November 13, 2007 Mr. Don L. Blankenship 24406 U.S. Route 119 Belfry, KY 41514 Dear Don:
Exhibit
10.32
November
13, 2007
Xx. Xxx
X. Xxxxxxxxxxx
00000
X.X. Xxxxx 000
Xxxxxx,
XX 00000
Dear
Don:
This
letter will summarize our agreement regarding your continued employment as
Chairman, Chief Executive Officer and President of Xxxxxx Energy Company,
through December 31, 2009. Your current employment agreement
will expire December 31, 2007. I am very pleased that you will
continue your leadership of Xxxxxx and look forward to the productive years
ahead.
The
specifics of your compensation package are included on Appendix A to this
letter. In addition, you generally will continue to participate in
the employee benefit plans and arrangements (e.g., the Xxxxxx Energy Retirement
Plan, the Coal Company Salary Deferral and Profit Sharing Plan, the welfare
benefit programs and the nonqualified or supplemental benefit programs) and be
entitled to receive the perquisites provided to you in keeping with past
practice, including, but not limited to, use of the Company’s
airplanes.
If you
have any questions regarding the terms and conditions of your employment or the
proposed compensation package included on Appendix A, please do not
hesitate to call me. If the offer details are acceptable, please
acknowledge by signing and dating one copy of this letter and return it to
me.
Sincerely,
/s/ Xxxxx
X. Xxxxx
Admiral
Xxxxx X. Xxxxx
Chairman,
Compensation Committee
Xxxxxx
Energy Company
Acknowledged
and agreed:
/s/ Don L.
Blankenship________ 11/13/07
Xxx X.
Xxxxxxxxxxx Date
APPENDIX A
TO LETTER AGREEMENT
THIS
APPENDIX A is part of a letter agreement dated November 13, 2007 by and
between XXXXXX ENERGY COMPANY, a Delaware corporation (“Xxxxxx”), and XXX X.
XXXXXXXXXXX (the “Executive”), and relates to the Executive’s employment by
Xxxxxx for calendar years 2008 and 2009 subject to extension as set forth in
Section 7 below.
SECTION
1. Compensation.
1.1. Base Monthly Salary –
$83,333.
1.2. Cash Incentive Bonus
Awards – A target cash incentive bonus award for fiscal year 2008 of
$900,000 (the “2008 Cash Incentive Bonus Award”) and a target cash incentive
bonus award for fiscal year 2009 of $900,000 (the “2009 Cash Incentive Bonus
Award”), each granted pursuant to the Xxxxxx Energy Company 2006 Stock and
Incentive Compensation Plan, as such plan may be amended from time to time (the
“2006 Plan”) based on the achievement of certain performance objectives for
fiscal year 2008 (for the 2008 Cash Incentive Bonus Award) and for fiscal year
2009 (for the 2009 Cash Incentive Bonus Award) using qualifying performance
criteria contained in the 2006 Plan. The target 2008 Cash Incentive Bonus Award
was granted and performance objectives set by the Compensation Committee of the
Board of Directors on November 13, 2007. The target 2009 Cash Incentive Bonus
Award shall be granted and the performance objectives set by the Compensation
Committee of the Board of Directors of Xxxxxx prior to the commencement of
fiscal year 2009. There shall be a threshold level of performance for each
performance objective below which no payment shall occur, a target level of
performance, and a maximum level of performance, the value of which can be up to
two and a half times the target amount, above which no additional payment will
occur. The achievement of Cash Incentive Bonus Awards for purposes of this
Section 1.2 shall be confirmed by the Chief Financial Officer and the
Compensation Committee and may be adjusted at the sole discretion of the
Compensation Committee in a manner consistent with the performance-based
compensation rules of Section 162(m) of the Internal Revenue Code, as amended
(the “IRC”), and as permitted by the 2006 Plan. The 2008 Cash Incentive Bonus
Award, if payable, shall be paid on February 28, 2009 and the 2009 Cash
Incentive Bonus Award, if payable, shall be paid on February 28,
2010.
1.3. Long Term Incentive
Awards – The Executive shall participate in the Company’s 2008 Long Term
Incentive Program which covers fiscal years 2008 through 2010 and the Company’s
2009 Long Term Incentive Program which covers fiscal years 2009 through 2011.
The Executive’s long term incentive awards granted pursuant to each of the 2008
Long Term Incentive Program (the “2008 Long Term Incentive Awards”) and the 2009
Long Term Incentive Program (the “2009 Long Term Incentive Awards”) shall
include the following four components: (i) a $300,000 target cash incentive
award granted pursuant to the 2006 Plan based on the achievement of a certain
performance objective using qualifying performance criteria contained in the
2006 Plan (with a threshold level of performance below which no payment shall
occur, a target level of performance, and a maximum level of performance, the
value of which can be up to two times the target amount, above which no
additional payment will occur); (ii) 50,000 non-qualified stock options granted
under the 2006 Plan with service-based vesting; (iii) 12,700 shares of
restricted stock granted pursuant to the 2006 Plan with service-based vesting;
and (iv) 7,300 restricted units granted pursuant to the 2006 Plan with
service-based vesting. The Executive’s 2008 Long Term Incentive Awards and the
2009 Long Term Incentive Awards will be subject to all the terms, conditions,
and performance and service-based vesting requirements made to participants in
Xxxxxx’x 2008 Long Term Incentive Program and 2009 Long Term Incentive Program,
respectively, with the following exception regarding the non-qualified stock
options, such options must be exercised by the Executive in the first twenty
days exercise is permissible for the Executive pursuant to Xxxxxx’x trading
window policy and applicable securities laws following their vesting, otherwise
they will be automatically forfeited.
1.4. Performance-Based Restricted
Unit Awards – Two performance-based restricted unit awards, granted prior
to the commencement of fiscal year 2008, pursuant to the 2006 Plan, which shall
vest based on the achievement of certain performance objectives for fiscal year
2008 using qualifying performance criteria contained in the 2006 Plan (the “2008
Performance Restricted Unit Awards”) and two performance-based restricted unit
awards, granted prior to the commencement of fiscal year 2009, pursuant to the
2006 Plan, which shall vest based on the achievement of certain performance
objectives for fiscal year 2009 using qualifying performance criteria contained
in the 2006 Plan (the “2009 Performance Restricted Unit Awards”). The 2008
Performance Restricted
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Unit
Awards were granted and the performance objectives were set by the Compensation
Committee on November 13, 2007 and the 2009 Performance Restricted Unit Awards
shall be granted and the performance objectives shall be set by the Compensation
Committee prior to the commencement of fiscal year 2009. Each particular
performance objective shall consist of two levels of targeted performance, a
threshold level (“Level 1”) and an enhanced level (“Level 2”), which, for
purposes of this Section 1.4, if achieved, shall be confirmed by the Chief
Financial Officer and the Compensation Committee and which may be adjusted at
the sole discretion of the Compensation Committee in a manner consistent with
the performance-based compensation rules of Section 162(m) of the IRC, and as
permitted by the 2006 Plan. The Level 1 Performance Restricted Unit Award shall
be for a total of 120,000 restricted units, comprised of a certain number of
restricted units attributed to each particular performance objective, and the
Level 2 Performance Restricted Unit Award shall be for a total of 70,000
restricted units, comprised of a certain number of restricted units attributed
to each particular performance objective. If Level 1 targeted performance for a
given performance objective is confirmed as set forth above, the Executive shall
vest in that portion of the Level 1 Performance Restricted Unit Award that has
been allocated to the achievement of the targeted performance for such
performance objective and that portion of the Level 1 Performance Restricted
Unit Award that has vested shall be paid on February 28 of the year following
the completion of the fiscal year of performance to which it relates, based on
the closing market price of Xxxxxx common stock on the New York Stock Exchange
on the last trading day of the fiscal year of performance to which it relates.
If Level 1 targeted performance for a given performance objective is not
confirmed as set forth above that portion of the Level 1 Performance Restricted
Unit Award that has been allocated to the achievement of the targeted
performance for such performance objective shall be forfeited. If Level 2
targeted performance for a given performance objective is confirmed as set forth
above, the Executive shall vest in that portion of the Level 2 Performance
Restricted Unit Award that has been allocated to the achievement of the targeted
performance for such performance objective and that portion of the Level 2
Performance Restricted Unit Award that has vested shall be paid on February 28
of the year following the completion of the fiscal year of performance to which
it relates, based on the closing market price of Xxxxxx common stock on the New
York Stock Exchange on the last trading day of the fiscal year of performance to
which it relates. If the targeted performance for a given performance objective
is confirmed, as set forth above, to have fallen between Level 1 and Level 2
targeted performance for such performance objective, the Executive shall vest in
that portion of the Level 2 Performance Restricted Unit Award that is equal to
the number of restricted units allocated to Level 2 targeted performance for
such performance objective times a fraction, the numerator of which is that
amount of performance achieved over and above Level 1 targeted performance for
such performance objective and the denominator of which is the difference
between Level 2 targeted performance for such performance objective and Level 1
targeted performance for such performance objective. For example, if the number
of restricted units allocated to Level 2 targeted performance for a certain
performance objective was 30,000 and only one-third of Level 2 targeted
performance for such performance objective was achieved, then the Executive
would vest in 10,000 restricted units. That portion of the Level 2 Performance
Restricted Unit Award that vests shall be paid on February 28 of the year
following completion of the fiscal year of performance to which it relates and
shall be based on the closing market price of Xxxxxx common stock on the New
York Stock Exchange on the last trading day of the fiscal year of performance to
which it relates and that portion of the Level 2 Performance Restricted Unit
Award which did not vest shall be forfeited. In the event the Executive
ceases to be employed on or before December 30, 2008 and is entitled to payments
and benefits under the Change in Control Agreement (as defined in Section 1.10
below), the Level 1 Performance Restricted Unit Award that relates to fiscal
year 2008 shall vest and become payable based on the closing market price of
Xxxxxx common stock on the New York Stock Exchange on the date of termination.
In the event the Executive ceases to be employed on or after January 1, 2009 and
on or before December 30, 2009 and is entitled to payments and benefits under
the Change in Control Agreement (as defined in Section 1.10 below), the Level 1
Performance Restricted Unit Award that relates to fiscal year 2009 shall vest
and become payable based on the closing market price of Xxxxxx common stock on
the New York Stock Exchange on the date of termination.
1.5. Performance-Based Cash
Incentive Awards – Two performance-based cash incentive awards
granted prior to the commencement of fiscal year 2008, pursuant to the 2006
Plan, based on the achievement of certain performance objectives for fiscal year
2008 using qualifying performance criteria contained in the 2006 Plan (the “2008
Performance Cash Awards”). Two performance-based cash incentive awards granted
prior to the commencement of fiscal year 2009, pursuant to the 2006 Plan, based
on the achievement of certain performance objectives for fiscal year 2009 using
qualifying performance criteria contained in the 2006 Plan (the “2009
Performance Cash Awards”). The 2008 Performance Cash Awards were granted and the
performance objectives set by the Compensation Committee on November 13,
2007 and the 2009 Performance Cash Awards shall be granted and the
performance objectives set by the Compensation Committee prior to the
commencement of fiscal year 2009.
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Each
performance objective shall consist of two levels of targeted performance, a
further enhanced level (“Level 3”) and a superior level (“Level 4”), which, for
purposes of this Section 1.5, if achieved, shall be confirmed by the Chief
Financial Officer and the Compensation Committee and which may be adjusted at
the sole discretion of the Compensation Committee in a manner consistent with
the performance-based compensation rules of Section 162(m) of the IRC, and as
permitted by the 2006 Plan. Each Performance Cash Award shall consist of a
certain number of units attributed to each performance objective earnable, in
whole or in part, by the Executive based on the achievement, in whole or in
part, of the levels of targeted performance set for each performance objective
(the “Earned Units”). The Level 3 Performance Cash Award that may be earned by
the Executive, assuming the satisfaction of Level 3 targeted performance for all
the selected performance objectives combined, shall consist of a total of 90,000
units. The Level 4 Performance Cash Award that may be earned by the Executive,
assuming the satisfaction of Level 4 targeted performance for all the selected
performance objectives combined, shall consist of an additional 200,000 units.
If Level 3 targeted performance for a given performance objective is confirmed,
as set forth above, the Executive shall earn that portion of the Level 3
Performance Cash Award that has been allocated to the achievement of the
targeted performance for such performance objective. If the targeted performance
for a given performance objective is confirmed, as set forth above, to have
fallen between Level 2 and Level 3 targeted performance for such performance
objective, the Executive shall earn that portion of the Level 3 Performance Cash
Award that is equal to the number of units allocated to Level 3 targeted
performance for such performance objective times a fraction, the numerator of
which is that amount of performance achieved over and above Level 2 targeted
performance for such performance objective and the denominator of which is the
difference between Level 3 targeted performance for such performance objective
and Level 2 targeted performance for such performance objective. If Level 4
targeted performance for a given performance objective is confirmed, as set
forth above, the Executive shall earn that portion of the Level 4 Performance
Cash Award that has been allocated to the achievement of the targeted
performance for such performance objective. If the targeted performance for a
given performance objective is confirmed, as set forth above, to have fallen
between Level 3 and Level 4 targeted performance for such performance objective,
the Executive shall earn that portion of the Level 4 Performance Cash Award that
is equal to the number of units allocated to Level 4 targeted performance for
such performance objective times a fraction, the numerator of which is that
amount of performance achieved over and above Level 3 targeted performance for
such performance objective and the denominator of which is the difference
between Level 4 targeted performance for such performance objective and Level 3
targeted performance for such performance objective. The portions of each
Performance Cash Award that are earned by the Executive shall be equal to the
product obtained by multiplying (i) the Earned Units by (ii) the closing
market price of Xxxxxx common stock on the New York Stock Exchange on the last
trading day of the fiscal year of performance to which it relates. In the event
the Executive’s employment is terminated by Xxxxxx or the Executive prior to the
end of fiscal year 2008 then both 2008 Performance Cash Awards shall be
forfeited, except for a termination which occurs on December 31, 2008, in which
case any and all earned portions of each Performance Cash Award shall be paid in
accordance with this Section 1.5. In the event the Executive’s employment is
terminated by Xxxxxx or the Executive on or after January 1, 2009 but prior to
the end of fiscal year 2009 then both 2009 Performance Cash Awards shall be
forfeited, except for a termination which occurs on December 31, 2009, in which
case any and all earned portions of each 2009 Performance Cash Award shall be
paid in accordance with this Section 1.5. Any and all earned portions of each
Performance Cash Award shall be paid on February 28 following completion of the
fiscal year of performance to which it relates. No additional Performance Cash
Award will be granted for the achievement of performance above Xxxxx 0 for any
selected performance objective. As provided in Section 11.1 of the 2006 Plan,
the aggregate maximum amount payable as Incentive Awards under the 2006 Plan
(which in the case of this letter agreement consist of the Cash Incentive Bonus
Award in Section 1.2 above, the cash incentive award in Section 1.3 above and
the Performance Cash Award in this Section 1.5) for any fiscal year shall not
exceed $10,000,000.
1.6. Additional Stock Option Award –
For fiscal year 2008, 200,000 non-qualified stock options (the “2008 Additional
Stock Option Award”) granted under the 2006 Plan on or before December 29, 2007,
with an exercise price based on the closing market price of Xxxxxx’x common
stock on the date such grant was made, with service-based vesting on December
30, 2008. For fiscal year 2009, 200,000 non-qualified stock options (the “2009
Additional Stock Option Award”) granted under the 2006 Plan on or before
December 29, 2008, with an exercise price based on the closing market price of
Xxxxxx’x common stock on the date such grant was made, with service-based
vesting on December 30, 2009. Once vested, the stock options must be exercised
by the Executive in the first twenty days exercise is permissible for the
Executive pursuant to Xxxxxx’x trading window policy and applicable securities
laws following their vesting, otherwise they will be automatically
forfeited.
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1.7. Retention Cash Bonus
Awards – If employed through December 30, 2008, $300,000, payable on
February 28, 2009 (the “2008 Retention Cash Bonus Award”). If employed
through December 30, 2009, $300,000, payable on February 28, 2010 (the
“2009 Retention Cash Bonus Award”).
1.8. Discretionary Award –
Notwithstanding anything herein to the contrary, the Compensation Committee
retains the discretion to cause the Company to pay or provide for additional or
other compensation for extraordinary performance regardless of the outcome on
any performance-based pay contained in this letter agreement provided such
extraordinary performance relates to performance which is not based on the
performance criteria or goals contained herein.
1.9. Life Insurance –
Xxxxxx shall pay the premiums, if any, on the Executive’s $4,000,000 split
dollar life insurance policies payable in 2008 and 2009.
1.10. Severance – The
Executive entered into a certain Change in Control Agreement with Xxxxxx dated
December 21, 2005 (which agreement, as the same may hereafter be amended or
replaced, is referred to as the “Change in Control Agreement”) which governs the
Executives’ rights, duties and obligations in the event of the Executive’s
cessation of employment with Xxxxxx (or any successor) covered by the Change in
Control Agreement. In the event of the Executive’s cessation of employment with
Xxxxxx during the period commencing January 1, 2008 through December 30, 2009
for any reason other than for “Cause” (as defined, and determined pursuant to
the procedure, in the aforesaid Change in Control Agreement) under circumstances
where such cessation of employment is not covered by the Change in Control
Agreement, then Xxxxxx shall pay to the Executive, or if the Executive is
deceased to his Estate, 2.5 times the sum of the Executive’s Annual Base Salary
of $1,000,000 plus the Executive’s target Cash Incentive Bonus Award of $900,000
for the fiscal year in which he ceases employment, unless the Executive elects
to terminate his employment voluntarily during the period commencing January 1,
2008 through December 30, 2009 other than for any reason which would
constitute “a Constructive Termination Associated With a Change in Control” (as
defined, and determined pursuant to the procedure, in the aforesaid Change in
Control Agreement, under circumstances where such Constructive Termination is
not covered by the Change in Control Agreement). Any such payment shall be made
in six (6) equal monthly payments beginning the month after the Executive’s
employment with Xxxxxx terminates.
1.11. Termination of Certain
Rights on Cessation of Employment – In the event that the Executive’s
employment with Xxxxxx terminates during the period commencing January 1, 2008
through December 30, 2008 for any reason, all of the Executive’s rights
with respect to the following awards covering the 2008 fiscal year (the unearned
or unvested Performance Restricted Unit Awards, Performance Cash Awards,
Additional Stock Option Awards, and Retention Cash Bonus Awards, as set forth in
Sections 1.4, 1.5, 1.6, and 1.7 above, shall terminate and all rights thereunder
shall cease, except as otherwise is set forth in Section 1.4, and payment of
life insurance premiums as set forth in Section 1.9 above shall cease. In the
event that the Executive’s employment with Xxxxxx terminates during the period
commencing January 1, 2009 through December 30, 2009 for any reason, all of
the Executive’s rights with respect to the following awards covering the 2009
fiscal year (the unearned or unvested Performance Restricted Unit Awards,
Performance Cash Awards, Additional Stock Option Awards, and Retention Cash
Bonus Awards, as set forth in Sections 1.4, 1.5, 1.6, and 1.7 above, shall
terminate and all rights thereunder shall cease, except as otherwise is set
forth in Section 1.4, and payment of life insurance premiums as set forth in
Section 1.9 above shall cease.
SECTION
2. Expenses. Subject
to prevailing Xxxxxx policy or such guidelines as may be established by the
Board of Xxxxxx, Xxxxxx will reimburse the Executive for all reasonable expenses
incurred by the Executive in carrying out his duties.
SECTION
3. Withholding of
Taxes. Xxxxxx may withhold from any amounts payable under this
letter agreement all federal, state, city or other taxes as Xxxxxx is required
to withhold pursuant to any applicable law, regulation or ruling.
SECTION
4. Validity. If
any provision of this letter agreement or the application of any provision
hereof to any person or circumstances is held invalid, unenforceable or
otherwise illegal, the remainder of this letter agreement and the application of
such provision to any other person or circumstances will not be affected, and
the
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provision
so held to be invalid, unenforceable or otherwise illegal will be reformed to
the extent (and only to the extent) necessary to make it enforceable, valid or
legal.
SECTION
5. Governing Law. The
validity, interpretation, construction and performance of this letter agreement
will be governed by and construed in accordance with the substantive laws of the
State of Delaware, without giving effect to the principles of conflict of laws
of such State.
SECTION
6. Nonqualified Deferred
Compensation Omnibus Provision. Any compensation or benefits
which are provided or available to the Executive pursuant to or in connection
with any plan or program (including without limitation this letter agreement) to
which Xxxxxx or any of its subsidiaries or affiliates is a party and which is
considered to be provided under a nonqualified deferred compensation plan or
program subject to IRC Section 409A shall be provided and paid in a manner, and
at such time and in such form, as complies with the applicable requirements of
IRC Section 409A to avoid the unfavorable tax consequences provided therein
for non-compliance. The Executive hereby consents to the amendment of any such
plan or program as may be determined by Xxxxxx to be necessary or appropriate to
evidence or further evidence required compliance with IRC Section 409A. In the
event the Executive is a specified employee described in IRC Section
409A(a)(2)(B)(i) whose nonqualified deferred compensation subject to IRC Section
409A must be deferred until six (6) months after his separation from service,
then payment of any amount or provision of any benefit under this letter
agreement which is considered to be nonqualified deferred compensation subject
to IRC Section 409A shall be deferred until six (6) months after the Executive's
separation from service (the “409A Deferral Period”), absent an intervening
payment event under IRC Section 409A such as his death. 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 the Executive’s
expense, with the Executive having a right to reimbursement from Xxxxxx once the
409A Deferral Period ends, and the balance of the benefits shall be provided as
otherwise scheduled. For purposes of this letter 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 IRC Section
409A, and for purposes of determining time of (but
not entitlement to) payment of nonqualified deferred compensation for purposes
of IRC Section 409A in connection with a termination of employment, termination
of employment will be read to mean a “separation from service” within the
meaning of IRC Section 409A where it is reasonably anticipated that no further
services would be performed after that date or that the level of bona fide
services the 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.
SECTION
7. Extension. This
letter agreement may be extended by mutual agreement between the Executive and
Xxxxxx for an additional two years.
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