Exhibit 10.24
CHANGE IN CONTROL SEVERANCE
AGREEMENT
AS AMENDED AND
RESTATED
THIS AMENDED AND RESTATED CHANGE IN
CONTROL SEVERANCE AGREEMENT (this “Agreement”) is made
on December 23, 2008 between Massey Energy Company, a Delaware
corporation (the “Company”), and Don L. Blankenship
(the “Executive”) and amends, restates and supercedes
the Change in Control Severance Agreement between the Company and
the Executive (the “Original Agreement”), effective as
of December 21, 2005 (the “Effective
Date”).
WITNESSETH:
WHEREAS, Executive is a senior
executive of the Company or one of its Subsidiaries (as defined
below) and has made and is expected to continue to make major
contributions to the short-term and long-term profitability, growth
and financial strength of the Company; and
WHEREAS, the Board of Directors of
the Company (the “Board,” as defined in
Section 23) recognizes that, as is the case with many
publicly-held corporations, the possibility of a Change in Control
(as defined in Section 23) exists and that such possibility,
and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of key
management personnel to the detriment of the Company and its
stockholders; and
WHEREAS, the Board has determined
that appropriate steps should be taken to reinforce and encourage
the continued attention and dedication of, and to contract for the
continued rendering of services by, members of the Company’s
management, including Executive, in connection with their assigned
duties without distraction in the face of potentially disturbing
circumstances, and without the Company’s loss of needed
personnel, arising from the possibility of a Change in Control;
and
WHEREAS, in consideration of
Executive’s continued employment with the Company, the
Company desires to provide Executive with certain compensation and
benefits set forth in this Agreement in order to ameliorate the
financial and career impact on Executive in the event
Executive’s employment with the Company is terminated for a
reason related to a Change in Control; and
WHEREAS, the Company and the
Executive entered into the Original Agreement, effective as of the
Effective Date; and
WHEREAS, the Company and the
Executive now desire to amend, restate and supercede the Original
Agreement to reflect provisions of Section 409A of the
Internal Revenue Service Code and the final regulations issued
thereunder, which amendment is to be effective as of the Effective
Date.
NOW, THEREFORE, in consideration of
the foregoing and the mutual covenants and agreements hereinafter
set forth (including definitions of capitalized terms which are set
forth in Section 23 and throughout this Agreement) and
intending to be legally bound hereby, the Company and Executive
agree as follows:
1. Obligations of Executive to
Remain Employed . Executive agrees that in the event any person
or group attempts a Change in Control and he is either notified by
the Board or aware of an attempted Change in Control, he shall not,
without the written agreement of the Board, voluntarily leave the
employ of the Company other than by reason of a Constructive
Termination Associated With a Change in Control (as defined in
Section 23) (i) until such attempted Change in Control
terminates or (ii) if a Change in Control shall occur, until
the occurrence of such actual Change in Control. For purposes of
the foregoing clause (i) and this Agreement, Constructive
Termination Associated With a Change in Control shall be
determined, except as expressly provided in the definition of the
term, as if a Change in Control had occurred when such attempted
Change in Control (which is sometimes referred to herein as a
“potential”, as opposed to an “actual”,
Change
in Control) became known to the Board. For
purposes of this Agreement, any decision by the Board that the
person or group has abandoned or terminated his or its efforts to
effect a Change in Control shall be conclusive and binding on
Executive.
2. Termination Associated With a
Change in Control .
(a) Involuntary Termination
Associated With a Change in Control . Executive shall be
entitled to the payments and benefits provided in Section 2(b)
in the event Executive’s employment is terminated after, or
in connection with, a Change in Control, on account of:
(i) an Involuntary Termination
Associated With a Change in Control (as defined in Section 23)
within the two-year period after an actual Change in
Control,
(ii) a termination by the Company,
other than for Cause (as defined in Section 23) or other than
due to Executive’s death or Disability (as defined in
Section 23), that (A) occurs not more than three
(3) months prior to the date on which an actual Change in
Control occurs or (B) is requested by a third party who
initiates and effects an actual Change in Control, or
(iii) a termination by Executive
that occurs after a potential Change in Control but before an
actual Change in Control and is considered a Constructive
Termination Associated With a Change in Control.
For purposes of clause (ii)(B) in
the preceding sentence, to be eligible to receive amounts described
in Section 2(b) below, a Change in Control must be consummated
within the twelve (12) month period following
Executive’s Termination Date (as defined in Section 23),
except in circumstances pursuant to which the consummation of the
Change in Control is delayed, through no failure of the Company or
the third person, by a governmental or regulatory authority or
agency with jurisdiction over the matter, or as a result of other
similar circumstances. In such a circumstance, the remainder of the
twelve (12) month period shall be tolled and shall recommence
upon termination of the delaying event.
(b) Payments Upon Involuntary
Termination Associated With a Change in Control . Subject to
the provisions of Section 2(c) or Sections 3 and 6 hereof, in
the event a termination described in Section 2(a) occurs, the
Company shall pay and provide to Executive on or beginning, as
applicable, the first business day that occurs following sixty
(60) days after his Termination Date or, where Executive is
entitled to benefits under this Agreement by reason of clause
(ii) or (iii) of Section 2(a) above, the later of as
soon as administratively feasible after the date an actual Change
in Control occurs or the first business day that occurs following
sixty (60) days after his Termination Date (contingent on the
execution of the release without revocation as contemplated in
Section 4 hereof):
(i) a lump sum cash payment equal to
2.5 times Executive’s Base Pay (as defined in
Section 23);
(ii) a lump sum cash payment equal
to 2.5 times Executive’s Target Bonus (as defined in
Section 23);
(iii) a pro rated payment of his
Target Bonus for the year in which Executive’s Termination
Date occurs. The pro rated payment shall be based on
Executive’s Target Bonus as of Executive’s Termination
Date, multiplied by a fraction, the numerator of which is the
number of days during which Executive was employed by the Company
in the year of his termination and the denominator of which is
365;
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(iv) any award under the
Company’s long-term cash and equity incentive program,
including stock option, restricted stock, restricted unit, other
equity- or cash-based incentive awards or other equity- or
cash-based incentive agreements, which by its terms vests in
connection with the Change in Control, provided that payment of
such award shall be determined solely by the terms of such award
and any plan, program or arrangement which controls its
determination and payment; and
(v) for a period of 24 months
following his Termination Date, Executive shall continue to receive
on a monthly basis the medical and dental coverage in effect on his
Termination Date (or generally comparable coverage) for himself
and, if applicable, his spouse and dependents, as the same may be
changed from time to time for employees generally, as if Executive
had continued in employment during such period; or, as an
alternative, the Company may elect to pay Executive cash in lieu of
such coverage in an amount equal to Executive’s reasonable
after-tax cost of continuing comparable coverage, where such
coverage may not be continued by the Company (or where such
continuation would adversely affect the tax status of the plan
pursuant to which the coverage is provided), with any such cash
payments to be made in accordance with the ordinary payroll
practices of the Company (not less frequently than monthly) for
employees generally for the period during which such cash payments
are to be provided.
(A) If Executive does not receive
the cash payment described in the preceding sentence, the Company
shall take all commercially reasonable efforts to provide that the
COBRA (as defined in Section 23) health care continuation
coverage period under section 4980B of the Code (as defined in
Section 23) shall commence immediately after the foregoing 24
month benefit period, with such continuation coverage continuing
until the end of applicable COBRA health care continuation coverage
period.
(B) If Executive would have been
eligible for post-retirement medical and dental coverage had he
retired from employment during the period of 24 months following
his Termination Date, but is not so eligible as the result of his
Involuntary Termination Associated With a Change in Control, then
at the conclusion of the benefit continuation period described in
(A) above, the Company shall take all commercially reasonable
efforts to provide Executive on a monthly basis with additional
continued group medical and dental coverage comparable to that
which would have been available to him from time to time under the
Company’s post-retirement medical and dental program, for as
long as such coverage would have been available under such program,
or, as an alternative, the Company may elect to pay Executive cash
in lieu of such coverage in an amount equal to Executive’s
reasonable after-tax cost of continuing comparable coverage, where
such coverage may not be continued by the Company (or where such
continuation would adversely affect the tax status of the plan
pursuant to which the coverage is provided), with any such cash
payments to be made in accordance with the ordinary payroll
practices of the Company (not less frequently than monthly) for
employees generally for the period during which such cash payments
are to be provided.
(c) Limitation on Payments and
Benefits . Notwithstanding anything in this Agreement to the
contrary, the sum of the maximum amount payable and the value of
the benefits provided to Executive pursuant to this Section 2
and Section 6(a) shall be limited to 2.99 times the sum of
Executive’s Base Pay and Bonus (as defined in
Section 23). In the event a reduction is required pursuant
hereto, unless Executive is permitted by the Company to choose the
order of reduction, the order of reduction shall be first any
Gross-Up Payment provided pursuant to Section 6(a), next all
other cash payments on a pro rata basis, then any equity
compensation on a pro rata basis, and lastly medical and dental
coverage.
(d) Cessation of Employment on
Account of Disability, Cause or Death . Notwithstanding
anything in this Agreement to the contrary, if Executive’s
employment terminates on account of Disability,
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Executive shall be entitled to
receive disability benefits under any disability program maintained
by the Company that covers Executive, and Executive shall not be
considered to have terminated employment under this Agreement and
shall not receive payments and benefits pursuant to this
Section 2. If Executive’s employment is terminated by
the Company on account of Cause or because of his death, Executive
shall not be considered to have terminated employment under this
Agreement and shall not receive payments and benefits pursuant to
this Section 2.
(e) Beneficiaries . 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. If Executive dies without having
designated a beneficiary, or if the beneficiary so designated has
predeceased Executive or cannot be located by the Company within
one year after the date when the Company commenced making a
reasonable effort to locate such beneficiary, then
Executive’s surviving spouse, or if none, then
Executive’s estate shall be deemed to be his
beneficiary.
3. Nonqualified Deferred
Compensation Plan Omnibus Provisions . Notwithstanding any
other provision of this Agreement, it is intended that any payment
or benefit which is provided pursuant to or in connection with this
Agreement which is considered to be nonqualified deferred
compensation subject to Section 409A of the Code shall be
provided and paid in a manner, and at such time and in such form,
as complies with the applicable requirements of Section 409A
of the Code to avoid the unfavorable tax consequences provided
therein for non-compliance. Notwithstanding any other provision of
this Agreement, the Board is authorized to amend this Agreement, to
amend any election made by Executive under this Agreement and/or to
delay the payment of any monies and/or provision of any benefits in
such manner as may be determined by it to be necessary or
appropriate to comply, or to evidence or further evidence required
compliance, with Section 409A of the Code (including any
transition or grandfather rules thereunder). For purposes of this
Agreement, all rights to payments and benefits hereunder shall be
treated as rights to a series of separate payments and benefits to
the fullest extent allowable by Section 409A of the Code.
Payments or provision of benefits in connection with a separation
from service payment event will be delayed, to the extent
applicable, until six months after the separation from service or,
if earlier, the Executive’s death, if the Executive is a key
employee of a publicly traded corporation under
Section 409A(a)(2)(B)(i) of the Code (the “409A Deferral
Period”). In the event such payments are otherwise due to be
made in installments or periodically during the 409A Deferral
Period, the payments which would otherwise have been made in the
409A Deferral Period shall be accumulated and paid in a lump sum as
soon as the 409A Deferral Period ends, and the balance of the
payments shall be made as otherwise scheduled. In the event
benefits are required to be deferred, any such benefit may be
provided during the 409A Deferral Period at Executive’s
expense, with Executive having a right to reimbursement from the
Company once the 409A Deferral Period ends, and the balance of the
benefits shall be provided as otherwise scheduled. For purposes of
this Agreement, termination of employment will be read to mean a
“separation from service” within the meaning of
Section 409A of the Code where it is reasonably anticipated
that no further services would be performed after that date or that
the level of bona fide services Executive would perform after that
date (whether as an employee or independent contractor) would
permanently decrease to no more than 20 percent of the average
level of bona fide services performed over the immediately
preceding thirty-six (36)-month period.
4. Release . Notwithstanding
the foregoing, no payments shall be made or benefits provided under
Section 2(b) unless Executive executes, and does not revoke,
the Company’s standard written release, substantially in the
form as attached hereto as Appendix A (the “Release”),
of any and all claims against the Company and all related parties
with respect to all matters arising out of Executive’s
employment by the Company (other than any claim or entitlement
under an employee benefit, long term cash or equity compensation
plan, program, arrangement or agreement which is due pursuant to
the terms of such plan,
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program, arrangement or agreement) or a
termination thereof. Such Release must be provided within sixty
(60) days after Executive’s Termination Date or, where
Executive is entitled to benefits under this Agreement by reason of
clause (ii) or (iii) of Section 2(a) above, the
later of before the date an actual Change in Control occurs or
within sixty (60) days after the Executive’s Termination
Date.
5. Enforcement . Without
limiting the rights of Executive at law or in equity, except as
provided in Section 6, if the Company fails to make any
payment or provide any benefit required to be made or provided
hereunder on a timely basis, the Company will pay interest on the
amount or value thereof at an annualized rate of interest equal to
the so-called composite “prime rate” as quoted from
time to time during the relevant period in the Eastern Edition of
The Wall Street Journal . Such interest will be payable as
it accrues consistent with the timing of the related payments or
benefits to be provided. Any change in such prime rate will be
effective on and as of the date of such change.
6. Tax Limitation on Payments by
the Company . The provisions of this Section 6 shall apply
notwithstanding anything in this Agreement to the
contrary.
(a) Subject to the limitation in
Section 2(c), in the event that it shall be determined that
any Payment would constitute an “excess parachute
payment” within the meaning of Section 280G of the Code,
then the Company shall pay Executive an additional amount (the
“Gross-Up Payment”) such that the net amount retained
by the Executive after deduction of any excise tax imposed under
Section 4999 of the Code, and any federal, state and local
income tax, employment tax, excise tax and other tax imposed upon
the Gross-Up Payment, shall be equal to the Payment.
Notwithstanding the foregoing, if the Net After-tax Benefit to the
Executive of receiving the Gross-Up Payment does not exceed the
Reduced Amount (as defined below) by more than the lesser of
$50,000 or 10% (as compared to the Net After-tax Benefit to
Executive resulting from elimination of the Gross-Up Payment and
reduction of the Payments under Section 2 of this Agreement
(“Change in Control Payments”) to the Reduced Amount),
then the Company shall not pay Executive the Gross-Up Payment and
the Change in Control Payments shall be reduced (but not below
zero) so that the Present Value of the aggregate of all Payments
does not exceed the Reduced Amount; provided, however, that no such
reduction shall be effected, but no Gross-Up Payment shall be made,
if the Net After-tax Benefit to Executive of receiving all of the
Payments exceeds by more than the lesser of $50,000 or 10% of the
Net After-tax Benefit to Executive resulting from having such
Change in Control Payments so reduced. In the event a reduction is
required pursuant hereto, the order of reduction shall be first all
cash payments on a pro rata basis, then any equity compensation on
a pro rata basis, and lastly medical and dental coverage. For
purposes of this Section 6, the following terms have the
following meanings:
(i) “Net After-tax
Benefit” shall mean the Present Value of a Payment net of all
federal state and local income, employment and excise taxes imposed
on Executive with respect thereto, determined by applying the
highest marginal rate(s) applicable to an individual for
Executive’s taxable year in which the Change in Control
occurs.
(ii) “Payment” means any
payment or distribution or provision of benefits by the Company to
or for the benefit of Executive, whether paid or payable or
distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any
reductions required by this Section 6.
(iii) “Present Value”
shall mean such value determined in accordance with
Section 280G(d)(4) of the Code.
(iv) “Reduced Amount”
shall be an amount expressed in Present Value which maximizes the
aggregate Present Value of Payments without causing any Payment to
be subject to excise tax under Section 4999 of the Code or the
deduction limitation of Section 280G of the Code.
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(b) Except as set forth in the next
sentence, all determinations to be made under this Section 6
shall be made by the nationally recognized independent public
accounting firm used by the Company immediately prior to the Change
in Control (“Accounting Firm”), which Accounting Firm
shall provide its determinations and any supporting calculations to
the Company and Executive within ten days of Executive’s
Termination Date. If determined by the Accounting Firm to be
excludible from parachute payments under Section 280G of the
Code, the value of Executive’s non-competition covenant under
Section 10(a) of this Agreement shall be determined by
independent appraisal by a nationally-recognized business valuation
firm acceptable to both Executive and the Company, and a portion of
the Change in Control Payments shall, to the extent of that
appraised value, be specifically allocated as reasonable
compensation for such non-competition covenant and shall not be
treated as a parachute payment. Any such determination by the
Accounting Firm shall be binding upon the Company and
Executive.
(c) If the Accounting Firm
determines that Change in Control Payments should be reduced, the
Company shall promptly give Executive notice to that effect and a
copy of the detailed calculation thereof. All determinations made
by the Accounting Firm under this Section 6 shall be binding
upon the Company and Executive and shall be made within twenty
(20) business days of Executive’s Termination
Date.
(d) While it is the intention of the
Company and Executive to reduce the amounts payable or
distributable to Executive hereunder only if the aggregate Net
After-tax Benefit to Executive would thereby be increased in the
manner provided for herein, as a result of the uncertainty in the
application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is
possible that amounts will have been paid or distributed by the
Company to or for the benefit of Executive pursuant to this
Agreement which should not have been so paid or distributed
(“Overpayment”) or that additional amounts which will
have not been paid or distributed by the Company to or for the
benefit of Executive pursuant to this Agreement could have been so
paid or distributed (“Underpayment”), in each case,
consistent with the calculation of the Reduced Amount hereunder. In
the event that the Accounting Firm, based either upon the assertion
of a deficiency by the Internal Revenue Service against the Company
or Executive which the Accounting Firm believes has a high
probability of success determines that an Overpayment has been
made, any such Overpayment paid or distributed by the Company to or
for the benefit of Executive shall be treated for all purposes as a
loan to Executive which Executive shall repay to the Company
together with interest at the applicable federal rate provided for
in Section 7872(f)(2) of the Code; provided, however, that no
such loan shall be deemed to have been made and no amount shall be
payable by Executive to the Company if and to the extent such
deemed loan and payment would not either reduce the amount on which
Executive is subject to tax under Sections 1 and 4999 of the Code
or generate a refund of such taxes. In the event that the
Accounting Firm, based upon controlling precedent or substantial
authority, determines that an Underpayment has occurred, any such
Underpayment shall be promptly paid by the Company to or for the
benefit of Executive together with interest at the applicable
federal rate provided for in Section 7872(f)(2) of the
Code.
(e) All of the fees and expenses of
the Accounting Firm in performing the determinations referred to in
this Section 6 shall be borne solely by the
Company.
(f) All payments to be made under
this Section 6 (other than the Underpayment described in
Section 6(d)) must be made by the end of the Executive’s
taxable year next following the Company’s taxable year in
which the Company remits the related taxes. Any right to
reimbursement incurred due to a tax audit or litigation addressing
the existence or amount of a tax liability must be made by the end
of the Executive’s taxable year following the
Executive’s taxable year in which the taxes that are the
subject of the audit or litigation are remitted to the taxing
authorities or, where no such taxes are remitted, the end of the
Executive’s taxable year following the year in which the
audit is completed or there is a final and non-appealable
settlement or the resolution of the litigation.
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7. Duties upon Termination;
Mitigation Obligation . Upon termination of 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. The Company hereby
acknowledges that it will be difficult and may be impossible for
Executive to find reasonably comparable employment following the
Termination Date. Accordingly, the payment and provision of the
severance compensation by the Company to Executive in accordance
with the terms of this Agreement is hereby acknowledged by the
Company to be reasonable, and Executive will not be required to
mitigate the amount of any payment or benefit provided for in this
Agreement by seeking other employment or otherwise, nor will any
profits, income, earnings or other benefits from any source
whatsoever create any mitigation, offset, reduction or any other
obligation on the part of Executive hereunder or
otherwise.
8. Legal Fees and Expenses .
If litigation or arbitration is commenced by either party to
enforce or interpret any provision contained in this Agreement, the
Company will undertake to indemnify Executive for his reasonable
attorneys’ fees and expenses associated with such litigation
or arbitration if Executive substantially prevails in such
litigation or arbitration or any settlement thereof.
Notwithstanding the foregoing, if it should appear to Executive
that the Company has failed to comply with any of its obligations
under this Agreement or in the event that the Company or any other
person takes or threatens to take any action to declare this
Agreement void or unenforceable, or institutes any litigation or
other action or proceeding designed to deny, or to recover from,
Executive the benefits provided or intended to be provided to
Executive under Section 2 of this Agreement, the Company will
in any event reimburse Executive for his reasonable
attorneys’ fees and expenses incurred in connection therewith
up to $10,000 without regard to the commencement or outcome of any
litigation or arbitration in order for Executive to retain counsel
to advise and represent Executive in connection with any such
interpretation, enforcement or defense, including without
limitation the initiation or defense of any litigation or other
legal action, whether by or against the Company or any director,
officer or employee of the Company, in any jurisdiction.
Notwithstanding any existing or prior attorney-client relationship
between the Company and such counsel, the Company irrevocably
consents to Executive’s entering into an attorney-client
relationship with such counsel, and in that connection, the Company
and Executive agree that a confidential relationship will exist
between Executive and such counsel. The first $10,000 of such
expenses will be paid by the Company as they are incurred by
Executive, and any balance thereof due to Executive shall be paid
within thirty (30) days after any final judgment or decision
or settlement in which Executive substantially prevails. Any
reimbursements to be paid by the Company to the Executive under
this Section 8 for the first $10,000 of such expenses must be
paid as soon as administratively feasible after the Executive
incurs the expense and the Executive will be entitled to receive
any balance thereof as soon as administratively feasible after the
termination of such litigation or arbitration or any settlement
thereof under terms on which the Executive substantially
prevails.
9. Confidentiality .
Executive hereby covenants and agrees that, except as specifically
requested or directed by the Company, he will not disclose to any
person not employed by the Company, or use in connection with
engaging in competition with the Company, any confidential or
proprietary information (as provided below) of the Company. For
purposes of this Agreement, the term “confidential or
proprietary information” will include all information of any
nature and in any
