|
Exhibit 10.26
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 Eric B.
Tolbert (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;
2
(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,
3
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,
4
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.
5
(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.
6
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 form that is owned by the
Company and that is not publicly available (other than by
Executive’s breach of this Section 9) or generally known
to persons engaged in businesses similar
|
