EMPLOYMENT
AGREEMENT
This
AGREEMENT is entered into by and between Patriot Coal
Corporation , a Delaware corporation (the
“Company”), and the undersigned executive (the
“Executive”), with effect as of the effective date
of the merger pursuant to that certain Agreement and Plan of
Merger, dated as of April 2, 2008 (the “Merger
Agreement”), by and among Magnum Coal Company, Patriot
Coal Corporation, Colt Merger Corporation and ArcLight Energy
Partners Fund I, L.P. and ArcLight Energy Partners Fund II,
L.P. (such date, the “Closing Date”).
RECITALS
To
induce Executive to serve in the executive team position set
forth on the signature page hereof, the Company desires to
provide Executive with compensation and other benefits on the
terms and subject to the conditions set forth in this
Agreement.
Executive
is willing to accept such employment and perform services for
the Company, on the terms and subject to the conditions
hereinafter set forth.
It
is therefore hereby agreed by and between the parties as
follows:
1.
Employment .
1.1
Subject
to the terms and conditions of this Agreement, the Company agrees
to employ Executive during the term hereof in the executive team
position set forth on the signature page hereof. In such
capacity, Executive shall report to the Chief Executive Officer of
the Company (the “CEO”) and shall have the customary
powers, responsibilities and authorities of executives holding such
positions in publicly-held corporations of the size, type and
nature of the Company, as it exists from time to time, and as are
assigned by the CEO.
1.2
Subject
to the terms and conditions of this Agreement, Executive hereby
accepts employment in the executive team position set forth on the
signature page hereof commencing on the commencement date set forth
on the signature page hereof (the “Commencement Date”)
and agrees, subject to any period of vacation or sick leave, to
devote his full business time and efforts to the performance of
services, duties and responsibilities in connection therewith,
subject at all times to review and control of the CEO.
1.3
Nothing
in this Agreement shall preclude Executive from engaging in trade
association activities, charitable work and community affairs, from
delivering lectures, fulfilling speaking engagements or teaching at
educational institutions, from managing any investment made by him
or his immediate family with respect to which Executive or such
family member is not substantially involved with the management or
operation of the entity in which Executive has invested (provided
that no such investment in publicly traded equity securities or
other property may exceed five percent (5%) of the equity of any
entity, without the prior approval of the CEO or the Board of
Directors of the Company (the “Board”)) or from
serving, subject to the prior approval of the CEO or the Board, as
a member of the board of directors or as a trustee of any other
corporation, association or entity, to the extent that any of the
above activities do not materially interfere with the performance
of his duties hereunder. For purposes
of
the preceding sentence, any approval by the CEO or the Board
required therein shall not be unreasonably withheld.
2.
Term of Employment . Executive’s term of
employment under this Agreement (the “Term of
Employment”) shall commence on the Commencement Date and,
subject to termination as provided in this Agreement, shall have an
initial term of three years (the “Initial Term”).
Following the Initial Term, Executive’s employment shall be
employment “at will” unless both parties elect to
extend the Term of Employment. Following the Term of Employment,
Executive shall be not entitled to any benefits upon any
termination of employment except for the Accrued Obligations (as
defined in Section 6.1 hereof).
3.
Compensation .
3.1
Salary . During the Term of Employment, the
Company shall pay Executive a base salary (“Base
Salary”) in the amount set forth on the signature page
hereof. Such Base Salary shall be payable in accordance
with the ordinary payroll practices of the
Company. During the Term of Employment, the Board and
the CEO shall review in good faith, at least annually,
Executive’s Base Salary in accordance with the
Company’s customary procedures and practices regarding the
salaries of senior executives and may, if determined by the Board
to be appropriate, increase Executive’s Base Salary following
such review. “Base Salary” for all purposes
herein shall be deemed to be a reference to any such increased
amount.
3.2
Annual Bonus . In addition to his Base Salary,
Executive shall, commencing with the 2008 calendar year and
continuing for each calendar year thereafter during the Term of
Employment, be eligible to receive an annual cash bonus (the
“Bonus”) in accordance with a program to be developed
by the Board, based on achievement of performance targets
established by the compensation committee of the Board (the
“Compensation Committee”) as soon as practicable at or
after the beginning of the calendar year to which the performance
targets relate. The target for the 2008 bonus amount
shall be determined before or as soon as practicable after
the Commencement
Date, it being understood that Executive shall be qualified to
receive a Bonus for 2008 as though he had been employed by the
Company since January 1, 2008. Executive’s target
and maximum annual Bonus percentages are set forth on the signature
page hereof. A Bonus award for any calendar year shall
be payable to Executive at the time bonuses are paid to executive
officers for such calendar year in accordance with the
Company’s policies and practices as set by the Board in
consultation with the CEO, but in no event later than March 15 of
the calendar year following the later of (a) the calendar year in
which the Bonus is earned or (b) the calendar year in which the
Bonus is no longer subject to a substantial risk of forfeiture
within the meaning of Section 409A of the Internal Revenue Code of
1986, as amended (the “Code”) and the guidance
promulgated and in effect thereunder (“Section
409A”).
4.
Employee Benefits .
4.1
Equity and Stock Options .
(a)
Executive shall
receive an extended long-term incentive award (the “Extended
Long Term Incentive Award”) with a value (as determined by
the
Compensation
Committee in good faith) that is at least equal to the percentage
of Executive’s initial Base Salary as set forth on the
signature page hereof. Such award shall consist of stock
options and restricted stock units, which will be granted effective
on the Closing Date. The stock options will be granted
with an exercise price per share equal to the closing market price
of a share of Company common stock on the grant
date. The restricted stock units will be granted with a
value per unit equal to the closing market price of a share of
Company common stock on the grant date.
(b)
With respect to each
calendar year during the Term of Employment, commencing with the
2008 calendar year, Executive shall receive equity-based
compensation awards under the Company’s equity incentive
plans (the “Annual Long Term Incentive Awards” and,
together with the Extended Long Term Incentive Award, the
“Long Term Incentive Awards”) with a value at least
equal to the percentage of Executive’s Base Salary (as in
effect on the date of such award) as set forth on the signature
page hereof. The Annual Long Term Incentive Award with
respect to the 2008 calendar year shall be made in the form of
restricted stock granted effective on the Closing Date, with a
value per share that equals the closing market price of a share of
Company common stock on the grant date. The Annual Long
Term Incentive Award with respect to each calendar year after 2008
shall be made effective on the first business day of such calendar
year.
(c)
As of the date of
termination of Executive’s employment due to
Executive’s Disability (as hereinafter defined) or death, or
upon the occurrence of a change in control (as defined in the
applicable equity-based plan or award) all outstanding Long Term
Incentive Awards and any other equity-based awards granted to
Executive by the Company shall become immediately and fully vested;
provided, however, that any performance units granted to Executive
shall not become fully vested upon a change in control unless
otherwise provided in the applicable plan or award
agreement. In the case of termination of
Executive’s employment due to Executive’s Disability
(as defined in Section 6.4) or death, any options held by Executive
as of such date shall remain exercisable until at least the earlier
of (i) the date that is one (1) year after the date of termination
of Executive’s employment or (ii) the date on which the
option would have expired solely by reason of the passage of time
if Executive’s employment had not been terminated, provided
that no option shall remain outstanding longer than the maximum
time permitted by Section 409A.
(d)
The Long Term
Incentive Awards shall be governed by separate grant agreements
(together with any other agreement approved by the Board and
designated by the Board as an “Ancillary Document” for
purposes of this Agreement, the “Ancillary
Documents”). To the extent permitted by any
applicable law and the rules of any exchange on which the
Company’s stock is listed, in the event of any conflict
between an Ancillary Document and the terms of this Agreement, the
terms of this Agreement shall govern.
(e)
All Long Term
Incentive Awards and any other equity-based awards granted to
Executive by the Company (i) shall be subject to the approval of
the
Compensation
Committee and (ii) shall be exempt from Section 16(b) of the
Exchange Act by reason of Rule 16b-3 under the Exchange
Act.
4.2
Employee Benefit Programs, Plans and Practices; Perquisites
. During
the Term of Employment, the Company shall provide Executive with
employee benefits and perquisites at a level (a) commensurate with
his position in the Company and (b) at least as favorable to
Executive as the Company provides to its other senior executives,
including retirement benefits, health and welfare benefits (both
active and retiree), the Continuation Benefits (as defined in
Section 6.2(a)(2)), and other employee benefits and perquisites
which the Company may make available to its senior executives from
time to time.
4.3
Vacation . Executive shall be
entitled to the number of business days paid vacation in each
calendar year as determined in accordance with the Company’s
applicable vacation policies, which shall be taken at such times as
are reasonably consistent with Executive’s responsibilities
hereunder.
4.4
Retention Award . The Company shall
pay Executive a retention award (the “Retention
Award”) in the amount set forth on the signature page
hereof. The Company shall pay the Executive one-half
(1/2) of the Retention Award on the first anniversary of the
Commencement Date, provided
that
the Executive remain
employed by the Company on such date, and the remainder of the
Retention Award on the second anniversary of the Commencement
Date, provided
that
the Executive remain
employed by the Company on such date.
5.
Expenses . Subject to
prevailing Company policy or such guidelines as may be established
by the Board, the Company will reimburse Executive for all
reasonable expenses incurred by Executive in carrying out his
duties on behalf of the Company, provided
that
no such reimbursement
will be required if such reimbursement would be taxable income to
Executive.
6.
Termination of Employment .
6.1
Termination of Employment for Any Reason . In the event of a
termination of Executive’s employment for any reason, whether
or not such termination occurs during the Term of Employment, the
Company shall pay to Executive (a) within five (5) business days
following the date of termination of Executive’s employment,
a lump sum equal to (i) Executive’s Base Salary earned on or
prior to the date of such termination but not yet paid to Executive
in accordance with the Company’s customary procedures and
practices regarding the salaries of executives, (ii) any business
expenses incurred by Executive and not yet reimbursed by the
Company under Section 5 above, as of the date of such termination,
(iii) any vacation time accrued but unused as of the date of such
termination, and (iv) any Bonus earned but not yet paid for any
calendar year prior to the date of such termination and (b) any
benefits accrued and vested under any of the Company’s
employee benefit programs, plans and practices on or prior to the
date of termination of Executive’s employment (remuneration
described in (a) and (b) above are collectively referred to as the
“Accrued Obligations” herein) in accordance with the
terms of such programs, plans and practices.
6.2
Termination Not for Cause or for Good Reason . (a) The Company or
Executive may terminate Executive’s Term of Employment at any
time for any reason by providing written notice to the other party
at least thirty (30) days (or such other number of days specified
in this Agreement) in advance of the date of termination of
Executive’s employment. If, during the Term of
Employment, Executive terminates his employment for Good Reason,
such notice shall describe the conduct Executive believes to
constitute Good Reason.
If Executive’s
employment is terminated prior to the third anniversary of the
Commencement Date (i) by the Company other than for Cause (as
defined in Section 6.3(b) hereof), Disability (as defined in
Section 6.4 hereof) or death or (ii) by Executive for Good Reason
(as defined in Section 6.2(b) hereof), and such termination
constitutes a Separation from Service (as hereinafter defined), the
Company, as severance, shall pay to Executive an amount (the
“Severance Payment”) equal to:
(A) two (2) times Executive’s
Base Salary, plus
(B) an additional amount equal two
(2) times the greater of (x) Executive’s target Bonus for the
calendar year of termination of Executive’s employment or (y)
the annual average of the actual Bonus awards paid to Executive by
the Company for the three (3) calendar years preceding the date of
termination of Executive’s employment (or, if Executive has
not yet been employed by the Company pursuant to this Agreement for
three (3) full calendar years as of the date his employment is
terminated, for the two (2) year or (1) year period, as applicable,
for which he has been so employed and received a Bonus);
plus
(C) an additional amount equal to two
(2) times six percent (6%) of Executive’s Base
Salary.
The Company shall pay
to Executive (I) one-half (1/2) of such Severance Payment in a lump
sum payment on the six (6) month anniversary of Executive’s
Separation from Service and (II) the remaining one-half (1/2) of
the Severance Payment in a lump sum on the first anniversary of the
date of Executive’s Separation from
Service.
“Separation from
Service” means a “separation from service,” as
such term is defined under Section 409A.
In addition, if
Executive’s employment is terminated (i) by the Company other
than for Cause (as defined in Section 6.3(b) hereof), Disability
(as defined in Section 6.4 hereof), or death or (ii) by Executive
for Good Reason (as defined in Section 6.2(b)) and if such
termination constitutes a Separation from
Service,
(1)
The Company shall pay to
Executive a prorated bonus (the “Prorated Bonus”)
for the calendar year of termination of Executive’s
employment, calculated as the Bonus Executive would have
received in such year based on actual performance multiplied
by a fraction, the numerator of which is the number of
business days during the calendar year of termination that
Executive was employed and the denominator of which is the
total number of business days during the calendar year of
termination. The
Prorated Bonus shall be payable when annual bonuses are paid to
other senior executives of the Company, but in no event later than
March 15 of the calendar year following the later of (a) the
calendar year in which the Bonus is earned or (b) the calendar year
in which the Bonus is no longer subject to a substantial risk of
forfeiture within the meaning of Section 409A.
(2) The Company shall also continue
to provide Executive, as though he or she remained actively
employed, for a period ending on two years from the date of
termination of Executive’s employment (the “Benefit
Continuation Period”), life insurance, group health coverage
(including medical, dental, and vision benefits), accidental death
and dismemberment coverage, and the health care flexible spending
account (to the extent required to comply with COBRA continuation
coverage requirements (collectively, the “Continuation
Benefits”) in accordance with the applicable plan
terms; provided
, however
, that any such
coverage shall terminate to the extent that Executive is offered or
obtains comparable benefits from any other employer during the
Benefit Continuation Period; provided
, further
, that the amount of
Continuation Benefits provided during one calendar year shall not
affect the amount of Continuation Benefits provided during a
subsequent calendar year (except with respect to health plan
maximums), the Continuation Benefits may not be exchanged or
substituted for other forms of compensation to Executive, and any
reimbursement or payment under the Continuation Benefit
arrangements will be paid in accordance with applicable plan terms
and no later than the last day of Executive’s taxable year
following the taxable year in which he incurred the expense giving
rise to such reimbursement or payment. Notwithstanding
the foregoing, if Executive breaches any provision of Section 13
hereof, the remaining balances of the Severance Payment, the
Prorated Bonus, and any Continuation Benefits shall be
forfeited.
(b) For purposes of this Agreement,
the term “Good Reason” means: (i) a reduction by the
Company in Executive’s Base Salary (in which event the
Severance Payment shall be calculated based on Executive’s
Base Salary in effect prior to any such reduction); (ii) a material
reduction in the aggregate program of employee benefits and
perquisites to which Executive is entitled (other than a reduction
that generally a
