EXHIBIT 10.1
EMPLOYEE RETENTION AGREEMENT
THIS EMPLOYEE RETENTION AGREEMENT ("AGREEMENT") is made as of this 20th day of
October, 2008 (the "EFFECTIVE Date"), by and between Xxxxxxx X. Xxxxxx, an
individual who resides at 0000 Xxx Xxxx Xxxxx, Xxxxxxxxx, XX 00000 ("EMPLOYEE"),
and NATIONAL COAL CORPORATION ("OPERATING COMPANY"), a Tennessee corporation
with a principal place of business at 0000 Xxxxxx Xxxxxxxx Xxxx, Xxxxxxxxx,
Xxxxxxxxx, and National Coal Corp., a Florida corporation and the sole
shareholder of the Operating Company ("PARENT" and together with Operating
Company the "COMPANY").
RECITALS
WHEREAS, the Company is exposed from time to time to numerous business
opportunities for growth and expansion, including the possible acquisition by or
of another company or other change of control; and
WHEREAS, the Board of Directors of the Company (the "BOARD") has
determined that it is in the best interests of the Company and its stockholders
to (i) assure that the Company will have the continued dedication and
objectivity of the Employee to take maximum advantage of these opportunities,
and (ii) to provide the Employee with an incentive to continue employment and to
continue to maximize the value of the Company for the benefit of its
stockholders.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and in consideration of the continuing employment of Employee by the
Company, the parties agree as follows:
1. BONUS. Employee shall be entitled to receive a cash bonus
equal to $50,000.00 (the "BONUS") payable upon the execution of this Agreement.
If Employee's employment with the Company is terminated by the Company for Cause
(as defined below) or by Employee without Good Reason (as defined below) prior
to the third anniversary of the date hereof, then Employee shall refund and pay
to the Company, on the date of termination of employment, an amount equal to
$50,000 multiplied by a ratio determined by dividing (i) the number of days
remaining from the date of termination until the third anniversary of the date
hereof, and (ii) 1,095 days. The Company shall have the right to offset any
refundable portion of the Bonus against any amounts the Company owes Employee
pursuant to his employment with the Company or otherwise.
2. BASE COMPENSATION AND BONUS. Effective December 1, 2008,
Employee's base rate of annual compensation shall be increased to $300,000.00,
and shall thereafter be increased (but not thereafter decreased) periodically
upon review of Employee's performance by the Board ("BASE COMPENSATION").
Employee shall also be eligible for an incentive bonus, upon terms and
conditions to be established by the Board, for an annual amount up to and not to
exceed 50% of Base Compensation.
3. EQUITY AWARDS.
(a) RESTRICTED STOCK. Subject to the terms of the restricted stock
agreement attached hereto as EXHIBIT A ("RESTRICTED STOCK AGREEMENT") Employee
shall receive 100,000 shares of the Company's common stock $.0001 par value (the
"RESTRICTED SHARES"). Except as otherwise provided in Sections 6 hereof, upon
(i) Employee's termination from employment for any reason other than death on or
prior to November 30, 2009, all of the Restricted Shares shall be forfeited; or
(ii) Employee's termination from employment for any reason other than death
between December 1, 2009 and on or prior to November 30, 2010, 66,000 of the
Restricted Shares shall be forfeited; or (iii) Employee's termination from
employment for any reason other than death between December 1, 2010 and on or
prior to November 30, 2011, 33,000 of the Restricted Shares shall be forfeited
(the period prior to each such date with respect to each such portion of the
Restricted Shares hereinafter referred to as the "RESTRICTION PERIOD"). All
Restricted Shares issued to the Employee hereunder shall be subject to the
restrictions on transfer and forfeitability as set forth in this Agreement and
the Restricted Stock Agreement.
(b) STOCK OPTIONS. Subject to the terms of the stock option
agreement attached hereto as EXHIBIT B ("STOCK OPTION AGREEMENT") Employee will
be granted a ten year option to purchase 75,000 shares of the Company's Common
Stock. The exercise price per share will be equal to the closing price of the
Company's common stock on the date this Agreement is approved by the
Compensation Committee of the Company's Board of Directors, or the date this
Agreement is signed by Employee, whichever is later. The option will be subject
to the terms and conditions applicable to options granted under the 2004
National Coal Corp. Stock Option Plan, as described in that plan and the Stock
Option Agreement. So long as Employee remains employed with the Company, the
option will vest 25,000 shares on each of November 30, 2009, 2010 and 2011, as
described in the applicable stock option agreement.
4. TERM LIFE INSURANCE. As additional consideration under this
Agreement, the Company shall purchase and own a term life insurance policy on
Employee's life in the face amount of $1,000,000.00 issued by an insurance
company selected by the Company with a rating of A or better by A.M. Best Co.
During the term of this Agreement and as long as Employee remains actively
employed by the Company, the Company shall pay the annual premium of such
policy. The Company's obligation to pay such premiums shall terminate upon
Employee's termination of employment with the Company for any reason. The
beneficiary on such policy shall be designated as the Operating Company with
respect to 50% of the death benefit under such policy and the remaining 50% of
the death benefit shall be payable to a Employee beneficiary designated by
Employee, or, failing such designation, Employee's estate. Employee acknowledges
that the Company will report imputed wage income in accordance with Internal
Revenue Service guidelines for the 50% of the death benefit payable to
Employee's beneficiary and withhold taxes related thereto form his cash
compensation, and Employee agrees to consent to the purchase of such policy in
accordance with the requirements of Section 101 of the Internal Revenue Code
(the "CODE") so that any proceeds payable to the Company thereunder shall be
income tax free.
5. AGREEMENT NOT TO COMPETE. The parties acknowledge that
Employee has learned significant confidential and proprietary information and
trade secrets of the Company the disclosure or use of which for purposes other
than the Company's business will be detrimental to the Company and Employee
agrees that
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for the duration of his employment by the Company, and for 12 months thereafter
(in the latter case, if, and only if, the payment provided for in Section 6(b)
hereof is paid), he shall not without the prior written consent of the Company,
directly or indirectly, engage, participate in, or assist in any capacity
whatever, or have an interest in, any firm, enterprise, entity or arrangement
operating in the states of Tennessee or Alabama or any other state in which the
Company is mining coal (either directly or using contract miners) on the date of
termination of Employee's employment with the Company, which competes with the
business of the Company. For purposes of this Agreement, "business of the
Company" shall mean coal mining operations. The foregoing shall not prevent
Employee from acquiring on the open market up to 5% of the outstanding
securities of any publicly held corporation. In the event that Employee shall
breach this agreement not to compete, Employee shall forfeit any Restricted
Shares issued to him under this Agreement.
6. CHANGE OF CONTROL; ACCELERATED VESTING ON RESTRICTED STOCK AND
SEVERANCE.
(a) In the event of a Change of Control (hereinafter defined)
during the Restriction Period, all restrictions on the Restricted Shares shall
lapse.
(b) In the event that Employee's employment with the Company is
terminated by the Company other than for "CAUSE," or terminated by the Employee
for "GOOD REASON" within 90 days before or one year following a Change of
Control, Employee shall receive in a lump sum an amount equal to his then Base
Compensation, payable (subject to 6(c) below) within 5 days following the later
of his termination of employment or the Change of Control.
(c) If and to the extent the payments under Section 6(b) hereof
constitute "deferred compensation," rather than exempt "severance" or a "short
term deferral" within the meaning of Section 409A of the Code, and, if Employee
is a "specified employee" at that time, that portion shall be paid (plus
interest at the short term Applicable Federal Rate) 6 months following the
Employee's separation form service (or immediately following the Employee's
death, if earlier). Determination of whether the Employee is a specified
employee shall be made pursuant to Treas. Regs. ss.1.409A-1(i) or any successor
regulation.
(d) The occurrence of any of the following events shall constitute
a Change of Control for purposes of this Agreement: (a) any "person" (as such
term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934,
as amended (the "EXCHANGE ACT") ) other than the Operating Company or Parent,
any trustee or other fiduciary holding securities under any employee benefit
plan of the Company and/or Parent, or any company owned, directly or indirectly,
by the stockholders of Parent in substantially the same proportions as their
ownership of the Operating Company and/or Parent is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Operating Company and/or Parent representing
50% or more of the combined voting power of such entity's then-outstanding
securities; (b) the consummation of a merger or consolidation of the Operating
Company and/or Parent with any other corporation, other than a merger or
consolidation which would result in the voting securities of such entity
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than 50% of the combined voting power of the voting
securities of such surviving entity's then-outstanding securities which shall
not
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constitute a Change of Control of the Operating Company and/or Parent; or (d)
the stockholders of the Operating Company and/or Parent approve a plan of
complete liquidation of the Operating Company and/or Parent or an agreement for
the sale or disposition by the Operating Company and/or Parent of all or
substantially all of its assets.
(e) For purposes of this Section 6, "CAUSE" shall mean a
termination by the Company after notice to the Employee (as described below),
and majority vote of the Board of Directors and advice of independent legal
counsel, effected for any of the following limited reasons:
(i) Habitual and continued unavailability to act or
respond on behalf of the Company;
(ii) Willful misconduct or fraud;
(iii) Conviction by a court of competent jurisdiction, of a
felony (whether or not committed during the term hereof or in the course of
employment hereunder);
(iv) Willful, continued and material failure to observe or
perform the duties of his employment hereunder;
(v) Willfully acting in a manner materially adverse to
the best interests of the Company.
With regard to the notice required for a Cause termination, Company shall first
provide Employee with 45 days written notice of such alleged misconduct,
including a specific description of such breach, failure or neglect of duty or
obligation sufficient to allow Employee an opportunity to correct such noted
problems. Employee shall not be terminated for Cause unless, after the notice
period expires, the Employee continues to fail to satisfactorily perform his
duties. Prior to any vote regarding misconduct, Employee will be given the
opportunity to appear before the Board, with his legal counsel, to present any
relevant information he believes the Board should consider in making such
decision.
(f) For purposes of this Section 6, "GOOD REASON" shall exist if
the Company makes one of the following material negative changes in the service
relationship between it and the Employee, without the Employee's prior written
consent, provided that, Employee notifies the Company of his dissatisfaction
with the change no later than 90 days after it is effected, and, prior to
terminating for Good Reason, the Employee provides written notice to the
Chairman of the Board of the Parent of the circumstance(s) he believes
constitute(s) Good Reason hereunder, and the Company has failed or refused to
remedy the circumstance(s) within 30 days after that written notice:
(i) without his express written consent, the Employee is
assigned any duties materially inconsistent with the positions, duties and
responsibilities of his current office;
(ii) relocation of the office at which the Employee is to
perform his duties to a location more than 60 aerial miles from the location at
which the Employee performs such duties at the date of this Agreement, or a
requirement that Employee travel more than he has historical traveled for the
Company prior to the date hereof;
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(iii) a reduction by Company in the Employee's Base
Compensation as in effect on the date hereof or as the same may be increased
from time to time; or
(iv) a material reduction in the aggregate value of the
benefits and perks available to Employee from time to time.
7. TERM OF AGREEMENT. The terms of this Agreement shall be
effective for the period ending on November 30, 2011; provided that if a Change
of Control shall occur prior thereto, the term of this Agreement shall end on
the later of November 30, 2011 or the first anniversary of a Change of Control,
and in either event the Company shall have no further obligations under this
Agreement.
8. WITHHOLDING, ETC. The Company shall make such deductions,
withholdings and other payments from all sums payable to Employee pursuant to
this Agreement which are required by law or as Employee requests for taxes and
other charges.
9. CODE SECTION 409A. For purposes of payments of "deferred
compensation" hereunder within the meaning of Code Section 409A, "termination of
employment" or simply "termination" hereunder shall only be deemed to have
occurred on the date Company and Employee reasonably anticipate that (i) the
Employee will not perform any further services for Company or any other entity
considered a single employer with Company under Section 414(b) or (c) of the
Code (that broader group referred to in this definition as the "EMPLOYER
GROUP"), or (ii) the level of bona fide services performed after that date (as
an employee or independent contractor, except that service as a member of the
board of an Employer Group entity is not counted unless termination benefits
under this Agreement are aggregated with benefits under any other Employer Group
plan or agreement in which Employee also participates as a director) will
permanently decrease to less than 50% of the average level of bona fide services
performed over the previous 36 months (or if shorter over the duration of
service). The Employee will not be treated as having a incurred a termination
while on military leave, sick leave or other bona fide leave of absence if the
leave does not exceed six months or, if longer, the period during which the
Employee has a reemployment right with Company by statute or contract. If a bona
fide leave of absence extends beyond six months, a termination will be deemed to
occur on the first day after the end of such six month period, or on the day
after the Employee's statutory or contractual reemployment right lapses, if
later. The Board will determine whether a termination has occurred based on all
relevant facts and circumstances, in accordance with the "separation form
service" definition in Treasury Regulation ss.1.409A-1(h) or any successor
guidance thereto. In all other respects, to the extent that the parties
reasonably determine that any compensation or benefits payable under this
Agreement are subject to Section 409A of the Code, this Agreement shall be
operated, construed and interpreted in such a way so as not to subject Employee
to excise taxes for violation thereof.
10. ARBITRATION. If any dispute between the parties arises out of
this agreement, such dispute shall be finally resolved by binding arbitration
conducted in Knoxville, Tennessee in accordance with the commercial rules of the
American Arbitration Association then in effect. Any such arbitration shall be
conducted before a single arbitrator. Judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof.
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11. ASSIGNMENT. This Agreement shall inure to the benefit of and
shall be binding upon the successors and the assigns of the Company. This
Agreement is personal to Employee and may not be assigned by him.
12. SEVERABILITY. If any provision of the Agreement shall be found
invalid by any court of competent jurisdiction, such findings shall not affect
the validity of the other provisions hereof and such invalid or unenforceable
provision shall be stricken to the extent necessary to preserve the validity and
enforceability of the Agreement..
13. APPLICABLE LAW. This Agreement is entered into and executed in
the State of Tennessee and shall be governed by the laws of such State.
14. COUNTERPARTS. This Agreement may be executed simultaneously in
any number of counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
15. NON-INTEGRATION. This Agreement shall be in addition to any
other agreements between the parties hereto.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth on the first page hereof.
NATIONAL COAL CORPORATION
By: /S/ XXXXXX X. XXXXXX
------------------------
Title: PRESIDENT AND CEO
NATIONAL COAL CORP.
By: /S/ XXXXXX X. XXXXXX
------------------------
Title: PRESIDENT AND CEO
EMPLOYEE
By: /S/ XXXXXXX X. XXXXXX
------------------------
Xxxxxxx X. Xxxxxx
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EXHIBIT A
RESTRICTED STOCK AGREEMENT
This Restricted Stock Agreement (the "AGREEMENT") is made as of the
20th day of October, 2008 by and between Xxxxxxx X. Xxxxxx ("EMPLOYEE") who
resides at 0000 Xxx Xxxx Xxxxx, Xxxxxxxxx, XX 00000, and National Coal Corp.
(the "COMPANY"), a Florida corporation with a principal place of business at
0000 Xxxxxx Xxxxxxxx Xxxx, Xxxxxxxxx, Xxxxxxxxx.
WHEREAS, Employee and the Company are parties to that certain Retention
Agreement dated October 20, 2008 (the "RETENTION AGREEMENT");
WHEREAS, pursuant to the terms of such agreement, the Company has
issued to Employee certain Restricted Shares as defined in the Retention
Agreement; and
WHEREAS, any Restricted Shares issued to employee under the Retention
Agreement are subject to the terms of said agreement and the terms of this
Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
undertakings herein contained, and for other good and valuable consideration,
the mutuality, receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows;
1. CERTIFICATES FOR SHARES; PROXIES. Certificates evidencing
Restricted Shares shall be deposited with the Company to be held in escrow until
such Shares are released to the Employee or forfeited in accordance with the
Retention Agreement and this Agreement. Employee shall, simultaneously with the
execution and delivery of this Agreement, execute and deliver to the Company a
stock power in blank with respect to the Restricted Shares. If any Restricted
Shares are forfeited, the Company shall direct the transfer agent of the Common
Stock or Company Secretary, as applicable, to make the appropriate entries in
its records showing the cancellation of the certificate or certificates for such
Restricted Shares.
2. RESTRICTIONS. During the Restriction Period (as defined in the
Retention Agreement), Restricted Shares, and all rights with respect to such
Shares, may not be sold, assigned, transferred, exchanged, pledged, hypothecated
or otherwise encumbered or disposed of and shall be subject to the risk of
forfeiture contained in the Retention Agreement and this Agreement (such
limitation on transferability and risk of forfeiture being herein referred to as
the "RESTRICTIONS"), but Employee shall have all other rights of a stockholder,
including the right to vote the Restricted Shares and to receive and retain
dividends thereon.
3. FORFEITURE OF RESTRICTED SHARES. In the event that Employee
shall breach the provisions of Section 5 of the Retention Agreement, such event
shall constitute an "Event of Forfeiture" and all Shares which at that time are
Restricted Shares shall thereupon be forfeited by Employee to the Company
without payment of any consideration by the Company, and neither Employee nor
any heir, personal representative, successor or assign of Employee shall have
any right, title or interest in or to such Restricted Shares or the certificates
evidencing the same.
4. LAPSE OF RESTRICTIONS. Except as otherwise provided in this
Agreement or the Retention Agreement, the Restrictions on the Restricted Shares
shall lapse at the end of the Restriction
Period. Upon the lapse of the Restrictions in accordance with this Section, the
Company shall, as soon as practicable thereafter, deliver to Employee a
certificate without any restrictive endorsement for the Shares that are no
longer subject to such Restrictions. Notwithstanding the foregoing, the
Restrictions shall lapse upon a Change of Control (as defined in the Retention
Agreement) as specified in Section 6 of the Retention Agreement.
5. WITHHOLDING REQUIREMENTS; CODE SECTION 83(B). Whenever
Restrictions lapse with respect to Restricted Shares, the Company shall have the
right, at its election, to (i) withhold from sums due to the Employee; (ii)
require the Employee to remit to the Company; or (iii) transfer back to the
Company Shares otherwise released from escrow; in an amount sufficient to
satisfy any Federal, state or local withholding tax requirements prior to making
such payments or delivering any such Shares to the Employee, with the latter
option being the default if the Company has not, prior to the lapse of the
Restrictions, directed in writing use of options (i) or (ii) for payment. The
Employee agrees to notify the Company promptly in the event the Employee files
an election under Internal Revenue Code ss.83(b).
6. EFFECT UPON EMPLOYMENT, ETC. Nothing contained in this
Agreement shall confer upon Employee the right to be employed by the Company or
its subsidiaries or affect any right that the Company or its subsidiaries may
have to terminate the employment of Employee.
7. AMENDMENT. This Agreement may not be amended, modified or
supplemented except with the consent of the Board and by a written instrument
duly executed by Employee and the Company.
8. BINDING EFFECT. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their heirs, personal
representatives, successors and assigns.
9. NOTICES. Notices shall be deemed delivered if delivered
personally or if sent by registered or certified mail to the Company at its
principal place of business, as set forth above, and to Employee at the address
set forth above, or at such other address as either party may hereafter
designate in writing to the other.
10. SEVERABILITY. The invalidity or unenforceability of any
provision of the Agreement shall not affect the validity or enforceability of
the remaining provisions of the Agreement, and such invalid or unenforceable
provision shall be stricken to the extent necessary to preserve the validity and
enforceability of the Agreement.
11. GOVERNING LAW. This Agreement is entered into and executed in
the State of Tennessee and shall be governed by the laws of such State.
12. DEFINITIONS. The initially capitalized terms shall have the
meanings set forth herein. Initially capitalized terms not otherwise defined
herein shall have the meaning provided in the Retention Agreement and, if not
defined therein, in this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth on the first page hereof.
NATIONAL COAL CORP.
By: /S/ XXXXXX X. XXXXXX
------------------------
Title: PRESIDENT AND CEO
EMPLOYEE
By: /S/ XXXXXXX X. XXXXXX
------------------------
Xxxxxxx X. Xxxxxx
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