EXHIBIT 10.9
EMPLOYMENT AGREEMENT
This AGREEMENT is entered into as of
11:59 p.m. New York time on the date set forth
on the signature page hereof, by and between Patriot Coal
Corporation , a Delaware corporation (the
“Company”), and Richard M. Whiting (the
“Executive”).
RECITALS
To induce Executive to serve as the
Company’s President and Chief Executive Officer, 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 as the Company’s President
and Chief Executive Officer. In such capacity, Executive shall
report to the Board of Directors of the Company (the
“Board”) 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.
1.2 Subject to the terms and
conditions of this Agreement, Executive hereby accepts employment
as the Company’s President and Chief Executive Officer
commencing as of the date 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.
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 Board) or from serving,
subject to the prior approval of 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 the avoidance of doubt, Executive shall be
permitted to continue to serve as a member or director in any
organization of which he was a member or director as of the date
hereof (including, without limitation, as director of the Society
of Mining Engineers Foundation)
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without
obtaining Board approval. For purposes of this Section 1.3,
any approval by the Board required herein 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 shall continue until terminated as
provided in this Agreement.
3. Compensation
.
3.1 Salary . During
the Term of Employment, the Company shall pay Executive a base
salary (“Base Salary”), which shall be payable in
accordance with the ordinary payroll practices of the Company.
Executive’s initial Base Salary shall be $700,000 per annum.
During the Term of Employment, the Board 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
2007 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 Board as soon as practicable at or after
the beginning of the calendar year to which the performance targets
relate. The target for the 2007 bonus amount shall be determined
before or as soon as practicable after the Commencement Date. For
each calendar year, Executive’s target Bonus shall be at
least 100% of Base Salary, and his maximum bonus shall be at least
175% of Base Salary, as in effect at the end of such calendar year.
A Bonus award for any calendar year shall be payable to Executive
at the time bonuses are paid to other senior executives for such
calendar year in accordance with the Company’s policies and
practices as set by the Board, 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 Compensation
Committee of the Board in good faith) that is at least equal to
850% of Executive’s initial Base Salary as set forth in
Section 3.1. Such award shall consist of stock options and
restricted stock units, which will be granted on or about
November 1, 2007. 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.
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(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 250% of
Executive’s Base Salary as in effect on the date of such
award. The Annual Long Term Incentive Award with respect to the
2008 calendar year shall be made in the form of restricted stock on
or about November 1, 2007, 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 shall be approved by a committee of the Board comprised of
individuals who are both disinterested directors (within the
meaning of Section 16 of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”)) and independent
directors (within the meaning of applicable stock exchange rules)
and shall be exempt from Section 16(b) of the Exchange Act by
reason of Rule 16b-3 under the Exchange Act.
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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. To the extent permitted by applicable
law, applicable tax-qualification requirements, and any relevant
benefit plan document, Executive’s service with Peabody
Energy Corporation and its affiliates shall be taken into account
for purposes of determining eligibility, vesting, level of benefits
and benefit accruals under the Company’s benefit plans
(except to the extent that such service credit would result in a
duplication of benefits).
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, but in no event
less than twenty (20) business days, which shall be taken at
such times as are reasonably consistent with Executive’s
responsibilities hereunder.
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 such
reimbursement is not 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, 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 senior 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.
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 Executive terminates his
employment for Good Reason, such notice shall describe the conduct
Executive believes to constitute Good Reason and the Company
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shall have the
opportunity to cure the Good Reason within thirty (30) days of
receiving such notice. If the Company cures the conduct that is the
basis for the potential termination for Good Reason within such
thirty (30) day period, Executive’s notice of
termination shall be deemed withdrawn.
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) 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 the total of:
(A) three (3) times
Executive’s Base Salary, plus
(B) an additional amount equal three
(3) 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
three (3) times six percent (6%) of Executive’s Base
Salary.
The Company
shall pay to Executive (I) one-third (1/3) 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
two-thirds (2/3) 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
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business days
during the calendar year of termination. The 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 remained actively employed, for
a period of three (3) years following 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 &
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 cease.
(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; (iv) relocation of Executive’s primary office
by more than 50 miles from the location of Executive’s
primary office in Saint Louis, Missouri; or (v) any material
diminution or material adverse change in Executive’s title,
duties, responsibilities o
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