EMPLOYMENT AGREEMENT
EXECUTION
COPY
This
AGREEMENT is entered into by and between Patriot Coal Corporation, a
Delaware corporation (the “Company”), and the undersigned executive (the
“Executive”), with effect as of the effective date of the merger pursuant to
that certain Agreement and Plan of Merger, dated as of April 2, 2008 (the
“Merger Agreement”), by and among Magnum Coal Company, Patriot Coal Corporation,
Colt Merger Corporation and ArcLight Energy Partners Fund I, L.P. and ArcLight
Energy Partners Fund II, L.P. (such date, the “Closing Date”).
RECITALS
To induce
Executive to serve in the executive team position set forth on the signature
page hereof, the Company desires to provide Executive with compensation and
other benefits on the terms and subject to the conditions set forth in this
Agreement.
Executive
is willing to accept such employment and perform services for the Company, on
the terms and subject to the conditions hereinafter set forth.
It is
therefore hereby agreed by and between the parties as follows:
1. Employment.
1.1 Subject to
the terms and conditions of this Agreement, the Company agrees to employ
Executive during the term hereof in the executive team position set forth on the
signature page hereof. In such capacity, Executive shall report to
the Chief Executive Officer of the Company (the “CEO”) and shall have the
customary powers, responsibilities and authorities of executives holding such
positions in publicly-held corporations of the size, type and nature of the
Company, as it exists from time to time, and as are assigned by the
CEO.
1.2 Subject to
the terms and conditions of this Agreement, Executive hereby accepts employment
in the executive team position set forth on the signature page hereof commencing
on the commencement date set forth on the signature page hereof (the
“Commencement Date”) and agrees, subject to any period of vacation or sick
leave, to devote his full business time and efforts to the performance of
services, duties and responsibilities in connection therewith, subject at all
times to review and control of the CEO.
1.3 Nothing in
this Agreement shall preclude Executive from engaging in trade association
activities, charitable work and community affairs, from delivering lectures,
fulfilling speaking engagements or teaching at educational institutions, from
managing any investment made by him or his immediate family with respect to
which Executive or such family member is not substantially involved with the
management or operation of the entity in which Executive has invested (provided
that no such investment in publicly traded equity securities or other property
may exceed five percent (5%) of the equity of any entity, without the prior
approval of the CEO or the Board of Directors of the Company (the “Board”)) or
from serving, subject to the prior approval of the CEO or the Board, as a member
of the board of directors or as a trustee of any other corporation, association
or entity, to the extent that any of the above activities do not materially
interfere with the performance of his duties hereunder. For purposes
of the
preceding sentence, any approval by the CEO or the Board required therein shall
not be unreasonably withheld.
2. Term of
Employment. Executive’s term of employment under this
Agreement (the “Term of Employment”) shall commence on the Commencement Date
and, subject to termination as provided in this Agreement, shall have an initial
term of three years (the “Initial Term”). Following the Initial Term,
Executive’s employment shall be employment “at will” unless both parties elect
to extend the Term of Employment. Following the Term of Employment, Executive
shall be not entitled to any benefits upon any termination of employment except
for the Accrued Obligations (as defined in Section 6.1 hereof).
3. Compensation.
3.1
Salary. During
the Term of Employment, the Company shall pay Executive a base salary (“Base
Salary”) in the amount set forth on the signature page hereof. Such
Base Salary shall be payable in accordance with the ordinary payroll practices
of the Company. During the Term of Employment, the Board and the CEO
shall review in good faith, at least annually, Executive’s Base Salary in
accordance with the Company’s customary procedures and practices regarding the
salaries of senior executives and may, if determined by the Board to be
appropriate, increase Executive’s Base Salary following such
review. “Base Salary” for all purposes herein shall be deemed to be a
reference to any such increased amount.
3.2 Annual
Bonus. In addition to his Base Salary, Executive shall,
commencing with the 2008 calendar year and continuing for each calendar year
thereafter during the Term of Employment, be eligible to receive an annual cash
bonus (the “Bonus”) in accordance with a program to be developed by the Board,
based on achievement of performance targets established by the compensation
committee of the Board (the “Compensation Committee”) as soon as practicable at
or after the beginning of the calendar year to which the performance targets
relate. The target for the 2008 bonus amount shall be determined
before or as soon as practicable after the Commencement Date, it being
understood that Executive shall be qualified to receive a Bonus for 2008 as
though he had been employed by the Company since January 1,
2008. Executive’s target and maximum annual Bonus percentages are set
forth on the signature page hereof. A Bonus award for any calendar
year shall be payable to Executive at the time bonuses are paid to executive
officers for such calendar year in accordance with the Company’s policies and
practices as set by the Board in consultation with the CEO, but in no event
later than March 15 of the calendar year following the later of (a) the calendar
year in which the Bonus is earned or (b) the calendar year in which the Bonus is
no longer subject to a substantial risk of forfeiture within the meaning of
Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and
the guidance promulgated and in effect thereunder (“Section
409A”).
4. Employee
Benefits.
4.1 Equity and
Stock Options.
(a) Executive shall receive an extended
long-term incentive award (the “Extended Long Term Incentive Award”) with a
value (as determined by the
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Compensation Committee in good faith)
that is at least equal to the percentage of Executive’s initial Base Salary as
set forth on the signature page hereof. Such award shall consist of
stock options and restricted stock units, which will be granted effective on the
Closing Date. The stock options will be granted with an exercise
price per share equal to the closing market price of a share of Company common
stock on the grant date. The restricted stock units will be granted
with a value per unit equal to the closing market price of a share of Company
common stock on the grant date.
(b) With respect to each calendar year
during the Term of Employment, commencing with the 2008 calendar year, Executive
shall receive equity-based compensation awards under the Company’s equity
incentive plans (the “Annual Long Term Incentive Awards” and, together with the
Extended Long Term Incentive Award, the “Long Term Incentive Awards”) with a
value at least equal to the percentage of Executive’s Base Salary (as in effect
on the date of such award) as set forth on the signature page
hereof. The Annual Long Term Incentive Award with respect to the 2008
calendar year shall be made in the form of restricted stock granted effective on
the Closing Date, with a value per share that equals the closing market price of
a share of Company common stock on the grant date. The Annual Long
Term Incentive Award with respect to each calendar year after 2008 shall be made
effective on the first business day of such calendar year.
(c) As of the date of termination of
Executive’s employment due to Executive’s Disability (as hereinafter defined) or
death, or upon the occurrence of a change in control (as defined in the
applicable equity-based plan or award) all outstanding Long Term Incentive
Awards and any other equity-based awards granted to Executive by the Company
shall become immediately and fully vested; provided, however, that any
performance units granted to Executive shall not become fully vested upon a
change in control unless otherwise provided in the applicable plan or award
agreement. In the case of termination of Executive’s employment due
to Executive’s Disability (as defined in Section 6.4) or death, any options held
by Executive as of such date shall remain exercisable until at least the earlier
of (i) the date that is one (1) year after the date of termination of
Executive’s employment or (ii) the date on which the option would have expired
solely by reason of the passage of time if Executive’s employment had not been
terminated, provided that no option shall remain outstanding longer than the
maximum time permitted by Section 409A.
(d) The Long Term Incentive Awards shall be
governed by separate grant agreements (together with any other agreement
approved by the Board and designated by the Board as an “Ancillary Document” for
purposes of this Agreement, the “Ancillary Documents”). To the extent
permitted by any applicable law and the rules of any exchange on which the
Company’s stock is listed, in the event of any conflict between an Ancillary
Document and the terms of this Agreement, the terms of this Agreement shall
govern.
(e) All Long Term Incentive Awards and any
other equity-based awards granted to Executive by the Company (i) shall be
subject to the approval of the
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Compensation Committee and (ii) shall be
exempt from Section 16(b) of the Exchange Act by reason of Rule 16b-3 under the
Exchange Act.
4.2 Employee
Benefit Programs, Plans and Practices; Perquisites. During the Term of
Employment, the Company shall provide Executive with employee benefits and
perquisites at a level (a) commensurate with his position in the Company and (b)
at least as favorable to Executive as the Company provides to its other senior
executives, including retirement benefits, health and welfare benefits (both
active and retiree), the Continuation Benefits (as defined in Section
6.2(a)(2)), and other employee benefits and perquisites which the Company may
make available to its senior executives from time to time.
4.3 Vacation. Executive shall be entitled
to the number of business days paid vacation in each calendar year as determined
in accordance with the Company’s applicable vacation policies, which shall be
taken at such times as are reasonably consistent with Executive’s
responsibilities hereunder.
4.4 Retention
Award. The
Company shall pay Executive a retention award (the “Retention Award”)
in the amount set forth on the signature page hereof. The Company
shall pay the Executive one-half (1/2) of the Retention Award on the first
anniversary of the Commencement Date, provided that the Executive remain employed by the
Company on such date, and the remainder of the Retention Award on the second
anniversary of the Commencement Date, provided that the Executive remain employed by the
Company on such date.
5. Expenses. Subject to prevailing
Company policy or such guidelines as may be established by the Board, the
Company will reimburse Executive for all reasonable expenses incurred by
Executive in carrying out his duties on behalf of the Company, provided that no such reimbursement will be required
if such reimbursement would be taxable income to Executive.
6. Termination
of Employment.
6.1 Termination
of Employment for Any Reason. In the event of a
termination of Executive’s employment for any reason, whether or not such
termination occurs during the Term of Employment, the Company shall pay to
Executive (a) within five (5) business days following the date of termination of
Executive’s employment, a lump sum equal to (i) Executive’s Base Salary earned
on or prior to the date of such termination but not yet paid to Executive in
accordance with the Company’s customary procedures and practices regarding the
salaries of executives, (ii) any business expenses incurred by Executive and not
yet reimbursed by the Company under Section 5 above, as of the date of such
termination, (iii) any vacation time accrued but unused as of the date of such
termination, and (iv) any Bonus earned but not yet paid for any calendar year
prior to the date of such termination and (b) any benefits accrued and vested
under any of the Company’s employee benefit programs, plans and practices on or
prior to the date of termination of Executive’s employment (remuneration
described in (a) and (b) above are collectively referred to as the “Accrued
Obligations” herein) in accordance with the terms of such programs, plans and
practices.
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6.2 Termination
Not for Cause or for Good Reason. (a) The Company or Executive may
terminate Executive’s Term of Employment at any time for any reason by providing
written notice to the other party at least thirty (30) days (or such other
number of days specified in this Agreement) in advance of the date of
termination of Executive’s employment. If, during the Term of
Employment, Executive terminates his employment for Good Reason, such notice
shall describe the conduct Executive believes to constitute Good
Reason.
If Executive’s employment is terminated
prior to the third anniversary of the Commencement Date (i) by the Company other
than for Cause (as defined in Section 6.3(b) hereof), Disability (as defined in
Section 6.4 hereof) or death or (ii) by Executive for Good Reason (as defined in
Section 6.2(b) hereof), and such termination constitutes a Separation from
Service (as hereinafter defined), the Company, as severance, shall pay to
Executive an amount (the “Severance Payment”) equal to:
(A) two (2) times Executive’s Base Salary,
plus
(B) an additional amount equal two (2) times
the greater of (x) Executive’s target Bonus for the calendar year of termination
of Executive’s employment or (y) the annual average of the actual Bonus awards
paid to Executive by the Company for the three (3) calendar years preceding the
date of termination of Executive’s employment (or, if Executive has not yet been
employed by the Company pursuant to this Agreement for three (3) full calendar
years as of the date his employment is terminated, for the two (2) year or (1)
year period, as applicable, for which he has been so employed and received a
Bonus); plus
(C) an additional amount equal to two (2)
times six percent (6%) of Executive’s Base Salary.
The Company shall pay to Executive (I)
one-half (1/2) of such Severance Payment in a lump sum payment on the six (6)
month anniversary of Executive’s Separation from Service and (II) the remaining
one-half (1/2) of the Severance Payment in a lump sum on the first anniversary
of the date of Executive’s Separation from Service.
“Separation from Service” means a
“separation from service,” as such term is defined under Section
409A.
In addition, if Executive’s employment
is terminated (i) by the Company other than for Cause (as defined in Section
6.3(b) hereof), Disability (as defined in Section 6.4 hereof), or death or (ii)
by Executive for Good Reason (as defined in Section 6.2(b)) and if such
termination constitutes a Separation from Service,
(1) The Company shall pay to Executive a
prorated bonus (the “Prorated Bonus”) for the calendar year of termination of
Executive’s employment, calculated as the Bonus Executive would have received in
such year based on actual performance multiplied by a fraction, the numerator of
which is the number of business days during the calendar year of termination
that Executive was employed and the denominator of which is the total number of
business days during the calendar year of termination. The
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Prorated Bonus shall be payable when
annual bonuses are paid to other senior executives of the Company, but in no
event later than March 15 of the calendar year following the later of (a) the
calendar year in which the Bonus is earned or (b) the calendar year in which the
Bonus is no longer subject to a substantial risk of forfeiture within the
meaning of Section 409A.
(2) The Company shall also continue to
provide Executive, as though he or she remained actively employed, for a period
ending on two years from the date of termination of Executive’s employment (the
“Benefit Continuation Period”), life insurance, group health coverage (including
medical, dental, and vision benefits), accidental death and dismemberment
coverage, and the health care flexible spending account (to the extent required
to comply with COBRA continuation coverage requirements (collectively, the
“Continuation Benefits”) in accordance with the applicable plan terms;
provided, however, that any such coverage shall terminate
to the extent that Executive is offered or obtains comparable benefits from any
other employer during the Benefit Continuation Period; provided, further, that the amount of Continuation
Benefits provided during one calendar year shall not affect the amount of
Continuation Benefits provided during a subsequent calendar year (except with
respect to health plan maximums), the Continuation Benefits may not be exchanged
or substituted for other forms of compensation to Executive, and any
reimbursement or payment under the Continuation Benefit arrangements will be
paid in accordance with applicable plan terms and no later than the last day of
Executive’s taxable year following the taxable year in which he incurred the
expense giving rise to such reimbursement or payment. Notwithstanding
the foregoing, if Executive breaches any provision of Section 13 hereof, the
remaining balances of the Severance Payment, the Prorated Bonus, and any
Continuation Benefits shall be forfeited.
(b) For purposes of this Agreement, the term
“Good Reason” means: (i) a reduction by the Company in Executive’s Base Salary
(in which event the Severance Payment shall be calculated based on Executive’s
Base Salary in effect prior to any such reduction); (ii) a material reduction in
the aggregate program of employee benefits and perquisites to which Executive is
entitled (other than a reduction that generally affects all executives); (iii) a
material decline in Executive’s Bonus or Long Term Incentive Award opportunities
(other than a decline that generally affects all executives); (iv) relocation of
Executive’s primary office by more than 50 miles from the location of
Executive’s primary office in Charleston, West Virginia or secondary office in
Saint Louis, Missouri; or (v) any material diminution or material adverse change
in Executive’s title, duties, responsibilities or reporting
relationships. Any amounts due to Executive in connection with a
termination of employment shall be computed without giving effect to any changes
that give rise to Good Reason. If Executive does not give notice to
the Company as described in Section 6.2(a) hereof within ninety (90) days after
an event giving rise to Good Reason, Executive’s right to claim Good Reason
termination on the basis of such event shall be deemed
waived.
6.3 Voluntary
Termination by Executive; Discharge for Cause. (a) In the
event that Executive’s employment is terminated (i) by the Company for Cause, as
hereinafter
6
defined or (ii) by Executive other than
for Good Reason, the Company shall pay to Executive the Accrued
Obligations.
(b) As used herein, the term “Cause” shall
be limited to (i) any material and uncorrected breach by Executive of the terms
of this Agreement, including, but not limited to, a violation of Section 13
hereof, (ii) any willful fraud or dishonesty of Executive involving the property
or business of the Company, (iii) a deliberate or willful refusal or failure of
Executive to comply with any major corporate policy of the Company which is
communicated to Executive in writing, or (iv) Executive’s conviction of, or plea
of nolo contendere to, any felony if such conviction or
plea results in his imprisonment; provided that, with respect to clauses (i), (ii) and
(iii) above, Executive shall have thirty (30) days following his receipt of
written notice of the conduct that is the basis for the potential termination
for Cause within which to cure such conduct to prevent termination for Cause by
the Company. If Executive cures the conduct that is the basis for the
potential termination for Cause within such thirty (30) day period, the
Company’s notice of termination shall be deemed withdrawn. In the
event that Executive is terminated for failure to meet performance goals, as
determined by the Board, such termination shall be considered a termination for
Cause for all purposes relating to his equity-based compensation awards, but it
shall be considered a termination without Cause for purposes of his right to
receive the Severance Payment, the Prorated Bonus, and the Continuation
Benefits.
6.4 Disability. In the event of the
Disability (as defined below) of Executive during the Term of Employment, the
Company may terminate Executive’s Term of Employment upon written notice to
Executive (or Executive’s personal representative, if applicable) effective upon
the date of receipt thereof (the “Disability Commencement Date”). The
Company shall pay to Executive the Accrued Obligations as provided in Section
6.1 and the Prorated Bonus when such bonuses are paid to other senior executives
of the Company. The term “Disability,” for purposes of this
Agreement, shall mean Executive’s absence from the full-time performance of
Executive’s duties pursuant to a reasonable determination made in accordance
with the Company’s disability plan that Executive is disabled as a result of
incapacity due to physical or mental illness that lasts, or is reasonably
expected to last, for at least six (6) months.
6.5 Death. In the event of Executive’s
death during the Term of Employment or at any time thereafter while payments are
still owing to Executive under the terms of this Agreement, the Company shall
pay to Executive’s beneficiary(ies) (to the extent so designated by Executive)
or his estate (to the extent that no such beneficiary has been designated) the
Accrued Obligations as provided in Section 6.1, the Prorated Bonus when such
bonuses are paid to other senior executives of the Company, and any remaining
payments that were payable to Executive by reason of his termination of
employment under Section 6.2 to which Executive was entitled at the time of his
death in accordance with the terms of Section 6.2.
6.6 No Further
Notice or Compensation or Damages. Executive understands and
agrees that he or she shall not be entitled to any further notice, compensation
or damages upon a termination of his employment under this Agreement or
otherwise, other than amounts specified in Sections 4 and 6 hereof, the
Ancillary Documents, and any plan, program or arrangement of the
Company.
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6.7 Executive’s
Duty to Deliver Materials. Upon the termination of
Executive’s employment for any reason, Executive or his estate shall surrender
to the Company all correspondence, letters, files, contracts, mailing lists,
customer lists, advertising materials, ledgers, supplies, equipment, checks, and
all other materials and records of any kind that are the property of the Company
or any of its subsidiaries or affiliates, that may be in Executive’s possession
or under his control, including all copies of any of the
foregoing.
7. Gross-Up
Payments.
7.1 Gross-Up of
Excise Tax. If
Executive becomes entitled to any payment, benefit or distribution (or
combination thereof) by the Company, any affiliated company, or one or more
trusts established by the Company for the benefit of its employees, whether paid
or payable pursuant to Section 6.2 hereof or any other plan, arrangement, or
agreement with the Company or any affiliated company (the “Payments”), which are
or become subject to the excise tax imposed by Code Section 4999, or any
interest or penalties are incurred by Executive during his lifetime with respect
to such excise tax (such excise tax, together with any such interest and
penalties, hereinafter collectively referred to as the “Excise Tax”), the
Company shall pay to Executive an additional payment (the “Gross-Up Payment”) in
an amount such that the net retained by Executive, after deduction of any Excise
Tax on such Payments and any federal, state or local income tax and Excise Tax
on the Gross-Up Payment shall equal the amount of such
Payments.
7.2 Determination
of Gross-Up Payment. All determinations required
to be made under this Section 7, including whether and when a Gross-Up Payment
is required and the amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by a nationally
recognized certified public accounting firm as may be mutually agreed by the
Company and Executive (the “Accounting Firm”) which shall provide detailed
supporting calculations both to the Company and Executive within ten (10)
business days of the receipt of notice from Executive that Payments were made,
or such earlier time as is required by the Company; provided that for purposes of determining the
amount of any Gross-Up Payment, Executive shall be deemed to pay federal income
tax at the highest marginal rates applicable to individuals in the calendar year
in which any such Gross-Up Payment is to be made and deemed to pay state and
local income taxes at the highest effective rates applicable to individuals in
the state or locality of Executive’s residence or place of employment in the
calendar year in which any such Gross-Up Payment is to be made, net of the
maximum reduction in federal income taxes that can be obtained from deduction of
such state and local taxes, taking into account limitations applicable to
individuals subject to federal income tax at the highest marginal
rates. All fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any Gross-Up Payment, as determined pursuant
to this Section 7.2, shall be paid by the Company to Executive (or to the
appropriate taxing authority on Executive’s behalf) when due; provided, however, that such payment shall be made no
later than (a) with respect to taxes, the end of Executive’s taxable year
following the taxable year in which Executive remits such taxes to the
applicable taxing authority and (b) with respect to interest and penalties
incurred by Executive with respect to such taxes, the end of Executive’s taxable
year following the taxable year in which Executive incurs such interest and/or
penalties, as applicable. The amount of interest and penalties
reimbursed by the Company during one calendar year shall not affect the amount
of interest and penalties reimbursable by the Company during a subsequent
calendar
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year, the right to such reimbursement
may not be exchanged or substituted for other forms of compensation to
Executive. If the Accounting Firm determines that no Excise Tax is
payable by Executive, it shall so indicate to Executive in
writing. Any determination by the Accounting Firm shall be binding
upon the Company and Executive. As a result of the uncertainty in the
application of Code Section 4999, it is possible that the amount of the Gross-Up
Payment determined by the Accounting Firm to be due to (or on behalf of)
Executive was lower than the amount actually required to be paid by Executive to
the applicable taxing authority (“Underpayment”). In the event that
the Company exhausts its remedies hereunder and Executive thereafter is required
to make a payment of any Excise Tax, the Accounting Firm shall determine the
amount of the Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of Executive; provided, however, that such Underpayment shall be made
no later than the end of Executive’s taxable year following the taxable year in
which Executive remits the Excise Tax to the applicable taxing
authority.
7.3 Disputed
Taxes. Executive
shall notify the Company in writing of any claim by the Internal Revenue Service
or other relevant taxing authority that, if successful, would require the
payment by the Company of any Gross-Up Payment. Such notification
shall be given as soon as practicable, but no later than fifteen (15) business
days after Executive is informed in writing of such claim and shall apprise the
Company of the nature of such claim and the date on which such claim is
requested to be paid. If such claim is due to a tax audit or
litigation addressing the existence or amount of tax liability, whether Federal,
state or local (a “Reimbursable Claim”), then Executive shall not pay such
Reimbursable Claim prior to the expiration of the thirty (30) day period
following the date on which he gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such
Reimbursable Claim is due). If the Company notifies Executive in
writing prior to the expiration of such period that it desires to contest such
Reimbursable Claim, Executive shall (i) give the Company any information
reasonably requested by the Company relating to such Reimbursable Claim, (ii)
take such action in connection with contesting such Reimbursable Claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such
Reimbursable Claim by an attorney reasonably selected by the Company, (iii)
cooperate with the Company in good faith in order to effectively contest such
Reimbursable Claim and (iv) permit the Company to participate in any proceedings
relating to such Reimbursable Claim; provided, however, that the Company shall bear and pay
directly all costs and expenses (including additional interest and penalties)
incurred in connection with such contest and shall indemnify and hold Executive
harmless, on an after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without limitation
on the foregoing provisions of this Section 7.3, the Company shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forego any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such Reimbursable Claim and
may, at its sole option, either direct Executive to pay the tax claimed and xxx
for a refund or contest the Reimbursable Claim in any permissible manner, and
Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, further, that if the Company directs Executive
to pay such Reimbursable Claim and xxx for a refund, the Company shall advance
the amount of such
9
payment to Executive, on an
interest-free basis, and shall indemnify and hold Executive harmless, on an
after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; provided, further, that if Executive is required to
extend the statute of limitations to enable the Company to contest such
Reimbursable Claim, Executive may limit this extension solely to such contested
amount. The Company’s control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
Executive shall be entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing
authority. In no event shall payments for or reimbursements to
Executive for Reimbursable Claims be made later than the end of Executive’s
taxable year following the taxable year in which the taxes that are the subject
to the Reimbursable Claim are remitted to the taxing authority, or where, as a
result of such audit or litigation no taxes are remitted, the end of Executive’s
taxable year following the taxable year in which the audit is completed or there
is a final nonappealable settlement or other resolution of the
litigation.
7.4 Refunds of
Gross-Up Payments. If, after the receipt by
Executive of an amount paid or advanced by the Company pursuant to this Section
7, Executive becomes entitled to receive any refund with respect to a Gross-Up
Payment, Executive shall (subject to the Company’s compliance with the
requirements of Section 7.3) promptly pay to the Company the amount of such
refund received (together with any interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by Executive of an amount
advanced by the Company pursuant to this Section 7, a determination is made that
Executive shall not be entitled to any refund with respect to such claim and the
Company does not notify Executive in writing of its intent to contest such
denial of refund prior to the expiration of thirty days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of the Gross-Up Payment required to be paid.
8. Notices. All notices or
communications hereunder shall be in writing, addressed as
follows:
To the Company:
Patriot Coal
Corporation
attn: Board of
Directors
00000 Xxxxx Xxxxxxxxx, Xxxxx
000
Xxxxx Xxxxx, Xxxxxxxx
00000
10
with a copy to:
Patriot Coal
Corporation
attn: Xxxxxxx X.
Xxxxxxx
00000 Xxxxx Xxxxxxxxx, Xxxxx
000
Xxxxx Xxxxx, Xxxxxxxx
00000
To Executive at the address set forth on
the signature page hereof.
Any such notice or communication shall
be delivered by hand or by courier or sent certified or registered mail, return
receipt requested, postage prepaid, addressed as above (or to such other address
as such party may designate in a notice duly delivered as described above), and
the third business day after the actual date of sending shall constitute the
time at which notice was given.
9. Severability. If any provision of this
Agreement shall be declared to be invalid or unenforceable, in whole or in part,
such invalidity or unenforceability shall not affect the remaining provisions
hereof which shall remain in full force and effect.
10. Assignment. This Agreement shall be
binding upon, inure to the benefit of and be enforceable by the heirs and
representatives of Executive and the assigns and successors of the Company, but
neither this Agreement nor any rights or obligations hereunder shall be
assignable or otherwise subject to hypothecation by Executive (except by will or
by operation of the laws of intestate succession) or by the Company, except that
the Company may assign this Agreement to any successor (whether by merger, spin
off, purchase or otherwise) to all or substantially all of the stock, assets or
businesses of the Company.
11. Amendment. This Agreement may be
amended only by written agreement of the parties hereto.
12. Amendment to
Comply with Code Section 409A. If either party to this
Agreement reasonably determines that any amount payable pursuant to this
Agreement would result in adverse tax consequences under Code Section 409A
(including, but not limited to, the additional tax described in Code Section
409A(a)(1)(B)), then such party shall deliver written notice of such
determination to the other party, and the parties hereby agree to work in good
faith to amend this Agreement so it is exempt from, or compliant with, the
requirements of Code Section 409A and preserves as nearly as possible the
original intentions of the affected provisions. If any payment due to
Executive is required to be delayed by reason of Code Section 409A, such payment
shall be paid in one lump-sum payment as soon as administratively feasible on or
after the date such payment is permitted to be made under Code Section 409A,
subject to standard payroll deductions and withholdings.
13. Nondisclosure
of Confidential Information; Non-Competition; Non-Solicitation.
(a) Executive, both during the term hereof
and thereafter, will not, directly or indirectly, use for himself or use for, or
disclose to, any party other than the Company, or any subsidiary of the Company
(other than in the ordinary course of Executive’s duties
11
for the benefit of the Company or any
subsidiary of the Company or to the extent required by applicable law), any
secret or confidential information that is not publicly available regarding the
business or property of the Company or its subsidiaries or regarding any secret
or confidential apparatus, process, system, or other method at any time used,
developed, acquired, discovered or investigated by or for the Company or its
subsidiaries, whether or not developed, acquired, discovered or investigated by
Executive. At the termination of Executive’s employment or at any
other time the Company or any of its subsidiaries may request, Executive shall
promptly deliver to the Company all memoranda, notes, records, plats, sketches,
plans or other documents made by, compiled by, delivered to, or otherwise
acquired by Executive concerning the business or properties of the Company or
its subsidiaries or any secret or confidential product, apparatus or process
used developed, acquired or investigated by the Company or its
subsidiaries.
(b) In consideration of the Company’s
obligations under this Agreement, Executive agrees that: (i) during the period
of his employment hereunder and for a period of one (1) year thereafter, without
the prior written consent of the Board, he will not, directly or indirectly, as
principal, manager, agent, consultant, officer, stockholder, partner, investor,
lender or employee or in any other capacity, carry on, be engaged in or have any
financial interest in, any activities which are in competition with the business
of the Company or its subsidiaries; and (ii) during the period of his
employment hereunder and for a period of one (1) year thereafter, without the
prior written consent of the Board, he shall not, on his own behalf or on behalf
of any person, firm or company, directly or indirectly solicit or offer
employment to any person who is or has been employed by the Company or its
subsidiaries at any time during the twelve (12) months immediately preceding
such solicitation.
(c) For purposes of this Section 13, an
entity shall be deemed to be in competition with the Company if it is
principally involved in the purchase, sale or other dealing in any property or
the rendering of any service purchased, sold, dealt in or rendered by the
Company as a part of the business of the Company within the same geographic area
in which the Company effects such sales or dealings or renders such
services. Notwithstanding this Section 13(c) or Section 13(b),
nothing herein shall be construed so as to preclude Executive from investing in
any publicly or privately held company, provided Executive’s beneficial
ownership of any class of such company’s securities does not exceed five percent
(5%) of the outstanding securities of such class.
(d) Executive agrees that this covenant not
to compete is reasonable under the circumstances and will not interfere with his
ability to earn a living or to otherwise meet his financial
obligations. Executive and the Company agree that if in the opinion
of any court of competent jurisdiction such restraint is not reasonable in any
respect, such court shall have the right, power and authority to excise or
modify such provision or provisions of this covenant as to the court shall
appear not reasonable and to enforce the remainder of the covenant as so
amended. Executive agrees that any breach of the covenants contained
in this Section 13 would irreparably injure the Company. Accordingly,
Executive agrees that, in the event of such a breach of this Section 13 by
Executive, the Company may, in addition to pursuing any other remedies it may
have in law or in
12
equity, cease making any payments
otherwise required by this Agreement and seek to obtain an injunction against
Executive from any court having jurisdiction over the matter to restrain any
further violation of this Section 13 by Executive.
14. Beneficiaries;
References. Executive shall be entitled
to select (and change, to the extent permitted under any applicable law) a
beneficiary or beneficiaries to receive any compensation or benefit payable
hereunder following Executive’s death, and may change such election, in either
case by giving the Company written notice thereof. In the event of
Executive’s death or a judicial determination of his incompetence, reference in
this Agreement to Executive shall be deemed, where appropriate, to refer to his
beneficiary, estate or other legal representative. Any reference to
the masculine gender in this Agreement shall include, where appropriate, the
feminine.
15. Dispute
Resolution. Any
dispute or controversy arising under or in connection with this Agreement (other
than an action to enforce the covenants in Section 13 hereof) or the Ancillary
Documents shall be resolved by arbitration. Arbitrators shall be
selected, and arbitration shall be conducted, in accordance with the rules of
the American Arbitration Association. The Company shall pay any legal
fees in connection with such arbitration in the event that Executive prevails on
a material element of his claim or defense. Notwithstanding anything
in this Section 15 to the contrary, payments made under this Section 15 that are
provided during one calendar year shall not affect the amount of such payments
provided during a subsequent calendar year, payments under this Section 15 may
not be exchanged or substituted for other forms of compensation to Executive,
and any such reimbursement or payment will be paid within sixty (60) days after
Executive prevails, but in no later than the last day of Executive’s taxable
year following the taxable year in which he incurred the expense giving rise to
such reimbursement or payment. This Section 15 shall remain in effect
throughout the Term of Employment and for a period of five (5) years following
the termination of the Term of Employment.
16. Indemnification;
Directors’ & Officers’ Liability Insurance.
(a) The Company shall indemnify Executive
during and after the Term of Employment to the maximum extent permitted by
applicable law for any liability incurred by Executive by reason of his service
as an officer or director of the Company or any of its subsidiaries or
affiliates or by reason of his service as a fiduciary of any employee benefit
plan of the Company or any of its subsidiaries or
affiliates.
(b) During the Term of Employment and for so
long as Executive may have any liability by reason of serving as an officer or
director of the Company or any of its subsidiaries or affiliates, Executive
shall be entitled to the same directors’ and officers’ liability insurance
coverage that the Company provides generally to its other directors and
officers, as may be amended from time to time for such directors and
officers. During the Term of Employment and for so long as Executive
may have any liability by reason of serving as a fiduciary of any employee
benefit plan of the Company or any of its subsidiaries or affiliates, Executive
shall be entitled to the same fiduciary liability insurance coverage that the
Company provides generally to its other directors and officers, as may be
amended from time to time for such directors and officers.
13
17. Governing
Law. This
Agreement shall be construed, interpreted and governed in accordance with the
laws of the State of New York, without reference to rules relating to conflicts
of law.
18. Effect on
Prior Agreements. This Agreement and the
Ancillary Documents contain the entire understanding between the parties hereto
and this Agreement, except as proved in an Ancillary Document, supersedes in all
respects any prior or other agreement or understanding, both written and oral,
between the (i) the Executive, and (ii) the Company or Magnum Coal Company
(“Magnum”), any affiliate of the Company or Magnum, any predecessor of the
Company or affiliate of the Company, or any predecessor of Magnum or affiliate
of Magnum.
19. Withholding. The Company shall be
entitled to withhold from payments to Executive any amount of withholding
required by law.
20. Survival. Notwithstanding the
expiration of the term of this Agreement, the provisions of Sections 4, 13 and
16 hereunder shall remain in effect as long as is reasonably necessary to give
effect thereto in accordance with the terms hereof.
21.
Closing
of Merger. This
Agreement shall become effective if and only if the Closing Date occurs on or
before the
later of September
30, 2008, or such later date to which the End Date (as defined in Section
10.01(b) of the Merger Agreement) is extended by mutual agreement of the parties
to the Merger Agreement (the “MA End Date”). If
the Closing Date does not occur on or before the
MA End Date,
this Agreement shall be null and void and of no force and
effect.
14
22. Counterparts. This Agreement may be
executed in two or more counterparts, each of which will be deemed an
original.
|
PATRIOT COAL
CORPORATION
|
||
|
By: /s/
Xxxxxxx X.
Xxxxxxx
|
||
|
Xxxxxxx X. Xxxxxxx, Chief
Executive Officer
|
||
|
|
EXECUTIVE
|
|
|
|
||
|
|
/s/
Xxxx X.
Xxxxxx
|
|
|
|
Xxxx X.
Xxxxxx
|
|
Commencement
Date:
|
The Closing
Date
|
|
|
Name of
Executive:
|
Xxxx X.
Xxxxxx
|
|
|
Address of
Executive:
|
0000 Xxxxx Xxxxx
Xxx
Xxxxxxxx Xxxxx, XX
00000
|
|
|
Executive Team
Position:
|
President and Chief Operating
Officer
|
|
|
Base
Salary:
|
$600,000 per
annum
|
|
|
Annual Bonus
Target:
|
100% of Base Salary commencing
with the 2008 calendar year and continuing for each calendar year
thereafter (with a
maximum of no less than 175% of Base Salary).
|
|
|
Long-Term
Incentive Award:
|
200% of Base
Salary
|
|
|
Extended
Long-Term Incentive Award:
|
650% of Base
Salary
|
|
|
Retention
Award:
|
$1,000,000
|
|
