term Loans and the Series 1993 Term Loans that would otherwise be payable from and after the Transfer Effective Date to or for the account of the Transferor Lender pursuant to the Credit Agreement shall, instead, be payable to or for the account of the Transferor Lender and the Purchasing Lender, as the case may be, in accordance with their respective interests as reflected in this Commitment Transfer Supplement.

                         (b) Except as otherwise agreed as set forth in Section 3 hereof, all interest, fees and other amounts that arise from the Series 1991 Term Loans and Series 1993 Term Loans, any repayments of unreimbursed L/C Reimbursement Obligations relating to the outstanding Series 1991 Term Loans, Series 1993 Term Loans and any other amounts related to the Series 1991 Term Loans, Series 1993 Term Loans and such unreimbursed L/C Reimbursement Obligations that would otherwise accrue for the account of the Transferor Lender from and after the Transfer Effective Date pursuant to the Credit Agreement shall, instead, accrue for the account of, and be payable to, the Transferor Lender and the Purchasing Lender, as the case may be, in accordance with their respective interests as reflected in this Commitment Transfer Supplement. In the event that any amount of interest, fees or other amounts accruing prior to the Transfer Effective Date was included in the Purchase Price paid by the Purchasing Lender, the Transferor Lender and the Purchasing Lender will make appropriate arrangements for payment by the Transferor Lender to the Purchasing Lender of such amount upon receipt thereof from Borrower.

16

                         (c) Each of the parties to this Commitment Transfer Supplement (including Borrower) confirms that (i) the Agency Fee and the Management Fee referred to in Section 2.2(d) (i) of the Credit Agreement shall be paid to Agent for its own account, (ii) the Prepayment Fee referred to in Section 2.2(d) (ii) of the Credit Agreement shall be paid to Agent for the account of the Lenders, (iii) the letter of credit fee referred to in Section 2.2(d) (iii) of the Credit Agreement shall be paid to Agent for the account of the Lenders and the fronting fee referred to in such Section shall be paid to Agent for the account of the Issuing Bank, (iv) the Lenders’ Commitment Fee referred to in Section 2.2(d) (iv) of the Credit Agreement shall be paid to Agent for the account of the Lenders, (v) the Institutional Lenders’ Commitment Fee referred to in Section 2.2(d) (v) of the Credit Agreement shall be paid to Agent for the account of the Institutional Lenders, (vi) the Cancellation Fee, Delayed Delivery Fee and Break-Up Fee referred to in Sections 2.2(d) (vi), 2.2(d) (vii) and 2.2(d) (viii), respectively, of the Credit Agreement shall be paid to Agent for the account of the Institutional Lenders and (vii) the Series 1991 Letter of Credit fees, the Series 1993 Letter of Credit fees and the fronting fees referred to in Section 2.2(d) (ix) of the Credit Agreement shall be payable to Agent for the account of Dexia Crédit Local, New York Agency as Bond L/C Issuing Bank and (ix) the intermediation fee referred to in Section 2.8 of the Credit Agreement shall be paid to Agent for the account of those Lenders participating in the Interest Rate Hedge Agreement.

               5.        Concurrently with the execution and delivery hereof, the Transferor Lender will provide to the Purchasing Lender copies of all documents delivered to the Transferor Lender evidencing satisfaction of the conditions precedent set forth in the Credit Agreement.

               6.        Each of the parties to this Commitment Transfer Supplement agrees that at any time and from time to time upon the written request of any other party, it will execute and deliver such further documents and do such further acts and things as such other party may reasonably request in order to effect the purposes of this Commitment Transfer Supplement. The Purchasing Lender agrees to keep confidential, on the terms set forth in Section 9.2(c) of the Credit Agreement, all proprietary information provided to it regarding Borrower, the transactions contemplated by the Credit Agreement and the Facilities.

17

               7.        By executing and delivering this Commitment Transfer Supplement, the Transferor Lender and the Purchasing Lender confirm to and agree with each other and Agent, Lenders and Institutional Lenders as follows: (a) other than the representation and warranty that it is the legal and beneficial owner of the interest being assigned hereby free and clear of any adverse claim, the Transferor Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement, the Notes or any other Loan Instrument or other instrument or document furnished pursuant thereto, (b) the Transferor Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of Borrower or the performance or observance by Borrower of any of its obligations under the Credit Agreement, the Notes or any other Loan Instrument or other instrument or document furnished pursuant hereto, (c) the Purchasing Lender confirms that it has received copy of the Credit Agreement, together with copies of the financial statements referred to in Section 5.14 thereof, the financial statements delivered pursuant to Section 6.9(a), (b) and (d) thereof, if any, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Commitment Transfer Supplement, (d) the Purchasing Lender will, independently and without reliance upon Agent, the Transferor Lender or any other Lender or Institutional Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement, (e) the Purchasing Lender appoints and authorizes Agent to act as its agent under the Credit Agreement and under the other Loan Instruments (including, without limitation, the Security Documents) with such powers as are expressly delegated to Agent by the terms of the Credit Agreement, together with such powers as are reasonably incidental thereto, all in accordance with Article 8 of the Credit Agreement and (f) the Purchasing Lender agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Credit Agreement are required to be performed by it as a Lender; provided that the participation and funding commitments of the Purchasing Lender shall be limited to the extent of the Bond L/C Term Facility Commitment.

               8.        Schedule III hereto sets forth the Bond L/C Term Facility Commitment and the percentage thereof (which shall be rounded to five decimal places) set forth opposite the names of the Transferor Lender and the Purchasing Lender under the caption “Bond L/C Term Facility Commitment Percentage” (the “Bond L/C Term Facility Commitment Percentage”), as well as certain administrative information with respect to the Purchasing Lender and the revised Term Facility Commitment of the Transferor Lender.

               9.        Notwithstanding anything to the contrary in this Commitment Transfer Supplement, if the long-term debt rating of the Purchasing Lender shall, at any time, be less than a rating of BBB or the equivalent thereof by S&P or Baa or the equivalent thereof by Moody’s, then the Agent may, in its sole and absolute discretion, purchase the Purchasing Lender’s participating interest hereunder (the “Terminated Interests”) by providing the Purchasing Lender with at least two Banking Days’ prior notice of such purchase and making a payment to such Purchasing Lender for all outstanding amounts owing to it hereunder or pursuant to the Credit Agreement on the date of such purchase as set forth in such notice. Upon such purchase, the Purchasing Lender shall no longer have any rights or obligations as a Purchasing Lender hereunder or as a Lender under the Credit Agreement. The Agent may, in its sole and absolute discretion, retain for its own account and/or sell its interest in all or any portion of the Terminated Interests.

               10.        THIS COMMITMENT TRANSFER SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

18

               11.        This Commitment Transfer Supplement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same document.

               IN WITNESS WHEREOF, the parties hereto have caused this Commitment Transfer Supplement to be executed by their respective duly authorized officers on Schedule I hereto as of the date set forth in Item 1 of Schedule I hereto.

19

SCHEDULE I
TO COMMITMENT TRANSFER SUPPLEMENT

COMPLETION OF INFORMATION AND
SIGNATURES FOR COMMITMENT
TRANSFER SUPPLEMENT

Re: Amended and Restated Construction and Term Loan Agreement, dated as of December 1, 1993, as amended, with Westmoreland-LG&E Partners, as Borrower.

Item 1 Date of Commitment Transfer Supplement: [         ]

Item 2 Transferor Lender: [         ]

Item 3 Purchasing Lender: [         ]

Item 4 Signatures of Parties to Commitment Transfer Supplement:

[                          ]
as Transferor Lender

By: __________________________
Name:
Title:

[                          ]
as Purchasing Lender

By: __________________________
Name:
Title:

20

CREDIT SUISSE FIRST BOSTON, as Agent and as Issuing Bank

By: __________________________
Name:
Title:

By: __________________________
Name:
Title:

DEXIA CREDIT LOCAL, NEW YORK AGENCY as Bond L/C Issuing Bank

By: __________________________
Name:
Title:

21

SCHEDULE I

(Continued)

CONSENTED TO AND ACKNOWLEDGED:

WESTMORELAND-LG&E PARTNERS, as Borrower

By: WESTMORELAND-ROANOKE VALLEY L.P.,

as general partner

By: WEI-ROANOKE VALLEY, INC.,

as general partner

By: /s/ Gregory S. Woods
Name: Mr. Gregory S. Woods
Title: Executive Vice President

By: LG&E-ROANOKE VALLEY, L.P.,

as general partner

By: LG&E POWER 16 INCORPORATED,

as general partner

By: ___________________________________
Name:
Title:

ACCEPTED FOR RECORDATION IN REGISTER:

CREDIT SUISSE FIRST BOSTON, as Agent

By: ___________________________________
Name:
Title:

By: ___________________________________
Name:
Title:

22

SCHEDULE II
TO COMMITMENT
TRANSFER SUPPLEMENT

Total Commitment Assigned

Names of
Transferor Lender

	[                    ]
Name of Purchasing Lender	$[                    ]

23

SCHEDULE III
TO COMMITMENT TRANSFER
SUPPLEMENT

LIST OF LENDING OFFICES, ADDRESSES FOR NOTICES,
COMMITMENT AMOUNTS, AND PROPORTIONATE SHARES

Name of Transferor Lender	Revised Maximum Bond L/C Term Facility Commitment	Revised Bond L/C Term Facility Commitment Percentage
[               ]	$[       ]	[    ]%
Name of Purchasing Lender	Maximum Bond L/C Term Facility Commitment	Bond L/C Commitment Percentage
[               ]	$[       ]	[    ]%

24

SCHEDULE III

(Continued)

[Name Purchasing Lender]
[Address]
[Attention:]
[Telephone: ]
[Facsimile: ]

25

SCHEDULE IV TO COMMITMENT
TRANSFER
SUPPLEMENT

TRANSFER EFFECTIVE NOTICE

[Date]

Transferor Lender: [               ]



Purchasing Lender: [               ]

               The undersigned, as Agent under the Amended and Restated Construction and Term Loan Agreement, dated as of December 1, 1993, as amended by Amendment No. 1 dated as of November 4, 1994, Amendment No. 2 dated as of December 30, 1994, Amendment No. 3 dated as of January 31, 1995, Amendment No. 4 dated as of October 19, 1995, Amendment No. 5 dated as of December 15, 1996, Amendment No. 5 dated as of August 23, 2000, Amendment No. 6 dated as of November 21, 2000, Amendment No. 7 dated as of November 15, 2001, Amendment No. 8 dated as of November 28, 2001 and Amendment No. 9 dated as of January [ ], 2002, among (i) WESTMORELAND-LG&E PARTNERS, a Virginia general partnership, as Borrower (the “Borrower”), (ii) CREDIT SUISSE FIRST BOSTON, NIB CAPITAL BANK N.V., THE BANK OF NOVA SCOTIA, SUMITOMO MITSUI BANKING CORPORATION (formerly known as The Sumitomo Bank Limited), New York Branch, THE UFJ BANK LIMITED (formerly known as The Sanwa Bank Limited), UNION BANK OF CALIFORNIA, N.A., THE FUJI BANK LIMITED, New York Branch, CREDIT LYONNAIS, New York Branch, CREDIT LYONNAIS, Cayman Island Branch, LANDESBANK HESSEN-THURINGEN GIROZENTRALE and each Purchasing Lender, as Lenders, (iii) THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, as Institutional Lender and as Institutional Agent and each Purchasing Institutional Lender, (iv) CREDIT SUISSE FIRST BOSTON, New York Branch, as Issuing Bank, (v) DEXIA CREDIT LOCAL, NEW YORK AGENCY as Bond L/C Issuing Bank, (vi) CREDIT SUISSE FIRST BOSTON, NIB CAPITAL BANK N.V., THE BANK OF NOVA SCOTIA and SUMITOMO MITSUI BANKING CORPORATION (formerly known as The Sumitomo Bank Limited), New York Branch, as Co-Agents (together with their successors in such capacity) and (vii) CREDIT SUISSE FIRST BOSTON, as Agent for the Lenders, the Institutional Lenders, the Bond L/C Issuing Bank and the Issuing Bank (together with its successors in such capacity) and the letter agreement, dated July 20, 1999 from Credit Suisse First Boston as Agent, as Issuing Bank, as Co-Agent and as Securities Intermediary, and acknowledged and agreed to by the Borrower, the Lenders, the Institutional Lenders and the Institutional Agent, acknowledges receipt of five (5) copies of the Commitment Transfer Supplement as described in Annex I hereto, each fully executed. Terms defined in such Commitment Transfer Supplement are used herein as therein defined.

26

               1.        Pursuant to such Commitment Transfer Supplement, you are advised that the Transfer Effective Date will be the date hereof.

               2.        Pursuant to such Commitment Transfer Supplement, the Transferor Lender is required to deliver to Agent on or before the Transfer Effective Date the following notes: [         ].

               3.        Pursuant to such Commitment Transfer Supplement, Borrower is required to deliver to Agent on or before the Transfer Effective Date the following Loan Notes:

Payee	Loan Note
[         ]	[         ]

               4.        Pursuant to such Commitment Transfer Supplement the Purchasing Lender is required to pay its Purchase Price, in immediately available funds, to the Transferor Lender at or before 12:00 noon, local time of the Transferor Lender, on the first day of each Interest Period (including, if applicable, the Transfer Effective Date) applicable to the Outstanding Obligations.

Very truly yours,

CREDIT SUISSE FIRST BOSTON, as Agent

By: ________________________________
Name:
Title:

By: ________________________________
Name:
Title:

27

EX-10

Exhibit 10.15

EXECUTION COPY

AMENDMENT NO. 10 TO AMENDED AND
RESTATED CONSTRUCTION AND TERM LOAN AGREEMENT AND CONSENT

               THIS AMENDMENT NO. 10 TO AMENDED AND RESTATED CONSTRUCTION AND TERM LOAN AGREEMENT AND CONSENT (this “Amendment and Consent”), dated as of April 8, 2003 is made by and among (i) WESTMORELAND-LG&E PARTNERS, a Virginia general partnership, as Borrower (the “Borrower”), (ii) NIB CAPITAL BANK N.V., THE BANK OF NOVA SCOTIA, SUMITOMO MITSUI BANKING CORPORATION (formerly known as The Sumitomo Bank Limited), New York Branch, UFJ BANK LIMITED (formerly known as The Sanwa Bank Limited), UNION BANK OF CALIFORNIA, N.A., MIZUHO CORPORATE BANK, LTD. (formerly known as The Fuji Bank Limited, New York Branch), CREDIT LYONNAIS, New York Branch, CREDIT LYONNAIS, Cayman Island Branch, LANDESBANK HESSEN-THURINGEN GIROZENTRALE and each Purchasing Lender, as Lenders, (iii) THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, as Institutional Lender and as Institutional Agent for each Purchasing Institutional Lender, (iv) DEXIA CREDIT LOCAL, NEW YORK AGENCY (“Dexia”), as Bond L/C Issuing Bank, (v) NIB CAPITAL BANK N.V., THE BANK OF NOVA SCOTIA and SUMITOMO MITSUI BANKING CORPORATION (formerly known as The Sumitomo Bank Limited), New York Branch, as Co-Agents (together with their successors in such capacity), (vi) CREDIT SUISSE FIRST BOSTON (“CSFB”), as Party A to the ISDA Interest Rate and Currency and Exchange Agreement dated as of January 17, 1992 between CSFB and Borrower and the Schedule thereto (the “Interest Rate Hedge Agreement”) and as resigning Agent for the Lenders, the Institutional Lenders, and the Bond L/C Issuing Bank (together with its successors in such capacity), resigning Co-Agent, and transferring Lender, (vii) CREDIT SUISSE FIRST BOSTON, NEW YORK BRANCH, as resigning Issuing Bank (as defined below) and (viii) DEXIA CREDIT LOCAL, NEW YORK AGENCY, as successor Agent, Co-Agent and Issuing Bank and as a Purchasing Lender.

               Reference is made to the Amended and Restated Construction and Term Loan Agreement, dated as of December 1, 1993, as amended by Amendment No. 1 dated as of November 4, 1994, Amendment No. 2 dated as of December 30, 1994, Amendment No. 3 dated as of January 31, 1995, Amendment No. 4 dated as of October 19, 1995, Amendment No. 5 dated as of December 15, 1996, Amendment No. 5 dated as of August 23, 2000, Amendment No. 6 dated as of November 21, 2000, Amendment No. 7 dated as of November 15, 2001, Amendment No. 8 dated as of November 28, 2001 and Amendment No. 9 dated as of March 1, 2002 among Borrower, the Lenders, the Institutional Lenders, the Issuing Bank, the Bond L/C Issuing Bank, the Co-Agents and Agent (each, as defined therein) and the letter agreement, dated July 20, 1999 from Credit Suisse First Boston, as Agent, as Issuing Bank, as Co-Agent and as Securities Intermediary, and acknowledged and agreed to by the Borrower, the Lenders, the Institutional Lenders and the Institutional Agent (collectively, the “Credit Agreement”).

W I T N E S S E T H:

               WHEREAS, CSFB desires to resign as Agent under and in connection with the Credit Agreement and the other Loan Instruments and the Majority Lenders desire to appoint Dexia as successor Agent under and in connection with the Credit Agreement and the other Loan Instruments;

1

               WHEREAS, Section 8.7 of the Credit Agreement requires the written consent of the Majority Lenders and the approval of the Borrower in order to approve and appoint Dexia as successor Agent under and in connection with the Credit Agreement and the other Loan Instruments;

               WHEREAS, the parties to this Amendment and Consent desire to amend the Credit Agreement to provide that Dexia be appointed the successor Agent, the successor Issuing Bank and a successor Co-Agent under the Credit Agreement and the other Loan Instruments;

               WHEREAS, Dexia desires to assume the rights and obligations of the Agent, the Issuing Bank and a Co-Agent under the Credit Agreement and the other Loan Instruments and to become a party to the Credit Agreement and the other Loan Instruments in such capacities;

               WHEREAS, pursuant to Section 9.2 of the Credit Agreement, any Lender may sell to one or more first-class financial institutions, with the consent of Agent, Issuing Bank, and the Borrower, its rights or obligations with respect to the Tranche A Term Loans, Tranche B Term Loans, any unreimbursed L/C Reimbursement Obligations with respect to any Virginia Power Letter of Credit, the Credit Agreement and the Notes pursuant to a Commitment Transfer Supplement;

               WHEREAS, concurrent with the execution and delivery of this Amendment and Consent, pursuant to a Commitment Transfer Supplement, a form of which is attached as Exhibit A hereto, CSFB is transferring and selling and Dexia is assuming and purchasing the rights and obligations of CSFB as a Lender with respect to its Tranche A Term Loans, Tranche B Term Loans, all participation commitments of CSFB pursuant to Section 3.1(f) of the Credit Agreement, any unreimbursed L/C Reimbursement Obligations with respect to any Virginia Power Letter of Credit and all other rights and obligations of CSFB as a Lender under the Credit Agreement and the Notes (other than any such rights and obligations of CSFB as a Lender assumed by Dexia prior to the date of such Commitment Transfer Supplement);

               WHEREAS, Section 9.4 of the Credit Agreement requires the written consent of the Majority Lenders and the signature of the Borrower and the Agent in order to amend the Credit Agreement and to approve the use of a revised form of Commitment Transfer Supplement which varies from the form attached to the Credit Agreement as Schedule 9.2(a) thereof;

               WHEREAS, Sections 6.19(c) and 9.4 of the Credit Agreement require the written consent of the Agent and the Majority Lenders in order to provide for the amendments specified in this Amendment and Consent, to assign certain Collateral and to provide for the amendment and termination of the Account Pledge Agreement in connection with the execution and delivery of the Deposit Agreement; and

               WHEREAS, Section 6.19(a) requires the written consent of the Agent and the Institutional Agent for the entering into by the Borrower of certain additional agreements.

2

               NOW, THEREFORE, in consideration of the premises set forth above and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, each of the parties hereto hereby agrees as follows:

               1.       Definitions. For all purposes of this Amendment and Consent, capitalized terms used herein (including in the preamble and the recitals hereof) but not otherwise defined herein shall have the meanings set forth in the Credit Agreement including Exhibit X thereto.

               2.       Amendments to Exhibit X to the Credit Agreement. Subject to Section 14 hereof, Exhibit X to the Credit Agreement is hereby amended as follows:

        (a)        The following definitions are hereby amended and restated in their entireties as follows:

                 “Accounts” means the Project Control Account (including the Rate Sub-Account and the Rova II Sub-Account), the Rova I Contingency Account, the Rova II Contingency Account, the Debt Protection Account, the Additional Collateral Account, the Disallowance Reserve Account, the Local Bank Account, the Ash Reserve Account, the Repair and Maintenance Account, the Tranche A Repayment Account and the Tranche B Repayment Account.

                “Additional Collateral Ledger” means the Ledger entitled “Additional Collateral Ledger” maintained until the Amendment No. 10 Execution Date by Credit Suisse First Boston, New York Branch as Agent at such time.

                “Ash Reserve Ledger” means the Ledger entitled “Ash Reserve Ledger” maintained until the Amendment No. 10 Execution Date by Credit Suisse First Boston, New York Branch as Agent at such time.

                “Checking Sub-Account Ledger” means the Ledger entitled “Checking Sub-Account Ledger” maintained until the Amendment No. 10 Execution Date by Credit Suisse First Boston, New York Branch as Agent at such time.

                “Debt Protection Ledger” means the Ledger entitled “Debt Protection Ledger” maintained until the Amendment No. 10 Execution Date by Credit Suisse First Boston, New York Branch as Agent at such time.

                “Deposit Agreement” means the Security Accounts Deposit and Control Agreement dated as of April 8, 2003 among the Borrower, the Agent and BNY, concerning the Accounts (other than the Local Bank Account), as the same may be further amended, supplemented or modified from time to time.”

                “Disallowance Reserve Ledger” means the Ledger entitled “Disallowance Reserve Ledger” maintained until the Amendment No. 10 Execution Date by Credit Suisse First Boston, New York Branch as Agent at such time.

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                “Issuing Bank” means, with respect to any Virginia Power Letter of Credit, (i) from, including and after the date that it issues a replacement Rova I Virginia Power Letter of Credit and a replacement Rova II Virginia Power Letter of Credit, Dexia Crédit Local, New York Agency and its successors and assigns, in its capacity as the issuer of, and for so long as it is the issuer of such replacement Rova I Virginia Power Letter of Credit and/or such replacement Rova II Virginia Power Letter of Credit then in effect or (ii) from, including and after the date that it issues any other replacement Rova I Virginia Power Letter of Credit or Rova II Virginia Power Letter of Credit then in effect, the issuer of such replacement Rova I Virginia Letter of Credit or replacement Rova II Virginia Power Letter of Credit and its successors and assigns in such capacity and (iii) for purposes of Section 3.4(f) of the Credit Agreement, (A) Credit Suisse First Boston, New York Branch, as issuer of letters of credit replaced by a Rova I Virginia Power Letter of Credit and/or a Rova II Virginia Power Letter of Credit and as issuer of the Rova I Trade Letter of Credit and the Rova II Trade Letter of Credit and (B) any other issuer of any Virginia Power Letter of Credit that is replaced in the future by the issuer of any replacement Virginia Power Letters of Credit.”

                “Project Control Ledger” means the Ledger entitled “Project Control Ledger” maintained until the Amendment No. 10 Execution Date by Credit Suisse First Boston, New York Branch as Agent at such time.

                “Rate Sub-Account Ledger” means the Ledger entitled “Rate Sub-Account Ledger” maintained until the Amendment No. 10 Execution Date by Credit Suisse First Boston, New York Branch as Agent at such time.

                “Repair and Maintenance Ledger” means the Ledger entitled “Repair and Maintenance Ledger” maintained until the Amendment No. 10 Execution Date by Credit Suisse First Boston, New York Branch as Agent at such time.

                “Roanoke Account” means the account entitled “CSFB, as Agent, CSFB-Westmoreland-LG&E ROVA I & II” (account No. 890-0410-639) established and maintained until the Amendment No. 10 Execution Date by Credit Suisse First Boston, New York Branch as resigning Agent with BNY pursuant to the Original Deposit Agreement.

                “Rova I Contingency Ledger” means the Ledger entitled “Rova I Contingency Ledger” maintained until the Amendment No. 10 Execution Date by Credit Suisse First Boston, New York Branch as Agent at such time.

                “Rova I Special Disbursement Account” means the Roanoke Account (for the sole account of the Rova I Special Disbursement Ledger).

                “Rova I Special Disbursement Ledger” means the Ledger entitled “Rova I Special Disbursement Ledger” maintained until the Amendment No. 10 Execution Date by Credit Suisse First Boston, New York Branch as Agent at such time.

                “Rova I Virginia Power Letter of Credit” means the replacement letter of credit issued by the Issuing Bank pursuant to Section 3.1(a) of the Credit Agreement, which Rova I Virginia Power Letter of Credit replaced any letter of credit previously issued for such purposes, as such Rova I Virginia Power Letter of Credit may be amended, supplemented or extended in accordance with its terms; provided for clarification that, upon the issuance and delivery of any other Rova I Virginia Power Letter of Credit in accordance with Section 3.1(a) of the Credit Agreement, “Rova I Virginia Power Letter of Credit” shall mean such other Rova I Virginia Power Letter of Credit.”

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                “Rova II Contingency Ledger” means the Ledger entitled “Rova II Contingency Ledger” maintained until the Amendment No. 10 Execution Date by Credit Suisse First Boston, New York Branch as Agent at such time.

                “Rova II Special Disbursement Account” means the Roanoke Account (for the sole account of the Rova II Special Disbursement Ledger).

                “Rova II Special Disbursement Ledger” means the Ledger entitled “Rova II Special Disbursement Ledger” maintained until the Amendment No. 10 Execution Date by Credit Suisse First Boston, New York Branch as Agent at such time.

                “Rova II Virginia Power Letter of Credit” means the replacement letter of credit issued by the Issuing Bank pursuant to Section 3.1(a) of the Credit Agreement, which Rova II Virginia Power Letter of Credit replaced any letter of credit previously issues for such purposes, as such Rova II Virginia Power Letter of Credit may be amended, supplemented or extended in accordance with its terms; provided for clarification that, upon the issuance and delivery of any other Rova II Virginia Power Letter of Credit in accordance with Section 3.1(a) of the Credit Agreement, “Rova II Virginia Power Letter of Credit” shall mean such other Rova II Virginia Power Letter of Credit.”

                “Tranche A Repayment Ledger” means the Ledger entitled “Tranche A Repayment Ledger” maintained until the Amendment No. 10 Execution Date by Credit Suisse First Boston, New York Branch as Agent at such time.

                “Tranche B Repayment Ledger” means the Ledger entitled “Tranche B Repayment Ledger” maintained until the Amendment No. 10 Execution Date by Credit Suisse First Boston, New York Branch as Agent at such time.

        (b)        The following new definitions are hereby inserted:

                “Amendment No. 10” means Amendment No. 10 to the Amended and Restated Construction and Term Loan Agreement and Consent dated as of April 8, 2003 among Borrower, the Lenders, the Institutional Lenders, Institutional Agent, the Issuing Bank, the Bond L/C Issuing Bank, the Co-Agents, the resigning Agent and the successor Agent.”

                “Amendment No. 10 Execution Date” means April 8, 2003.

                “Amendment, Assignment and Assumption Agreement” means the Amendment, Assignment, Assumption and Termination Agreement dated as of April 8, 2003 made by and among Credit Suisse First Boston, Dexia Credit Local, New York Agency and Westmoreland-LG&E Partners and consented and agreed to by Dexia Credit Local, New York Agency and BNY.

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                “Agency Agreement and Consent” means the Agency Agreement and Consent dated as of April 8, 2003 made by and between Credit Suisse First Boston and Dexia Credit Local, New York Agency and consented and agreed to by Westmoreland-LG&E Partners, Dexia Credit Local, New York Agency, Credit Lyonnais, New York Branch and Landesbank Hessen-Thuringen Girozentrale.

                “Master Amendment to Security Documents” means the Master Amendment to Security Documents dated as of April 8, 2003 made by and among the Borrower, the resigning Agent and the successor Agent.

                “Original Accounts” shall mean the Original Ash Reserve Account, Original Additional Collateral Account, Original Debt Protection Account, Original Disallowance Reserve Account, Original Project Control Account (including the Original Checking Sub-Account and the Original Rate Sub-Account), Original Repair and Maintenance Account, Original Rova I Contingency Account, Original Rova II Contingency Account, Original Tranche A Repayment Account and Original Tranche B Repayment Account, the Rova I Special Disbursement Account and Rova II Special Disbursement Account.

                “Original Additional Collateral Account” means the Roanoke Account (for the sole account of the Additional Collateral Ledger).

                “Original Ash Reserve Account” means the Roanoke Account (for the sole account of the Ash Reserve Ledger).

                “Original Checking Sub-Account” means the Roanoke Account (for the sole account of the Checking Sub-Account Ledger).

                “Original Debt Protection Account” means the Roanoke Account (for the sole account of the Debt Protection Ledger).

                “Original Deposit Agreement” means the deposit agreement dated as of July 30, 1999, between Credit Suisse First Boston and BNY, concerning various accounts, as modified on the Amendment No. 10 Execution Date to delete reference to the Roanoke Account.

                “Original Disallowance Reserve Account” means the Roanoke Account (for the sole account of the Disallowance Reserve Ledger).

                “Original Project Control Account” means the Roanoke Account (for the sole account of the Project Control Ledger).

                “Original Rate Sub-Account” means the Roanoke Account (for the sole account of the Rate Sub-Account Ledger).

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                “Original Repair and Maintenance Account” means the Roanoke Account (for the sole account of the Repair and Maintenance Ledger).

                “Original Rova I Contingency Account” means the Roanoke Account (for the sole account of the Rova I Contingency Ledger).

                “Original Rova II Contingency Account” means the Roanoke Account (for the sole account of the Rova II Contingency Ledger).

                “Original Tranche A Repayment Account” means the Roanoke Account (for the sole account of the Tranche A Repayment Ledger).

                “Original Tranche B Repayment Account” means the Roanoke Account (for the sole account of the Tranche B Repayment Ledger).

                “Rate Sub-Account” shall have the meaning specified in Section 6.1(c)(xi) hereof.

                “Rova II Sub-Account” shall have the meaning specified in Section 6.1(b) hereof.

                “Transfer/Withdrawal Instructions” shall have the meaning specified in Section 6.1(n) hereof.

        (c)        The following definitions are hereby deleted in their entireties:

                “Repayment Ledgers”

                “Rova I Special Disbursement Ledger”

                “Rova II Special Disbursement Ledger”

                “Rova II Sub-Ledger”

                “Special Disbursement Account”

                “Special Disbursement Ledger”

                “Tranche A Overfunded Amount”

                “Tranche B Overfunded Amount”

        (d)        Exhibit X to the Credit Agreement is hereby further amended as follows:

                (i)        deleting the words “Roanoke Account (for the sole account of the Project Control Ledger)” in lines 4, 5, 6 and 7 of the definition for “Cash Revenues”, in line 2 of the definition for “Discretionary Cash Flow”, in lines 13 and 14 of the definition for “Rova I Project Savings”, and in line 14 of the definition for “Rova II Project Savings”, and inserting the words “Project Control Account” in their place and stead;

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                (ii)        deleting the words “Roanoke Account (for the sole account of the Rova II Sub-Ledger)” in lines 4 and 5 of the definition for “Discretionary Cash Flow” and in line 14 of the definition for “Rova I Project Savings”, and inserting the words “Roanoke II Sub Account” in their place and stead;

                (iii)        deleting the words “Roanoke Account (for the sole account of the Debt Protection Ledger)” in lines 15 and 16 of the definition for “Rova I Project Costs”, in line 5 of the definition for “Rova I Project Savings”, in lines 15 and 16 of the definition for “Rova II Project Costs”, and in line 5 of the definition for “Rova II Project Savings” and inserting the words “Debt Protection Account” in their place and stead;

                (iv)        deleting the words “and the dollar amount of each release of Tranche A Overfunded Amounts from the Roanoke Account (for the sole account of the sub-ledger of the Tranche A Special Disbursement Ledger)” in lines 5, 6 and 7 of paragraph (a) in the definition for “Tranche A Application for Borrowing”;

                (v)        deleting the words “and the dollar amount of each release of Tranche B Overfunded Amounts from the Roanoke Account (for the sole account of the sub-ledger of the Tranche B Special Disbursement Ledger)” in lines 5, 6 and 7 of paragraph (a) in the definition for “Tranche B Application for Borrowing”;

                (vi)        deleting the words “Roanoke Account” in line 6 of the definition for “Cash Revenues”, in line 6 of the definition for “Gross Revenues”, and in line 17 of the definition for “Tranche B Debt Service”, and inserting the word “Accounts” in their place and stead;

                (vii)        adding the words “, each for the purpose of maintaining a record of all amounts in, and all deposits, withdrawals, investments and transfers into or from, the Roanoke Account until the Amendment No. 10 Execution Date” to the end of the definition for “Ledger” and “Ledgers”.

                (viii)        deleting the words “Ledger of the Roanoke Account” in line 23 of the definition for “Permitted Investments”, and inserting the word “Account” in their place and stead.

                (ix)        deleting the words “and (j)” in the eighth line of the definition for “Security Documents” and inserting the words “(j) the Amendment, Assignment and Assumption Agreement, (k) the Agency Agreement and Consent, (l) the Deposit Agreement, (m) the Master Amendment to Security Documents and (n)".

               3.       Amendments to the Credit Agreement. Subject to Section 14 hereof, the Credit Agreement is hereby amended as follows:

        (a)        The preamble of the Credit Agreement is hereby amended by (i) deleting the words “(ii) CREDIT SUISSE” and inserting the words “(ii) DEXIA CREDIT LOCAL, New York Agency”, (ii) deleting the words “(iv) CREDIT SUISSE, New York Branch” and inserting the words “DEXIA CREDIT LOCAL, New York Agency” and (iii) deleting the words “(v) CREDIT SUISSE” and inserting the words “(v) DEXIA CREDIT LOCAL, New York Agency”.

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        (b)        Sections 2.5(b)(i)(A), 2.5(b)(ii) and 6.5(c) of the Credit Agreement are hereby amended by deleting the words “Roanoke Account (for the sole account of the Rova I Contingency Ledger)" in lines 4 and 5 of Section 2.5(b)(i)(A), in lines 7 and 8 of Section 2.5(b)(ii) and in lines 10 and 11 of Section 6.5(c), and the words “Rova I Contingency Account” shall be inserted in their place and stead;

        (c)        Section 2.1(b)(i) of the Credit Agreement is hereby amended by deleting the second sentence thereof in its entirety;

        (d)        Section 2.1(e) of the Credit Agreement is hereby amended by deleting, in the last sentence thereof, the words “and without regard to the $10,000,000 limitation set forth in the first sentence of Section 2.1(f)(ii) hereof,”.

        (e)        Section 2.1(f) of the Credit Agreement is hereby deleted in its entirety.

        (f)        Sections 2.5(b)(i)(A), 2.5(b)(i)(H), 2.5(b)(ii) and 6.5(c) of the Credit Agreement are hereby amended by deleting the words “Roanoke Account (for the sole account of the Rova II Contingency Ledger)” in line 5 of Section 2.5(b)(i)(A), in line 4 of Section 2.5(b)(i)(H), in lines 26 and 27 of Section 2.5(b)(ii) and in line 11 of Section 6.5(c), and the words “Rova II Contingency Account” shall be inserted in their place and stead;

        (g)        Section 3.1(d)(i) of the Credit Agreement is hereby amended by deleting the words “Roanoke Account (for the sole account of the Rova II Sub-Ledger of the Contingency Ledger)” in line 22 thereof, and the words “Rova II Sub-Account of the Contingency Account” shall be inserted in their place and stead;

        (h)        Section 2.6(a) of the Credit Agreement is hereby amended by deleting the words “The Bank of New York, ABA No. 021 000 018 (for credit to the account of Credit Suisse First Boston, “CSFB-Project Finance Funds Clearing” (account no. 890-0410-701) for subsequent credit to “CSFB-Rova I and II” (account no. 890-0410-639)” and inserting the following words: “JP Morgan Chase, ABA No. 021000021, Account #: 400-083917".

        (i)        Section 3.2(f)(ii) of the Credit Agreement is hereby amended by inserting after the words “Section 2.4(c) hereof” in the nineteenth line of the first paragraph thereof the words “and to any outstanding fees and expenses of any of the Secured Parties relating to any Series 1991 Drawing in accordance with Section 6.24 hereof” and by inserting after the words “Section 2.4(c) hereof” in the eighteenth line of the second paragraph thereof the words “and to any outstanding fees and expenses of any of the Secured Parties relating to any Series 1993 Drawing in accordance with Section 6.24 hereof”.

        (j)        A new Section 3.4(f) of the Credit Agreement is hereby inserted as follows:

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        “(f)        After any successor Issuing Bank shall have issued any of the replacement Rova I Virginia Power Letter of Credit or the replacement Rova II Virginia Power Letter of Credit in accordance herewith, the provisions of this Section 3.4 shall continue in effect for any prior Issuing Bank’s benefit in respect of any actions taken or omitted by it while it acted as Issuing Bank hereunder.”

        (k)        Section 6.1 of the Credit Agreement is amended and restated in its entirety as follows:

        “6.1 The Accounts.

        (a)        [Reserved].

        (b)       Project Control Account. The Borrower hereby irrevocably requests that the Agent shall maintain a special account (the “Project Control Account”) at BNY and such account shall be titled “Project Control Account”. The Agent shall have “control” (within the meaning of the UCC) over the Project Control Account in accordance with the terms of the Deposit Agreement. The Project Control Account shall be maintained so long as there exists any amount in any of the funds or accounts created under the Series 1991 Indenture or the Series 1993 Indenture. Until the Tranche B Conversion Date, Borrower shall maintain a sub-account of the Project Control Account (the “Rova II Sub-Account”) into which all Cash Revenues from the Rova II Facility shall be deposited. All Cash Revenues (and insurance proceeds not required to be deposited in the Contingency Account pursuant to Section 6.1(i) hereof) shall be deposited in the Project Control Account. Borrower has irrevocably instructed all parties paying Cash Revenues to Borrower, and shall so instruct all other parties at any time paying Cash Revenues to Borrower, to make such payments into the Project Control Account. On the Amendment No. 10 Execution Date, the proceeds of the funds which were on deposit in the Original Project Control Account shall be deposited in the Project Control Account (including that proceeds of funds which were on deposit in the Original Rate Sub-Account shall be deposited in the Rate Sub-Account).

        (c)       Withdrawals from Project Control Account. Borrower hereby irrevocably authorizes Agent to cause BNY to make withdrawals from the Project Control Account, pursuant to the terms of this Agreement and the Deposit Agreement and for the purposes of satisfying the provisions of this Section 6.1, as follows:

        (i)       Payment of Cash and Other Expenses: Upon the request of Borrower, the Agent shall cause BNY to withdraw and transfer from the Project Control Account such amount as Borrower requests in order to pay Cash Expenses (directly to such payees as Borrower specifies or through funds transferred to the Local Bank Account); provided that in the event the Combined Debt Service Coverage Ratio or the Combined Projected Debt Service Coverage Ratio as calculated on the most recent Calculation Delivery Date is less than 1.1 to 1.0, then until such condition no longer exists, any withdrawals and transfers of funds for Cash Expenses that would cause the aggregate withdrawals in such month for Cash Expenses to exceed the aggregate Operating Costs allocated for such month in the Rova I Operating Budget and the Rova II Operating Budget shall require (except for withdrawals needed to fund emergency measures) the prior written consent of Agent and, commencing on the 12th anniversary of the Tranche A Conversion Date, Institutional Agent, in each case not to be unreasonably withheld or delayed);

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        (ii)       Payments to Ash Reserve Account: After making the withdrawals specified in clause (i) above, on each Repayment Date, withdraw and transfer for deposit in the Ash Reserve Account, to the extent funds are available, an amount equal to the lesser of (A) the excess of the Required Ash Reserve Balance over the then-current balance in the Ash Reserve Account and (B) the sum of (1) $1.35 (in 1991 U.S. dollars) per ton of ash disposed of during the six month period immediately preceding such Repayment Date (such dollar amount subject to increase promptly after the end of each calendar year to reflect changes in the GNP Deflator during the immediately preceding calendar year) and (2) any amounts not previously deposited in the Ash Reserve Account due to unavailability;

        (iii)       Payment of Agency Fee: After making the withdrawals specified in clauses (i) and (ii) above, on each date on which such fee is payable, withdraw and pay the Agency Fees referred to in Section 2.2(d)(i) hereof to Agent;

        (iv)       Payments of Interest, L/C Fees and Interest Rate Hedge Costs: After making the withdrawals specified in clauses (i) through (iii) above, (x) on each Interest Payment Date and on each date upon which payment is required under Section 2.2(d)(ix) hereof or under any Interest Rate Hedge Agreement, withdraw and transfer accordingly for the payment of any interest on the Tranche A Loans, Tranche A Institutional Loans, Rova I L/C Fees, Series 1991 Bond L/C Fees, Yield-Maintenance Premiums on the Tranche A Institutional Loans and other fees due under any of the Loan Instruments in connection with the Tranche A Loans, and the Series 1991 Letter of Credit, including any Interest Rate Hedge Agreement and (y) on each Interest Payment Date and on each date occurring on and after the Tranche B Conversion Date upon which payment is required under Section 2.2(d)(ix) hereof, withdraw and transfer accordingly for the payment of any interest on the Tranche B Loans, Tranche B Institutional Loans, Rova II L/C Fees, Series 1993 Rova Bond L/C Fees, Yield-Maintenance Premiums on the Tranche B Institutional Loans and other fees due under any of the Loan Instruments in connection with the Tranche B Loans;

        (v)       Payments of Debt Service: After making the withdrawals specified in clauses (i) through (iv) above, on each Repayment Date and on each date that Borrower incurs a Rova I L/C Reimbursement Obligation that cannot be automatically converted into a Loan and on each Repayment Date that Borrower incurs a Rova II L/C Reimbursement Obligation that cannot be automatically converted into a Tranche B Loan, withdraw and transfer accordingly amounts for the payment of Debt Service (after taking into account payments made pursuant to clauses (iii) and (iv) above) due and payable on such date;

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        (vi)       Payments to Repair and Maintenance Account: After making the withdrawals specified in clauses (i) through (v) above, on each Repayment Date, withdraw and transfer for deposit in the Repair and Maintenance Account, to the extent funds are available, an amount equal to the lesser of (A) the excess of the Required Maintenance Balance over the then-current balance in the Repair and Maintenance Account and (B) the sum of (1) $110,000 (in 1992 U.S. dollars) such dollar amount subject to increase promptly after the end of each calendar year to reflect changes in the GNP Deflator during the immediately preceding calendar year plus (2) 50% of the Plant Aging Allowance Amount for the calendar year in which such Repayment Date occurs plus (3) any amounts not previously deposited in the Repair and Maintenance Account due to unavailability;

        (vii)       Payments to Debt Protection Account: After making the withdrawals specified in clauses (i) through (vi) above, on each Repayment Date or such other date as requested by Borrower and approved by Agent in its sole discretion, withdraw and transfer for deposit in the Debt Protection Account up to a maximum amount of $18,000,000 to the extent necessary to fund the full amount of the Required Debt Protection Balance, as follows: (A) first, 50% of Discretionary Cash Flow; and (B) second, 100% of remaining Discretionary Cash Flow as of such Repayment Date in an amount equal to the difference between (x) the sum of all amounts previously withdrawn from such account or drawn under the Debt Protection Letter of Credit to satisfy Borrower’s obligations under the Loan Instruments less (y) the sum of all amounts previously deposited in such account pursuant to this clause (B);

        (viii)       Capital Expenditures: After making the withdrawals specified in clauses (i) through (vii) above, on any date withdraw such amounts as are permitted under or consented to by Agent pursuant to Section 6.6(c) hereof for capital expenditures;

        (ix)       Payments to Additional Collateral Account: After making the withdrawals specified in clauses (i) through (viii) above, on each Repayment Date, withdraw and transfer amounts for deposit in the Additional Collateral Account to the extent necessary to fund the full amount of the Required Additional Collateral Balance, as follows: (A) if on any Repayment Date the Combined Debt Service Coverage Ratio or the Combined Projected Debt Service Coverage Ratio, in each case as of the immediately preceding Calculation Delivery Date, is less than 1.20 to 1.00 and greater than or equal to 1.15 to 1.00, an amount equal to 50% of Residual Cash Flow; (B) if on any Repayment Date the Combined Debt Service Coverage Ratio or the Combined Projected Debt Service Coverage Ratio, in each case as of the immediately preceding Calculation Delivery Date, is less than 1.15 to 1.00 and greater than or equal to 1.10 to 1.00, an amount equal to 75% of Residual Cash Flow; and (C) if on any Repayment Date the Combined Debt Service Coverage Ratio or the Combined Projected Debt Service Coverage Ratio, in each case as of the immediately preceding Calculation Delivery Date, is less than 1.10 to 1.00, an amount equal to 100% of Residual Cash Flow. “Residual Cash Flow” means, as of any Repayment Date, the Discretionary Cash Flow as calculated for such Repayment Date less the sum of all amounts to be deposited on such Repayment Date in the Debt Protection Account and all payments made as of such Repayment Date pursuant to Section 6.1(c) (viii) hereof since the Repayment Date immediately preceding such Repayment Date;

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        (x)       Payments to Disallowance Reserve Account: After making the withdrawals specified in clauses (i) through (ix) above, if a Disallowance (except where such Disallowance is due to certain actions or inactions of Virginia Power that will not result, pursuant to the Rova I Power Purchase Agreement or the Rova II Power Purchase Agreement, as applicable, in reductions in the revenue stream thereunder) has occurred, on each Repayment Date after such Disallowance has first occurred, withdraw and transfer amounts for deposit in the Disallowance Reserve Account, to the extent necessary to fund the full amount of the Required Disallowance Balance, as follows: (A) during the period commencing on the Closing Date and ending on the last day of the fifth year following the Rova I Commercial Operations Date, 10% of Remaining Cash Flow, (B) during the period commencing on the first day of the sixth year and ending on the last day of the tenth year following the Rova I Commercial Operations Date, 50% of Remaining Cash Flow; and (C) during the period commencing on the first day of the eleventh year following the Rova I Commercial Operations Date and ending on the Tranche B Institutional Maturity Date, 100% of Remaining Cash Flow. “Remaining Cash Flow” means, as of any Repayment Date, the Residual Cash Flow for such Repayment Date less all amounts to be deposited on such Repayment Date in the Additional Collateral Account; and

        (xi)       Transfers or Distributions by Borrower: After making the withdrawals specified in clauses (i) through (x) above, Agent may cause BNY to retain in a sub-account of the Project Control Account (which sub-account shall not be available for the uses contemplated in (i) above) (hereinafter, the “Rate Sub-Account”) an amount equal to the Rate Redetermination Amount upon (x) the issuance of an initial decision (as defined in 18 C.F.R. § 385.702(a), or any successor provision thereof, hereinafter referred to as an “Initial Decision”) that recommends a reduction in the rates payable to Borrower under the Rova I Power Purchase Agreement or (y) the issuance by FERC or any other regulatory body having jurisdiction over the rates under the Rova I Power Purchase Agreement of an order setting for hearing the issue of the reasonableness of such rates. The Rate Redetermination Amount shall no longer be retained after the earlier to occur of (1) the satisfaction of Borrower’s obligation under clauses (x) or (y) of Section 6.26 hereof; (2) the issuance of a final order by the FERC or such other regulatory body affirming the reasonableness of such rates, or (3) the date on which it shall otherwise be evident (to the reasonable satisfaction of the Agent) that no action is reasonably likely to be taken by FERC or such other regulatory body with respect to such Initial Decision, order or hearing, and if such retention ceases, then on the next succeeding Repayment Date Agent shall withdraw and transfer to Borrower all funds so retained as set forth in the last paragraph of this clause (xi); provided further, that if the applicable FERC (or other such regulatory body) proceeding has not resulted in a final order on the merits within 15 months after the applicable “refund effective date” within the meaning of section 206(b) of the FPA, then retention under this section shall not be made with respect to Cash Revenues derived from electricity sold from the Facilities after such 15 months have expired, unless Agent shall have reasonably determined that the primary reason that such proceeding shall not have been resolved is the dilatory conduct of the Borrower. In addition, immediately upon the issuance of a final order on the merits by the FERC (or such other regulatory body) reducing the rates payable to Borrower under the Rova I Power Purchase Agreement, (x) all funds in the Rate Sub-Account shall be applied to prepay the Loans and the Institutional Loans in accordance with Section 2.5(b) (vi) hereof and (y) funds in the Project Control Account shall be retained in amounts as Agent shall reasonably determine to be required to satisfy the unpaid portion of the Rate Redetermination Amount. In addition, the Agent, in its discretion, may use such funds at any time to pay costs and expenses incurred in connection with the Substitute Steam Arrangements and not previously paid for by Borrower.

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        After any such amounts are retained in the Rate Sub-Account and after retaining in the Project Control Account (A) a minimum balance of at least $900,000, plus (B) such amounts as Agent reasonably determines (based on current indications of operations and taking account of anticipated accumulations of funds in subsequent months) are reasonably necessary to anticipate any payments that Borrower may be required to make to Virginia Power pursuant to the Rova I Power Purchase Agreement or the Rova II Power Purchase Agreement prior to the next succeeding Repayment Date, and subject to Section 6.18(b) hereof, then, on each Repayment Date, Agent shall cause BNY to withdraw and transfer the monies remaining in the Project Control Account to such account as Borrower shall direct, including any account permitted pursuant to Section 6.10(b) hereof; provided that within three years after the Tranche A Conversion Date, Borrower, Agent, Co-Agents and Institutional Agent shall negotiate in good faith a procedure that will permit withdrawals to be made under this clause (xi) on a quarterly rather than a semi-annual basis, while preventing, in the reasonable judgment of Agent, Co-Agents and Institutional Agent, any increase in the risk to the Lenders, the Institutional Lenders, the Issuing Bank and the Bond L/C Issuing Bank of non-payment of any obligation under the Loan Instruments. Borrower may from time to time withdraw funds then on deposit in the Project Control Account as Retained Amounts upon delivery to Agent of an unconditional, absolute and irrevocable letter of credit or third party guaranty in each case in form and substance and from an issuer or third party, as the case may be, satisfactory to Agent and Co-Agents in their sole discretion.

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        (d)       Ash Reserve Account. (i) The Agent, at the request of the Borrower, shall maintain a special account (the “Ash Reserve Account”) at BNY and such account shall be titled “Ash Reserve Account”. The Agent shall have “control” (within the meaning of the UCC) over the Ash Reserve Account in accordance with the terms of the Deposit Agreement. The Ash Reserve Account shall be funded pursuant to Section 6.1(c)(ii) hereof up to a maximum amount of $1,000,000 (the “Required Ash Reserve Balance”). On the Amendment No. 10 Execution Date, the proceeds of the funds which were on deposit in the Original Ash Reserve Account shall be deposited in the Ash Reserve Account. The Borrower shall cause the Agent to cause BNY to use funds in the Ash Reserve Account for payment of the “Capacity Charges” described in Section 6(b) of the Ash Disposal Agreement. So long as no Event of Default has occurred and is continuing, on each Repayment Date, Agent shall cause BNY to transfer on instruction by Borrower any amount in excess of the Required Ash Reserve Balance for deposit in the Project Control Account as an item of Cash Revenues and such amount shall be applied on such date pursuant to the provisions of Section 6.1(c) hereof and shall be available for withdrawal by Agent for the benefit of the Borrower from the Project Control Account pursuant to Section 6.1(c)(xi) above on such date, subject to any prior applications pursuant to Section 6.1(c) hereof; and

        (ii)        Notwithstanding any provision in this Agreement or any of the Loan Instruments to the contrary, including Section 6.1(d)(i) hereof, commencing upon the effective date of Amendment No. 6 to the Credit Agreement:

        (A)        the Ash Reserve Account shall be funded pursuant to Section 6.1(c)(ii) hereof up to a maximum amount of $600,000 and such amount shall be considered the “Required Ash Reserve Balance”, provided, that, in the event that any of the funds held in the Ash Reserve Account are used pursuant to section 6.1(d)(ii)(B) below, such maximum amount shall immediately increase to $1,000,000 and the term “Required Ash Reserve Balance” shall revert to the meaning given such term in Section 6.1(d)(i) above; and

        (B)        The Lenders and Institutional Lenders shall be entitled to use the funds in the Ash Reserve Account to satisfy payment obligations of Borrower under the Loan Instruments after (1) distributing funds from the Additional Collateral Account for such purpose pursuant to Section 6.1(g) below; and (2) using funds in the Debt Protection Account for such purpose pursuant to Section 6.1(f) below; provided, that, in the event that the Borrower receives written notice from the Independent Engineer that a new Ash Monofill (as defined in the Ash Disposal Agreement) will be required for the Facilities, immediately upon the receipt of such notice by Borrower, and thereafter, (x) the funds in the Ash Reserve Account shall no longer be used as provided in this Section 6.1(d)(ii)(B), (y) the maximum amount to which the Ash Reserve Account shall be funded shall increase to $1,000,000, and (z) the term “Required Ash Reserve Balance” shall revert to the meaning given such term in Section 6.1(d)(i) above.

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        (e)       Repair and Maintenance Account. The Agent, at the request of the Borrower, shall maintain a special account (the “Repair and Maintenance Account”) at BNY and such account shall be titled “Repair and Maintenance Account”. The Agent shall have “control” (within the meaning of the UCC) over the Repair and Maintenance Account in accordance with the terms of the Deposit Agreement. The Repair and Maintenance Account shall be funded pursuant to Section 6.1(c)(vi) hereof up to a maximum amount of (x) $2,200,000 on or prior to January 31, 2004 and after January 31, 2010 and (y) $2,600,000 after January 31, 2004 through and including January 31, 2010 (such amount the “Required Maintenance Balance”). On the Amendment No. 10 Execution Date, the proceeds of the funds which were on deposit in the Original Repair and Maintenance Account shall be deposited in the Repair and Maintenance Account. Borrower may only use funds in the Repair and Maintenance Account from time to time to pay prudent expenses associated with major equipment inspection, major overhaul, major repair and major component replacement with respect to the Facilities. So long as no Event of Default has occurred and is continuing, on each Repayment Date, Agent shall cause BNY to transfer on instruction by Borrower any amount in excess of the Required Maintenance Balance for deposit in the Repair and Maintenance Account as an item of Cash Revenues and such amount shall be applied on such date pursuant to the provisions of Section 6.1(c) hereof and shall be available for withdrawal by Borrower from the Repair and Maintenance Account pursuant to Section 6.1(c)(xi) above on such date, subject to any prior applications pursuant to Section 6.1(c) hereof.

        (f)       Debt Protection Account. (aa) The Agent, at the request of the Borrower, shall maintain a special account (the “Debt Protection Account”) at BNY and such account shall be titled “Debt Protection Account”. The Agent shall have “control” (within the meaning of the UCC) over the Debt Protection Account in accordance with the terms of the Deposit Agreement. The Debt Protection Account shall be funded pursuant to Section 6.1(c)(vii) hereof and as set forth in this Section 6.1(f) up to a maximum amount of $20,000,000 (the “Required Debt Protection Balance”). On the Amendment No. 10 Execution Date, the proceeds of the funds which were on deposit in the Original Debt Protection Account shall be deposited in the Debt Protection Account. The Lenders and the Institutional Lenders shall be entitled to use the funds in the Debt Protection Account to satisfy payment obligations of Borrower under the Loan Instruments after distributing funds from the Additional Collateral Account for such purpose pursuant to Section 6.1(g) below. So long as no Event of Default has occurred and is continuing, on each Repayment Date, Agent shall cause BNY to transfer on instruction by Borrower any amount in excess of the Required Debt Protection Balance for deposit in the Project Control Account as an item of Cash Revenues and such amount shall be applied on such date pursuant to the provisions of Section 6.1(c) hereof and shall be available for withdrawal by Borrower from the Project Control Account pursuant to Section 6.1(c)(xi) above on such date, subject to any prior applications pursuant to Section 6.1(c) hereof.

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        Borrower may from time to time cause Agent to withdraw for Borrower’s benefit funds then on deposit in the Debt Protection Account up to an aggregate maximum amount of $19,700,000 upon delivery to Agent of one or more (but no more than three at any one time outstanding) unconditional, absolute and irrevocable letters of credit in form and substance and from (i) an issuer whose senior unsecured debt is rated “Aal” or better by Moody’s or “AA+” or better by S&P or possessing an equivalent rating from another nationally recognized credit rating agency of similar standing acceptable to Agent, or (ii) Bank One, N.A. provided that its senior unsecured debt is rated “Aa2” or better by Moody’s or “A” or better by S&P or an equivalent rating from another nationally recognized credit rating agency of similar standing acceptable to Agent (each such letters of credit as each may be amended, supplemented, renewed or replaced (with the consent of Majority Lenders) is hereinafter referred to as the “Debt Protection Letter of Credit”) together with such corporate documents, legal opinions and other documents and information, all as Agent may reasonably request. The amount of any Debt Protection Letter of Credit shall equal the amount of cash withdrawn from the Debt Protection Account (exclusive of withdrawals made pursuant to Section 6.1(f)(bb)(B) hereof, for which no Debt Protection Letter of Credit is required). Each Debt Protection Letter of Credit shall provide that Agent may draw down the amount of any such Debt Protection Letter of Credit and apply the same to satisfy payment obligations for which funds in the Debt Protection Account may be used, and upon any such drawing Agent shall draw down the full amount of all such Debt Protection Letters of Credit and deposit the amount of such drawdowns in the Debt Protection Account. After Agent shall have so drawn down on any Debt Protection Letter of Credit, Borrower shall not be entitled to deliver additional Debt Protection Letters of Credit until and unless the Debt Protection Account is funded in the full amount of the Required Debt Protection Balance. Each Debt Protection Letter of Credit shall provide that Agent may draw on such Debt Protection Letter of Credit if (x) Borrower shall fail to deliver to Agent a further renewal or replacement of such Debt Protection Letter of Credit then in effect not less than 30 days prior to its expiration date or (y) upon five days notice to Borrower if the rating of the senior unsecured debt of the issuer of such Debt Protection Letter of Credit is downgraded such that (i) its senior unsecured debt is no longer rated “Aa1” or better by Moody’s or “AA+” or better by S&P (or the equivalent thereof by another nationally recognized credit agency of similar standing), or (ii) in the case of Bank One, N.A., its senior unsecured debt is no longer rated “Aa2” or better by Moody’s or “A” or better by S&P (or the equivalent thereof by another nationally recognized credit agency of similar standing). Each Debt Protection Letter of Credit shall be (i) for a minimum of 364 days and (ii) in the case of a renewal or replacement, in an amount equal to the stated amount of such Debt Protection Letter of Credit being replaced (with provisions providing for increases thereof identical to the Debt Protection Letter of Credit being replaced) or with other substantially similar provisions (other than as to the stated amount thereof) acceptable to Agent in its sole discretion. Borrower agrees that if any dispute shall arise as to the right of Agent to submit any Debt Protection Letter of Credit for payment or to draw thereunder, Borrower will not join the issuer thereof in any action or proceeding seeking to enjoin or stop payment on such Debt Protection Letter of Credit. Nothing contained in this paragraph shall affect Borrower’s continuing obligations to deposit funds in the Debt Protection Account as provided in this Section 6.1 unless and until such obligations have been satisfied by delivery to Agent of a Debt Protection Letter of Credit or an increase in the amount available under any Debt Protection Letter of Credit then held by Agent. The amount of any Debt Protection Letter of Credit shall be deemed to be included in the balance of the Debt Protection Account for purposes of determining the balance of the Debt Protection Account where required to do so in this Agreement. Each Debt Protection Letter of Credit shall constitute a Loan Instrument. Costs and expenses incurred by or on behalf of Borrower in connection with any Debt Protection Letter of Credit shall not constitute Cash Expenses.

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        (bb)        Notwithstanding the provisions of Section 6.1(f)(aa) above, (A) commencing on the effective date of Amendment No. 6 to Credit Agreement and ending on January 31, 2010, (x) the maximum amount to which the Debt Protection Account shall be funded shall be increased by $550,000 on each Repayment Date that is a Quarterly Date in January and each Repayment Date that is a Quarterly Date in July, commencing on January 1, 2002 through and including July 31, 2008 and (y) the term “Required Debt Protection Balance” shall mean, at any given time, the maximum amount to which the Debt Protection Account shall be funded in accordance with this section 6.1(f)(bb); and (B) as long as no Event of Default has occurred and is continuing, (1) on January 31, 2009, any amounts on deposit in the Debt Protection Account in excess of $23,000,000 and (2) on January 31, 2010, the Agent shall cause any amounts on deposit in the Debt Protection Account in excess of $20,000,000 to be distributed to the Borrower to such account as Borrower shall direct and simultaneously with the last such distribution, the provisions of this Section 6.1(f)(bb) shall cease to have any force or effect.

        (g)       Additional Collateral Account. The Agent, at the request of the Borrower, shall maintain a special account (the “Additional Collateral Account”) at BNY and such account shall be titled “Additional Collateral Account”. The Agent shall have “control” (within the meaning of the UCC) over the Additional Collateral Account in accordance with the terms of the Deposit Agreement. The Additional Collateral Account shall be funded pursuant to Section 6.1(c)(ix) hereof up to a maximum amount of $20,000,000 (the “Required Additional Collateral Balance”). On the Amendment No. 10 Execution Date, the proceeds of the funds which were on deposit in the Original Additional Collateral Account shall be deposited in the Additional Collateral Account. The Lenders and the Institutional Lenders shall be entitled to use the funds in the Additional Collateral Account to satisfy payment obligations of Borrower under the Loan Instruments. If on any Calculation Delivery Date the Combined Debt Service Coverage Ratio and the Combined Projected Debt Service Coverage Ratio then delivered pursuant to Section 6.2 hereof are equal to or greater than 1.25 to 1.00, so long as no Event of Default has occurred and is continuing, then Agent shall cause BNY to transfer on instruction by Borrower the monies in the Additional Collateral Account for deposit in the Project Control Account as an item of Cash Revenues. Funds in the Additional Collateral Account may, upon three Banking Days’ prior written notice from Borrower to Agent, be used to prepay Agreement Term Loans (including a reduction in the Bond Letter of Credit Facilities) and Institutional Term Loans (together with the Yield-Maintenance Premium with respect to the principal amount of the Institutional Term Loans being prepaid) on a pro rata basis (such prepayments to be applied to whichever is the last maturing principal repayment as between the Tranche A Term Loan and the Tranche B Term Loan and to whichever is the last maturing principal repayment as between the Tranche A Institutional Term Loan and the Tranche B Institutional Term Loan). So long as no Event of Default has occurred and is continuing, on each Repayment Date, Agent shall transfer on instruction by Borrower any amount in excess of the Required Additional Collateral Balance for deposit in the Project Control Account as an item of Cash Revenues and such amount shall be applied on such date pursuant to the provisions of Section 6.1(c) hereof and shall be available for withdrawal by Borrower from the Project Control Account pursuant to Section 6.1(c)(xi) above on such date, subject to any prior applications pursuant to Section 6.1(c) hereof.

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        (h)       Disallowance Reserve Account. Commencing on or prior to an event of Disallowance that requires deposits to be made pursuant to Section 6.1(c)(x) hereof, the Agent shall, at the request of Borrower, maintain a special account (the “Disallowance Reserve Account”) at BNY and such account shall be titled “Disallowance Reserve Account”. The Agent shall have “control” (within the meaning of the UCC) over the Disallowance Reserve Account in accordance with the terms of the Deposit Agreement. The Disallowance Reserve Account shall be funded from time to time pursuant to Section 6.1(c)(x) hereof up to a maximum amount, calculated as the aggregate of all such fundings (the “Required Disallowance Funding”), equal to the least of (“Required Disallowance Balance”) (i) $34,500,000, (ii) the aggregate amount, as determined by Institutional Agent and Agent, that will be due and owing to Virginia Power (whether by direct payment or as set-offs or deductions from payments due from Virginia Power) pursuant to the terms of Article 18 of each of the Power Purchase Agreements (including any interest) for the period commencing (a) with respect to the Rova I Power Purchase Agreement, on the 18th anniversary of the Rova I Commercial Operations Date and ending on the Tranche B Institutional Maturity Date and (b) with respect to the Rova II Power Purchase Agreement, or in the event the Rova II Power Purchase Agreement has been terminated, with respect to the Rova I Power Purchase Agreement, on the 15th anniversary of the Rova II Commercial Operations Date and ending on the Tranche B Institutional Maturity Date and (iii) until all Obligations to the Accounts and Lenders have been satisfied in full, the Total Outstanding Extensions of Credit on the date of the applicable funding and thereafter the difference (if a positive number) between the aggregate unpaid principal amount of the Institutional Loans outstanding on the date of the applicable funding and the balance of the Debt Protection Account on such date. On the Amendment No. 10 Execution Date, the proceeds of the funds which were on deposit in the Original Disallowance Reserve Account shall be deposited in the Disallowance Reserve Account. Funds in the Disallowance Reserve Account shall be used only as follows: (x) at any time the Institutional Lenders shall be entitled to use the funds in the Disallowance Reserve Account to satisfy payment obligations of Borrower under the Loan Instruments upon any declaration that Obligations are due and payable pursuant to Section 7.2(a) hereof, and (y) from and after the earlier of the 18th anniversary of the Rova I Commercial Operations Date or the 15th anniversary of the Rova II Commercial Operations Date, the Institutional Lenders shall also be entitled to use the funds in the Disallowance Reserve Account to satisfy payment obligations of Borrower under the Loan Instruments upon any Event of Default under Section 7.1(a) hereof, provided, that any application of funds pursuant to clause (x) or (y) hereof to any Obligations to the Institutional Agent or Institutional Lenders shall be made only as part of a prorata application to the Obligations of all the Secured Parties, based on each Secured Party’s share of the Total Outstanding Extensions of Credit as of the date of such application and any prepayments of principal shall be applied to whichever is the last maturing principal repayment as between the Tranche A Term Loan and the Tranche B Term Loan, and to whichever is the last maturing principal repayment as between the Tranche A Institutional Term Loan and the Tranche B Institutional Term Loan. In addition, commencing on the earlier of the 18th anniversary of the Rova I Commercial Operations Date or the 15th anniversary of the Rova II Commercial Operations Date, and so long as no Default or Event of Default has occurred and is continuing, on each Repayment Date, Borrower may use funds in the Disallowance Reserve Account to prepay the Institutional Term Loan, together with the Yield-Maintenance Premium with respect to the principal amount of the Institutional Term Loan being prepaid, such prepayments to be applied to whichever is the last maturing principal repayment as between the Tranche A Institutional Term Loan and the Tranche B Institutional Term Loan. So long as no Event of Default has occurred and is continuing, on each Repayment Date, Agent shall transfer on instruction by Borrower any amount in excess of the Required Disallowance Funding for deposit in the Project Control Account as an item of Cash Revenues and such amount shall be applied on such date pursuant to the provisions of Section 6.1(c) hereof and shall be available for withdrawal by Borrower from the Project Control Account pursuant to Section 6.1(c)(xi) above on such date, subject to any prior applications pursuant to Section 6.1(c) hereof. The Disallowance Reserve Account and the funds therein shall be held by a collateral agent designated by Institutional Agent and said collateral agent shall hold a perfected prior security interest therein for the benefit of Institutional Agent and Institutional Lenders only, provided that disbursements from the Disallowance Reserve Account shall be made in accordance with this Section 6.1(h), where required, for the benefit of the Secured Parties. Documentation reflecting the arrangement contemplated in this Section 6.1(h) shall be satisfactory to the Institutional Agent and Agent.

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        (i)       Contingency Account. The Agent, at the request of the Borrower, shall maintain two special accounts (the “Rova I Contingency Account” and the “Rova II Contingency Account”) at BNY and such accounts shall be titled “Roanoke Rova I Contingency Account” and “Rova II Contingency Account”. The Agent shall have “control” (within the meaning of the UCC) over the Contingency Account in accordance with the terms of the Deposit Agreement. All of the monies specified below shall be deposited in the Contingency Accounts as set forth below. On the Amendment No. 10 Execution Date, the proceeds of the funds which were on deposit in the Original Rova I Contingency Account shall be deposited in the Rova I Contingency Account and proceeds of the funds which were on deposit in the Original Rova II Contingency Account shall be deposited in the Rova II Contingency Account. Borrower hereby irrevocably authorizes Agent to cause BNY to open sub-accounts within the Contingency Accounts for ease of administration, and to cause BNY to make withdrawals from the Contingency Accounts pursuant to this Agreement for the purposes set forth below, or, where not specified or determinable, as Agent shall reasonably deem necessary or advisable:

        (i)       Casualty Proceeds: All proceeds of Insurance Policies (other than such proceeds aggregating less than $2,000,000 in any fiscal year of Borrower, which shall be released directly to Borrower for use in restoration of the Facility to which the proceeds relate in accordance with Section 6.16 hereof), condemnation awards and similar payments, to be applied pursuant to Section 6.16 hereof, or, to the extent such proceeds are not to be used for restoration pursuant to Section 6.16, to be deposited into the Rova I Contingency Account to the extent such proceeds relate to the Rova I Facility and into the Rova II Contingency Account to the extent such proceeds relate to the Rova II Facility and to the extent such proceeds cannot be so allocated, then, as the Agent and the Institutional Agent shall in their sole discretion determine to be applied to prepay the Agreement Term Loans and the Institutional Term Loans pursuant to Section 2.5(b) (ii) hereof;

        (ii)        [Reserved];

        (iii)        [Reserved];

        (iv)       Payments for Draw on Virginia Power Letter of Credit: Payments of equity pursuant to Section 2(c) of the Equity Agreement to be deposited into the Rova I Contingency Account and to be applied to satisfy any Rova I Virginia Power L/C Reimbursement Obligations then outstanding;

        Payments of equity pursuant to Section 2(c), Sections 2(d) and the last sentence of Section 2(j) of the Equity Agreement which, in Agent’s determination, is to be allocated to Rova II Virginia Power L/C Reimbursement Obligations and to be deposited into the Rova II Contingency Account and to be applied to satisfy any Rova II Virginia Power L/C Reimbursement Obligations then outstanding;

        (v)        [Reserved];

        (vi)       Substitute Steam Costs: Payments under clause (x) of Section 2(h) of the Equity Agreement in respect of the Substitute Steam Arrangements shall be deposited into the Rova I Contingency Account to be applied by Agent for the costs and expenses incurred in connection with the Substitute Steam Arrangements.

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        (vii)       Indemnification Payments: Payments under indemnification agreements referred to in Section 2(g) of the Equity Agreement shall be deposited into the Contingency Accounts and shall be applied by Agent to make the payments owing under the Project Contracts in accordance with the terms thereof.

        (j)       Repayment Accounts. The Agent, at the request of Borrower, shall maintain two special depository accounts (the “Tranche A Repayment Account” and the “Tranche B Repayment Account”) at BNY and such accounts shall be titled “Tranche A Repayment Account” and “Tranche B Repayment Account”. The Agent shall have “control” (within the meaning of the UCC) over the Tranche A Repayment Account and the Tranche B Repayment Account in accordance with the terms of the Deposit Agreement. All of the Tranche A Repayment Amounts shall be deposited in the Tranche A Repayment Account and all of the Tranche B Repayment Amounts shall be deposited in the Tranche B Repayment Account. On the Amendment No. 10 Execution Date, the proceeds of the funds which were on deposit in the Original Tranche A Repayment Account shall be deposited in the Tranche A Repayment Account and proceeds of the funds which were on deposit in the Original Tranche B Repayment Account shall be deposited in the Tranche B Repayment Account. Borrower hereby irrevocably authorizes Agent to cause BNY to make withdrawals from the Tranche A Repayment Account to the extent necessary to permit Agent to apply all or any portion of such sums as are in the Tranche A Repayment Account against (i) L/C Reimbursement Obligations relating to the redemption of the Series 1991 Bonds as set forth in Section 2.4(c) hereof and Section 3.2(f)(ii) hereof and expenses or fees of any of the Secured Parties in accordance with Section 6.24 hereof related to any such redemption, (ii) the Term Loan arising from the conversion of the Drawings relating to the payment of the Series 1991 Bonds upon the acceleration thereof and expenses or fees of any of the Secured Parties in accordance with Section 6.24 hereof related to any such acceleration or (iii) against such other Obligations of Borrower as permitted under the Deposit Agreement. Borrower hereby irrevocably authorizes Agent to cause BNY to make withdrawals from the Tranche B Repayment Account to the extent necessary to permit Agent to apply all or any portion of such sums as are in the Tranche B Repayment Account against (i) L/C Reimbursement Obligations relating to the redemption of the Series 1993 Bonds as set forth in Section 2.4(c) hereof and Section 3.2(f)(ii) hereof and expenses or fees of any of the Secured Parties in accordance with Section 6.24 hereof related to any such redemption, (ii) the Term Loan arising from the conversion of the Drawings relating to the payment of the Series 1993 Bonds upon the acceleration thereof and expenses or fees of any of the Secured Parties in accordance with Section 6.24 hereof related to any such acceleration or (iii) against such other Obligations of Borrower as permitted under the Deposit Agreement.

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        (k)       Permitted Investments. Funds in the Accounts (other than the Local Bank Account) may be invested and reinvested only in Permitted Investments and liquidated (at the risk and expense of Borrower) in accordance with instructions given to Agent by Borrower (prior to the occurrence of an Event of Default and, thereafter, as determined by Agent) and given by Agent to BNY in accordance with the Deposit Agreement. Agent shall not be required to cause BNY to take any action with respect to investing the funds in the Accounts in the absence of written instructions by Borrower. Neither Agent nor BNY shall be liable for any loss resulting from any Permitted Investment or the sale or redemption thereof. If and when cash is required for disbursement in accordance with this Section 6.1, Agent is authorized, without instructions from Borrower, to the extent necessary to make payments required pursuant to this Section 6.1 in the event Borrower fails to do so in a timely manner, to cause BNY to cause Permitted Investments to be sold or otherwise liquidated into cash (without regard to maturity) in such manner as Agent shall deem reasonable and prudent under the circumstances.

        All funds in the Accounts and all Permitted Investments made in respect thereof (other than with respect to the Local Bank Account), shall be held by BNY under the control of Agent and the interests of Borrower therein shall constitute part of the security subject to the pledge and security interests created by the Security Documents.

        (l)       Accounts, Generally. Borrower shall not make, attempt to make or consent to the making of any withdrawal or transfer from the Accounts except in strict adherence to the provisions of this Agreement. Notwithstanding anything to the contrary herein, the Agent shall have the exclusive authority to give instructions and directions to BNY with respect to the Accounts. The Agent reserves its right at any time and from time to time to cause BNY to create separate accounts in respect of the Rova I Facility and the Rova II Facility and Borrower shall execute such documentation as Agent requests in connection with the creation of any such accounts and the continuation of the Lien created pursuant to the Deposit Agreement as to such new accounts.

        (m)       Use of Certain Collateral in Accounts. (i) Notwithstanding anything in Section 2.4 of the Deposit Agreement or this Agreement to the contrary, the Agent agrees that the Account Funds (as defined in the Deposit Agreement) in the Tranche A Repayment Account shall remain in the Tranche A Repayment Account until such time as (A) Borrower is permitted under the Series 1991 Indenture to cause the redemption of the Series 1991 Bonds referred to in Section 3.2(f)(ii) hereof and such Series 1991 Bonds are redeemed or (B) there shall have been an acceleration of the Series 1991 Bonds or (C) the Series 1991 Letter of Credit shall have terminated or expired while Series 1991 Bonds are Outstanding and a Person other than a Lender shall have delivered a Series 1991 Substitute Letter of Credit or a Series 1991 Fixed Rate Credit Facility to the Series 1991 Trustee. At such time as Borrower is permitted under the Series 1991 Indenture to cause the redemption of such Series 1991 Bonds and such Series 1991 Bonds are redeemed, Agent shall direct BNY to apply such sums as are in the Tranche A Repayment Account against the Rova I L/C Reimbursement Obligation, any interest outstanding with respect to such Obligation in accordance with Section 3.2(d)(iv)(F)(y) or Section 2.2(a) hereof and any fees and expenses outstanding with respect to such Obligation in accordance with Section 6.24 hereof relating to such redemptions. If there shall have been an acceleration of the Series 1991 Bonds, Agent shall direct BNY to apply such sums as are in the Tranche A Repayment Account against the principal and interest due with respect to existing Series 1991 Term Loan arising from the conversion of the Drawings relating to the payment of the Series 1991 Bonds upon acceleration and any fees and expenses outstanding with respect to such Term Loan in accordance with Section 6.24 hereof. At such time as the Series 1991 Letter of Credit terminates or expires while Series 1991 Bonds are Outstanding and a Person other than a Lender delivers a Series 1991 Substitute Letter of Credit or a Series 1991 Fixed Rate Credit Facility, then upon the repayment of the principal and interest due with respect to Series 1991 Term Loan and any fees and expenses outstanding with respect to such Term Loan in accordance with Section 6.24 hereof arising from the conversion of the Drawings relating to the redemption or acceleration of the Series 1991 Letter of Credit and application of any remaining Account Funds by the Agent in accordance with Section 6.1(m)(iv) hereof, Agent shall direct BNY to pay over to Borrower, or such other Person as Borrower directs, all Account Funds (as such term is defined in the Deposit Agreement) in the Tranche A Repayment Account (other than Tranche A Term Loan Repayment Amounts which shall be paid in accordance with Section 2.4 hereof).

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        (ii)        Notwithstanding anything in Section 2.4 of the Deposit Agreement or this Agreement to the contrary, the Agent agrees that the Account Funds in the Tranche B Repayment Account shall remain in the Tranche B Repayment Account until such time as (A) Borrower is permitted under the Series 1993 Indenture to cause the redemption of the Series 1993 Bonds referred to in Section 3.2(f)(ii) hereof and such Series 1993 Bonds are redeemed or (B) there shall have been an acceleration of the Series 1993 Bonds or (C) the Series 1993 Letter of Credit shall have terminated or expired while Series 1993 Bonds are Outstanding and a Person other than a Lender shall have delivered a Series 1993 Substitute Letter of Credit or a Series 1993 Fixed Rate Credit Facility to the Series 1993 Trustee. At such time as Borrower is permitted under the Series 1993 Indenture to cause the redemption of such Series 1993 Bonds and such Series 1993 Bonds are redeemed, Agent shall direct BNY to apply such sums as are in the Tranche B Repayment Account against the Rova II L/C Reimbursement Obligation, any interest outstanding with respect to such Obligation in accordance with Section 3.2(d)(iv)(F)(y) or Section 2.2(a) hereof and any fees and expenses outstanding with respect to such Obligation in accordance with Section 6.24 hereof relating to such redemptions. If there shall have been an acceleration of the Series 1993 Bonds, Agent shall direct BNY to apply such sums as are in the Tranche B Repayment Account against the principal and interest due with respect to existing Series 1993 Term Loan arising from the conversion of the Drawings relating to the payment of the Series 1993 Bonds upon acceleration and any fees and expenses outstanding with respect to such Term Loan in accordance with Section 6.24 hereof. At such time as the Series 1993 Letter of Credit terminates or expires while Series 1993 Bonds are Outstanding and a Person other than a Lender delivers a Series 1993 Substitute Letter of Credit or a Series 1993 Fixed Rate Credit Facility, then upon the repayment of the principal and interest due with respect to Series 1993 Term Loan and any fees and expenses outstanding with respect to such Term Loan in accordance with Section 6.24 hereof arising from the conversion of the Drawings relating to the redemption or acceleration of the Series 1993 Letter of Credit and application of any remaining Account Funds by the Agent in accordance with Section 6.1(m)(iv) hereof, Agent shall direct BNY to pay over to Borrower, or such other Person as Borrower directs, all Account Funds (as such term is defined in the Deposit Agreement) in the Tranche B Repayment Account (other than Tranche B Term Loan Repayment Amounts which shall be paid in accordance with Section 2.4 hereof).

24

        (iii)        Agent shall take such action as instructed by Borrower to restrict or limit the yield on the investment of the Account Funds in the Tranche A Repayment Account or the Tranche B Repayment Account. Agent shall not be required to take any such action with respect to any Account Funds in the Tranche A Repayment Account or the Tranche B Repayment Account in the absence of written instructions by the Borrower.

        (iv)        Upon payment in full of the Series 1991 Bonds, any portion of the investment earnings in the Tranche A Repayment Account and any other sums, if any, then in the Tranche A Repayment Account, may be applied by Agent against such Obligations of Borrower as Agent may determine in its sole discretion. Upon payment in full of the Series 1993 Bonds, any portion of the investment earnings in the Tranche B Repayment Account and any other sums, if any, then in the Tranche B Repayment Account, may be applied by Agent against such Obligations of Borrower as Agent may determine in its sole discretion.

        (n)       Instructions for Transfer, Withdrawals and Disbursements from the Accounts.

        (i)        For purposes of requesting any transfer, withdrawal or disbursement to or from any of the Accounts, the Borrower shall deliver to the Agent proposed instructions for such disbursements, transfers and withdrawals within two (2) Banking Days prior to the date Borrower requests such disbursement, transfer or withdrawal to be made (“Transfer/Withdrawal Instructions”). The Borrower shall only request the disbursement, transfer, or withdrawal of funds from the Accounts (other than the Local Bank Account) pursuant to proposed Transfer/Withdrawal Instructions in accordance with the terms of this Section 6.1. All such proposed Transfer/Withdrawal Instructions shall specify: (A) the Account from which each disbursement, transfer or withdrawal is requested, the Person or Account to which such disbursement, transfer or withdrawal is to be made, and the amount of such disbursement, transfer, or withdrawal; and (B) the date upon which such disbursement, transfer or withdrawal is to be made.

        (ii)        The Agent shall review any proposed Transfer/Withdrawal Instructions upon receipt thereof from the Borrower. If the Agent (A) determines that all amounts requested for disbursement, transfer or withdrawal in such proposed Transfer/Withdrawal Instructions have been correctly calculated, and (B) determines that such proposed Transfer/Withdrawal Instructions are consistent with, and satisfy the requirements of, the provisions of this Section 6.1 and the other Loan Instruments, the Agent shall countersign such proposed Transfer/Withdrawal Instructions and deliver the same to BNY within two (2) Banking Days after receipt thereof from the Borrower.

25

        If the Agent (A) determines that any amounts requested for disbursement, transfer or withdrawal in such proposed Transfer/Withdrawal Instructions have been incorrectly calculated, or (B) determines that such proposed Transfer/Withdrawal Instructions are inconsistent with, or otherwise fail to satisfy the requirements of, the provisions of this Section 6.1 and any other Loan Instrument, the Agent shall, within one (1) Banking Day after receipt of such proposed Transfer/Withdrawal Instructions from the Borrower, return such proposed Transfer/Withdrawal Instructions to the Borrower with its determinations noted thereon.

        Nothing in this Section 6.1 shall preclude the Agent from consulting with the Borrower or any Secured Party in making its determinations with respect to the accuracy of any proposed Transfer/Withdrawal Instructions.

        (iii)        Notwithstanding any other provision of this Section 6.1(n) to the contrary, (A) if at any time the Borrower fails to deliver proposed Transfer/Withdrawal Instructions to the Agent to effect any disbursement, transfer or withdrawal from any Account as and when contemplated by this Agreement and any other Loan Instrument, Agent may, but shall not have any obligation to, direct BNY to make disbursements, transfers or withdrawals from any Account as permitted pursuant to this Section 6.1 or (B) upon the occurrence and during the continuation of an Event of Default, the Agent shall have the right, subject to Section 6.1(m), to direct BNY to administer the Accounts and disburse Account Funds (as defined in the Deposit Agreement) therefrom as directed by the Agent for such purposes as Agent shall deem advisable, including, without limitation, for the payment of Borrower’s Obligations to the Secured Parties and Agent (whether or not then due and payable) in such order of application as the Loan Instruments require. The Agent shall have no liability with respect to actions taken pursuant to this Section 6.1(n) (except to the extent of any willful misconduct or gross negligence) and shall be indemnified by the Borrower pursuant to Section 6.24.”

        (l)        Section 6.10 of the Credit Agreement shall be amended by deleting the words “commercial bank in North Carolina or Virginia” in line 3 thereof and inserting the words “bank reasonably acceptable to the Agent (upon the prior written approval of the Agent, without further consent or approval by any Lender) which such bank accounts may be established, and, notwithstanding anything to the contrary contained in Section 6.19(c) of this Agreement, may be terminated or cancelled (upon the prior written consent of the Agent, without any further consent or approval by any Lender)” in their place and stead;

26

        (m)        Section 6.16(f)(ii) of the Credit Agreement shall be amended by deleting the words “Roanoke Account (for the sole account of the Project Control Ledger)” in line 3 thereof and inserting the words “Project Control Account” in their place and stead and Section 6.26(iii) of the Credit Agreement shall be amended by deleting the words “Roanoke Account (for the sole account of the Project Control Ledger)” in each of lines 45 and 46, 47 and 49 thereof, and the words “Project Control Account” shall be inserted in their place and stead;

        (n)        Sections 7.2(c), 7.2(d) and 9.20 of the Credit Agreement are hereby amended by deleting the words “Accounts and the Roanoke Account” in line 8 of Section 7.2(c), line 15 of Section 7.2(d) and line 18 of Section 9.20, and the word “Accounts” shall be inserted in their place and stead;

        (o)        Section 8.7 of the Credit Agreement is hereby amended by deleting the words “various Accounts and the Roanoke Account” in line 11 thereof, and the words “various Accounts” shall be inserted in their place and stead;

        (p)        Section 8.10 of the Credit Agreement is hereby amended and restated in its entirety as follows:

“8.10 Party to Credit Agreement. (a) Upon the issuance of any Series 1991 Substitute Letter of Credit or Series 1993 Substitute Letter of Credit in conformity with the requirements set forth in the Loan Instruments and with the prior written consent of the Agent and the Borrower and the acknowledgment and agreement of the issuer of any Series 1991 Substitute Letter of Credit or Series 1993 Substitute Letter of Credit, such issuer shall become a party to the Credit Agreement as Bond L/C Issuing Bank, with all rights and obligations thereof.

(b)        Upon the issuance of any replacement Rova I Virginia Power Letter of Credit or replacement Rova II Virginia Power Letter of Credit in conformity with the requirements set forth in the Loan Instruments and with the prior written consent of the Agent and the Borrower and the acknowledgment and agreement of the issuer of any replacement Rova I Virginia Power Letter of Credit or replacement Rova II Virginia Power Letter of Credit, such issuer shall become a party to the Credit Agreement as Issuing Bank, with all rights and obligations thereof.”

        (q)        Section 9.1 of the Credit Agreement is hereby amended by (i) deleting the contact information for notices for the Agent and replacing such contact information with the following:

Dexia Crédit Local, New York Agency
445 Park Avenue
New York, NY 10022

Attention: Project Finance
Telephone: 212-515-7019
Facsimile: 212-753-5522

27

        and (ii) deleting the contact information for notices for the Issuing Bank and replacing such contact information with the following:

Dexia Crédit Local, New York Agency
445 Park Avenue
New York, NY 10022

Attention: Project Finance
Telephone: 212-515-7019
Facsimile: 212-753-5522

        (r)        Section 9.4 of the Credit Agreement is hereby amended by deleting the words “Roanoke Account (for the sole account of the Additional Collateral Ledger)” in line 25 thereof and inserting the words “Additional Collateral Account” in their place and stead.

        (s)        The Credit Agreement is hereby amended by deleting the words “Roanoke Account (for the sole account of the Debt Protection Ledger)” in lines 11 and 12 of each of the sixth and seventh paragraphs in Section 2.1(a), in lines 16 and 33 of Section 3.1(d)(i) and in lines 23 and 24 of Section 9.4, and the words “Debt Protection Account” shall be inserted in their place and stead;

        (t)        The Credit Agreement is hereby amended by deleting the words “Roanoke Account (for the sole account of the Disallowance Reserve Ledger)” in lines 1 and 2 of Section 7.1(t) and in lines 24 and 25 of Section 9.4, and the words “Disallowance Reserve Account” shall be inserted in their place and stead;

               4.        [Reserved].

               5.       Resignation of Agent and Co-Agent and Appointment of Successor Agent and Co-Agent. CSFB has in accordance with Section 8.7 of the Credit Agreement given written notice to the Lenders and the Borrower, subject to the confirmation of the appointment of Dexia hereunder, of its resignation as Agent and as Co-Agent. By execution of this Amendment and Consent, the Lenders party hereto hereby approve and appoint Dexia as successor Agent and Co-Agent under the Credit Agreement, the Borrower hereby consents to such appointments and Dexia hereby accepts such appointments. Dexia as Agent and as Co-Agent shall hereby be considered a party to the Credit Agreement and the other Loan Instruments to which the Agent or Co-Agent is party respectively and shall succeed to and become vested with all the respective rights, powers, privileges and duties of the Agent and a Co-Agent under the Credit Agreement and any other applicable Loan Instruments.

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               6.       Appointment of Issuing Bank. By execution of this Amendment and Consent, the Agent, Institutional Agent, Majority Lenders party hereto and the Borrower hereby appoint Dexia as Issuing Bank under the Credit Agreement and Dexia hereby accepts such appointment. Upon the issuance of the replacement Rova I Virginia Power Letter of Credit and the replacement Rova II Virginia Power Letter of Credit and the execution of this Amendment and Consent, Dexia shall hereby be considered a party to the Credit Agreement as Issuing Bank and shall succeed to and become vested with all the rights, powers, privileges and duties of the Issuing Bank under the Credit Agreement and any other applicable Loan Instruments.

               7.       Consents.

               (a)        The parties hereto hereby consent to the execution and delivery of a Commitment Transfer Supplement substantially in the form attached hereto as Exhibit A for the purpose of transferring to Dexia the Tranche A Term Loans and Tranche B Term Loans of CSFB, all participation commitments of CSFB pursuant to Section 3.1(f) of the Credit Agreement, any unreimbursed L/C Reimbursement Obligations with respect to the Virginia Power Letters of Credit and all other rights and obligations of CSFB as a Lender under the Credit Agreement and its Notes (other than any such rights and obligations of CSFB as a Lender assumed by Dexia prior to the date of such Commitment Transfer Supplement).

               (b)        The Agent, the resigning Issuing Bank, the Bond LC Issuing Bank and the Borrower hereby consent to the transfer by CSFB to Dexia, as a Lender, of its Tranche A Term Loans and Tranche B Term Loans, all participation commitments of CSFB pursuant to Section 3.1(f) of the Credit Agreement, all unreimbursed L/C Reimbursement Obligations with respect to the Virginia Power Letters of Credit and all other rights and obligations of CSFB as a Lender under the Credit Agreement and its Notes (other than any such rights and obligations of CSFB as a Lender assumed by Dexia prior to the date hereof).

               (c)        (i) Pursuant to Sections 6.19(c) and Section 9.4 of the Credit Agreement, the Agent and the Majority Lenders party hereto hereby consent to, and consent to the Borrower giving its consent to, and CSFB as Party A to the Interest Hedge Agreement consents to, (A) the amendments specified in this Amendment and Consent, (B) the amendment and termination of the Account Pledge Agreement in accordance with the Amendment, Assignment and Assumption Agreement, (C) the amendments specified in the Master Amendment to Security Documents, and (D) the amendment, modification, restatement, replacement or termination of that certain Agreement dated as of August 11, 1999, among Westmoreland-LG&E Partners, Wachovia Bank, N.A. and Credit Suisse First Boston, as Agent with respect to the Local Bank Account.

               (ii)        Pursuant to Section 6.19(a) of the Credit Agreement, the Agent and the Institutional Agent hereby consent to the execution, delivery and performance by the Borrower of, (A) the Amendment, Assignment and Assumption Agreement, (B) the Agency Agreement and Consent and (C) the Deposit Agreement.

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               (iii)        Pursuant to Sections 6.19(c) of the Credit Agreement, the Agent and the Majority Lenders party hereto hereby consent to the assignments by CSFB as resigning Agent to Dexia as successor Agent of any and all Security Documents and Liens created thereby, including without limitation, (A) the assignment of that certain Future Advance Deed of Trust and Security Agreement, dated as of December 18, 1991, by Westmoreland-Hadson Partners, as grantor, to Terri T. McGaughey, Esq., as trustee, which has been recorded in the Office of the Register of Deeds of Halifax County, North Carolina in Book 1520, Page 1, as modified by that certain Agreement of Modification of Future Advance Deed of Trust and Security Agreement dated as of December 1, 1993 which has been recorded in the Office of the Register of Deeds of Halifax County, North Carolina in Book 1591, Page 492, and as further modified by that certain Deed of Partial Release, dated as of January 26, 1995 which has been recorded in the Office of the Register of Deeds of Halifax County, North Carolina in Book 1633, Page 432, and (B) the assignment of that certain Future Advance Deed of Trust and Security Agreement, dated as of December 1, 1993, by Westmoreland-LG&E Partners, as grantor, to Terri T. McGaughey, Esq., as trustee, which has been recorded in the Office of the Register of Deeds of Halifax County, North Carolina in Book 1591, Page 563, and as modified by that certain Deed of Partial Release, dated as of January 26, 1995 which has been recorded in the Office of the Register of Deeds of Halifax County, North Carolina in Book 1633, Page 432.

               8.       Further Assurances and Account Matters. The Borrower agrees to promptly comply with any reasonable request by Dexia, as successor Agent to (i) amend any Loan Instrument; (ii) execute any additional document; and (iii) cooperate with Dexia, as successor Agent to prepare for filing and to file or record any financing statement, mortgage, deed of trust or similar instrument or any amendment thereto, in each case to the extent necessary or prudent, as reasonably determined by Dexia, as successor Agent, to protect, preserve, maintain or establish the first priority perfected security interest in the Collateral for the benefit of the Secured Parties (including without limitation, (A) in order to comply with revisions to Articles 8 and 9 of the Uniform Commercial Code and (B) the recording of each of those certain Assignments of Deed of Trust dated concurrently with this Amendment No. 10 from CSFB as resigning Agent as assignor to Dexia as successor Agent as assignee). CSFB, as resigning Agent and as Party A to the Interest Rate Hedging Agreement, agrees to cooperate with Dexia, as reasonably necessary to protect, preserve, maintain or establish the first priority perfected security interest in the Collateral for the benefit of the Secured Parties. CSFB further agrees on the Amendment No. 10 Execution Date and concurrently with the assumption by Dexia of each of the rights and obligations of CSFB as Agent, (i) to comply with each of the provisions of Sections 2 and 4 of the Assignment, Assumption and Termination Agreement, and (ii) to deliver to (A) Bank of Montreal a request for cancellation and termination of the Debt Protection Letter of Credit originally issued by Bank of Montreal on January 31, 1995 together with either (aa) the original of such Debt Protection Letter of Credit or (bb) an affidavit of lost letter of credit indemnity in favor of Bank of Montreal and LG&E Capital Corp. each in form and in substance reasonably acceptable to Bank of Montreal and LG&E Capital Corp. respectively and (B) Wells Fargo Bank, N.A. a request for transfer of the certain Debt Protection Letter of Credit No. NZS425547 originally issued by Wells Fargo Bank, N.A., from CSFB as resigning Agent to Dexia as successor Agent, together with the original of such Debt Protection Letter of Credit. The Borrower acknowledges that any reasonable costs incurred by CSFB as resigning Agent and Dexia as successor Agent in connection with the preparation, negotiation and filing, as applicable, of this Amendment and Consent and any documents or filings contemplated by this Section 8 shall be reimbursed by the Borrower in accordance with the Credit Agreement.

30

               9.       Limitation. Except as expressly stated herein, all of the representations, warranties, terms, covenants and conditions of the Credit Agreement shall remain unamended and shall continue to be, and shall remain, in full force and effect in accordance with their respective terms. This Amendment and Consent is only effective in the specific instance and for the specific purpose for which it is given and shall not be effective for any other purpose, and, except as expressly stated herein, no provision of any Loan Instrument is amended in any way.

               10.       Credit Agreement References. On and after the effective date of this Amendment and Consent, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof” or words of like import, and each reference to the Credit Agreement by the words “thereunder”, “thereof” or words of like import in any Project Document, Loan Instrument or other document executed in connection with the Credit Agreement, shall mean and be a reference to the Credit Agreement, as amended or otherwise modified by this Amendment and Consent.

               11.       Governing Law. This Amendment and Consent shall for all purposes be considered a Loan Instrument and shall be governed by, construed and interpreted in accordance with, the laws of the State of New York without regard to principles of conflict of laws (except for Section 5-1401 of the General Obligations Law of the State of New York).

               12.       Successors and Assigns. This Amendment and Consent shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns and all future parties to the Credit Agreement.

               13.       Counterparts. This Amendment and Consent may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all the counterparts shall together constitute one and the same instrument. A facsimile signature on a counterpart of this Amendment and Consent shall be binding to the same extent as an original signature by the signatory.

               14.       Effectiveness. This Amendment and Consent shall be effective when executed by the Agent, the Borrower, the Institutional Agent, the Issuing Bank and the Majority Lenders.

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               IN WITNESS WHEREOF, the parties hereto have executed this Amendment and Consent through their duly authorized representatives as of the date first above written.

WESTMORELAND-LG&E PARTNERS,
as Borrower

By: WESTMORELAND-ROANOKE VALLEY, L.P.
as general partner

By: WEI-ROANOKE VALLEY, INC.,
as general partner

By: /s/ Gregory S. Woods
Name: Gregory S. Woods
Title: President

By: LG&E ROANOKE VALLEY, L.P.,
as general partner

By: LG&E POWER 16 INCORPORATED,
as general partner

By: /s/ Daniel K. Arbough
Name: Daniel K. Arbough
Title: Treasurer

CREDIT SUISSE FIRST BOSTON,
as resigning Agent, Co-Agent, Party A to the Interest Rate Hedge Agreement and as transferring Lender

By: /s/ Caldwell
Name: Brian T. Caldwell
Title: Director

By: /s/ [illegible]
Name: Thomas R. Cantello
Title: Vice President

32

CREDIT SUISSE FIRST BOSTON, NEW YORK BRANCH
as resigning Issuing Bank

By: /s/ Caldwell
Name: Brian T. Caldwell
Title: Director

By: /s/ [illegible]
Name: Thomas R. Cantello
Title: Vice President

THE BANK OF NOVA SCOTIA,
as Co-Agent and Lender

By: /s/ Denis O'Meara
Name: Denis O’Meara
Title: Managing Director

SUMITOMO MITSUI BANKING CORPORATION
(formerly known as THE SUMITOMO BANK, LIMITED),
NEW YORK BRANCH,
as Co-Agent and Lender

By: /s/ William M. Ginn
Name: William M. Ginn
Title: General Manager

NIB CAPITAL BANK, N.V.,
as Co-Agent and Lender

By: _________________________________
Name:
Title:

33

UNION BANK OF CALIFORNIA, N.A.,
(AS SUCCESSOR IN INTEREST TO UNION BANK),
as Lender

By: _________________________________
Name:
Title:

MIZUHO CORPORATE BANK, LTD.,
as Lender

By: _________________________________
Name:
Title:

CREDIT LYONNAIS, NEW YORK BRANCH,
as Lender

By: /s/ Robert G. Colvin
Name: Robert G. Colvin
Title: Vice President

34

CREDIT LYONNAIS,
CAYMAN ISLAND BRANCH,
as Lender

By: /s/ Robert G. Colvin
Name: Robert G. Colvin
Title: Vice President

UFJ BANK LIMITED (formerly known as The Sanwa Bank Limited), as Lender

By: _________________________________
Name:
Title:

LANDESBANK HESSEN THURINGEN GIROZENTRALE,
as Lender

By: /s/ Erica A. Egan
Name: Erica A. Egan
Title: Vice President, Corporate Finance Division, Structured Finance Dept.

By: /s/ David A. Leech
Name: David A. Leech
Title: Vice President, Corporate Finance Division, Structured Finance Dept.

35

THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA,
as Institutional Agent and Institutional Lender

By: /s/ Brian N. Thomas
Name: Brian N. Thomas
Title: Vice President

DEXIA CREDIT LOCAL, NEW YORK AGENCY, as Bond L/C Bank, as successor Agent, Co-Agent, Issuing Bank and as transferee Lender

By: /s/ [illegible]
Name:
Title:

By: _________________________________
Name:
Title:

36

EXHIBIT A

Form of Commitment Transfer Supplement

37

EX-10

Exhibit 10.16

WESTMORELAND ENERGY LLC

$30,000,000

Floating Rate Senior Notes

_________________

Note Purchase Agreement

_________________

Dated June 29, 2006

Table of Contents

Section 1. Authorization of Notes 1

Section 2. Sale and Purchase of Notes 1

Section 3. Closing 1

Section 4. Conditions to Closing 2

Section 4.1. Representations and Warranties 2

Section 4.2. Performance; No Default 2

Section 4.3. Compliance Certificates 2

Section 4.4. Opinions of Counsel 2

Section 4.5. Purchase Permitted By Applicable Law, Etc 2

Section 4.6. Sale of Other Notes 3

Section 4.7. Funding Instructions 3

Section 4.8. Proceedings and Documents 3

Section 4.9. Satisfaction of Conditions to Closing under Purchase Agreement 3

Section 4.10. Closing Fee and Expenses 3

Section 4.11. Security and Pledge Agreements and Collateral Agency Agreement 3

Section 4.12. Consent of Lenders 4

Section 4.13. Other Documents and Instruments 4

Section 5. Representations and Warranties of the Company 4

Section 5.1. Organization; Power and Authority 4

Section 5.2. Authorization, Etc 4

Section 5.3. Organization and Certain Other Matters Related to Subsidiaries 4

Section 5.4. Compliance with Laws, Other Instruments, Etc 6

Section 5.5. Governmental Authorizations, Etc 6

Section 5.6. Litigation; Observance of Agreements, Statutes and Orders 6

Section 5.7. Taxes 7

Section 5.8. Title to Property 7

Section 5.9. Licenses, Permits, Etc 7

Section 5.10. Compliance with ERISA 7

Section 5.11. Private Offering by the Company and the Subsidiaries 8

Section 5.12. Use of Proceeds; Margin Regulations 8

Section 5.13. Existing Indebtedness 9

Section 5.14. Foreign Assets Control Regulations, Etc 9

Section 5.15. Status under Certain Statutes 9

Section 5.16. Environmental Matters 9

Section 5.17. Financial Statements of the Project Partnership 10

Section 5.18. Financial Projections of the Project Partnership 10

i

Section 5.19. No Default or Event of Default under the Credit Agreement 10

Section 5.20. Broker's Fees 10

Section 5.21. Solvency 11

Section 5.22. Affiliate Transactions 11

Section 5.23. No Default 11

Section 5.24. Insurance 11

Section 5.25. Full Disclosure 11

Section 6. Representations of the Purchasers 11

Section 6.1. Purchase for Investment 11

Section 6.2. Source of Funds 11

Section 6.3. Accredited Investor 13

Section 7. Information as to Company 13

Section 7.1. Financial and Business Information 13

Section 7.2. Officer's Certificate 15

Section 7.3. Visitation 15

Section 8. Payment and Prepayment of the Notes 15

Section 8.1. Maturity 15

Section 8.2. Mandatory Prepayments 15

Section 8.3. Optional Prepayments 17

Section 8.4. Allocation of Partial Prepayments 17

Section 8.5. Maturity; Surrender, Etc 17

Section 8.6. Purchase of Notes 17

Section 8.7. Initial Interest Payment 17

Section 9. Affirmative Covenants 18

Section 9.1. Compliance with Law 18

Section 9.2. Insurance 18

Section 9.3. Maintenance of Properties 18

Section 9.4. Payment of Taxes and Claims 18

Section 9.5. Existence, Etc 19

Section 9.6. Books and Records 19

Section 9.7. Use of Proceeds 19

Section 9.8. Further Assurances 19

Section 9.9. Dismissal of Litigation 19

Section 10. Negative Covenants 19

Section 10.1. Transactions with Affiliates 19

Section 10.2. Merger, Consolidation, Etc 19

Section 10.3. Sale or Transfer of Assets 20

Section 10.4. Liens 21

Section 10.5. Indebtedness 21

Section 10.6. Restricted Payments 21

ii

Section 10.7. No Amendments to Governing Documents 22

Section 10.8. Changes in Fiscal Year 22

Section 10.9. No Restrictions 22

Section 10.10. Permitted Investments 22

Section 11. Events of Default 22

Section 12. Remedies on Default, Etc 24

Section 12.1. Acceleration 24

Section 12.2. Other Remedies 25

Section 12.3. Rescission 25

Section 12.4. No Waivers or Election of Remedies, Expenses, Etc 26

Section 13. Registration; Exchange; Substitution of Notes 26

Section 13.1. Registration of Notes 26

Section 13.2. Transfer and Exchange of Notes 26

Section 13.3. Replacement of Notes 27

Section 14. Payments on Notes 27

Section 14.1. Place of Payment 27

Section 14.2. Home Office Payment 27

Section 15. Expenses, Etc 28

Section 15.1. Enforcement Expenses 28

Section 15.2. Documentary Taxes 28

Section 15.3. Survival 28

Section 16. Survival of Representations and Warranties; Entire Agreement 28

Section 17. Amendment and Waiver 29

Section 17.1. Requirements 29

Section 17.2. Solicitation of Holders of Notes 29

Section 17.3. Binding Effect, etc 29

Section 17.4. Notes Held by Company, etc 30

Section 18. Notices 30

Section 19. Reproduction of Documents 30

Section 20. Confidential Information 31

Section 21. Substitution of Purchaser 31

Section 22. Issuance of Warrants; Representations, Warranties and Covenants of the Parent 32

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Section 23. Miscellaneous 35

Section 23.1. Successors and Assigns 35

Section 23.2. Payments Due on Non-Business Days 35

Section 23.3. Accounting Terms 35

Section 23.4. Severability 35

Section 23.5. Set-off 36

Section 23.6. Construction, etc 36

Section 23.7. Counterparts 37

Section 23.8. Governing Law 37

Section 23.9. Jurisdiction and Process; Waiver of Jury Trial 37

Schedules and Exhibits:

Schedule A - Information Relating to Purchasers

Schedule B - Defined Terms

Schedule 3 - Wire Transfer Instructions

Schedule 8.2(b) - Scheduled Prepayments if the Company gives a Notice of Extension Disclosure Schedule

Exhibit A - Form of Floating Rate Senior Note

Exhibit B-1 - Form of Pledge and Security Agreement - Company

Exhibit B-2 - Form of Guaranty, Distribution Pledge, Collateral Assignment and Security Agreement - Project Partners

Exhibit B-3 - Form of Guaranty, Pledge and Security Agreement - Westmoreland Power Inc. and Subsidiaries

Exhibit C - Form of Collateral Agency Agreement

Exhibit D - Form of Warrant

Exhibit 4.4(a) - Matters to Be Covered in Opinions of Counsel to the Company

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WESTMORELAND ENERGY LLC

Floating Rate Senior Notes

June 29, 2006

TO EACH OF THE PURCHASERS LISTED IN
SCHEDULE A HERETO:

Ladies and Gentlemen:

               Westmoreland Energy LLC, a Delaware limited liability company (the “Company”), agrees with each of the purchasers whose names appear at the end hereof (each, a “Purchaser” and, collectively, the “Purchasers”) as follows:

Section 1.      Authorization of Notes.

               The Company will authorize the issue and sale of $30,000,000 aggregate principal amount of its Floating Rate Senior Notes (the “Notes”, such term to include any such notes issued in substitution therefor pursuant to Section 13). The Notes shall be substantially in the form set out in Exhibit A. Certain capitalized and other terms used in this Agreement are defined in Schedule B; and references to a “Schedule” or an “Exhibit” are, unless otherwise specified, to a Schedule or an Exhibit attached to this Agreement.

Section 2.      Sale and Purchase of Notes.

               Subject to the terms and conditions of this Agreement, the Company will issue and sell to each Purchaser and each Purchaser will purchase from the Company, at the Closing provided for in Section 3, Notes in the principal amount specified opposite such Purchaser’s name in Schedule A at the purchase price of 100% of the principal amount thereof. The Purchasers’ obligations hereunder are several and not joint obligations and no Purchaser shall have any liability to any Person for the performance or non-performance of any obligation by any other Purchaser hereunder.

Section 3.      Closing.

               The sale and purchase of the Notes to be purchased by each Purchaser shall occur at the offices of Chadbourne & Parke LLP, 30 Rockefeller Plaza, New York, NY 10112, at 10:00 a.m., New York City time, at a closing (the “Closing”) on June 29, 2006 or on such other Business Day thereafter on or prior to June 30, 2006 as may be agreed upon by the Company and the Purchasers. At the Closing the Company will deliver to each Purchaser the Notes to be purchased by such Purchaser in the form of a single Note (or such greater number of Notes in denominations of at least $5,000,000 as such Purchaser may request) dated the date of the Closing and registered in such Purchaser’s name (or in the name of its nominee), against delivery by such Purchaser to the Company or its order of immediately available funds in the amount of the purchase price therefor by wire transfer of immediately available funds for the account of the Company pursuant to the wire instructions, to the accounts and in the amounts set forth on Schedule 3. If at the Closing the Company shall fail to tender such Notes to any Purchaser as provided above in this Section 3, or any of the conditions specified in Section 4 shall not have been fulfilled to such Purchaser’s satisfaction, such Purchaser shall, at its election, be relieved of all further obligations under this Agreement, without thereby waiving any rights such Purchaser may have by reason of such failure or such nonfulfillment.

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Section 4.      Conditions to Closing.

               Each Purchaser’s obligation to purchase and pay for the Notes to be sold to such Purchaser at the Closing is subject to the fulfillment to such Purchaser’s satisfaction, prior to or at the Closing, of the following conditions:

               Section 4.1.     Representations and Warranties. The representations and warranties of the Company in this Agreement shall be correct when made and at the time of the Closing.

               Section 4.2.     Performance; No Default. The Company shall have performed and complied with all agreements and conditions contained in this Agreement required to be performed or complied with by it prior to or at the Closing and after giving effect to the issue and sale of the Notes (and the application of the proceeds thereof as contemplated by Section 5.12) no Default or Event of Default shall have occurred and be continuing.

Section 4.3.      Compliance Certificates.

               (a)     The Company shall have delivered to such Purchaser an Officer’s Certificate, dated the date of the Closing, certifying that the conditions specified in Sections 4.1, 4.2 and 4.9 have been fulfilled.

               (b)     The Company shall have delivered to such Purchaser a certificate of its Secretary or Assistant Secretary, dated the date of Closing, certifying as to the resolutions attached thereto and other limited liability company proceedings relating to the authorization, execution and delivery of the Notes and this Agreement.

               Section 4.4.     Opinions of Counsel. Such Purchaser shall have received opinions in form and substance satisfactory to such Purchaser, dated the date of the Closing, from Roger D. Wiegley and Wilmer Cutler Pickering Hale and Dorr LLP, counsel for the Company, collectively covering the matters set forth in Exhibit 4.4(a) and such other matters incident to the transactions contemplated hereby as such Purchaser or its counsel may reasonably request (and the Company hereby instructs its counsel to deliver such opinion to the Purchasers). As a post closing covenant, the Company hereby agrees to cause to be delivered to each Purchaser within thirty days of the Closing, an opinion from Wilmer Cutler Pickering Hale and Dorr LLP, or another nationally recognized outside counsel, in form and substance reasonably satisfactory to the Purchasers with respect to the perfection of the liens and security interests created under the Security Documents and the matters specified in paragraphs 6, 7 and 8 of Exhibit 4.4(a).

               Section 4.5.     Purchase Permitted By Applicable Law, Etc. On the date of the Closing such Purchaser’s purchase of Notes shall (a) be permitted by the laws and regulations of each jurisdiction to which such Purchaser is subject, and (b) not violate any applicable law or regulation (including, without limitation, Regulation T, U or X of the Board of Governors of the Federal Reserve System).

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               Section 4.6.     Sale of Other Notes. Contemporaneously with the Closing the Company shall sell to each Purchaser and each Purchaser shall purchase the Notes to be purchased by it at the Closing as specified in Schedule A.

               Section 4.7.     Funding Instructions. Each Purchaser shall have received written instructions signed by a Responsible Officer on letterhead of the Company confirming the information specified in Section 3 and Schedule 3 including (i) the name and address of the transferee bank, (ii) such transferee bank’s ABA number and (iii) the account name and number into which the purchase price for the Notes is to be deposited.

               Section 4.8.     Proceedings and Documents. All limited liability company and other proceedings in connection with the transactions contemplated by this Agreement and all documents and instruments incident to such transactions shall be satisfactory to such Purchaser and its special counsel, and such Purchaser and its special counsel shall have received all such counterpart originals or certified or other copies of such documents as such Purchaser or such special counsel may reasonably request.

               Section 4.9.     Satisfaction of Conditions to Closing under Purchase Agreement. All of the conditions precedent to the closing of the transactions contemplated by the Purchase Agreement (including the assignment of the O&M Agreements to WPO and WUO) shall have been satisfied or waived and the transaction contemplated by the Purchase Agreement shall have contemporaneously closed; provided, however, that if any of those conditions can only be satisfied upon or after the Company’s receipt of the proceeds from the issuance of the Notes, these conditions shall be deemed to be satisfied for purposes of this Section 4 provided that the proceeds are on the same business day as the Closing used to complete the transactions contemplated by the Purchase Agreement.

               Section 4.10.     Closing Fee and Expenses. Contemporaneously with the Closing the Company shall pay to each Purchaser, or to an Affiliate of such Purchaser designated by such Purchaser, a closing fee equal to 1% of the principal amount of the Notes purchased by such Purchaser. In addition, the Company shall pay the Purchasers’ reasonable and documented costs and expenses incurred in connection with the diligence, negotiation and closing of the purchase of the Notes (including the reasonable and documented fees of one special counsel to the Purchasers), provided that the Company shall not be required to pay more than $70,000 pursuant to this sentence.

               Section 4.11.     Security and Pledge Agreements and Collateral Agency Agreement. Contemporaneously with the Closing the Company shall execute and deliver the Security and Pledge Agreements in the form of Exhibit B-1, Exhibit B-2, and Exhibit B-3 and the Collateral Agency Agreement in the form of Exhibit C (such Security and Pledge Agreements and Collateral Agency Agreement collectively, the “Security Documents”, and together with the Notes and this Agreement, the “Note Documents”).

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               Section 4.12.     Consent of Lenders. The Lenders under the Credit Agreement shall have consented to the transactions contemplated by this Agreement, and a copy of such consent shall have been delivered to the Purchasers.

               Section 4.13.     Other Documents and Instruments. The Purchasers shall have received a full and complete copy of the Credit Agreement and such other certificates, documents, instruments and agreements as any Purchaser shall reasonably request.

Section 5.      Representations and Warranties of the Company.

               The Company represents and warrants to each Purchaser that the statements contained in this Section 5 are true and correct as of the date hereof, except as set forth in the Disclosure Schedule. The Disclosure Schedule shall be arranged in sections and subsections corresponding to the numbered and lettered sections and subsections contained in this Section 5. The inclusion of any information in the Disclosure Schedule (or any update thereto) shall not be deemed to be an admission or acknowledgment, in and of itself, that such information is required by the terms hereof to be disclosed, is material to the Company, has had in or would have a Material Adverse Effect, or is outside the ordinary course of business.

               Section 5.1.     Organization; Power and Authority. The Company is a limited liability company organized, validly existing and in good standing under the laws of the State of Delaware, and is duly qualified to do business as a foreign limited liability company in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The Company has the limited liability company power and authority to own or hold under lease the properties it purports to own or hold under lease, to transact the business it transacts and proposes to transact, to execute and deliver this Agreement and the Notes and to perform the provisions hereof and thereof.

               Section 5.2.     Authorization, Etc. This Agreement and the Notes have been duly authorized by all necessary limited liability company action on the part of the Company, and this Agreement constitutes, and upon execution and delivery thereof each Note will constitute, a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

               Section 5.3.      Organization and Certain Other Matters Related to Subsidiaries.

               (a)     Section 5.3 of the Disclosure Schedule contains (except as noted therein) complete and correct lists of the Company’s Subsidiaries, showing, as to each Subsidiary, the correct name thereof, the jurisdiction of its organization, and the percentage of shares of each class of its capital stock or similar equity interests outstanding owned by the Company and each other Subsidiary. No shares of the capital stock or other equity securities of any Subsidiary, other than those described above, are issued and outstanding as of the Closing Date. As of the Closing there are no preemptive or other outstanding rights, options, warrants, conversion rights or similar agreements or understandings for the purchase or acquisition from the Company or any of the Subsidiaries of any equity securities of any such entity. For the avoidance of doubt, the Project Partnership is not, and following the date hereof shall not be deemed to be, a Subsidiary of the Company. The Project Partnership is a Virginia general partnership, 50% of the partnership interests in which are owned by Westmoreland-Roanoke Valley, L.P., a Delaware limited partnership (“Westmoreland-RV”), and 50% of the partnership interests in which will be owned, effective upon the completion of the transactions contemplated by the Purchase Agreement, by Westmoreland — North Carolina Power, L.L.C., a Virginia limited liability company (“Westmoreland-NC”). For the avoidance of doubt, Westmoreland-RV and Westmoreland-NC are Subsidiaries of the Company.

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               (b)     All of the outstanding shares of capital stock or similar equity interests of each Subsidiary shown in Section 5.3 of the Disclosure Schedule as being owned by the Company and its Subsidiaries have been validly issued, are fully paid and nonassessable, are owned by the Company or another Subsidiary free and clear of any Lien (except as otherwise disclosed in Section 5.3 of the Disclosure Schedule) and were issued in compliance with all applicable statutes or other rules and regulations of any Governmental Authority.

               (c)     Each Subsidiary identified in Section 5.3 of the Disclosure Schedule is a corporation, limited liability company, limited partnership, or other legal entity organized, validly existing and in good standing under the laws of its jurisdiction of organization, and is duly qualified as a foreign corporation, limited liability company, limited partnership, or other legal entity and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Each such Subsidiary has the corporate, limited liability company, limited partnership, or other power and authority to own or hold under lease the properties it purports to own or hold under lease and to transact the business it transacts and proposes to transact. The Project Partnership is a partnership duly formed and validly existing under the laws of the Commonwealth of Virginia and has the power and authority to own or hold under lease the properties it purports to own or hold under lease and to transact the business it transacts and proposes to transact.

               (d)     No Subsidiary is a party to, or otherwise subject to any legal, regulatory, contractual or other restriction (other than in connection with this Agreement, the agreements listed on Section 5.3 of the Disclosure Schedule and customary limitations imposed by corporate law, limited liability company law, limited partnership law, or similar statutes) restricting the ability of such Subsidiary to pay dividends out of profits or make any other similar distributions of profits to the Company or any of its Subsidiaries that owns outstanding shares of capital stock or similar equity interests of such Subsidiary.

               (e)     The Note Documents to which each Subsidiary is party have been duly authorized by all necessary limited liability company or limited partnership action on the part of the relevant Subsidiary, and the Note Documents to which each Subsidiary is party constitute valid and binding obligations of such Subsidiary, enforceable against such Subsidiary in accordance with their terms, except as such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

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               Section 5.4.     Compliance with Laws, Other Instruments, Etc. The execution, delivery and performance by the Company and its Subsidiaries of this Agreement, the Notes and the other Note Documents to which they are respectively a party and the consummation of the transactions contemplated by the Purchase Agreement will not (i) contravene, result in any breach of, or constitute a default under, or result in the creation of any Lien (other than a Permitted Lien) in respect of any property of the Company or any Subsidiary or the Project Partnership under, any indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease, agreement, agreement of limited partnership, corporate charter or by-laws, or any other agreement or instrument to which the Company or any Subsidiary or the Project Partnership is bound or by which the Company or any Subsidiary or the Project Partnership or any of their respective properties may be bound or affected, (ii) conflict with or result in a breach of any of the terms, conditions or provisions of any order, judgment, decree, or ruling of any court, arbitrator or Governmental Authority applicable to the Company or any Subsidiary or the Project Partnership or (iii) violate any provision of any statute or other rule or regulation of any Governmental Authority applicable to the Company or any Subsidiary or the Project Partnership, except, in each case, for such contraventions, breaches, defaults, Liens, conflicts and violations that could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

               Section 5.5.     Governmental Authorizations, Etc. No consent, approval or authorization of, or registration, filing or declaration with, any Governmental Authority is required in connection with the execution, delivery or performance by the Company or any other Credit Party of this Agreement, the Notes or the other Note Documents, except for such consents, approvals, and authorizations, or registrations, filings or declarations, that have been made or obtained or the absence of which could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

               Section 5.6.       Litigation; Observance of Agreements, Statutes and Orders.

               (a)     There are no actions, suits, investigations or proceedings pending or, to the knowledge of the Company, threatened against or affecting the Company or any Subsidiary or the Project Partnership or any property of the Company or any Subsidiary or the Project Partnership in any court or before any arbitrator of any kind or before or by any Governmental Authority (i) that involve the validity or enforceability of this Agreement or the Notes or (ii) that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

               (b)     Neither the Company nor any Subsidiary nor the Project Partnership is in default under any term of any covenant, agreement or instrument of or affecting such Person or any of its property, or any order, judgment, decree or ruling of any court, arbitrator or Governmental Authority or is in violation of any applicable law, ordinance, rule or regulation (including without limitation Environmental Laws or the USA Patriot Act) of any Governmental Authority, which default or violation, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

               (c)     Concurrently with the Closing, the Project Partnership and Dominion Virginia Power have caused a proposed order, signed by counsel for both the Project Partnership and Dominion Virginia Power on behalf of their respective clients, to be submitted to the appropriate courts of the Commonwealth of Virginia, which proposed order provides for the dismissal with prejudice, by consent of the litigants, of litigation initiated by Dominion Virginia Power against the Project Partnership.

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               Section 5.7.     Taxes. The Company and its Subsidiaries and the Project Partnership have filed all tax returns that are required to have been filed in any jurisdiction, and have paid all taxes shown to be due and payable on such returns and all other taxes and assessments levied upon them or their properties, assets, income or franchises, to the extent such taxes and assessments have become due and payable and before they have become delinquent, except for any taxes and assessments (i) the amount of which is not individually or in the aggregate Material or (ii) the amount, applicability or validity of which is currently being contested in good faith by appropriate proceedings and with respect to which the Company or a Subsidiary, as the case may be, has established adequate reserves in accordance with GAAP. The Company does not know of any proposed additional tax assessment against it or its Subsidiaries or the Project Partnership for which adequate provisions in accordance with GAAP have not been made on their accounts. Adequate provisions in accordance with GAAP for taxes on the books of the Company and each Subsidiary and the Project Partnership have been made for all open years, and for its current fiscal period.

               Section 5.8.     Title to Property. The Company and each of its Subsidiaries and the Project Partnership is the lawful owner of, has good and marketable title to and is in lawful possession of, or has valid leasehold interests in, all properties and other assets (real or personal, tangible, intangible or mixed) that individually or in the aggregate are Material and that are purported or reported to be owned or leased (as the case may be) by such Person, in each case free and clear of Liens other than Permitted Liens.

               Section 5.9.       Licenses, Permits, Etc.

               (a)     The Company and its Subsidiaries and the Project Partnership own or possess all licenses, permits, franchises, authorizations, patents, copyrights, proprietary software, service marks, trademarks and trade names, or rights thereto, that individually or in the aggregate are Material.

               (b)     To the knowledge of the Company, no product of the Company or any of its Subsidiaries or the Project Partnership infringes any license, permit, franchise, authorization, patent, copyright, proprietary software, service mark, trademark, trade name or other right owned by any other Person, where such infringement could reasonably be expected to have a Material Adverse Effect.

               (c)     To the knowledge of the Company, there is no violation by any Person of any right of the Company or any of its Subsidiaries or the Project Partnership with respect to any patent, copyright, proprietary software, service mark, trademark, trade name or other right owned or used by the Company or any of its Subsidiaries, where such violation could reasonably be expected to have a Material Adverse Effect.

               Section 5.10.       Compliance with ERISA.

               (a)     The Company and each ERISA Affiliate have operated and administered each Plan in compliance in all material respects with all applicable laws. Neither the Company nor any ERISA Affiliate has incurred any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans (as defined in section 3 of ERISA) that could reasonably be expected to have a Material Adverse Effect. No event, transaction or condition has occurred or exists that could reasonably be expected to result in the incurrence of any liability by the Company or any ERISA Affiliate, or in the imposition of any Lien (other than a Permitted Lien) on any of the rights, properties or assets of the Company or any ERISA Affiliate, in either case pursuant to Title I or IV of ERISA or to such penalty or excise tax provisions or to section 401(a)(29) or 412 of the Code or section 4068 of ERISA, other than such liabilities or Liens as would not reasonably be expected to have a Material Adverse Effect.

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               (b)     The Company and its ERISA Affiliates have not incurred withdrawal liabilities (and are not subject to contingent withdrawal liabilities) under section 4201 or 4204 of ERISA in respect of Multiemployer Plans that could reasonably be expected to have a Material Adverse Effect.

               (c)     The expected postretirement benefit obligation (determined as of the last day of the Company’s most recently ended fiscal year in accordance with Financial Accounting Standards Board Statement No. 106, without regard to liabilities attributable to continuation coverage mandated by section 4980B of the Code) of the Company and its Subsidiaries is not Material.

               (d)     The execution and delivery of this Agreement and the issuance and sale of the Notes hereunder will not involve any transaction that is subject to the prohibitions of section 406 of ERISA or in connection with which a tax could be imposed pursuant to section 4975(c)(1)(A)-(D) of the Code. The representation by the Company to each Purchaser in the first sentence of this Section 5.10(d) is made in reliance upon and subject to the accuracy of such Purchaser’s representation in Section 6.2 as to the sources of the funds used to pay the purchase price of the Notes to be purchased by such Purchaser.

               Section 5.11.     Private Offering by the Company and the Subsidiaries. Neither the Company nor anyone acting on its behalf has offered the Notes or any similar securities for sale to, or solicited any offer to buy any of the same from, or otherwise approached or negotiated in respect thereof with, any person other than the Purchasers and not more than 25 other Institutional Investors, each of which has been offered the Notes at a private sale for investment. Neither the Company nor anyone acting on its behalf has taken, or will take, any action that could subject the issuance or sale of the Notes to the registration requirements of Section 5 of the Securities Act or to the registration requirements of any securities or blue sky laws of any applicable jurisdiction.

               Section 5.12.     Use of Proceeds; Margin Regulations. The Company will concurrently with the occurrence of the Closing apply the proceeds of the sale of the Notes to acquire the interest of LG&E Roanoke Valley L.P. in the Project Partnership, to acquire the assets of LG&E Power Services LLC (including the O&M Agreements described in clause (i) through (v) of the definition of O&M Agreements) and to pay expenses related to the foregoing. No part of the proceeds from the sale of the Notes hereunder will be used, directly or indirectly, for the purpose of buying or carrying any margin stock within the meaning of Regulation U of the Board of Governors of the Federal Reserve System (12 CFR 221), or for the purpose of buying or carrying or trading in any securities under such circumstances as to involve the Company in a violation of Regulation X of said Board (12 CFR 224) or to involve any broker or dealer in a violation of Regulation T of said Board (12 CFR 220). As used in this Section, the terms “margin stock” and “purpose of buying or carrying” shall have the meanings assigned to them in said Regulation U.

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               Section 5.13.     Existing Indebtedness. The Company and its Subsidiaries and the Project Partnership do not have any Indebtedness other than Permitted Indebtedness.

               Section 5.14.       Foreign Assets Control Regulations, Etc.

               (a)     Neither the sale of the Notes by the Company hereunder nor its use of the proceeds thereof for the purposes described in Section 5.12 will violate the Trading with the Enemy Act, as amended, or any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive order relating thereto.

               (b)     Neither the Company nor any Subsidiary nor the Project Partnership (i) is a Person described or designated in the Specially Designated Nationals and Blocked Persons List of the Office of Foreign Assets Control or in Section 1 of the Anti-Terrorism Order or (ii) knowingly engages in any dealings or transactions, or is otherwise knowingly associated, with any such Person. Neither the Company nor any Subsidiary is or will be in violation of the USA Patriot Act.

               (c)     No part of the proceeds from the sale of the Notes hereunder will be used, directly or indirectly, for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended, assuming in all cases that such Act applies to the Company.

               Section 5.15.     Status under Certain Statutes. Neither the Company nor any Subsidiary nor the Project Partnership is subject to regulation under the Public Utility Holding Company Act of 2005, as amended, the ICC Termination Act of 1995, as amended, or the Federal Power Act, as amended. Neither the Company nor any of its Subsidiaries nor the Project Partnership is an “investment company” or a company “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

               Section 5.16.       Environmental Matters.

               (a)     Neither the Company nor any Subsidiary nor the Project Partnership has knowledge of any claim or has received any notice of any claim, and no proceeding has been instituted raising any claim against the Company or any of its Subsidiaries or the Project Partnership or any of their respective real properties now or formerly owned, leased or operated by any of them or other assets, alleging any damage to the environment, any liability for investigation or remediation under any Environmental Laws, or violation of any Environmental Laws, except, in each case, such as could not reasonably be expected to have a Material Adverse Effect.

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               (b)     Neither the Company nor any Subsidiary nor the Project Partnership has knowledge of any facts which could give rise to any claim, public or private, of violation of Environmental Laws, liability for investigation or remediation under any Environmental Laws, or damage to the environment emanating from, occurring on or in any way related to real properties now or formerly owned, leased or operated by any of them or to other assets or their use, except, in each case, such as could not reasonably be expected to have a Material Adverse Effect.

               (c)     Neither the Company nor any Subsidiary nor the Project Partnership has stored any Hazardous Materials on real properties now or formerly owned, leased or operated by any of them and has not disposed of any Hazardous Materials in a manner contrary to or reasonably likely to give rise to liability for investigation or remediation under any Environmental Laws, in each case in any manner that could reasonably be expected to have a Material Adverse Effect.

               (d)     All operations of the Company, any Subsidiary or the Project Partnership are, and during the previous five years have been, in compliance with applicable Environmental Laws, except where the failure to comply could not reasonably be expected to have a Material Adverse Effect.

               Section 5.17.     Financial Statements of the Project Partnership. The Company has delivered to each Purchaser copies of the financial statements of the Project Partnership listed on Section 5.17 of the Disclosure Schedule (the “Delivered Financial Statements”). All of said financial statements (including in each case the related schedules and notes) fairly present in all material respects the financial position of the Project Partnership as of the respective dates specified in such Schedule and the results of its operations and cash flows for the respective periods so specified and have been prepared in accordance with GAAP consistently applied throughout the periods involved except as set forth in the notes thereto (subject, in the case of any interim financial statements, to normal year-end adjustments). Since December 31, 2005, there has been no material adverse change in the business, operations, properties or condition (financial or otherwise) of the Project Partnership.

               Section 5.18.     Financial Projections of the Project Partnership. The Company has previously delivered to the Purchasers financial projections of the Project Partnership for the period from 2006 through 2010 that were prepared by the Company’s management (the “Financial Projections”). The Financial Projections represent a reasonable range of possible results in light of the history of the Project Partnership’s business and operations and present and foreseeable conditions (including the contracts to which the Project Partnership is party), and the Company represents that the same were prepared on the basis of information and estimates the Company believes to be reasonable.

               Section 5.19.     No Default or Event of Default under the Credit Agreement. No “Default” or “Event of Default” (as those terms are defined in the Credit Agreement) exists under the Credit Agreement.

               Section 5.20.     Broker’s Fees. Except with respect to the placement fee payable to CRT Capital LLC, which shall be paid by, and be the sole responsibility of, the Company, no broker’s or finder’s fee or commission will be payable with respect hereto or any of the transactions contemplated thereby; and the Company hereby agrees to indemnify the Purchasers against, and agree that they will hold the Purchasers harmless from, any claim, demand, or liability for any broker’s or finder’s fees alleged to have been incurred in connection herewith or therewith and any expenses (including reasonable attorneys’ fees) arising in connection with any such claim, demand, or liability.

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               Section 5.21.     Solvency. The Company, its Subsidiaries and the Project Partnership taken as a whole are solvent, able to pay their debts as they become due, and have sufficient capital to carry on their business and all businesses in which they are about to engage.

               Section 5.22.     Affiliate Transactions. Neither the Company nor any of its Subsidiaries nor the Project Partnership is a party to any contracts or agreements with any of its Affiliates on terms and conditions which, when entered into, were less favorable to the Company or such Subsidiary than would be obtainable in a comparable arm’s length transaction with a Person not an Affiliate.

               Section 5.23.      No Default. No Default or Event of Default has occurred and is continuing.

               Section 5.24.     Insurance. The insurance coverage of the Company, its Subsidiaries, and the Project Partnership is customary for entities of similar size engaged in similar lines of business.

               Section 5.25.     Full Disclosure. The written information and written statements furnished by the Company in connection with the negotiation of this Agreement does not contain any untrue statement of a material fact or omit a material fact necessary to make the statements contained therein or herein not misleading in light of the circumstances existing at the time such information or statements was furnished.

Section 6.      Representations of the Purchasers.

               Section 6.1.     Purchase for Investment. Each Purchaser severally represents that it is purchasing the Notes for its own account or for one or more separate accounts maintained by such Purchaser or for the account of one or more pension or trust funds and not with a view to the distribution thereof, provided that the disposition of such Purchaser’s or their property shall at all times be within such Purchaser’s or their control. Each Purchaser understands that the Notes have not been registered under the Securities Act and may be resold only if registered pursuant to the provisions of the Securities Act or if an exemption from registration is available, except under circumstances where neither such registration nor such an exemption is required by law, and that the Company is not required to register the Notes.

               Section 6.2.     Source of Funds. Each Purchaser severally represents that at least one of the following statements is an accurate representation as to each source of funds (a “Source”) to be used by such Purchaser to pay the purchase price of the Notes to be purchased by such Purchaser hereunder:

               (a)     the Source is an “insurance company general account” (as the term is defined in the United States Department of Labor’s Prohibited Transaction Exemption (“PTE”) 95-60) in respect of which the reserves and liabilities (as defined by the annual statement for life insurance companies approved by the National Association of Insurance Commissioners (the “NAIC Annual Statement”)) for the general account contract(s) held by or on behalf of any employee benefit plan together with the amount of the reserves and liabilities for the general account contract(s) held by or on behalf of any other employee benefit plans maintained by the same employer (or affiliate thereof as defined in PTE 95-60) or by the same employee organization in the general account do not exceed 10% of the total reserves and liabilities of the general account (exclusive of separate account liabilities) plus surplus as set forth in the NAIC Annual Statement filed with such Purchaser’s state of domicile; or

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               (b)     the Source is a separate account that is maintained solely in connection with such Purchaser’s fixed contractual obligations under which the amounts payable, or credited, to any employee benefit plan (or its related trust) that has any interest in such separate account (or to any participant or beneficiary of such plan (including any annuitant)) are not affected in any manner by the investment performance of the separate account; or

               (c)     the Source is either (i) an insurance company pooled separate account, within the meaning of PTE 90-1 or (ii) a bank collective investment fund, within the meaning of the PTE 91-38 and, except as disclosed by such Purchaser to the Company in writing pursuant to this clause (c), no employee benefit plan or group of plans maintained by the same employer or employee organization beneficially owns more than 10% of all assets allocated to such pooled separate account or collective investment fund; or

               (d)     the Source constitutes assets of an “investment fund” (within the meaning of Part V of PTE 84-14 (the “QPAM Exemption”)) managed by a “qualified professional asset manager” or “QPAM” (within the meaning of Part V of the QPAM Exemption), no employee benefit plan’s assets that are included in such investment fund, when combined with the assets of all other employee benefit plans established or maintained by the same employer or by an affiliate (within the meaning of Section V(c)(1) of the QPAM Exemption) of such employer or by the same employee organization and managed by such QPAM, exceed 20% of the total client assets managed by such QPAM, the conditions of Part I(c) and (g) of the QPAM Exemption are satisfied, neither the QPAM nor a person controlling or controlled by the QPAM (applying the definition of “control” in Section V(e) of the QPAM Exemption) owns a 5% or more interest in the Company and (i) the identity of such QPAM and (ii) the names of all employee benefit plans whose assets are included in such investment fund have been disclosed to the Company in writing pursuant to this clause (d); or

               (e)     the Source constitutes assets of a “plan(s)” (within the meaning of Section IV of PTE 96-23 (the “INHAM Exemption”)) managed by an “in-house asset manager” or “INHAM” (within the meaning of Part IV of the INHAM Exemption), the conditions of Part I(a), (g) and (h) of the INHAM Exemption are satisfied, neither the INHAM nor a person controlling or controlled by the INHAM (applying the definition of “control” in Section IV(d) of the INHAM Exemption) owns a 5% or more interest in the Company and (i) the identity of such INHAM and (ii) the name(s) of the employee benefit plan(s) whose assets constitute the Source have been disclosed to the Company in writing pursuant to this clause (e); or

               (f)     the Source is a governmental plan; or

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               (g)     the Source is one or more employee benefit plans, or a separate account or trust fund comprised of one or more employee benefit plans, each of which has been identified to the Company in writing pursuant to this clause (g); or

               (h)     the Source does not include assets of any employee benefit plan, other than a plan exempt from the coverage of ERISA.

As used in this Section 6.2, the terms “employee benefit plan,” “governmental plan,” and “separate account” shall have the respective meanings assigned to such terms in section 3 of ERISA.

               Section 6.3.     Accredited Investor. Each Purchaser severally represents that it is an “accredited investor” as defined in Rule 501(a) under the Securities Act.

Section 7.      Information as to Company.

               Section 7.1.       Financial and Business Information. The Company shall deliver to each holder of Notes that is an Institutional Investor:

               (a)     Financial Information about the Project Partnership — the same unaudited quarterly and audited annual financial information regarding the Project Partnership that it provides the Lenders under the Credit Agreement at the same time that it provides that information to the Lenders.

               (b)     Financial Information about the Company —

        (i)      within 50 days after the end of each quarterly fiscal period in each fiscal year of the Company (other than the last quarterly fiscal period of each such fiscal year), a consolidated balance sheet of the Company and its Subsidiaries as at the end of such quarter, and consolidated statements of income, changes in members’ equity and cash flows of the Company and its Subsidiaries, for such quarter and (in the case of the second and third quarters) for the portion of the fiscal year ending with such quarter, setting forth in each case in comparative form the figures for the corresponding periods in the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP applicable to quarterly financial statements generally, and

        (ii)      within 120 days after the end of each fiscal year of the Company, a consolidated balance sheet of the Company and its Subsidiaries as at the end of such year, and consolidated statements of income, changes in members’ equity and cash flows of the Company and its Subsidiaries for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP applicable to annual financial statements generally. The financial statements provided pursuant to this Section 7.1(b) are not required to be audited; provided, however, that if at any time, the holders are not being provided with audited annual statements of the Partnership pursuant to Section 7.1(a) above, then the annual financial statements provided pursuant to this Section 7.1(b)(ii) shall be audited by independent public accountants of recognized national standing in accordance with the requirements set forth in the Credit Agreement as in effect on the date hereof.

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               (c)      Notice of Default or Event of Default — promptly, and in any event within five days after a Responsible Officer becoming aware of (i) the existence of any Default or Event of Default or that any Person has given any notice or taken any action with respect to a claimed default hereunder or that any Person has given any notice or taken any action with respect to a claimed default of the type referred to in Section 11(f), (ii) the existence of a “Default” or “Event of Default” under the Credit Agreement, and (iii) the existence of a default or allegation of a default by a counterparty with respect to any of the O&M Agreements, a written notice specifying the nature and period of existence thereof and what action the Company is taking or proposes to take with respect thereto;

               (d)      ERISA Matters — promptly, and in any event within five days after a Responsible Officer becoming aware of any of the following, a written notice setting forth the nature thereof and the action, if any, that the Company or an ERISA Affiliate proposes to take with respect thereto:

        (i)      with respect to any Plan, any reportable event, as defined in section 4043(c) of ERISA and the regulations thereunder, for which notice thereof has not been waived pursuant to such regulations as in effect on the date hereof; or

        (ii)      the taking by the PBGC of steps to institute, or the threatening by the PBGC of the institution of, proceedings under section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the receipt by the Company or any ERISA Affiliate of a notice from a Multi-employer Plan that such action has been taken by the PBGC with respect to such Multi-employer Plan, in each case, that could reasonably be expected to have a Material Adverse Effect; or

        (iii)      any event, transaction or condition that could reasonably be expected to result in the incurrence of any liability by the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, or in the imposition of any Lien (other than a Permitted Lien) on any of the rights, properties or assets of the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or such penalty or excise tax provisions, if such liability or Lien, taken together with any other such liabilities or Liens then existing, could reasonably be expected to have a Material Adverse Effect;

               (e)      Notices from Governmental Authority — promptly, and in any event within 30 days of receipt thereof, copies of any notice to the Company or any Subsidiary or the Project Partnership from any Federal or state Governmental Authority relating to any order, ruling, statute or other law or regulation that could reasonably be expected to have a Material Adverse Effect; and

               (f)      Requested Information — with reasonable promptness, such other data and information relating to the business, operations, financial condition, or properties of the Company, any of its Subsidiaries, any Credit Party or the Project Partnership or relating to the ability of the Company or any Credit Party to perform its obligations hereunder and under the Notes and the other Note Documents as from time to time may be reasonably requested by any such holder of Notes.

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               Section 7.2.     Officer’s Certificate. Each set of financial statements delivered to a holder of Notes pursuant to Section 7.1(a) and (b) shall be accompanied by a certificate of a Senior Financial Officer setting forth a statement that such Senior Financial Officer has reviewed the relevant terms hereof and no condition or event that constitutes a Default or an Event of Default exists or, if any such condition or event exists (including any such event or condition resulting from the failure of the Company or any Subsidiary to comply with any Environmental Law), specifying the nature and period of existence thereof and what action the Company shall have taken or proposes to take with respect thereto.

               Section 7.3.     Visitation. The Company shall permit the representatives of each holder of Notes that is an Institutional Investor:

               (a)    No Default — if no Default or Event of Default then exists, at the expense of such holder and upon reasonable prior notice to the Company and no more than twice in any twelve-month period, to visit the principal executive office of the Company, to discuss the affairs, finances and accounts of the Company and its Subsidiaries, any other Credit Party and the Project Partnership with the Company’s officers, and (with the consent of the Compay, which consent will not be unreasonably withheld) to visit the other offices and properties of the Company and each Subsidiary, all at such reasonable times and as often as may be reasonably requested in writing; and

               (b)    Default — if a Default or Event of Default then exists, at the expense of the Company to visit and inspect any of the offices or properties of the Company or any Subsidiary, any other Credit Party and the Project Partnership, to examine all their respective books of account, records, reports and other papers, to make copies and extracts therefrom, and to discuss their respective affairs, finances and accounts with their respective officers and independent public accountants (and by this provision the Company authorizes said accountants to discuss the affairs, finances and accounts of the Company and its Subsidiaries, any Credit Party and the Project Partnership), all at such times and as often as may be reasonably requested.

Section 8.      Payment and Prepayment of the Notes.

               Section 8.1.     Maturity. The entire unpaid principal balance of the Notes shall be due and payable on the first anniversary of the date hereof; provided, however, that if, on or prior to the Business Day that is ten Business Days prior to the first anniversary of the date hereof, the Company gives each Purchaser written notice of its election to extend the maturity of the Notes (such notice, a “Notice of Extension”), then, if no Default or Event of Default shall have occurred and be continuing, the entire unpaid principal balance of the Notes shall be due and payable on the fourth anniversary of the date hereof. The date on which the Notes are due and payable, whether the first or fourth anniversary of the date hereof, is referred to hereafter as the “Maturity Date.”

               Section 8.2.      Mandatory Prepayments.

        (a)      Initial Scheduled Payment. The Company shall prepay $4,300,000 principal amount (or such lesser principal amount as shall then be outstanding) of the Notes at par and without payment of any make-whole amount, premium or penalty of any kind, on February 5, 2007.

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               (b)      Additional Scheduled Payments if the Company gives a Notice of Extension. In addition to the prepayment under Section 8.2(a), if the Company gives a Notice of Extension, then:

        (i)      on August 5, 2007 and on each February 5 and August 5 thereafter to and including February 5, 2010 (each such date, a “Scheduled Payment Date”), the Company shall prepay the principal amount indicated opposite such date on Schedule 8.2(b) (or such lesser principal amount as shall then be outstanding) of the Notes at par and without payment of any make-whole amount, premium or penalty of any kind; and

        (ii)      on each Scheduled Payment Date, the Company shall apply the full amount of any Surplus Project Distribution to prepay the Notes as hereinafter provided. Prepayments pursuant to this clause (ii) shall reduce the principal scheduled to be paid on the immediately following Scheduled Payment Date; provided, however, that if, through the application of Surplus Project Distributions, no principal is scheduled to be paid on the immediately following Scheduled Payment Date, then such Surplus Project Distribution shall reduce the principal scheduled to be paid on the next Scheduled Payment Date on which principal is scheduled to be paid (and has not otherwise been reduced to zero for such Scheduled Payment Date). No make-whole amount, premium or penalty of any kind shall be payable in connection with any payment pursuant to this clause (ii). For the avoidance of doubt, by way of example, and as an illustration of the parties’ intent:

        (A)        If the Company is scheduled to pay $4,300,000 principal and owes $750,000 interest on August 5, 2007, and if the Company receives Project Distributions of $6,000,000 on August 4, 2007, then the Company shall pay the Purchasers $6,000,000 on August 5, 2007, $5,050,000 of which amount shall be used to pay the principal and interest due on such date, and $950,000 of which shall be used to prepay the principal payment scheduled for February 5, 2008, reducing the amount of principal scheduled to be paid on February 5, 2008 to $3,350,000.

        (B)        If, through the application of Surplus Project Distributions, the Company is scheduled to pay $0 principal on August 5, 2008 and $0 principal on February 5, 2009, and if the Company owes $320,000 interest on August 5, 2008 and receives Project Distributions of $4,000,000 on August 4, 2008, then the Company shall pay the Purchaser $4,000,000 on August 5, 2008, $320,000 of which shall be used to pay the interest due on such date, and $3,680,000 of which shall be used to prepay the principal payment scheduled for August 5, 2009, reducing the amount of principal scheduled to be paid on August 5, 2009 to $620,000.

For purposes of this Agreement, the term “Project Distribution” means the aggregate cash amount actually received by the Company from WEI-Roanoke Valley, Inc., Westmoreland-Roanoke Valley, L.P. and Westmoreland — North Carolina Power, L.L.C. that such entities received in respect of their ownership interests in the Project Partnership, and which has actually been distributed to the Company by such entities. The term “Surplus Project Distribution” means the amount of any Project Distribution received by the Company on or prior to a Scheduled Payment Date (but on or after the immediately preceding Scheduled Payment Date), less the amount of any principal and interest that is scheduled to be paid on such Scheduled Payment Date.

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               Section 8.3.     Optional Prepayments. The Company may, at its option, upon notice as provided below, prepay at any time all, or from time to time any part of, the Notes, in an amount not less than $500,000, or such lesser principal amount as is then outstanding, at 100% of the principal amount so prepaid plus all accrued but unpaid interest on such principal amount being prepaid. The Company will give each holder of Notes written notice of each optional prepayment under this Section 8.3 not less than 10 Business Days prior to the date fixed for such prepayment. Each such notice shall specify the date of prepayment (which shall be a Business Day), the aggregate principal amount of the Notes to be prepaid on such date, the principal amount of each Note held by such holder to be prepaid (determined in accordance with Section 8.4), and the interest to be paid on the prepayment date with respect to such principal amount being prepaid. Under no circumstances shall the Company be required to pay any make-whole amount, premium or penalty of any kind in connection with any such optional prepayment.

               Section 8.4.     Allocation of Partial Prepayments. In the case of each partial prepayment of the Notes (other than a mandatory prepayment in accordance with Section 8.2), the principal amount of the Notes to be prepaid (i) shall be credited against the principal scheduled to be paid on the next Scheduled Payment Date on which principal is scheduled to be paid (and has not otherwise been reduced to zero for such Scheduled Payment Date) and (ii) shall be allocated among all of the Notes at the time outstanding in proportion, as nearly as practicable, to the respective unpaid principal amounts thereof not theretofore called for prepayment.

               Section 8.5.     Maturity; Surrender, Etc. In the case of each prepayment of Notes pursuant to this Section 8, the principal amount of each Note to be prepaid shall mature and become due and payable on the date fixed for such prepayment (which shall be a Business Day), together with interest on such principal amount accrued to such date. From and after such date, unless the Company shall fail to pay such principal amount when so due and payable, interest on such principal amount shall cease to accrue. Any Note paid or prepaid in full shall be surrendered to the Company and cancelled and shall not be reissued, and no Note shall be issued in lieu of any prepaid principal amount of any Note.

               Section 8.6.     Purchase of Notes. The Company will not and will not permit any Affiliate to purchase, redeem, prepay or otherwise acquire, directly or indirectly, any of the outstanding Notes except upon the payment or prepayment of the Notes in accordance with the terms of this Agreement and the Notes. The Company will promptly cancel all Notes acquired by it or any Affiliate pursuant to any payment or prepayment of Notes pursuant to any provision of this Agreement and no Notes may be issued in substitution or exchange for any such Notes.

               Section 8.7.     Initial Interest Payment. For the avoidance of doubt, the parties agree that the Initial Interest Period (as such term is defined in the Notes) shall end on (but exclude) August 5, 2006.

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Section 9.      Affirmative Covenants.

               The Company covenants that so long as any of the Notes are outstanding:

               Section 9.1.     Compliance with Law. The Company will, and will cause each of its Subsidiaries and the Project Partnership to, comply with all laws, ordinances or governmental rules or regulations to which each of them is subject, including ERISA, the USA Patriot Act and Environmental Laws, and will obtain and maintain in effect all licenses, certificates, permits, franchises and other governmental authorizations necessary to the ownership of their respective properties or to the conduct of their respective businesses, in each case to the extent necessary to ensure that non-compliance with such laws, ordinances or governmental rules or regulations or failures to obtain or maintain in effect such licenses, certificates, permits, franchises and other governmental authorizations could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

               Section 9.2.     Insurance. The Company will, and will cause each of its Subsidiaries and the Project Partnership to, maintain, with financially sound and reputable insurers, insurance with respect to their respective properties and businesses against such casualties and contingencies, of such types, on such terms and in such amounts (including deductibles, co-insurance and self-insurance, if adequate reserves are maintained with respect thereto) as is customary in the case of entities of established reputations engaged in the same or a similar business, in the same or similar geographic locations, and otherwise similarly situated.

               Section 9.3.     Maintenance of Properties. The Company will, and will cause each of its Subsidiaries and the Project Partnership to, maintain and keep, or cause to be maintained and kept, their respective properties in good repair, working order and condition (other than ordinary wear and tear), so that the business carried on in connection therewith may be properly conducted at all times; provided that this Section shall not prevent the Company or any Subsidiary or the Project Partnership from discontinuing the operation and the maintenance of any of its properties if such discontinuance is desirable in the conduct of its business and the Company has concluded that such discontinuance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

               Section 9.4.     Payment of Taxes and Claims. The Company will, and will cause each of its Subsidiaries and the Project Partnership to, file all tax returns required to be filed in any jurisdiction and to pay and discharge all taxes shown to be due and payable on such returns and all other taxes, assessments, governmental charges, or levies imposed on them or any of their properties, assets, income or franchises, to the extent the same have become due and payable and before they have become delinquent and all claims for which sums have become due and payable that have or could reasonably be expected to become a Lien on properties or assets of the Company or any Subsidiary or the Project Partnership; provided that neither the Company nor any Subsidiary nor the Project Partnership need pay any such tax, assessment, charge, levy or claim if (i) the amount, applicability or validity thereof is contested by the Company or such Subsidiary or the Project Partnership on a timely basis in good faith and in appropriate proceedings, and the Company or a Subsidiary or the Project Partnership, as the case may be, has established adequate reserves therefor in accordance with GAAP on the books of the Company or such Subsidiary or the Project Partnership or (ii) the nonpayment of all such taxes, assessments, charges, levies and claims in the aggregate could not reasonably be expected to have a Material Adverse Effect.

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               Section 9.5.     Existence, Etc. Subject to Section 10.2, the Company will at all times preserve and keep in full force and effect its existence. Subject to Section 10.2, the Company will at all times preserve and keep in full force and effect the existence of each of its Subsidiaries (unless merged into the Company or a Wholly-Owned Subsidiary) and the Project Partnership and all rights and franchises of the Company and its Subsidiaries and the Project Partnership unless, in the good faith judgment of the Company, the termination of or failure to preserve and keep in full force and effect such existence, right or franchise could not, individually or in the aggregate, have a Material Adverse Effect.

               Section 9.6.     Books and Records. The Company will, and will cause each of its Subsidiaries and the Project Partnership to, maintain proper books of record and account in conformity with GAAP and all applicable requirements of any Governmental Authority having legal or regulatory jurisdiction over the Company or such Subsidiary or the Project Partnership, as the case may be.

               Section 9.7.     Use of Proceeds. The Company will use the proceeds of the credit extended under this Agreement solely for the purposes described in, or otherwise permitted by, Section 4.9 hereof.

               Section 9.8.     Further Assurances. The Company shall, and shall cause its Subsidiaries and the Project Partnership to, upon the request of any of the holders, duly execute, and deliver, or cause to be duly executed and delivered, to such holders, such further instruments, and do and cause to be done such as further acts as such holder may reasonably request to carry out the provisions and purposes of this Agreement and the other Note Documents.

               Section 9.9.     Dismissal of Litigation. The litigation described in Section 5.11(c) will be dismissed in connection with the closing of the transactions contemplated by the Purchase Agreement.

Section 10.      Negative Covenants.

               The Company covenants that so long as any of the Notes are outstanding:

               Section 10.1.     Transactions with Affiliates. The Company will not and will not permit any Subsidiary or the Project Partnership to enter into directly or indirectly any transaction or group of related transactions (including the purchase, lease, sale or exchange of properties of any kind or the rendering of any service) with any Affiliate (other than the Company or another Subsidiary), except upon terms no less favorable to the Company or such Subsidiary or the Project Partnership than would be obtainable in a comparable arm’s-length transaction with a Person not an Affiliate.

               Section 10.2.     Merger, Consolidation, Etc. The Company will not permit the Project Partnership to consolidate with or merge with any other Person or convey, transfer or lease all or substantially all of its assets in a single transaction or series of transactions to any Person. The Company will not, and will not permit any Subsidiary to, consolidate with or merge with any other Person or convey, transfer or lease all or substantially all of its assets in a single transaction or series of transactions to any Person unless:

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               (a)     the successor formed by such consolidation or the survivor of such merger or the Person that acquires by conveyance, transfer or lease all or substantially all of the assets of the Company or such Subsidiary as an entirety, as the case may be, shall be a solvent corporation or limited liability company organized and existing under the laws of the United States or any State thereof (including the District of Columbia), and, if the Company or such Subsidiary is not itself such successor or survivor corporation or limited liability company, or in the event of any conveyance, transfer, or lease of all or substantially all of the assets of the Company or any Subsidiary as an entirety, (i) such corporation or limited liability company shall have executed and delivered to each holder of any Notes its assumption of the due and punctual performance and observance of each covenant and condition of its predecessor under the Note Documents to which its predecessor is party and (ii) such corporation or limited liability company shall have caused to be delivered to each holder of any Notes an opinion of nationally recognized independent counsel, or other independent counsel reasonably satisfactory to the Required Holders, to the effect that all agreements or instruments effecting such assumption are enforceable in accordance with their terms and comply with the terms hereof;

               (b)     immediately before and immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing; and

               (c)     such transactions consist of the (i) consolidation or merger of a Subsidiary (other than a Credit Party) into the Company or another Subsidiary, or result in the conveyance, transfer or lease by a Subsidiary (other than a Credit Party) to the Company or another Subsidiary or (ii) such transactions consist of the consolidation or merger of a Subsidiary that is a Credit Party into the Company or another Subsidiary that is a Credit Party, or result in the conveyance, transfer or lease by a Subsidiary that is a Credit Party to the Company or another Subsidiary that is a Credit Party.

No such conveyance, transfer or lease of substantially all of the assets of the Company shall have the effect of releasing the Company or any successor corporation or limited liability company that shall theretofore have become such in the manner prescribed in this Section 10.2 from its liability under this Agreement, the Notes or the other Note Documents.

               Section 10.3.      Sale or Transfer of Assets.

               (a)      The Company shall not, nor shall it permit any Subsidiary to, (i) except as provided in Section 10.2, be a party to any merger or consolidation or (ii) sell, transfer, lease or otherwise dispose of all or any part of its property, including any disposition of its property as part of a sale and leaseback transaction, or in any event sell or discount (with or without recourse) any of its notes or accounts receivable; provided that so long as no Default or Event of Default exists, this Section shall not apply to prevent:

        (i)      the sale or lease of inventory in the ordinary course of business;

        (ii)      the sale, transfer, lease or other disposition of any tangible personal property that in the reasonable business judgment of the Company or any Subsidiary has become uneconomical, unnecessary, obsolete or worn out and which is disposed of in the ordinary course of business; or

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        (iii)      other sales, transfers or disposition of any tangible personal property of the Company or any Subsidiary in an amount not to exceed $300,000 during any fiscal year of the Company.

               (b)      The Company shall not permit the Project Partnership to engage in any transaction restricted by Section 6.14(a) of the Credit Agreement as in effect on the Closing Date (without giving effect to the consent of any lenders under the Credit Agreement to any such transaction otherwise restricted).

               Section 10.4.     Liens. The Company shall not, and shall not permit the Project Partnership or any of its Subsidiaries to, at any time create, incur, assume or suffer to exist any Lien on any of its property or assets, tangible or intangible, now owned or hereafter acquired, or agree or become liable to do so, other than Permitted Liens.

               Section 10.5.     Indebtedness. The Company shall not, and shall not permit the Project Partnership or any of its Subsidiaries to, at any time create, incur, assume or suffer to exist any Indebtedness of the Company, the Project Partnership or such Subsidiaries, other than Permitted Indebtedness. In addition to the foregoing, the Company shall not permit the Project Partnership to create, incur or assume any Indebtedness of the type described in clause (iii) of Section 6.13(a) of the Credit Agreement, as in effect on the date hereof, without the consent of the holders of more than 50% of the aggregate principal amount of the Notes outstanding at the time of such creation, incurrence or assumption. In addition, the Company shall not permit the Project Partnership to refinance or replace Indebtedness of the Project Partnership under the Credit Agreement or Loan Instruments (as defined in the Credit Agreement as in effect on the date hereof) (i) if such refinancing or replacement would increase the principal amount of such Indebtedness or could reasonably be expected to result in a reduction in distributions from the Project Partnership and (ii) unless the holders receive at least 30 days advance written notice before the comsummation of such refinancing or replacement Indebtedness.

               Section 10.6.     Restricted Payments. From and after August 31, 2006, the Company shall not and shall not permit any Subsidiary or the Project Partnership to: declare or pay any dividends; or purchase, redeem, retire, or otherwise acquire for value, directly or indirectly, any of its membership interests or partnership interests or capital stock now or hereafter outstanding, or make any distribution of assets to its member, partners or stockholders as such; or make any other distribution by reduction of capital or otherwise in respect of any membership interests, partnership interests or shares of its capital stock, except that, so long as no Default or Event of Default is continuing, (i) the Company (1) may declare and deliver dividends and make distributions payable solely in membership interests of the Company or necessary to pay taxes related to the income of the Company attributable to members of the Company; (2) may distribute to the Parent amounts received in respect of a Subsidiary’s ownership interest in the Fort Lupton independent power project, but such distributions shall not exceed $250,000 per year; and (3) may purchase or otherwise acquire its membership interests by exchange for or out of the proceeds received from a substantially concurrent issue of new membership interests in the Company; and (ii) the Subsidiaries may declare and deliver dividends and make distributions to their immediate parent entities, partners, or members to the extent not prohibited by applicable law; and (iii) the Project Partnership may make distributions to Westmoreland-RV, Westmoreland-NC and WEI-Roanoke Valley, Inc. and such entities may make Project Distributions.

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               Section 10.7.     No Amendments to Governing Documents. Neither the Company nor any Subsidiary nor the Project Partnership shall cause or permit any of their Governing Documents to be modified, amended or supplemented in any respect whatever except that any Subsidiary other than a Credit Party may modify its Governing Documents if such modification could not reasonably be expected to result in a Material Adverse Effect.

               Section 10.8.      Changes in Fiscal Year. The fiscal year of the Company and its Subsidiaries and the Project Partnership ends on December 31 of each year; and the Company shall not, nor shall it permit any Subsidiary or the Project Partnership, to change the fiscal year from its present basis except to make a new Subsidiary conform to the Company’s fiscal year.

               Section 10.9.      No Restrictions. Except as required by the Credit Agreement with respect to the Project Partnership only, the Company shall not, nor shall it permit any Subsidiary to, directly or indirectly create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind on the ability of the Company or any Subsidiary to: (a) pay dividends or make any other distribution on any Subsidiary’s capital stock or other equity interests owned by the Company or any other Subsidiary, (b) pay any indebtedness owed to the Company or any other Subsidiary, (c) make loans or advances to the Company or any other Subsidiary, (d) transfer any of its Property to the Company or any other Subsidiary or (e) guarantee the Obligations.

               Section 10.10.     Permitted Investments. The Company shall not, nor shall it permit any Subsidiary or the Project Partnership to, directly or indirectly, make, retain or have outstanding any investments (whether through purchase of stock or obligations or otherwise) in, or loans or advances to (other than for travel advances and other similar cash advances made to employees in the ordinary course of business), any other Person, or acquire all or any substantial part of the assets or business of any other Person or division thereof other than Permitted Investments.

Section 11.      Events of Default.

               An “Event of Default” shall exist if any of the following conditions or events shall occur and be continuing:

               (a)     the Company defaults in the payment of any principal on any Note when the same becomes due and payable, whether at maturity or at a date fixed for prepayment or by declaration or otherwise; or

               (b)     the Company or any other Credit Party defaults in the payment of any interest on any Note or any other Obligation for more than five Business Days after the same becomes due and payable; or

               (c)     the Company defaults in the performance of or compliance with any term contained in Section 7.1(c); or

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               (d)     the Parent, the Company or any other Credit Party defaults in the performance of or compliance with any term contained herein (other than those referred to in Sections 11(a), (b) and (c)) or any other Note Documents and such default is not remedied within 30 days after the earlier of (i) a Responsible Officer obtaining actual knowledge of such default and (ii) the Company receives written notice of such default from any holder of a Note (any such written notice to be identified as a “notice of default” and to refer specifically to this Section 11(d)); or

               (e)     any representation or warranty made in writing by or on behalf of the Parent, the Company, the Project Partnership, any Credit Party or any Subsidiary or by any officer of the Parent, the Company, the Project Partnership, any Credit Party or any Subsidiary in this Agreement, any other Note Document or in any writing furnished in connection with the transactions contemplated hereby proves to have been false or incorrect in any material respect on the date as of which made; or

               (f)     an “Event of Default” (as such term is defined in the Credit Agreement) exists under the Credit Agreement as in effect on the date of this Agreement; or

               (g)     the Parent, the Company, the Project Partnership, any Credit Party or any Subsidiary (i) is generally not paying, or admits in writing its inability to pay, its debts as they become due, (ii) files, or consents by answer or otherwise to the filing against it of, a petition for relief or reorganization or arrangement or any other petition in bankruptcy, for liquidation or to take advantage of any bankruptcy, insolvency, reorganization, moratorium or other similar law of any jurisdiction, (iii) makes an assignment for the benefit of its creditors, (iv) consents to the appointment of a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, or (v) is adjudicated as insolvent or to be liquidated; or

               (h)     a court or Governmental Authority of competent jurisdiction enters an order appointing, without consent by the Parent, the Company, the Project Partnership, any Credit Party or any of their respective Subsidiaries, a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, or constituting an order for relief or approving a petition for relief or reorganization or any other petition in bankruptcy or for liquidation or to take advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution, winding-up or liquidation of the Parent, the Company or any of its Subsidiaries, or any such petition shall be filed against the Parent, the Company, the Project Partnership, any Credit Party, or any of their respective Subsidiaries and such petition shall not be dismissed within 60 days, or an order for relief is otherwise entered against the Parent, the Company, the Project Partnership, any Credit Party or any of their respective Subsidiaries under any bankruptcy or insolvency laws; or

               (i)     default shall occur under any Indebtedness aggregating $2,000,000 or more issued, assumed or guaranteed by the Company, any Credit Party, the Project Partnership or any Subsidiary or under any indenture, agreement or other instrument under which the same may be issued and such default shall continue for a period of time sufficient to permit the acceleration of the maturity of any such Indebtedness (whether or not such maturity is in fact accelerated) or any interest on any such Indebtedness shall not be paid when due (whether by demand, lapse of time, acceleration or otherwise) and such default shall continue for a period of time sufficient to permit the acceleration of the maturity of the principal amount thereof, or any principal amount of any such Indebtedness shall not be paid when due (whether by demand, lapse of time, acceleration or otherwise); or

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               (j)     a Change of Control shall occur; or

               (k)     the Parent shall fail to comply with any material provision of the Warrants; or

               (l)     any of the O&M Agreements shall be terminated for cause by a party other than WPO or WUO; or

               (m)     any material provision of this Agreement, the Notes or any other Note Document affecting the ability of the Company or any other Credit Party to perform its obligations hereunder or thereunder shall cease to be in full force and effect or shall be declared to be null and void by a court of competent jurisdiction, unless, within 30 days following the date such provision ceases to be in full force and effect, or unless within 30 days after such provision is declared to be null and void, the parties hereto agree to alternate arrangements reasonably satisfactory to the parties that achieve the practical realization of the effect sought to be achieved by the provision that has ceased to be in full force and effect or that has been declared null and void; or

               (n)     a final judgment or judgments for the payment of money aggregating in excess of $2,000,000 are rendered against one or more of the Company and its Subsidiaries or the Project Partnership or any Credit Party and which judgments are not, within 60 days after entry thereof, bonded, discharged or stayed pending appeal, or are not discharged within 60 days after the expiration of such stay; or

               (o)     if (i) any Plan shall fail to satisfy the minimum funding standards of ERISA or the Code for any plan year or part thereof or a waiver of such standards or extension of any amortization period is sought or granted under section 412 of the Code, (ii) a notice of intent to terminate any Plan shall have been or is reasonably expected to be filed with the PBGC or the PBGC shall have instituted proceedings under ERISA section 4042 to terminate or appoint a trustee to administer any Plan or the PBGC shall have notified the Company or any ERISA Affiliate that a Plan may become a subject of any such proceedings, (iii) the Company or any ERISA Affiliate shall have incurred or is reasonably expected to incur any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, (iv) the Company or any ERISA Affiliate withdraws from any Multiemployer Plan, or (v) the Company or any Subsidiary establishes or amends any employee welfare benefit plan that provides post-employment welfare benefits in a manner that would increase the liability of the Company or any Subsidiary thereunder; and any such event or events described in clauses (i) through (v) above, either individually or together with any other such event or events, would reasonably be expected to have a Material Adverse Effect.

As used in Section 11(o), the terms “employee benefit plan” and “employee welfare benefit plan” shall have the respective meanings assigned to such terms in section 3 of ERISA.

Section 12.      Remedies on Default, Etc.

               Section 12.1.       Acceleration.

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               (a)     If an Event of Default with respect to the Company described in Section 11(g) or (h) (other than an Event of Default described in clause (i) of Section 11(g) has occurred, all the Notes then outstanding shall automatically become immediately due and payable.

               (b)     If any other Event of Default has occurred and is continuing, any holder or holders of more than 50% in principal amount of the Notes at the time outstanding may at any time at its or their option, by notice or notices to the Company, declare all the Notes then outstanding to be immediately due and payable.

               (c)     If any Event of Default described in Section 11(a) or (b) has occurred and is continuing, any holder or holders of Notes at the time outstanding affected by such Event of Default may at any time, at its or their option, by notice or notices to the Company, declare all the Notes held by it or them to be immediately due and payable.

               (d)     Upon the occurrence and during the continuance of an Event of Default, the Notes shall bear interest at the Default Rate.

               Upon any Notes becoming due and payable under this Section 12.1, whether automatically or by declaration, such Notes will forthwith mature and the entire unpaid principal amount of such Notes, plus all accrued and unpaid interest thereon (including, but not limited to, interest accrued thereon at the Default Rate), shall all be immediately due and payable, in each and every case without presentment, demand, protest or further notice, all of which are hereby waived.

               Section 12.2.     Other Remedies. If any Event of Default has occurred and is continuing, and irrespective of whether any Notes have become or have been declared immediately due and payable under Section 12.1, the holders of Notes having at such time an outstanding principal amount in excess of 50% of the aggregate outstanding principal amount, or the holders of any Note with the written consent of the holder of more than 50% in principal amount of the Notes at the time outstanding, may proceed to protect and enforce the rights of such holder by an action at law, suit in equity or other appropriate proceeding, whether for the specific performance of any agreement contained herein or in any Note, or for an injunction against a violation of any of the terms hereof or thereof, or in aid of the exercise of any power granted hereby or thereby or by law or otherwise.

               Section 12.3.     Rescission. At any time after any Notes have been declared due and payable pursuant to Section 12.1(b) or (c), the holders of not less than 50% in principal amount of the Notes then outstanding, by written notice to the Company, may rescind and annul any such declaration and its consequences if (a) the Company has paid all overdue interest on the Notes, all principal, on any Notes that are due and payable and are unpaid other than by reason of such declaration, and all interest on such overdue principal, if any, and (to the extent permitted by applicable law) any overdue interest in respect of the Notes, at the Default Rate, (b) neither the Company nor any other Person shall have paid any amounts which have become due solely by reason of such declaration, (c) all Events of Default and Defaults, other than non-payment of amounts that have become due solely by reason of such declaration, have been cured or have been waived pursuant to Section 17, and (d) no judgment or decree has been entered for the payment of any monies due pursuant hereto or to the Notes. No rescission and annulment under this Section 12.3 will extend to or affect any subsequent Event of Default or Default or impair any right consequent thereon.

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               Section 12.4.      No Waivers or Election of Remedies, Expenses, Etc. No course of dealing and no delay on the part of any holder of any Note in exercising any right, power or remedy shall operate as a waiver thereof or otherwise prejudice such holder’s rights, powers or remedies. No right, power or remedy conferred by this Agreement or by any Note upon any holder thereof shall be exclusive of any other right, power or remedy referred to herein or therein or now or hereafter available at law, in equity, by statute or otherwise. Without limiting the obligations of the Company under Section 15, the Company will pay to the holder of each Note on demand such further amount as shall be sufficient to cover all costs and expenses of such holder incurred in any enforcement or collection under this Section 12, including, without limitation, reasonable attorneys’ fees, expenses and disbursements.

Section 13.      Registration; Exchange; Substitution of Notes.

               Section 13.1.     Registration of Notes. The Company shall keep at its principal executive office a register for the registration and registration of transfers of Notes. The name and address of each holder of one or more Notes, each transfer thereof and the name and address of each transferee of one or more Notes shall be registered in such register. Prior to due presentment for registration of transfer, the Person in whose name any Note shall be registered shall be deemed and treated as the owner and holder thereof for all purposes hereof, and the Company shall not be affected by any notice or knowledge to the contrary. The Company shall give to any holder of a Note that is an Institutional Investor promptly upon request therefor, a complete and correct copy of the names and addresses of all registered holders of Notes.

               Section 13.2.      Transfer and Exchange of Notes. Upon surrender of any Note to the Company at the address and to the attention of the designated officer (all as specified in Section 18(iii)), for registration of transfer or exchange (and in the case of a surrender for registration of transfer accompanied by a written instrument of transfer duly executed by the registered holder of such Note or such holder’s attorney duly authorized in writing and accompanied by the relevant name, address and other information for notices of each transferee of such Note or part thereof), within ten Business Days thereafter, the Company shall execute and deliver, at the Company’s expense (except as provided below), one or more new Notes (as requested by the holder thereof) in exchange therefor, in an aggregate principal amount equal to the unpaid principal amount of the surrendered Note. Each such new Note shall be payable to such Person as such holder may request and shall be substantially in the form of Exhibit A. Each such new Note shall be dated and bear interest from the date to which interest shall have been paid on the surrendered Note or dated the date of the surrendered Note if no interest shall have been paid thereon. The Company may require payment of a sum sufficient to cover any stamp tax or governmental charge imposed in respect of any such transfer of Notes. Notes shall not be transferred in denominations of less than $3,000,000, provided that if necessary to enable the registration of transfer by a holder of its entire holding of Notes, one Note may be in a denomination of less than $3,000,000. Any transferee, by its acceptance of a Note registered in its name (or the name of its nominee), shall be deemed to have made the representation set forth in Section 6.2.

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               Section 13.3.     Replacement of Notes. Upon receipt by the Company at the address and to the attention of the designated officer (all as specified in Section 18(iii)) of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of any Note (which evidence shall be, in the case of an Institutional Investor, notice from such Institutional Investor of such ownership and such loss, theft, destruction or mutilation), and

               (a)     in the case of loss, theft or destruction, of indemnity reasonably satisfactory to it (provided that if the holder of such Note is, or is a nominee for, an original Purchaser or another holder of a Note with a minimum net worth of at least $100,000,000 or a Qualified Institutional Buyer, such Person’s own unsecured agreement of indemnity shall be deemed to be satisfactory), or

               (b)     in the case of mutilation, upon surrender and cancellation thereof,

within ten Business Days thereafter, the Company at its own expense shall execute and deliver, in lieu thereof, a new Note, dated and bearing interest from the date to which interest shall have been paid on such lost, stolen, destroyed or mutilated Note or dated the date of such lost, stolen, destroyed or mutilated Note if no interest shall have been paid thereon.

Section 14.      Payments on Notes.

               Section 14.1.     Place of Payment. Subject to Section 14.2, payments of principal, and interest becoming due and payable on the Notes shall be made in New York, New York, at the principal office of the initial Purchaser in such jurisdiction. The Company may at any time, by notice to each holder of a Note, change the place of payment of the Notes so long as such place of payment shall be either the principal office of the Company in such jurisdiction or the principal office of a bank or trust company in such jurisdiction.

               Section 14.2.      Home Office Payment. So long as any Purchaser or its nominee shall be the holder of any Note, and notwithstanding anything contained in Section 14.1 or in such Note to the contrary, the Company will pay all sums becoming due on such Note for principal and interest by the method and at the address specified for such purpose below such Purchaser’s name in Schedule A, or by such other method or at such other address as such Purchaser shall have from time to time specified to the Company in writing for such purpose, without the presentation or surrender of such Note or the making of any notation thereon, except that upon written request of the Company made concurrently with or reasonably promptly after payment or prepayment in full of any Note, such Purchaser shall surrender such Note for cancellation, reasonably promptly after any such request, to the Company at its principal executive office or at the place of payment most recently designated by the Company pursuant to Section 14.1. Prior to any sale or other disposition of any Note held by a Purchaser or its nominee, such Purchaser will, at its election, either endorse thereon the amount of principal paid thereon and the last date to which interest has been paid thereon or surrender such Note to the Company in exchange for a new Note or Notes pursuant to Section 13.2. The Company will afford the benefits of this Section 14.2 to any Institutional Investor that is the direct or indirect transferee of any Note purchased by a Purchaser under this Agreement and that has made the same agreement relating to such Note as the Purchasers have made in this Section 14.2.

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Section 15.      Expenses, Etc.

               Section 15.1.     Enforcement Expenses. The Company will pay (a) the reasonable and documented costs and expenses of the holders in connection with the administration of this Agreement, the Notes and the other Note Documents, normal postclosing activities associated with the Closing (including filings related to Liens under the Security Documents) or the negotiation, execution and preparation of any amendment, waiver or other modification (including reasonable fees and expenses of counsel), and a special counsel and, if reasonably required by the Required Holders, local or other counsel incurred in enforcing or defending (or determining whether or how to enforce or defend) any rights under this Agreement, the Notes or the other Note Documents, or in responding to any subpoena or other legal process or informal investigative demand issued in connection with this Agreement or the Notes, or by reason of being a holder of any Note, and (b) the reasonable and documented costs and expenses of a special counsel and, if reasonably required by the Required Holders, local or other counsel incurred in connection with any Default or Event of Default, or the insolvency or bankruptcy of the Company or any Subsidiary or in connection with any work-out or restructuring of the transactions contemplated hereby and by the Notes and the other Note Documents. The Company agrees to indemnify and save the holders of the Notes and any officer, director, partner, member or agent of any such holder, harmless from any and all liabilities, losses, costs and expenses (collectively, “indemnified liabilities”) incurred by any such Person in connection with any breach of any representation or warranty or covenant by the Company or any Subsidiary, or any action, suit or proceeding brought against any holder or any such Person which arises out of the Note Documents, the transactions contemplated or financed hereby or out of any action or inaction by any holder of any Note hereunder or thereunder, except for such thereof as is caused by the gross negligence or willful misconduct of the party seeking to be indemnified as finally determined by a court of competent jurisdiction.

               Section 15.2.     Documentary Taxes. The Company agrees to pay on demand any documentary, stamp or similar taxes payable in respect of this Agreement, the Notes, or any other Note Document, including interest and penalties, in the event any such taxes are assessed, irrespective of when such assessment is made and whether or not any credit is then in use or available hereunder.

               Section 15.3.     Survival. The obligations of the Company under this Section 15 will survive the payment or transfer of any Note, the enforcement, amendment or waiver of any provision of this Agreement or the Notes, and the termination of this Agreement.

Section 16.      Survival of Representations and Warranties; Entire Agreement.

               All representations and warranties contained herein shall survive the execution and delivery of this Agreement and the Notes, the purchase or transfer by any Purchaser of any Note or portion thereof or interest therein and the payment of any Note, and may be relied upon by any subsequent holder of a Note, regardless of any investigation made at any time by or on behalf of such Purchaser or any other holder of a Note. All statements contained in any certificate or other instrument delivered by or on behalf of the Company pursuant to this Agreement shall be deemed representations and warranties of the Company under this Agreement. Subject to the preceding sentence, this Agreement and the Notes embody the entire agreement and understanding between each Purchaser and the Company and supersede all prior agreements and understandings relating to the subject matter hereof.

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Section 17.      Amendment and Waiver.

               Section 17.1.     Requirements. This Agreement and the Notes may be amended, and the observance of any term hereof or of the Notes may be waived (either retroactively or prospectively), with (and only with) the written consent of the Company and the Required Holders, except that (a) no amendment or waiver of any of the provisions of Section 1, 2, 3, 4, 5, 6 or 21 hereof, or any defined term (as it is used therein), will be effective as to any Purchaser unless consented to by such Purchaser in writing, and (b) no such amendment or waiver may, without the written consent of the holder of each Note at the time outstanding affected thereby, (i) subject to the provisions of Section 12 relating to acceleration or rescission, change the amount or time of any prepayment or payment of principal of, or reduce the rate or change the time of payment or method of computation of interest on, the Notes, (ii) change the percentage of the principal amount of the Notes the holders of which are required to consent to any such amendment or waiver, or (iii) amend any of Sections 8, 11(a), 11(b), 12, 17 or 20.

               Section 17.2.       Solicitation of Holders of Notes.

               (a)    Solicitation. The Company will provide each holder of the Notes (irrespective of the amount of Notes then owned by it) with sufficient information, sufficiently far in advance of the date a decision is required, to enable such holder to make an informed and considered decision with respect to any proposed amendment, waiver or consent in respect of any of the provisions hereof or of the Notes. The Company will deliver executed or true and correct copies of each amendment, waiver or consent effected pursuant to the provisions of this Section 17 to each holder of outstanding Notes promptly following the date on which it is executed and delivered by, or receives the consent or approval of, the requisite holders of Notes.

               (b)    Payment. The Company will not directly or indirectly pay or cause to be paid any remuneration, whether by way of supplemental or additional interest, fee or otherwise, or grant any security or provide other credit support, to any holder of Notes as consideration for or as an inducement to the entering into by any holder of Notes of any waiver or amendment of any of the terms and provisions hereof unless such remuneration is concurrently paid, or security is concurrently granted or other credit support concurrently provided, on the same terms, ratably to each holder of Notes then outstanding even if such holder did not consent to such waiver or amendment.

               Section 17.3.     Binding Effect, etc. Any amendment or waiver consented to as provided in this Section 17 applies equally to all holders of Notes and is binding upon them and upon each future holder of any Note and upon the Company without regard to whether such Note has been marked to indicate such amendment or waiver. No such amendment or waiver will extend to or affect any obligation, covenant, agreement, Default or Event of Default not expressly amended or waived or impair any right consequent thereon. No course of dealing between the Company and the holder of any Note nor any delay in exercising any rights hereunder or under any Note shall operate as a waiver of any rights of any holder of such Note. As used herein, the term “this Agreement” and references thereto shall mean this Agreement as it may from time to time be amended or supplemented.

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               Section 17.4.     Notes Held by Company, etc. Solely for the purpose of determining whether the holders of the requisite percentage of the aggregate principal amount of Notes then outstanding approved or consented to any amendment, waiver or consent to be given under this Agreement or the Notes, or have directed the taking of any action provided herein or in the Notes to be taken upon the direction of the holders of a specified percentage of the aggregate principal amount of Notes then outstanding, Notes directly or indirectly owned by the Company or any of its Affiliates shall be deemed not to be outstanding.

Section 18.      Notices.

               All notices and communications provided for hereunder shall be in writing and sent (a) by telecopy if the sender on the same day sends a confirming copy of such notice by a recognized overnight delivery service (charges prepaid), or (b) by registered or certified mail with return receipt requested (postage prepaid), or (c) by a recognized overnight delivery service (with charges prepaid). Any such notice must be sent:

        (i)      if to any Purchaser or its nominee, to such Purchaser or nominee at the address specified for such communications in Schedule A, or at such other address as such Purchaser or nominee shall have specified to the Company in writing,

        (ii)      if to any other holder of any Note, to such holder at such address as such other holder shall have specified to the Company in writing, or

        (iii)      if to the Company, the Parent or any Credit Party, to such Person care of the Company to the attention of the President of the Company, at 2 North Cascade Avenue, 14th Floor, Colorado Springs CO 80903, Telecopier 714-448-5825, with a copy to each of the General Counsel and the Chief Financial Officer of Westmoreland Coal Company, at 2 North Cascade Avenue, 14th Floor, Colorado Springs CO 80903, Telecopier 714-448-5824, or at such other address as the Company shall have specified to the holder of each Note in writing.

Notices under this Section 18 will be deemed given only when actually received.

Section 19.      Reproduction of Documents.

               This Agreement and all documents relating thereto, including, without limitation, (a) consents, waivers and modifications that may hereafter be executed, (b) documents received by any Purchaser at the Closing (except the Notes themselves), and (c) financial statements, certificates and other information previously or hereafter furnished to any Purchaser, may be reproduced by such Purchaser by any photographic, photostatic, electronic, digital, or other similar process and such Purchaser may destroy any original document so reproduced. The Company agrees and stipulates that, to the extent permitted by applicable law, any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made by such Purchaser in the regular course of business) and any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence. This Section 19 shall not prohibit the Company or any other holder of Notes from contesting any such reproduction to the same extent that it could contest the original, or from introducing evidence to demonstrate the inaccuracy of any such reproduction.

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Section 20.      Confidential Information.

               For the purposes of this Agreement, “Confidential Information” means information delivered to any Purchaser by or on behalf of the Company or any Subsidiary in connection with the transactions contemplated by or otherwise pursuant to this Agreement, provided that such term does not include information that (a) was publicly known prior to the time of such disclosure, (b) subsequently becomes publicly known through no act or omission by such Purchaser or any person acting on such Purchaser’s behalf, or (c) otherwise becomes known to such Purchaser other than through disclosure by the Company or any Subsidiary. Each Purchaser will maintain the confidentiality of such Confidential Information in accordance with procedures adopted by such Purchaser in good faith to protect confidential information of third parties delivered to such Purchaser, provided that such Purchaser may deliver or disclose Confidential Information to (i) its directors, officers, employees, agents, attorneys, trustees and affiliates (to the extent such disclosure reasonably relates to the administration of the investment represented by its Notes), (ii) its financial advisors and other professional advisors who agree to hold confidential the Confidential Information substantially in accordance with the terms of this Section 20, (iii) any other holder of any Note, (iv) any Institutional Investor to which it sells or offers to sell such Note or any part thereof or any participation therein (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this Section 20), (v) any Person from which it offers to purchase any security of the Company (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this Section 20), (vi) any federal or state regulatory authority having jurisdiction over such Purchaser, (vii) the NAIC or the SVO or, in each case, any similar organization, or any nationally recognized rating agency that requires access to information about such Purchaser’s investment portfolio, or (viii) any other Person to which such delivery or disclosure may be necessary or appropriate (w) to effect compliance with any law, rule, regulation or order applicable to such Purchaser, (x) in response to any subpoena or other legal process, (y) in connection with any litigation to which such Purchaser is a party or (z) if an Event of Default has occurred and is continuing, to the extent such Purchaser may reasonably determine such delivery and disclosure to be necessary or appropriate in the enforcement or for the protection of the rights and remedies under such Purchaser’s Notes and this Agreement. Each holder of a Note, by its acceptance of a Note, will be deemed to have agreed to be bound by and to be entitled to the benefits of this Section 20 as though it were a party to this Agreement. On reasonable request by the Company in connection with the delivery to any holder of a Note of information required to be delivered to such holder under this Agreement or requested by such holder (other than a holder that is a party to this Agreement or its nominee), such holder will enter into an agreement with the Company embodying the provisions of this Section 20. The Company shall not disclose the identity of any Affiliate of any Purchaser, except as required by law, rule or regulation, by court order or judicial process, or as necessary in order to comply with its obligations to any regulatory authority or the American Stock Exchange.

Section 21.      Substitution of Purchaser.

               Each Purchaser shall have the right to substitute any one of its Affiliates as the purchaser of the Notes that it has agreed to purchase hereunder, by written notice to the Company, which notice shall be signed by both such Purchaser and such Affiliate, shall contain such Affiliate’s agreement to be bound by this Agreement and shall contain a confirmation by such Affiliate of the accuracy with respect to it of the representations set forth in Section 6. Upon receipt of such notice, any reference to such Purchaser in this Agreement (other than in this Section 21), shall be deemed to refer to such Affiliate in lieu of such original Purchaser. In the event that such Affiliate is so substituted as a Purchaser hereunder and such Affiliate thereafter transfers to such original Purchaser all of the Notes then held by such Affiliate, upon receipt by the Company of notice of such transfer, any reference to such Affiliate as a “Purchaser” in this Agreement (other than in this Section 21), shall no longer be deemed to refer to such Affiliate, but shall refer to such original Purchaser, and such original Purchaser shall again have all the rights of an original holder of the Notes under this Agreement.

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Section 22.      Issuance of Warrants; Representations, Warranties and Covenants of the Parent.

               (a)      If the Company gives a Notice of Extension, the Parent shall, within ten Business Days after the Determination Date, deliver a warrant to each of the Purchasers, each such warrant to be in the form of Exhibit D, duly executed by an authorized officer of Westmoreland Coal Company (the “Parent”), with the three blanks in the first paragraph of each such warrant completed as follows:

        (i)      The first blank shall contain the name of the relevant Purchaser.

        (ii)      The second blank shall contain the number of shares of the common stock, par value $2.50 per share (the “Common Stock”), of the Parent that are purchasable upon exercise of the warrant (the “Section 22(a) Warrant Shares”). The number of Section 22(a) Warrant Shares for each Section 22(a) Warrant shall be equal to the number of Basic Warrant Shares set forth on Schedule A opposite the name of each Purchaser (subject to adjustment to such number after the Closing Date pursuant to the provisions of the warrant as if the warrant were issued on the Closing Date).

        (iii)      The third blank shall contain the purchase price per share (the “Section 22(a) Purchase Price”) to be paid by each Purchaser upon exercise of the Section 22(a) Warrant. If the Common Stock is listed on a national securities exchange, the Nasdaq National Market or another nationally recognized trading system on the Business Day immediately preceding the first anniversary of the Closing (the “Determination Date”), then the Section 22(a) Purchase Price for each Section 22(a) Warrant shall be equal to 115% of the last reported sales price of the Common Stock thereon on the Determination Date. If the Common Stock is not listed on a national securities exchange, the Nasdaq National Market or another nationally recognized trading system on the Determination Date, then the Section 22(a) Purchase Price for each Section 22(a) Warrant shall be equal to 115% of the fair market value of a share of Common Stock on the Determination Date, as determined in good faith by the Board of Directors of the Parent.

A warrant issued pursuant to this Section 22(a) is referred to below as a “Section 22(a) Warrant”. At the time the Parent delivers a Section 22(a) Warrant to a Purchaser, the Parent shall also perform such acts related to the Section 22(a) Warrant as any Purchaser may reasonably request and shall deliver to such Purchaser (x) an opinion of counsel, which may be the General Counsel of the Parent, in reasonable and appropriate form, and (y) such other certificates and instruments as are customarily furnished by an issuer to a purchaser in connection with the issuance of a warrant, as any Purchaser may reasonably request.

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               (b)      If the Company gives a Notice of Extension, then the Parent shall use its best efforts to register the Warrants and the Warrant Shares under the Securities Act as soon as practicable.

               (c)      If the SEC has not, within 90 days after the first anniversary of the Closing Date, declared effective under the Securities Act a registration statement covering the Section 22(a) Warrants and the Section 22(a) Warrant Shares as provided above, then each Purchaser shall surrender to the Parent the Section 22(a) Warrants issued to it, and upon surrender thereof, the Parent shall issue to such Purchaser a replacement warrant (a “Section 22(c) Warrant”), each such warrant to be in the form of Exhibit D, duly executed by an authorized officer of the Parent, with the three blanks in the first paragraph of each such warrant completed as follows:

        (i)      The first blank shall contain the name of the relevant Purchaser.

        (ii)      The second blank shall contain the number of shares of the Common Stock of the Parent that are purchasable upon exercise of the warrant (the “Section 22(c) Warrant Shares”). The number of Section 22(c) Warrant Shares for each Section 22(c) Warrant shall be equal to 110% of the number of Basic Warrant Shares set forth on Schedule A opposite the name of each Purchaser (subject to adjustment to such number after the Closing Date pursuant to the provisions of the warrant as if the warrant were issued on the Closing Date).

        (iii)      The third blank shall contain the purchase price per share (the “Section 22(c) Purchase Price”) to be paid by each Purchaser upon exercise of the Section 22(c) Warrant. If the Common Stock is listed on a national securities exchange, the Nasdaq National Market or another nationally recognized trading system on the Determination Date, then the Section 22(c)Purchase Price for each Section 22(c) Warrant shall be equal to 100% of the last reported sales price of the Common Stock thereon on the Determination Date. If the Common Stock is not listed on a national securities exchange, the Nasdaq National Market or another nationally recognized trading system on the Determination Date, then the Section 22(c) Purchase Price for each Section 22(c) Warrant shall be equal to 100% of the fair market value of a share of Common Stock on the Determination Date, as determined in good faith by the Board of Directors of the Parent.

Upon surrender of the Section 22(a) Warrants to the Parent pursuant to this Section 22(c), the Parent shall cancel and destroy the Section 22(a) Warrants. At the time the Parent delivers a Section 22(c) Warrant to a Purchaser, the Parent shall also perform such acts related to the Section 22(c) Warrant as any Purchaser may reasonably request and shall deliver to such Purchaser (x) an opinion of counsel, which may be the General Counsel of the Parent, in reasonable and appropriate form, and (y) such other certificates and instruments as are customarily furnished by an issuer to a purchaser in connection with the issuance of a warrant, as any Purchaser may reasonably request.

               (d) If the Section 22(c) Warrants and the Section 22(c) Warrant Shares have not been registered under the Securities Act as provided above prior to the date that is 180 days after the first anniversary of the Closing, then on such date the Company shall pay to each Purchaser who purchased Notes on the Closing Date (an “Initial Purchaser”) a fee equal to 1% of the outstanding principal amount of the Notes held by such Initial Purchaser or any transferee of such Initial Purchaser on the first anniversary of the Closing.

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               (e)      The parties acknowledge and agree that the number of shares subject to any Warrant, and the purchase price for any Warrant, are subject to adjustment pursuant to the terms of the Warrant and the number of Warrant Shares on the date of issuance of the Warrants shall reflect events occurring on and after the Closing Date and prior to the date of the issuance of the Warrants as if the Warrants were issued on the Closing Date.

               (f)      Notwithstanding any transfer or assignment of Notes between the date hereof and the first anniversary of the Closing, Warrants shall be issued only to the Initial Purchasers. Nothing in this Section 22 shall be deemed to limit any Purchaser’s ability to transfer any Warrant so received following its receipt thereof; provided, however, that the Initial Purchasers agree that they may only transfer Warrants in compliance with all applicable Federal and State securities laws and pursuant to Section 5 of each such Warrant.

               (g)      The Parent represents and warrants to each Purchaser as follows:

        (i)      The Parent is a corporation organized, validly existing and in good standing under the laws of the State of Delaware. The Parent has the corporate power and authority to own or hold under lease the properties it purports to own or hold under lease, to transact the business it transacts and proposes to transact, to execute and deliver this Agreement and the Warrants and to perform the provisions hereof and thereof.

        (ii)      This Agreement and the Warrants have been duly authorized by all necessary corporate action on the part of the Parent, and this Agreement constitutes, and upon execution and delivery thereof each Warrant will constitute, a valid and binding obligation of the Parent enforceable against the Parent in accordance with its terms, except as such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

        (iii)      The execution, delivery and performance by the Parent of this Agreement and the Warrants will not (i) contravene, result in any breach of, or constitute a default under, or result in the creation of any Lien (other than a Permitted Lien) in respect of any property of the Parent under, any indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease, agreement, corporate charter or by-laws, or any other agreement or instrument to which the Parent is bound or by which the Parent or any of its properties may be bound or affected, (ii) conflict with or result in a breach of any of the terms, conditions or provisions of any order, judgment, decree, or ruling of any court, arbitrator or Governmental Authority applicable to the Parent, or (iii) violate any provision of any statute or other rule or regulation of any Governmental Authority applicable to the Parent, except, in each case, for such contraventions, breaches, defaults, Liens, conflicts and violations that would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the Parent.

               (h)      The Parent covenants as follows:

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        (i)      The Parent agrees that it shall, upon the request of any of the holders, duly execute, and deliver, or cause to be duly executed and delivered, to such holders, such further instruments, and do and cause to be done such further acts as such holder may reasonably request to carry out the provisions and purposes of this Agreement and the other Note Documents.

        (ii)      The Parent agrees that so long as any Note is outstanding, it will cause any contracts for the operation and maintenance of independent power projects entered into by any of its Subsidiaries to be entered into by Westmoreland Power Operations, LLC, a Virginia limited liability company (“WPO”) or Westmoreland Utility Operations, LLC, a Virginia limited liability company (“WUO”).

        (iii)      Concurrently with the closing of the transactions contemplated by the Purchase Agreements, the O&M Agreements described in clause (i) through (v) of the definition of O&M Agreements shall be assigned to WPO and WUO without the need for any consent or approval from any other Person other than such consents or approvals as shall have been obtained.

Section 23.      Miscellaneous.

               Section 23.1.      Successors and Assigns. All covenants and other agreements contained in this Agreement by or on behalf of any of the parties hereto bind and inure to the benefit of their respective successors and assigns (including any subsequent holder of a Note) whether so expressed or not.

               Section 23.2.      Payments Due on Non-Business Days. Anything in this Agreement or the Notes to the contrary notwithstanding (but without limiting the requirement in Section 8.4 that the notice of any optional prepayment specify a Business Day as the date fixed for such prepayment), any payment of principal of or interest on any Note that is due on a date other than a Business Day shall be made on the next succeeding Business Day without including the additional days elapsed in the computation of the interest payable on such next succeeding Business Day; provided that if the maturity date of any Note is a date other than a Business Day, the payment otherwise due on such maturity date shall be made on the next succeeding Business Day and shall include the additional days elapsed in the computation of interest payable on such next succeeding Business Day.

               Section 23.3.      Accounting Terms. All accounting terms used herein which are not expressly defined in this Agreement have the meanings respectively given to them in accordance with GAAP. Except as otherwise specifically provided herein, (i) all computations made pursuant to this Agreement shall be made in accordance with GAAP, and (ii) all financial statements shall be prepared in accordance with GAAP.

               Section 23.4.      Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall (to the full extent permitted by law) not invalidate or render unenforceable such provision in any other jurisdiction.

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               Section 23.5.      Set-off. In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, upon the occurrence and during the continuation of any Event of Default, each holder of any Note is hereby authorized by the Company and each Credit Party at any time or from time to time, without notice to the Company or to any other Person, any such notice being hereby expressly waived, to set-off and to appropriate and to apply any and all deposits (general or special, including, but not limited to, indebtedness evidenced by certificates of deposit, whether matured or unmatured, but not including trust accounts, and in whatever currency denominated) and any other indebtedness at any time held or owing by that Purchaser or that subsequent holder to or for the credit or the account of the Company or such Credit Party, whether or not matured, against and on account of the obligations of the Company or such Credit Party to that Purchaser or that subsequent holder under the Loan Documents, including, but not limited to, all claims of any nature or description arising out of or connected with the Loan Documents, irrespective of whether or not that Purchaser or that subsequent holder shall have made any demand hereunder. Each holder of a Note agrees to promptly notify the Company after each application of such set-off; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application of proceeds.

Section 23.6.      Construction, etc.

               (a)     Each covenant contained herein shall be construed (absent express provision to the contrary) as being independent of each other covenant contained herein, so that compliance with any one covenant shall not (absent such an express contrary provision) be deemed to excuse compliance with any other covenant.

               (b)     Where any provision herein refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Person.

               (c)     The language used in this Agreement shall be deemed to be the language chosen by the Parties to express their mutual intent, and no rule of strict construction shall be applied against any Party.

               (d)     Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise.

               (e)     The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement.

               (f)     Any reference herein to a Section or clause shall be deemed to refer to a Section or clause of this Agreement, unless the context indicates otherwise.

               (g)     All references to “$,” “Dollars,” or “US$” are to the currency of the United States of America.

               (h)     The words “include,” “includes,” and “including” are not limiting and are deemed to be followed by the words “without limitation” whether or not in fact followed by such words or words of like import.

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               (i)     The conjunction “or” shall be interpreted in its inclusive sense, as “and/or.”

               (j)     For the avoidance of doubt, all Schedules, including the Disclosure Schedule, and Exhibits attached to this Agreement shall be deemed to be a part hereof.

Section 23.7.      Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original but all of which together shall constitute one instrument. Each counterpart may consist of a number of copies hereof, each signed by less than all, but together signed by all, of the parties hereto.

Section 23.8.      Governing Law. This Agreement shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of New York excluding choice-of-law principles of the law of such State that would permit the application of the laws of a jurisdiction other than such State.

Section 23.9.      Jurisdiction and Process; Waiver of Jury Trial.

               (a)     The Company irrevocably submits to the non-exclusive jurisdiction of any New York State or federal court sitting in the Borough of Manhattan, The City of New York, over any suit, action or proceeding arising out of or relating to this Agreement or the Notes. To the fullest extent permitted by applicable law, the Company irrevocably waives and agrees not to assert, by way of motion, as a defense or otherwise, any claim that it is not subject to the jurisdiction of any such court, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding brought in any such court and any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.

               (b)     The Company consents to process being served by or on behalf of any holder of Notes in any suit, action or proceeding of the nature referred to in Section 23.9(a) by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, return receipt requested, to it at its address specified in Section 18 or at such other address of which such holder shall then have been notified pursuant to said Section. The Company agrees that such service upon receipt (i) shall be deemed in every respect effective service of process upon it in any such suit, action or proceeding and (ii) shall, to the fullest extent permitted by applicable law, be taken and held to be valid personal service upon and personal delivery to it. Notices hereunder shall be conclusively presumed received as evidenced by a delivery receipt furnished by the United States Postal Service or any reputable commercial delivery service.

               (c)     Nothing in this Section 23.9 shall affect the right of any holder of a Note to serve process in any manner permitted by law, or limit any right that the holders of any of the Notes may have to bring proceedings against the Company in the courts of any appropriate jurisdiction or to enforce in any lawful manner a judgment obtained in one jurisdiction in any other jurisdiction.

               (d)     THE PARTIES HERETO HEREBY WAIVE TRIAL BY JURY IN ANY ACTION BROUGHT ON OR WITH RESPECT TO THIS AGREEMENT, THE NOTES OR ANY OTHER DOCUMENT EXECUTED IN CONNECTION HEREWITH OR THEREWITH.

[Signature page follows]

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               If you are in agreement with the foregoing, please sign the form of agreement on a counterpart of this Agreement and return it to the Company, whereupon this Agreement shall become a binding agreement between you and the Company.

Very truly yours,

WESTMORELAND ENERGY LLC

By: /s/ Roger D. Wiegley
Name: Roger D. Wiegley
Title: General Counsel and Secretary

With respect to Section 22 hereof:

WESTMORELAND COAL COMPANY

By: /s/ Roger D. Wiegley
Name: Roger D. Wiegley
Title: General Counsel and Secretary

This Agreement is hereby
accepted and agreed to as
of the date thereof.

SOF INVESTMENTS, L.P.

By: /s/ Marc R. Lisker
Name: Marc R. Lisker
Title: General Counsel

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SCHEDULE A

INFORMATION RELATING TO PURCHASERS

A-1

SCHEDULE B

DEFINED TERMS

               As used herein, the following terms have the respective meanings set forth below or set forth in the Section hereof following such term:

               “Affiliate” means, at any time, and with respect to any Person, any other Person that at such time directly or indirectly through one or more intermediaries Controls, or is Controlled by, or is under common Control with, such first Person, and, with respect to the Company, shall include any Person beneficially owning or holding, directly or indirectly, 25% or more of any class of voting or equity interests of the Company or any Subsidiary or any limited liability company, partnership, corporation or other entity of which the Company and its Subsidiaries beneficially own or hold, in the aggregate, directly or indirectly, 25% or more of any class of voting or equity interests. As used in this definition, “Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. Unless the context otherwise clearly requires, any reference to an “Affiliate” is a reference to an Affiliate of the Company.

               “Anti-Terrorism Order” means Executive Order No. 13,224 of September 24, 2001, Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit or Support Terrorism, 66 U.S. Fed. Reg. 49, 079 (2001), as amended.

               “Business Day” means any day other than a Saturday, a Sunday or a day on which commercial banks in New York, New York are required or authorized by law to be closed.

               “Capital Lease” means, at any time, a lease with respect to which the lessee is required concurrently to recognize the acquisition of an asset and the incurrence of a liability in accordance with GAAP.

               “Change of Control” means (i) the Parent shall for any reason not have legal and beneficial ownership of all of the issued and outstanding capital stock of the Company or Westmoreland Power, or (ii) the Company shall for any reason, through one or more subsidiaries, not have legal and beneficial ownership of all of the issued and outstanding ownership interests in the Project Partnership or (iii) Westmoreland Power shall for any reason not have legal and beneficial ownership of all of the issued and outstanding capital stock of WUO or WPO.

               “Closing” is defined in Section 3.

               “Code” means the Internal Revenue Code of 1986, as amended from time to time, and the rules and regulations promulgated thereunder from time to time.

               “Common Stock” is defined in Section 22.

B-1

               “Company” means Westmoreland Energy, LLC, a Delaware limited liability company, or any successor that becomes such in the manner prescribed in Section 10.2.

               “Confidential Information” is defined in Section 20.

               “Credit Agreement” means the Amended and Restated Construction and Term Loan Agreement, dated as of December 1, 1993, as amended by Amendment No. 1 dated as of November 4, 1994, Amendment No. 2 dated as of December 30, 1994, Amendment No. 3 dated as of January 31, 1995, Amendment No. 4 dated as of October 19, 1995, Amendment No. 5 dated as of December 15, 1996, Amendment No. 5 dated as of August 23, 2000, Amendment No. 6 dated as of November 21, 2000, Amendment No. 7 dated as of November 15, 2001, Amendment No. 8 dated as of November 28, 2001, Amendment No. 9 dated as of March 1, 2002 and Amendment No. 10 dated as of April 8, 2003 among Borrower, the Lenders, the Institutional Lenders, the Issuing Bank, the Bond L/C Issuing Bank, the Co-Agents and Agent (each, as defined therein) and the letter agreement, dated July 20, 1999, from Credit Suisse First Boston, as Agent, as Issuing Bank, as Co-Agent and as Securities Intermediary, and acknowledged and agreed to by the Borrower, the Lenders, the Institutional Lenders and the Institutional Agent.

               “Credit Parties” means the Company, Westmoreland Power, WPO, WUO, Westmoreland-NC, and Westmoreland-RV.

               “Default” means an event or condition the occurrence or existence of which would, with the lapse of time or the giving of notice or both, become an Event of Default.

               “Default Rate” means that rate of interest that is 2% per annum above the rate of interest stated in clause (a) of the first paragraph of Section of Schedule 1 of the Notes.

               “Delivered Financial Statements” is defined in Section 5.17.

               “Determination Date” is defined in Section 22(a).

               “Environmental Laws” means any and all Federal, state, local, and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to pollution and the protection of the environment or the release of any materials into the environment, including but not limited to those related to Hazardous Materials.

               “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the rules and regulations promulgated thereunder from time to time in effect.

               “ERISA Affiliate” means any trade or business (whether or not incorporated) that is treated as a single employer together with the Company under section 414 of the Code.

               “Event of Default” is defined in Section 11.

               “Financial Projections” is defined in Section 5.18.

B-2

               “GAAP” means generally accepted accounting principles as in effect from time to time in the United States of America.

               “Governmental Authority” means

               (a)     the government of

        (i)     the United States of America or any State or other political subdivision thereof, or

        (ii)     any other jurisdiction in which the Company or any Subsidiary conducts all or any part of its business, or which asserts jurisdiction over any properties of the Company or any Subsidiary, or

               (b)     any entity exercising executive, legislative, judicial, regulatory or administrative functions of, or pertaining to, any such government.

               “Governing Documents” means, as to any Person, the articles or certificate of incorporation, limited liability agreement, operating agreement, limited or general partnership agreement, by-laws or other analogous organizational documents of such Person.

               “Guaranty” means, with respect to any Person, any obligation (except the endorsement in the ordinary course of business of negotiable instruments for deposit or collection) of such Person guaranteeing or in effect guaranteeing any indebtedness, dividend or other obligation of any other Person in any manner, whether directly or indirectly, including (without limitation) obligations incurred through an agreement, contingent or otherwise, by such Person:

               (c)     to purchase such indebtedness or obligation or any property constituting security therefor;

               (d)     to advance or supply funds (i) for the purchase or payment of such indebtedness or obligation, or (ii) to maintain any working capital or other balance sheet condition or any income statement condition of any other Person or otherwise to advance or make available funds for the purchase or payment of such indebtedness or obligation;

               (e)     to lease properties or to purchase properties or services primarily for the purpose of assuring the owner of such indebtedness or obligation of the ability of any other Person to make payment of the indebtedness or obligation; or

               (f)     otherwise to assure the owner of such indebtedness or obligation against loss in respect thereof.

In any computation of the indebtedness or other liabilities of the obligor under any Guaranty, the indebtedness or other obligations that are the subject of such Guaranty shall be assumed to be direct obligations of such obligor.

               “Hazardous Material” means any and all pollutants, toxic or hazardous wastes or other substances that might pose a hazard to health and safety, the removal of which may be required or the generation, manufacture, refining, production, processing, treatment, storage, handling, transportation, transfer, use, disposal, release, discharge, spillage, seepage or filtration of which is or shall be restricted, prohibited or penalized by any applicable law including, but not limited to, asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls, petroleum, petroleum products, lead based paint, radon gas or similar restricted, prohibited or penalized substances.

B-3

               “holder” means, with respect to any Note the Person in whose name such Note is registered in the register maintained by the Company pursuant to Section 13.1.

               “Indebtedness” with respect to any Person means, at any time, without duplication,

               (g)     its liabilities for borrowed money;

               (h)     its liabilities for the deferred purchase price of property acquired by such Person (excluding accounts payable arising in the ordinary course of business but including all liabilities created or arising under any conditional sale or other title retention agreement with respect to any such property);

               (i)     (i) all liabilities appearing on its balance sheet in accordance with GAAP in respect of Capital Leases and (ii) all liabilities which would appear on its balance sheet in accordance with GAAP in respect of Synthetic Leases assuming such Synthetic Leases were accounted for as Capital Leases;

               (j)     its redemption obligations in respect of mandatorily redeemable Preferred Stock;

               (k)     all its liabilities in respect of letters of credit or instruments serving a similar function issued or accepted for its account by banks and other financial institutions (whether or not representing obligations for borrowed money); and

               (l)     any Guaranty of such Person with respect to liabilities of a type described in any of clauses (a) through (e) hereof.

Indebtedness of any Person shall include all obligations of such Person of the character described in clauses (a) through (f) to the extent such Person remains legally liable in respect thereof notwithstanding that any such obligation is deemed to be extinguished under GAAP.

               “Initial Purchaser” is defined in Section 22(d).

               “Institutional Investor” means (a) any Purchaser of a Note, (b) any holder of a Note holding (together with one or more of its affiliates) more than 50% of the aggregate principal amount of the Notes then outstanding, (c) any bank, trust company, savings and loan association or other financial institution, any pension plan, any investment company, any insurance company, any broker or dealer, or any other similar financial institution or entity, regardless of legal form, and (d) any Related Fund of any holder of any Note.

               “Lenders” has the meaning specified in the Credit Agreement.

               “Lien” means, with respect to any Person, any mortgage, lien, pledge, charge, security interest or other encumbrance, or any interest or title of any vendor, lessor, lender or other secured party to or of such Person under any conditional sale or other title retention agreement or Capital Lease (including in the case of stock, stockholder agreements, voting trust agreements and all similar arrangements), or any other type of preferential arrangement that has the practical effect of creating a security interest, upon or with respect to any property or asset of such Person.

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               “Material” means material in relation to the financial condition, operations, business, or properties of the Company and its Subsidiaries taken as a whole.

               “Material Adverse Effect” means a material adverse change in, or material adverse effect upon (a) the operations, business, properties or condition (financial or otherwise) of the Company and its Subsidiaries taken as a whole, or (b) the ability of the Company or any of its Subsidiaries to perform its obligations under this Agreement, the Notes and the other Note Documents, or (c) the legality, validity, binding effect, or enforceability of this Agreement, the Notes or the other Note Documents or the rights and remedies of the Purchasers hereunder and under the Note Documents.

               “Maturity Date” is defined in Section 8.1.

               “Multiemployer Plan” means any Plan that is a “multiemployer plan” (as such term is defined in section 4001(a)(3) of ERISA).

               “NAIC” means the National Association of Insurance Commissioners or any successor thereto.

               “Notice of Extension” is defined in Section 8.1.

               “Notes” is defined in Section 1.

               “Note Documents” is defined in Section 4.11.

               “Obligations” means the principal of and interest on the Notes, and all other indebtedness and obligations of the Company or any other Credit Party under this Agreement, the Notes and the other Note Documents, and the performance of and compliance with the terms of this Agreement, the Notes and the other Note Documents by the Company or any other Credit Party, whether direct or indirect, absolute or contingent, liquidated or unliquidated, and whether or not from time to time decreased or extinguished and later increased, created or incurred.

               “Officer’s Certificate” means a certificate of a Senior Financial Officer or of any other officer of the Company whose responsibilities extend to the subject matter of such certificate.

               “O&M Agreements” means, collectively, (i) the Facility Operating Agreement, dated as of November 22, 2000, between Virginia Electric and Power Company (“VEPCO”) and LG&E Power Services LLC, a Delaware limited liability company (“LPS” as predecessor in interest to WPO and WUO (by assignment to, and assumption by, respectively) immediately following the Closing) with respect to VEPCO’s power production facility located in or near Southampton, Virginia; (ii) the Facility Operating Agreement, dated as of November 22, 2000, between VEPCO and LPS with respect to VEPCO’s power production facility located in or near Altavista, Virginia; (iii) the Facility Operating Agreement, dated as of November 22, 2000, between VEPCO and LPS with respect to VEPCO’s power production facility located in or near Hopewell, Virginia, as amended pursuant to Amendment No. 1 dated March 4, 2002; (iv) the Operations and Maintenance Agreement, dated as of April 19, 2004, between VEPCO and LPS with respect to VEPCO’s power production facility located in or near Gordonsville, Virginia; and (v) the Amended and Restated Facility Operating Agreement, dated as of December 1, 1993, between the Project Partnership and LPS (as successor in interest in UC Operating Services) and (vi) any other contracts for the operation and maintenance of independent power projects entered into by WPO or WUO.

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               “Parent” is defined in Section 22.

               “PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in ERISA or any successor thereto.

               “Permitted Indebtedness” means:

                               (a)     Indebtedness under this Agreement and the Notes;

                               (b)     (i) Indebtedness of the Project Partnership under the Credit Agreement as in effect on the date hereof, less any principal payments thereunder, and (ii) Indebtedness of the Project Partnership under letters of credit in effect on the date hereof, together with replacements thereof in an amount not to exceed the amount in effect on the date hereof;

                               (c)     Indebtedness reflected on the Delivered Financial Statements (including any extensions or renewals thereof that do not increase the principal amount thereof or otherwise materially change the terms of such existing Indebtedness);

                               (d)     Indebtedness of (i) any of the Company, Westmoreland-NC, and Westmoreland-RV to the Company, Westmoreland-NC, and Westmoreland-RV, (ii) the Project Partnership to the Company in an amount not to exceed $500,000, or (iii) any Subsidiary that is not a Credit Party to any other Subsidiary that is not a Credit Party;

                               (e)     Indebtedness secured by Permitted Liens;

                               (f)     Indebtedness with respect to surety bonds, deposits or reclamation or other bonds incurred in the ordinary course of business; and

                               (g)     In the case of the Project Partnership, “Debt” (as that term is defined in the Credit Agreement) that the Project Partnership is permitted to incur pursuant to Section 6.13(a)(iv) and (v) of the Credit Agreement as in effect on the date hereof.

               “Permitted Investments” means:

                               (a)     investments in direct obligations of the United States of America or of any agency or instrumentality thereof whose obligations constitute full faith and credit obligations of the United States of America, provided that any such obligations shall mature within one year of the date of issuance thereof;

                               (b)     investments in commercial paper rated at least P-1 by Moody’s and at least A-1 by S&P maturing within one year of the date of issuance thereof;

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                               (c)     investments in money market funds that invest solely, and which are restricted by their respective charters to invest solely, in investments of the type described in the immediately preceding subsections (a), and (b) above;

                               (d)     the investments of the Company and its Subsidiaries in existence on the Closing Date as set forth on the Disclosure Schedule; investments made from time to time by the Company or any Subsidiary in the Company, Westmoreland-NC, or Westmoreland-RV, and investments made from time to time by a Subsidiary that is not a Credit Party in any other Subsidiary that is not a Credit Party;

                               (e)    transactions between the Company and WUO or WPO;

                               (f)     in the case of the Project Partnership, “Permitted Investments” (as that term is defined in the Credit Agreement as in effect on the date hereof);

                               (g)     other investments, loans, and advances in addition to those otherwise permitted by this Section in an amount not to exceed $250,000 in the aggregate at any one time outstanding;

                               (h)     investments in the ordinary course of business in deposit accounts with any United States commercial bank having capital and surplus of not less than $100,000,000;

                               (i)     investments in securities of trade creditors or customers in connection with a bankruptcy of such trade creditors or customers; and

                               (j)     investments in pledges, deposits and payment or performance bonds made or given in the ordinary course of business, required to be made pursuant to applicable law, in connection with or to secure obligations under applicable law, including Environmental Law.

               “Permitted Liens” means:

                               (a)     Liens for taxes, assessments, or similar charges, incurred in the ordinary course of business and which are not yet due and payable;

                               (b)     Pledges or deposits made in the ordinary course of business to secure payment of workmen’s compensation, or to participate in any fund in connection with workmen’s compensation, unemployment insurance, old-age pensions or other social security programs (exclusive, however, of Liens arising under ERISA);

                               (c)     Liens of mechanics, materialmen, warehousemen, carriers, or other like Liens, securing obligations incurred in the ordinary course of business that are not yet due and payable and Liens of landlords or deposits in favor of landlords securing obligations to pay lease payments that are not yet due and payable or in default;

                               (d)     Good-faith pledges or deposits made, or bonds given, in the ordinary course of business to secure performance of bids, tenders, contracts (including any reclamation bond funds) (other than for the repayment of borrowed money) or leases or other ordinary course obligations, not in excess of the aggregate amount due or which may become due thereunder, or to secure statutory obligations, or surety, appeal, indemnity, performance or other similar bonds required in the ordinary course of business;

B-7

                               (e)     Encumbrances consisting of zoning restrictions, easements or other restrictions on the use of real property, none of which materially impairs the use of such property or the value thereof, and none of which is violated in any material respect by existing or proposed structures or land use;

                               (f)     Liens in favor of the Purchasers;

                               (g)     Liens to secure Indebtedness permitted to be incurred by clause (b) of the definition of Permitted Indebtedness;

                               (h)     Liens specified on Section 5.3 of the Disclosure Schedule;

                               (i)     Liens in respect of judgments which judgments do not constitute an Event of Default;

                               (j)     in the case of the Project Partnership, Liens in effect on the date hereof with respect to Indebtedness permitted by clause (c) of the definition of Permitted Indebtedness;

                               (k)     In the case of the Project Partnership, “Permitted Liens” (as that term is defined in the Credit Agreement as in effect on the date hereof) of the categories described in Section 6.12(b), (c), (d), (e) and (f) of the Credit Agreement as in effect on the date hereof; and

                               (l)     The following, (A) if the validity or amount thereof is being contested in good faith by appropriate and lawful proceedings diligently conducted so long as levy and execution thereon have been stayed and continue to be stayed or (B) if a final judgment is entered and such judgment is discharged within forty-five (45) days of entry, and they do not, in the aggregate, materially impair the ability of the Company to perform its Obligations hereunder:

                                               (1)     Claims or Liens for taxes, assessments or charges due and payable and subject to interest or penalty, provided that the Company maintains such reserves or other appropriate provisions as shall be required by GAAP and pays all such taxes, assessments or charges forthwith upon the commencement of proceedings to foreclose any such Lien;

                                               (2)     Claims, Liens or encumbrances upon, and defects of title to, real or personal property other than the Collateral, including any attachment of personal or real property or other legal process prior to adjudication of a dispute on the merits; and

                                               (3)     Claims or Liens of mechanics, materialmen, warehousemen, carriers, or other statutory nonconsensual Liens.

               “Person” means an individual, partnership, corporation, limited liability company, association, trust, unincorporated organization, business entity or Governmental Authority.

               “Plan” means an “employee benefit plan” (as defined in section 3(3) of ERISA) subject to Title I of ERISA that is or, within the preceding five years, has been established or maintained, or to which contributions are or, within the preceding five years, have been made or required to be made, by the Company or any ERISA Affiliate or with respect to which the Company or any ERISA Affiliate may have any liability.

B-8

               “Preferred Stock” means any class of capital stock (or other equity interests) of a Person that is preferred over any other class of capital stock (or similar equity interests) of such Person as to the payment of dividends or the payment of any amount upon liquidation or dissolution of such Person.

               “Project Distribution” is defined in Section 8.2(b).

               “Project Partnership” means Westmoreland-LG&E Partners, a Virginia partnership that owns the Roanoke Valley independent power project.

               “property” or “properties” means, unless otherwise specifically limited, real or personal property of any kind, tangible or intangible, choate or inchoate, including rights under contracts and the O&M Agreements.

               “PTE” is defined in Section 6.2(a).

               “Purchase Agreement” means the Purchase Agreement dated as of June 23, 2006, by and between LG&E Roanoke Valley, L.P., a California limited partnership and LG&E Power Services LLC, a Delaware limited liability company and the Parent.

               “Purchaser” is defined in the first paragraph of this Agreement.

               “Qualified Institutional Buyer” means any Person who is a “qualified institutional buyer” within the meaning of such term as set forth in Rule 144A(a)(1) under the Securities Act.

               “Related Fund” means, with respect to any holder of any Note, any fund or entity that (i) invests in Securities or bank loans, and (ii) is advised or managed by such holder, the same investment advisor as such holder or by an affiliate of such holder or such investment advisor.

               “Required Holders” means, at any time, the holders of more than 50% in principal amount of the Notes at the time outstanding (exclusive of Notes then owned by the Company or any of its Affiliates).

               “Responsible Officer” means any Senior Financial Officer and any other officer of the Company with responsibility for the administration of the relevant portion of this Agreement.

               “Scheduled Payment Date” is defined in Section 8.2(b)(i).

               “SEC” means the Securities and Exchange Commission of the United States, or any successor thereto.

               “Section 22(a) Purchase Price” is defined in Section 22(a).

               “Section 22(a) Warrant” is defined in Section 22(a).

               “Section 22(a) Warrant Shares” is defined in Section 22(a).

B-9

               “Section 22(c) Purchase Price” is defined in Section 22(c).

               “Section 22(c) Warrant” is defined in Section 22(c).

               “Section 22(c) Warrant Shares” is defined in Section 22(c).

               “Securities” or “Security” shall have the meaning specified in Section 2(1) of the Securities Act.

               “Security Documents” is defined in Section 4.11.

               “Securities Act” means the Securities Act of 1933, as amended from time to time, and the rules and regulations promulgated thereunder from time to time in effect.

               “Senior Financial Officer” means the chief financial officer, principal accounting officer, treasurer or controller of the Company.

               “Subsidiary” means, as to any Person, any other Person in which such first Person or one or more of its Subsidiaries or such first Person and one or more of its Subsidiaries owns, directly or indirectly, sufficient equity or voting interests to enable it or them (as a group) ordinarily, in the absence of contingencies, to elect a majority of the directors (or Persons performing similar functions) of such second Person, and any partnership or joint venture if more than a 50% interest in the profits or capital thereof is owned by such first Person or one or more of its Subsidiaries or such first Person and one or more of its Subsidiaries (unless such partnership or joint venture can and does ordinarily take major business actions without the prior approval of such Person or one or more of its Subsidiaries). Unless the context otherwise clearly requires, any reference to a “Subsidiary” is a reference to a Subsidiary of the Company.

               “Surplus Project Distribution” is defined in Section 8.2(b).

               “SVO” means the Securities Valuation Office of the NAIC or any successor to such Office.

               “Synthetic Lease” means, at any time, any lease (including leases that may be terminated by the lessee at any time) of any property (a) that is accounted for as an operating lease under GAAP and (b) in respect of which the lessee retains or obtains ownership of the property so leased for U.S. federal income tax purposes, other than any such lease under which such Person is the lessor.

               “USA Patriot Act” means United States Public Law 107-56, Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT ACT) Act of 2001, as amended from time to time, and the rules and regulations promulgated thereunder from time to time in effect.

               “Warrants” means, collectively, the Section 22(a) Warrants and any Section 22(c) Warrants. The parties acknowledge that the word “warrants”, when used as a verb without capitalization, refers to an assurance given by one Person to another.

B-10

               “Warrant Shares” means collectively the Section 22(a) Warrants and any Section 22(c) Warrants.

               “Westmoreland-NC” is defined in Section 5.3(a).

               “Westmoreland Power” means Westmoreland Power, Inc., a Delaware corporation.

               “Westmoreland-RV” is defined in Section 5.3(a).

               “Wholly-Owned Subsidiary” means, at any time, any Subsidiary one hundred percent of all of the equity interests (except directors’ qualifying shares) and voting interests of which are owned by any one or more of the Company and the Company’s other Wholly-Owned Subsidiaries at such time.

               “WPO” is defined in Section 22(h)(ii).

               “WUO” is defined in Section 22(h)(ii).

B-11

SCHEDULE 3

WIRE TRANSFER INSTRUCTIONS

1

SCHEDULE 8.2(b)

SCHEDULED PREPAYMENTS IF THE COMPANY GIVES A NOTICE OF EXTENSION

Date	Amount
August 5, 2007	$4,300,000
February 5, 2008	$4,300,000
August 5, 2008	$4,300,000
February 5, 2009	$4,300,000
August 5, 2009	$4,300,000
February 5, 2010	$4,300,000
Maturity Date	$4,200,000

Note: The payment scheduled for February 5, 2007, is required by Section 8.2(a) and is not reflected in this table.

1

EXHIBIT A

[FORM OF NOTE]

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WESTMORELAND ENERGY LLC

FLOATING RATE SENIOR NOTE

No. [_____]	[Date]
$[_____]

               FOR VALUE RECEIVED, the undersigned, WESTMORELAND ENERGY LLC, a Delaware limited liability company (herein called the “Company”), hereby promises to pay to the order of ___________________________, or registered assigns (the “Purchaser”), the principal sum of _________________________________________ and 00/100 U. S. Dollars (US$____________), or so much thereof as shall not have been prepaid, which shall be payable to the Purchaser in the amounts set forth in the Note Purchase Agreement referred to and defined below and with a final payment of the entire balance due on the Maturity Date, with interest (computed on the basis of a 360 day year of twelve 30 day months) on the unpaid principal balance thereof at a floating rate determined in accordance with Schedule 1 attached hereto, from the date hereof, payable semi-annually on February 5 and August 5 in each year, commencing August 5, 2006, or if this Note is dated after August 5, 2006, then commencing with the February 5 or August 5 next succeeding the date hereof, or such other date as set forth in the Note Purchase Agreement (as defined below)(each such date being an “Interest Payment Date”), until the principal hereof shall have become due and payable, provided that from and after the occurrence and during the continuance of an Event of Default, interest shall be payable at a rate per annum equal to the Default Rate.

               Payments of principal of and interest on this Note are to be made in lawful money of the United States of America at the principal office of the Purchaser or at such other place as the holder of this Note shall have designated by written notice to the Company as provided in the Note Purchase Agreement.

               This Note is one of a series of Floating Rate Senior Notes (herein called the “Notes” and individually the “Note”) issued pursuant to that certain Note Purchase Agreement, dated as of June 29, 2006 (as amended from time to time, the “Note Purchase Agreement”), between the Company and the respective Purchasers named therein, and is entitled to the benefits thereof. Each holder of this Note will be deemed, by its acceptance hereof, (i) to have agreed to the confidentiality provisions set forth in Section 20 of the Note Purchase Agreement, and (ii) to have made the representations set forth in Section 6 of the Note Purchase Agreement.

               This Note is a registered note and, as provided in the Note Purchase Agreement, upon surrender of this Note for registration of transfer, duly endorsed, or accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder’s attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary.

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               The Company will make required prepayments of principal on the dates and in the amounts specified in the Note Purchase Agreement. This Note is also subject to optional prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreement, but not otherwise.

               This Note is secured by, and entitled to the benefits of, the Security Documents. Reference is made to the Security Documents for the terms and conditions governing the collateral security for the obligations of the Company hereunder.

               If an Event of Default occurs and is continuing, the principal of this Note may be declared or otherwise become due and payable in the manner and with the effect provided in the Note Purchase Agreement.

               This Note shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of New York applicable to contracts made and to be performed in said state.

               All capitalized terms used herein shall, unless otherwise defined herein or therein, have the same meanings given to such terms in the Note Purchase Agreement.

[SIGNATURE PAGE FOLLOWS]

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[SIGNATURE PAGE 1 OF 1 TO FLOATING RATE SENIOR NOTE]

               IN WITNESS WHEREOF, and intending to be legally bound hereby, the undersigned has executed this Note by its duly authorized officer with the intention that it constitute a sealed instrument.

WESTMORELAND ENERGY LLC
By:	___________________________(SEAL)
	Name:
	Title:

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SCHEDULE 1

to

Floating Rate Senior Note

Interest Rate Provisions

1. Definitions

        As used herein, in addition to the terms described in the Note Purchase Agreement, the following terms shall be defined as follows for purposes of this Schedule:

        Adjusted LIBOR Rate means with respect to any Interest Period a rate per annum equal to the LIBOR Rate for such Interest Period plus 4.00% (four hundred basis points).

        Default Rate shall have the meaning ascribed to such term in the Note Purchase Agreement.

        Initial Interest Period means the period commencing on and including the date of the Closing and ending on (but excluding) August 5, 2006.

        Interest Period means the Initial Interest Period and thereafter each period commencing on an Interest Payment Date and ending on (but excluding) the next succeeding Interest Payment Date. Notwithstanding the foregoing, if any Interest Payment Date is not a Business Day, such Interest Period shall be extended to the next day that is a Business Day and if there is no numerically corresponding date in the appropriate month, such Interest Period shall end on the last Business Day of such month.

        LIBOR Rate means (i) for the Initial Interest Period, the rate which is specified as the six month LIBOR rate set forth in the table entitled “Money Rates” published in The Wall Street Journal on the date that is two Business Days prior to the date of the Closing and (ii) for each other Interest Period, the rate that is specified as the six month LIBOR rate set forth in the table entitled “Money Rates” published in The Wall Street Journal on the Reset Date.

        Reset Date means, with respect to each Interest Period subsequent to the Initial Interest Period, the date which is two Business Days preceding the first day of such Interest Period.

2. Interest Rate Computation

        The Company agrees that the following provisions shall govern the interest accruing and payable on the Notes:

        (a)    Rate. This Note shall bear interest (computed on the basis of a year of 360 days consisting of twelve 30-day months) on the unpaid principal balance thereof, from the date hereof, at a rate per annum equal to the Adjusted LIBOR Rate as in effect for the applicable Interest Period, payable in cash on each Interest Payment Date in each year, until the principal thereof shall become due and payable, provided that from and after the occurrence and during the continuance of an Event of Default, interest shall be payable at a rate per annum equal to the Default Rate.

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        (b)    Payments. All payments and prepayments to be made in respect of principal, interest, or other amounts due from the Company under the Note Purchase Agreement including this Note shall be payable prior to 11:00 a.m., New York City time, on the date when due without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived by the Company, and without set-off, counterclaim or other deduction of any nature. Such payments shall be made to the holder of this Note at the office designated by such holder as provided in Section 14 of the Note Purchase Agreement in U.S. Dollars. The holder’s statement of account, ledger or other relevant record shall, in the absence of manifest error, be presumptive as the statement of the amount of principal of and interest on this Note and shall be deemed an “account stated.”

        (c)    Interest Payment Dates. Interest on the Notes shall be due and payable on the last day of each Interest Period.

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EXHIBIT B-1

[FORM OF PLEDGE AND SECURITY AGREEMENT – COMPANY]

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EXHIBIT B-2

[FORM OF GUARANTY, DISTRIBUTION PLEDGE, COLLATERAL ASSIGNMENT AND SECURITY AGREEMENT –PROJECT PARTNERS]

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EXHIBIT B-3

[FORM OF GUARANTY, PLEDGE AND SECURITY AGREEMENT –
WESTMORELAND POWER, INC. AND SUBSIDIARIES]

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EXHIBIT C

[FORM OF COLLATERAL AGENCY AGREEMENT]

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EXHIBIT D

[FORM OF WARRANT]

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THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUED
UPON ITS EXERCISE ARE SUBJECT TO THE RESTRICTIONS ON
TRANSFER SET FORTH IN SECTION 5 OF THIS WARRANT

Warrant No. ____	Number of Shares: ________ (subject to adjustment)
Date of Issuance: July __, 2007
Original Issue Date (as defined in subsection 2(a)(I)(B)): July __, 2007

WESTMORELAND COAL COMPANY

Common Stock Purchase Warrant

(Void after July __, 2010)

        Westmoreland Coal Company, a Delaware corporation (the “Company”), for value received, hereby certifies that _________________________, or its registered assigns (the “Registered Holder”), is entitled, subject to the terms and conditions set forth below, to purchase from the Company, at any time or from time to time on or after the date of issuance and on or before 5:00 p.m. (New York City time) on July __, 2010, ________ shares of common stock, $2.50 par value per share, of the Company (“Common Stock”), at a purchase price of $____ per share. The shares purchasable upon exercise of this Warrant, and the purchase price per share, each as adjusted from time to time pursuant to the provisions of this Warrant, are hereinafter referred to as the “Warrant Shares” and the “Purchase Price,” respectively.

1. Exercise.

                    (a)    Exercise for Cash. The Registered Holder may, at its option, elect to exercise this Warrant, in whole or in part and at any time or from time to time, by surrendering this Warrant, with the purchase form appended hereto as Exhibit I duly executed by or on behalf of the Registered Holder, at the principal office of the Company, or at such other office or agency as the Company may designate, accompanied by payment in full, in lawful money of the United States, of the Purchase Price payable in respect of the number of Warrant Shares purchased upon such exercise.

                    (b)    Cashless Exercise.

                              (i)     The Registered Holder may, at its option, elect to exercise this Warrant, in whole or in part and at any time or from time to time, on a cashless basis, by surrendering this Warrant, with the purchase form appended hereto as Exhibit I duly executed by or on behalf of the Registered Holder, at the principal office of the Company, or at such other office or agency as the Company may designate, by canceling a portion of this Warrant in payment of the Purchase Price payable in respect of the number of Warrant Shares purchased upon such exercise. In the event of an exercise pursuant to this subsection 1(b), the number of Warrant Shares issued to the Registered Holder shall be determined according to the following formula:

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X = Y(A-B)
    ------
      A

Where: X = the number of Warrant Shares that shall be issued to the Registered Holder;

Y = the number of Warrant Shares for which this Warrant is being exercised (which shall include both the number of Warrant Shares issued to the Registered Holder and the number of Warrant Shares subject to the portion of the Warrant being cancelled in payment of the Purchase Price);

A = the Fair Market Value (as defined below) of one share of Common Stock; and

B = the Purchase Price then in effect.

                               (ii)   The Fair Market Value per share of Common Stock shall be determined as follows:

                                          (A)      If the Common Stock is listed on a national securities exchange, the Nasdaq National Market or another nationally recognized trading system as of the Exercise Date, the Fair Market Value per share of Common Stock shall be deemed to be the average (weighted by daily trading volume) of the Daily Prices per share of the Common Stock for the 20 consecutive trading days ending on the trading day immediately preceding the Exercise Date. “Daily Price” means (1) if the shares of Common Stock then are listed and traded on the New York Stock Exchange, Inc. (“NYSE”), the closing price on such day as reported on the NYSE Composite Transactions Tape, (2) if the shares of Common Stock then are not listed and traded on the NYSE, the closing price on such day as reported by the principal national securities exchange on which the shares are listed and traded, (3) if the shares of Common Stock then are not listed and traded on any such securities exchange, the last reported sale price on such day on the National Market of the National Association of Securities Dealers, Inc. Automated Quotation System (“NASDAQ National Market”), (4) if the shares of Common Stock then are not listed and traded on any such securities exchange and not traded on the NASDAQ National Market, the average of the highest reported bid and lowest reported asked price on such day as reported by NASDAQ or (5) if such shares are not listed and traded on any such securities exchange, not traded on the NASDAQ National Market and bid and asked prices are not reported by NASDAQ, the average of the closing bid and asked prices, as reported by The Wall Street Journal for the over-the-counter market.

                                          (B)      If on any determination date the shares of Common Stock are not quoted by any such organization, then the Daily Price shall be the fair market value of such shares on such determination date as determined in good faith by the Company’s Board of Directors (the “Board”), subject to the objection of the Registered Holder pursuant to Section 2(j).

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                     (c)     Exercise Date. Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the day on which this Warrant shall have been surrendered to the Company as provided in subsection 1(a) or 1(b) above (the “Exercise Date”). At such time, the person or persons in whose name or names any certificates for Warrant Shares shall be issuable upon such exercise as provided in subsection 1(d) below shall be deemed to have become the holder or holders of record of the Warrant Shares represented by such certificates.

                     (d)     Issuance of Certificates. As soon as practicable after the exercise of this Warrant in whole or in part, and in any event within 10 days thereafter, the Company, at its expense, will cause to be issued in the name of, and delivered to, the Registered Holder, or as the Registered Holder (upon payment by the Registered Holder of any applicable transfer taxes) may direct:

                               (i)      a certificate or certificates for the number of full Warrant Shares to which the Registered Holder shall be entitled upon such exercise plus, in lieu of any fractional share to which the Registered Holder would otherwise be entitled, cash in an amount determined pursuant to Section 3 hereof; and

                               (ii)      in case such exercise is in part only, a new warrant or warrants (dated the date hereof) of like tenor, calling in the aggregate on the face or faces thereof for the number of Warrant Shares equal (without giving effect to any adjustment therein) to the number of such shares called for on the face of this Warrant, less the percentage of Warrant Shares for which this Warrant was so exercised (which, in the case of an exercise pursuant to subsection 1(b), shall include both the Warrant Shares issued to the Registered Holder pursuant to such partial exercise and the Warrant Shares subject to the portion of the Warrant being cancelled in payment of the Purchase Price).

                     (e)     Stamp Taxes. The Company shall pay any and all stamp taxes attributable to the issuance of Warrant Shares or other securities issuable upon the exercise of this Warrant or issuable pursuant to Section 2 of this Warrant.

2.  Adjustments.

                     (a)     Adjustments to Purchase Price for Diluting Issues.

                               (i)     Special Definitions. For purposes of this Section 2, the following definitions shall apply:

                                          (A)      “Option” shall mean rights (including stock appreciation rights), options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities.

                                          (B)      “Original Issue Date” shall mean the date on which this Warrant was first issued (or, if this Warrant was issued upon partial exercise of, or in replacement of, another warrant of like tenor, then the date on which such original warrant was first issued).

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                                          (C)      “Convertible Securities” shall mean any evidences of indebtedness, shares or other securities directly or indirectly convertible into or exchangeable for Common Stock, but excluding Options. For the avoidance of doubt, and without limiting the generality of securities that are Convertible Securities, the Company’s Series A Convertible Exchangeable Preferred Stock, and the Depositary Shares representing the Series A Convertible Exchangeable Preferred Stock, are Convertible Securities

                                          (D)      “Additional Shares of Common Stock” shall mean all shares of Common Stock issued (or, pursuant to subsection 2(a)(iii) below, deemed to be issued) by the Company after the Original Issue Date (including any shares of Common Stock owned or held by or for the account of the Company or any of its Subsidiaries prior to such issuance or deemed issuance), other than:

(I) shares of Common Stock issued or issuable upon conversion or exchange of any Convertible Securities or exercise or settlement of any Options outstanding on the Original Issue Date pursuant to the terms in place on the Original Issue Date, without giving effect to any amendments on or after the Original Issue Date;

(II) shares of Common Stock issued or issuable by reason of a dividend, stock split, split-up or other distribution on shares of Common Stock that is covered by subsection 2(b) or 2(c) below; or

(III) shares of Common Stock (or Options with respect thereto) issued or issuable to employees or directors of, or consultants to, the Company or any of its subsidiaries pursuant to a plan, agreement or arrangement approved by the Board and the stockholders of the Company.

                               (ii)     No Adjustment of Purchase Price. No adjustment to the Purchase Price shall be made as the result of the issuance of Additional Shares of Common Stock if the consideration per share (determined pursuant to subsection 2(a)(v)) for such Additional Shares of Common Stock issued or deemed to be issued by the Company is equal to or greater than the greater of (A) the Purchase Price in effect immediately prior to the issuance or deemed issuance of such Additional Shares of Common Stock or (B) the Fair Market Value of the Common Stock in effect immediately prior to the issuance or deemed issuance of such Additional Shares of Common Stock.

                               (iii)     Issue of Securities Deemed Issue of Additional Shares of Common Stock.

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                                          (A)      If the Company at any time or from time to time after the Original Issue Date shall issue any Options or Convertible Securities (excluding Options or Convertible Securities which, upon exercise, settlement, conversion or exchange thereof, would entitle the holder thereof to receive shares of Common Stock that are specifically excepted from the definition of Additional Shares of Common Stock by subsection 2(a)(i)(D) above) or shall fix a record date for the determination of holders of any class of securities entitled to receive any such Options or Convertible Securities, then the maximum number of shares of Common Stock (as set forth in the instrument relating thereto without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise or settlement of such Options or, in the case of Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities, shall be deemed to be Additional Shares of Common Stock issued as of the time of such issue or, in case such a record date shall have been fixed, as of the close of business on such record date.

                                          (B)      If the terms of any Option or Convertible Security, the issuance of which resulted in an adjustment to the Purchase Price pursuant to the terms of subsection 2(a)(iv) below, are revised (either automatically pursuant to the provisions contained therein or as a result of an amendment to such terms) to provide for either (1) any increase or decrease in the number of shares of Common Stock issuable upon the exercise, settlement, conversion or exchange of any such Option or Convertible Security or (2) any increase or decrease in the consideration payable to the Company upon such exercise, settlement, conversion or exchange, then, effective upon such increase or decrease becoming effective, the Purchase Price computed upon the original issue of such Option or Convertible Security (or upon the occurrence of a record date with respect thereto) shall be readjusted to such Purchase Price as would have obtained had such revised terms been in effect upon the original date of issuance of such Option or Convertible Security. Notwithstanding the foregoing, no adjustment pursuant to this clause (B) shall have the effect of increasing the Purchase Price to an amount which exceeds the lower of (i) the Purchase Price on the original adjustment date, or (ii) the Purchase Price that would have resulted from any issuances of Additional Shares of Common Stock between the original adjustment date and such readjustment date.

                                          (C)      If the terms of any Option or Convertible Security issued after the Original Issue Date (excluding Options or Convertible Securities which, upon exercise, settlement, conversion or exchange thereof, would entitle the holder thereof to receive shares of Common Stock that are specifically excepted from the definition of Additional Shares of Common Stock by subsection 2(a)(i)(D) above), the issuance of which did not result in an adjustment to the Purchase Price pursuant to the terms of subsection 2(a)(iv) below because the consideration per share (determined pursuant to subsection 2(a)(v) hereof) of the Additional Shares of Common Stock subject thereto was equal to or greater than the greater of (I) the Purchase Price or (II) the Fair Market Value then in effect, are revised after the Original Issue Date (either automatically pursuant the provisions contained therein or as a result of an amendment to such terms) to provide for either (1) any increase or decrease in the number of shares of Common Stock issuable upon the exercise, settlement, conversion or exchange of any such Option or Convertible Security or (2) any increase or decrease in the consideration payable to the Company upon such exercise, settlement, conversion or exchange, then such Option or Convertible Security, as so amended, and the Additional Shares of Common Stock subject thereto (determined in the manner provided in subsection 2(a)(iii)(A) above) shall be deemed to have been issued effective upon such increase or decrease becoming effective.

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                                          (D)      Upon the expiration or termination of any unexercised or expired Option or unconverted or unexchanged (as applicable) Convertible Security which resulted (either upon its original issuance or upon a revision of its terms) in an adjustment to the Purchase Price pursuant to the terms of subsection 2(a)(iv) below then, to the extent such Option or Convertible Security has not been exercised,, the Purchase Price shall be readjusted to such Purchase Price as would have obtained had such Option or Convertible Security never been issued.

                                          (E)      No adjustment in the Purchase Price shall be made upon the issue of shares of Common Stock or Convertible Securities upon the exercise or settlement of Options or the issue of shares of Common Stock upon the conversion or exchange of Convertible Securities.

                               (iv)     Adjustment of Purchase Price Upon Issuance of Additional Shares of Common Stock. In the event the Company shall at any time after the Original Issue Date issue Additional Shares of Common Stock (including Additional Shares of Common Stock deemed to be issued pursuant to subsection 2(a)(iii)), without consideration or for a consideration per share less than the greater of (A) the Purchase Price or (B) the Fair Market Value in effect immediately prior to such issue, then the Purchase Price shall be reduced, concurrently with such issue, to a price (calculated to the nearest cent) determined by multiplying such Purchase Price by a fraction, (A) the numerator of which shall be (1) the number of shares of Common Stock outstanding immediately prior to such issue plus (2) the number of shares of Common Stock which the aggregate consideration received or to be received by the Company for the total number of Additional Shares of Common Stock so issued would purchase at such Fair Market Value; and (B) the denominator of which shall be (1) the number of shares of Common Stock outstanding immediately prior to such issue plus (2) the number of such Additional Shares of Common Stock so issued; provided that, (i) for the purpose of this subsection 2(a)(iv), all shares of Common Stock issuable upon exercise of incentive stock options and non-qualified stock options and all shares of Common Stock issuable upon conversion or exchange of Convertible Securities outstanding immediately prior to such issue shall be deemed to be outstanding, and (ii) the number of shares of Common Stock deemed issuable upon conversion or exchange of such outstanding Convertible Securities shall be determined after giving effect to any adjustments to the conversion or exchange price or conversion or exchange rate of such Convertible Securities resulting from the issuance of Additional Shares of Common Stock that is the subject of this calculation.

                                (v)     Determination of Consideration. For purposes of this subsection 2(a), the consideration received by the Company for the issue of any Additional Shares of Common Stock shall be computed as follows:

                                          (A)     Cash and Property: Such consideration shall:

(I) insofar as it consists of cash, be computed at the aggregate of cash received by the Company, excluding amounts paid or payable for accrued interest; and

(II) insofar as it consists of property other than cash (“Non-Cash Consideration”), be computed at the fair market value thereof at the time of such issue; and

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(III) in the event Additional Shares of Common Stock are issued together with other shares or securities or other assets of the Company for consideration which covers both, be the proportion of such consideration so received, computed as provided in clauses (I) and (II) above.

                                          (B)     Options and Convertible Securities. The consideration per share received by the Company for Additional Shares of Common Stock deemed to have been issued pursuant to subsection 2(a)(iii), relating to Options and Convertible Securities, shall be determined by dividing

(I) the total amount, if any, received or receivable by the Company as consideration for the issue of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration) payable to the Company upon the exercise or settlement of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise or settlement of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities, by

(II) the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise or settlement of such Options or the conversion or exchange of such Convertible Securities.

                                (vi)     Multiple Closing Dates. In the event the Company shall issue on more than one date Additional Shares of Common Stock that are comprised of shares of the same series or class of Preferred Stock, and such issuance dates occur within a period of no more than 120 days, then, upon the final such issuance, the Purchase Price shall be readjusted to give effect to all such issuances as if they occurred on the date of the final such issuance (and without giving effect to any adjustments as a result of such prior issuances within such period).

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                     (b)     Adjustment for Stock Splits and Combinations. If the Company shall at any time or from time to time after the Original Issue Date effect a subdivision of the outstanding Common Stock, the Purchase Price then in effect immediately before that subdivision shall be proportionately decreased. If the Company shall at any time or from time to time after the Original Issue Date combine the outstanding shares of Common Stock, the Purchase Price then in effect immediately before the combination shall be proportionately increased. Any adjustment under this paragraph shall become effective at the close of business on the date the subdivision or combination becomes effective.

                     (c)     Adjustment for Certain Dividends and Distributions. In the event the Company at any time, or from time to time after the Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in additional shares of Common Stock, then and in each such event the Purchase Price then in effect immediately before such event shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying the Purchase Price then in effect by a fraction:

                                          (A)      the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and

                                           (B)      the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution;

provided, however, that if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Purchase Price shall be recomputed accordingly as of the close of business on such record date and thereafter the Purchase Price shall be adjusted pursuant to this paragraph as of the time of actual payment of such dividends or distributions.

                     (d)    Adjustment in Number of Warrant Shares. When any adjustment is required to be made in the Purchase Price pursuant to subsections 2(a), 2(b), 2(c) or 2(e), the number of Warrant Shares purchasable upon the exercise of this Warrant shall be changed to the number determined by dividing (i) an amount equal to the number of shares issuable upon the exercise of this Warrant immediately prior to such adjustment, multiplied by the Purchase Price in effect immediately prior to such adjustment, by (ii) the Purchase Price in effect immediately after such adjustment.

                     (e)    Adjustment for Repurchases of Common Stock, Convertible Securities, Warrants and Options. If at any time or from time to time the Company shall repurchase, redeem, retire or otherwise acquire Common Stock (a “Redemption”) for a consideration per share for such outstanding share of Common Stock greater than the Fair Market Value per share as of the date of such Redemption, then the Purchase Price in effect immediately prior to such Redemption shall be adjusted by multiplying (A) the Purchase Price in effect immediately prior to such Redemption by (B) a fraction, the numerator of which shall be the number obtained by subtracting (x) the aggregate consideration paid by the Company in connection with such Redemption from (y) the product of the Fair Market Value per share effective on the date of the Redemption and the number of outstanding shares of Common Stock immediately prior to the Redemption, and the denominator of which shall be the product of the Fair Market Value per share effective on the date of the Redemption and number of outstanding shares of Common Stock immediately after such Redemption.

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                     (f)    Adjustments for Other Dividends and Distributions. In the event the Company at any time or from time to time after the Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Company (other than shares of Common Stock) or in cash or other property (other than regular cash dividends paid out of earnings or earned surplus, determined in accordance with generally accepted accounting principles, and specifically excluding any special dividends or cash dividends in an annualized amount in excess of five percent of the Fair Market Value of a share of Common Stock), then and in each such event provision shall be made so that the Registered Holder shall receive upon exercise hereof, in addition to the number of shares of Common Stock issuable hereunder, the kind and amount of securities of the Company, cash or other property which the Registered Holder would have been entitled to receive had this Warrant been exercised on the date of such event and had the Registered Holder thereafter, during the period from the date of such event to and including the Exercise Date, retained any such securities receivable during such period, giving application to all adjustments called for during such period under this Section 2 with respect to the rights of the Registered Holder.

                     (g)    Adjustment for Reorganization. If there shall occur any reorganization, recapitalization, reclassification, consolidation or merger involving the Company in which the Common Stock is converted into or exchanged for securities, cash or other property (other than a transaction covered by subsections 2(b), 2(c) or 2(e)) (collectively, a “Reorganization”), then, following such Reorganization, the Registered Holder shall receive upon exercise hereof the kind and amount of securities, cash or other property which the Registered Holder would have been entitled to receive pursuant to such Reorganization if such exercise had taken place immediately prior to such Reorganization. In any such case, appropriate adjustment (as determined in good faith by the Board acting reasonably) shall be made in the application of the provisions set forth herein with respect to the rights and interests thereafter of the Registered Holder, to the end that the provisions set forth in this Section 2 (including provisions with respect to changes in and other adjustments of the Purchase Price) shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities, cash or other property thereafter deliverable upon the exercise of this Warrant.

                     (h)    Other Action Affecting Common Stock. In case at any time or from time to time the Company shall take any action affecting or relating to its Common Stock of the type contemplated by Section 2 hereof or otherwise similar to the type of events contemplated by Section 2 hereof, but not expressly provided for by such Section, then, unless in the good faith opinion of the Board, such action will not have an adverse effect upon the rights of the Registered Holder (taking into account the cumulative or other effect of any prior actions which the Board deemed not to adversely affect the rights of the Registered Holder), the Purchase Price and the number of Warrant Shares purchasable upon the exercise of this Warrant shall be adjusted in such manner and at such time as the Board may in good faith determine to be equitable under the circumstances.

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                     (i)    Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Purchase Price pursuant to this Section 2, the Company at its expense shall, as promptly as reasonably practicable but in any event not later than 10 days thereafter, compute such adjustment or readjustment in accordance with the terms hereof and furnish to the Registered Holder a certificate setting forth such adjustment or readjustment (including the kind and amount of securities, cash or other property for which this Warrant shall be exercisable and the Purchase Price) and showing in detail the facts upon which such adjustment or readjustment is based. The Company shall, as promptly as reasonably practicable after the written request at any time of the Registered Holder (but in any event not later than 10 days thereafter), furnish or cause to be furnished to the Registered Holder a certificate setting forth (i) the Purchase Price then in effect and (ii) the number of shares of Common Stock and the amount, if any, of other securities, cash or property which then would be received upon the exercise of this Warrant.

                     (j)    Notice of Proposed Transaction, Fair Marker Value per Share and Fair Market Value of Non-Cash Consideration. At least twenty (20) Business Days, but not more than sixty (60) Business Days, before taking any binding action that would require that the Purchase Price be adjusted under this Section 2 hereof, the Company shall give the Registered Holder written notice of the proposed transaction, the amount of the Fair Market Value per share and the amount of the fair market value of any Non-Cash Consideration involved in the transaction as determined by the Board of Directors of the Company (including the basis therefor), which Fair Market Value per share and/or fair market value of Non-Cash Consideration shall be binding on the Registered Holder unless it objects thereto within fifteen (15) Business Days of receipt of the Company’s notice. In the event the Company and the Registered Holder cannot agree to the amount of the Fair Market Value per share or the fair market value of the Non-Cash Consideration within fifteen (15) Business Days of the date of the Registered Holder’s objection, the disputed amount shall be determined by a national or regional investment bank or a national accounting firm mutually selected by the Registered Holder and the Company, the fees and expenses of which shall be borne equally by the Company and the Registered Holder. Notwithstanding anything to the contrary set forth in this paragraph, the Company shall not be required to give the notice described in the first sentence of this paragraph unless the Registered Holder signs a customary confidentiality agreement pursuant to which it agrees to maintain the confidentiality of material, non-public information until such time as the Company publicly discloses such information.

        3.    Fractional Shares. The Company shall not be required upon the exercise of this Warrant to issue any fractional shares, but shall pay the value thereof to the Registered Holder in cash on the basis of the Fair Market Value per share of Common Stock, as determined pursuant to subsection 1(b)(ii) above. Fractional shares will, however, be taken into account for purposes of adjustments.

        4.    Investment Representations. The initial Registered Holder represents and warrants to the Company as follows:

                     (a)    Investment. It is acquiring the Warrant, and (if and when it exercises this Warrant) it will acquire the Warrant Shares, for its own account for investment and not with a view to, or for sale in connection with, any distribution thereof, nor with any present intention of distributing or selling the same; and the Registered Holder has no present or contemplated agreement, undertaking, arrangement, obligation, indebtedness or commitment providing for the disposition thereof.

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                     (b)    Accredited Investor. The Registered Holder is an “accredited investor” as defined in Rule 501(a) under the Securities Act of 1933, as amended (the “Act”).

                     (c)    Experience. The Registered Holder has made such inquiry concerning the Company and its business and personnel as it has deemed appropriate; and the Registered Holder has sufficient knowledge and experience in finance and business that it is capable of evaluating the risks and merits of its investment in the Company.

        5.    Transfers, etc.

                     (a)     This Warrant and the Warrant Shares shall not be sold or transferred unless either (i) they first shall have been registered under the Act, or (ii) the Company first shall have been furnished with an opinion of legal counsel, reasonably satisfactory to the Company, to the effect that such sale or transfer is exempt from the registration requirements of the Act. Notwithstanding the foregoing, no registration or opinion of counsel shall be required for (i) any transfer by a Registered Holder which is an entity to any other entity controlling, controlled by or under common control with such entity (as used in this sentence, the term “control,” including the correlative terms “controlling,” “controlled by” and “under common control with,” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of an entity, whether through ownership of voting securities, by contract or otherwise) a transfer by a Registered Holder which is a partnership to a partner of such partnership or a retired partner of such partnership or to the estate of any such partner or retired partner, or a transfer by a Registered Holder which is a limited liability company to a member of such limited liability company or a retired member or to the estate of any such member or retired member, provided that the transferee in each case agrees in writing to be subject to the terms of this Section 5, or (ii) a transfer made in accordance with Rule 144 under the Act.

                     (b)     Each certificate representing Warrant Shares shall bear a legend substantially in the following form:

        “The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended, and may not be offered, sold or otherwise transferred, pledged or hypothecated unless and until such securities are registered under such Act or an opinion of counsel satisfactory to the Company is obtained to the effect that such registration is not required.”

        The foregoing legend shall be removed from the certificates representing any Warrant Shares, at the request of the holder thereof, at such time as they become eligible for resale pursuant to Rule 144(k) under the Act.

                     (c)     The Company will maintain a register containing the name and address of the Registered Holder of this Warrant. The Registered Holder may change its address as shown on the warrant register by written notice to the Company requesting such change.

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                     (d)     Subject to the provisions of Section 5 hereof, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of this Warrant with a properly executed assignment (in the form of Exhibit II hereto) at the principal office of the Company (or, if another office or agency has been designated by the Company for such purpose, then at such other office or agency).

        6.    Affirmative Actions to Permit Exercise and Realization of Benefits. If any Warrant Shares reserved or to be reserved for the purpose of the exercise of this Warrant, or any other securities reserved or to be reserved for the purpose of issuance pursuant to Section 2 hereof, require registration with or approval of any governmental authority under any federal or state law before such Warrant Shares or other securities may be validly delivered upon exercise of this Warrant, then in such case, the Company covenants that it will to such extent, at its sole expense, use its best efforts to secure such registration or approval, as the case may be (including but not limited to approvals or expirations of waiting periods required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended and registration under the Securities Act of 1933).

        7.    Listing of Company Securities. The Company covenants that from and after such time as the Common Stock or any other Company securities (or any securities of any successor to the Company) are listed on any national securities exchange or automated quotation system and for so long as the Common Stock or such other Company securities (or any securities of any successor to the Company) shall remain so listed, the Company (or its successor) will, if permitted by the rules of such exchange or such system, list and keep listed on each such exchange or system, upon official notice of issuance, all Warrant Shares (or other securities) issuable upon exercise of this Warrant and all other securities issuable pursuant to Section 7 hereof.

        8.    Validly Issued Shares of Common Stock. The Company covenants that all Warrant Shares (or other securities) that may be delivered upon exercise of this Warrant (including those issued pursuant to Section 2 hereof) shall upon delivery by the Company, and payment of the Purchase Price therefor by the Registered Holder, be duly authorized and validly issued, fully paid and nonassessable, free from all taxes, liens and charges with respect to the issue or delivery thereof and otherwise free of all other security interests, encumbrances and claims of any nature whatsoever other than liens created by the Registered Holder.

        9.    Financial Information. The Company shall provide or cause to be provided to the Registered Holder (i) copies of all notices, financial statements, reports and information which it provides to its shareholders (concurrently with the transmission to its shareholders), and (ii) upon the execution of a confidentiality agreement in form and substance reasonably satisfactory to the Company, promptly, such additional financial and other information as the Registered Holder may from time to time reasonably request.

        10.    No Impairment. The Company will not, by amendment of its charter or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Registered Holder against impairment.

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        11.    Notice of Proposed Fundamental Changes. In case the Company shall propose (A) to make any distributions payable in Common Stock to the holders of its Common Stock or to make any other distribution to the holders of its Common Stock, (B) to offer to the holders of its Common Stock rights to subscribe for or to purchase any Convertible Securities or additional Common Stock or any other securities, warrants, rights or options, (C) to effect any reclassification of its Common Stock, (D) to effect any capital reorganization, (E) to effect any consolidation or merger, exchange of securities (other than exchanges of Common Stock for the Company’s Series A Convertible Exchangeable Preferred Stock on terms that the Board has determined are fair to the holders of Common Stock), or sale, lease or other disposition of all or substantially all of its property, assets or business, (F) to effect the liquidation, dissolution or winding up of the Common Stock, or (G) to transfer at least fifty percent (50%) of its Common Stock on its books and records in connection with a sale of the Common Stock, then in each such case the Company shall give to the Registered Holder advance written notice of such proposed action, which shall specify the record date for the purposes of such distribution or rights, or the date on which such reclassification, reorganization, consolidation, merger, exchange of securities, sale, transfer, disposition, liquidation, dissolution or winding up is to take place and the date of participation therein by the holders of Common Stock, if any such date is to be fixed, or the date on which the transfer of Common Stock is to occur, and shall also set forth such facts with respect thereto as shall be reasonably necessary to indicate the effect of such action on the Common Stock and on the Purchase Price after giving effect to any adjustment which will be required as a result of such action. Such notice shall be so given in the case of any action covered by clause (A) or (B) above at least twenty (20) days prior to the record date for determining holders of the Common Stock for purposes of such action and, in the case of any other such action, at least twenty (20) days prior to the earlier of the date of the taking of such proposed action or the date of participation therein by the holders of Common Stock.

        12.    No Dilution or Impairment. The Company shall not, by amendment of its Certificate of Incorporation or Bylaws or through any reorganization, recapitalization, transfer of assets, consolidation, merger, exchange of securities, dissolution or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, including without limitation the adjustments required under Section 2 hereof, and shall at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate to protect the rights of the Registered Holder against dilution or other impairment in the manner contemplated by this Warrant but not specifically provided for herein. Without limiting the generality of the foregoing and notwithstanding any other provision of this Warrant to the contrary (including by way of implication), the Company shall take all such action as may be necessary or appropriate so that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock (or other securities) upon the exercise of this Warrant.

        13.    Reservation of Stock. The Company will at all times reserve and keep available, solely for issuance and delivery upon the exercise of this Warrant, such number of Warrant Shares and other securities, cash and/or property, as from time to time shall be issuable upon the exercise of this Warrant.

        14.    Exchange or Replacement of Warrants.

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                     (a)     Upon the surrender by the Registered Holder, properly endorsed, to the Company at the principal office of the Company, the Company will, subject to the provisions of Section 5 hereof, issue and deliver to or upon the order of the Registered Holder, at the Company’s expense, a new Warrant or Warrants of like tenor, in the name of the Registered Holder or as the Registered Holder (upon payment by the Registered Holder of any applicable transfer taxes) may direct, calling in the aggregate on the face or faces thereof for the number of shares of Common Stock (or other securities, cash and/or property) then issuable upon exercise of this Warrant.

                     (b)     Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and (in the case of loss, theft or destruction) upon delivery of an indemnity agreement (with surety if reasonably required) in an amount reasonably satisfactory to the Company, or (in the case of mutilation) upon surrender and cancellation of this Warrant, the Company will issue, in lieu thereof, a new Warrant of like tenor.

        15.    Remedies. In addition to all other remedies for the Company’s breach of its obligations under this Warrant that the Registered Holder may have under law or in equity, the Registered Holder may (i) at the Company’s expense, elect to have the number of Warrant Shares and Purchase Price fully and completely recomputed in order to remove and remedy any prejudice which has been or might have been caused to it by such breach, including, without limitation, rescinding and annulling any or all exercises of the Warrant and waivers or agreements made subsequent to such breach, and (ii) bring any action for injunctive relief or specific performance of any term or covenant contained herein, the Company hereby acknowledging that an action for money damages may not be adequate to protect the interests of the Registered Holder hereunder.

        16.    Notices. All notices and other communications from the Company to the Registered Holder in connection herewith shall be mailed by certified or registered mail, postage prepaid, or sent via a reputable nationwide overnight courier service guaranteeing next business day delivery, to the address last furnished to the Company in writing by the Registered Holder. All notices and other communications from the Registered Holder to the Company in connection herewith shall be mailed by certified or registered mail, postage prepaid, or sent via a reputable nationwide overnight courier service guaranteeing next business day delivery, to the Company at its principal office set forth below. If the Company should at any time change the location of its principal office to a place other than as set forth below, it shall give prompt written notice to the Registered Holder and thereafter all references in this Warrant to the location of its principal office at the particular time shall be as so specified in such notice. All such notices and communications shall be deemed delivered (i) two business days after being sent by certified or registered mail, return receipt requested, postage prepaid, or (ii) one business day after being sent via a reputable nationwide overnight courier service guaranteeing next business day delivery.

        17.    No Rights as Stockholder. Until the exercise of this Warrant, the Registered Holder shall not have or exercise any rights by virtue hereof as a stockholder of the Company. Notwithstanding the foregoing, in the event (i) the Company effects a split of the Common Stock by means of a stock dividend and the Purchase Price of and the number of Warrant Shares are adjusted as of the date of the distribution of the dividend (rather than as of the record date for such dividend), and (ii) the Registered Holder exercises this Warrant between the record date and the distribution date for such stock dividend, the Registered Holder shall be entitled to receive, on the distribution date, the stock dividend with respect to the shares of Common Stock acquired upon such exercise, notwithstanding the fact that such shares were not outstanding as of the close of business on the record date for such stock dividend.

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        18.    Amendment or Waiver. Any term of this Warrant may be amended or waived only by an instrument in writing signed by the party against which enforcement of the change or waiver is sought. No waivers of any term, condition or provision of this Warrant, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such term, condition or provision.

        19.    Section Headings. The section headings in this Warrant are for the convenience of the parties and in no way alter, modify, amend, limit or restrict the contractual obligations of the parties.

        20.    Governing Law. This Warrant will be governed by and construed in accordance with the internal laws of the State of New York (without reference to the conflicts of law provisions thereof).

        21.    Waiver of Jury Trial. THE COMPANY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS WARRANT.

        22.    Facsimile Signatures. This Warrant may be executed by facsimile signature.

[The remainder of this page is intentionally left blank]

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EXECUTED as of the Date of Issuance indicated above.

WESTMORELAND COAL COMPANY
By:	___________________________
	Name:
	Title:

	WESTMORELAND COAL COMPANY
ATTEST:
___________________________
Name:
Title:

Notice Address of the Company:

Westmoreland Coal Company

2 North Cascade Avenue, 14th Floor

Colorado Springs, CO 80903

Attention: General Counsel

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EXHIBIT I

EXERCISE NOTICE AND LETTER OF REPRESENTATIONS

Dated:____________

Westmoreland Coal Company
2 North Cascade Avenue, 14th Floor
Colorado Springs, CO 80903
Attention: General Counsel
Ladies and Gentlemen:

1.         Purchase

        The undersigned, the registered holder of the attached Warrant (No. ___) (the “Warrant”, and the registered holder the “Purchaser”), hereby elects to purchase (check applicable box):

              _________ shares of the common stock, par value $2.50 per share (the Common Stock”), of Westmoreland Coal Company (the “Company”) covered by such Warrant; or

              the maximum number of shares of Common Stock covered by such Warrant pursuant to the cashless exercise procedure set forth in subsection 1(b).

        The Purchaser herewith makes payment of the full purchase price for such shares at the price per share provided for in such Warrant. Such payment takes the form of (check applicable box or boxes):

 $_________ in lawful money of the United States; and/or

 the cancellation of such portion of the attached Warrant as is exercisable for a total of _________ Warrant Shares (using a Fair Market Value of $_________ per share for purposes of this calculation); and/or

 the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 1(b), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 1(b).

2.        Representations [Note: These representations shall only be required if the shares of Common Stock purchased pursuant to this Exercise Notice are not registered under the Securities Act of 1933 on the date of this Exercise Notice.]

        The Purchaser hereby represents and warrants to the Company, in connection with the purchase of shares of Common Stock pursuant to the attached Warrant, that:

        (a)     The Purchaser is acquiring the shares of Common Stock for its own account for investment and not with a view to, or for sale in connection with, any distribution thereof, nor with any present intention of distributing or selling the same; and the Purchaser has no present or contemplated agreement, undertaking, arrangement, obligation, indebtedness or commitment providing for the disposition thereof.

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        (b)     The Purchaser is an “accredited investor” as defined in Rule 501(a) under the Securities Act of 1933, as amended (the “Act”).

        (c)     The Purchaser has made such inquiry concerning the Company and its business and personnel as it has deemed appropriate; and the Purchaser has sufficient knowledge and experience in finance and business that it is capable of evaluating the risks and merits of its investment in the Company.

        IN WITNESS WHEREOF, the Purchaser has caused this Exercise Notice and Letter of Representations to be executed and delivered by the undersigned, thereunto duly authorized, as of the date first written above.

[PURCHASER NAME]
By:	___________________________
	Name:
	Title:
	Address: _______________________

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EXHIBIT II

ASSIGNMENT FORM

        FOR VALUE RECEIVED, ________________________________________ hereby sells, assigns and transfers all of the rights of the undersigned under the attached Warrant (No. ____) with respect to the number of shares of Common Stock of Westmoreland Coal Company covered thereby set forth below, unto:

Name of Assignee Address No. of Shares

Dated:_____________________                 Signature:________________________________

Signature Guaranteed:

By: _______________________

The signature should be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program) pursuant to Rule 17Ad 15 under the Securities Exchange Act of 1934.

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EX-31

Exhibit 31

CERTIFICATION

I, Christopher K. Seglem, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Westmoreland Coal Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:   November 3, 2006 /s/ Christopher K. Seglem

Name:	Christopher K. Seglem
Title:	Chairman of the Board, President and Chief Executive Officer

1

CERTIFICATION

I, David J. Blair, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Westmoreland Coal Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:   November 3, 2006 /s/ David J. Blair

Name:	David J. Blair
Title:	Chief Financial Officer

2

EX-32

Exhibit 32

STATEMENT PURSUANT TO 18 U.S.C. § 1350

Pursuant to 18 U.S.C. § 1350, each of the undersigned certifies that this Quarterly Report on Form 10-Q for the period ended June 30, 2006 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in this report fairly presents, in all material respects, the financial condition and results of operations of Westmoreland Coal Company.

Date:   November 3, 2006 /s/ Christopher K. Seglem

Christopher K. Seglem

Chief Executive Officer

Date:   November 3, 2006 /s/ David J. Blair

David J. Blair

Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to Westmoreland Coal Company and will be retained by Westmoreland Coal Company and furnished to the Securities and Exchange Commission or its staff upon request.