Exhibit 10.2
2009 Patriot Award
NON-QUALIFIED STOCK OPTION AGREEMENT
     THIS AGREEMENT, dated [•] (the “Grant Date”) is made by and between PATRIOT
COAL CORPORATION, a Delaware corporation (the “Company”), and the undersigned
employee or other service provider of the Company or a Subsidiary (as defined
below) or an Affiliate (as defined below) of the Company (the “Optionee”).
     WHEREAS, the Company wishes to afford the Optionee the opportunity to
purchase shares of its $.01 par value common stock (the “Common Stock”);
     WHEREAS, the Company wishes to carry out the Plan (as hereinafter defined),
the terms of which are hereby incorporated by reference and made a part of this
Agreement; and
     WHEREAS, the Administrator appointed to administer the Plan has determined
that it would be to the advantage and best interest of the Company and its
stockholders to grant the Options provided for herein to the Optionee as an
incentive for increased efforts during his or her term of office with the
Company or its Subsidiaries or Affiliates, and has advised the Company thereof
and instructed the undersigned officer to issue the options;
     NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
     Whenever the following terms are used in this Agreement, they shall have
the meanings specified below. Capitalized terms that are not defined in this
Agreement shall have the meanings specified in the Plan.
     Section 1.1 “Affiliate” means any Person that (i) is directly or indirectly
controlling, controlled by, or under common control with, the Company and
(ii) would, together with the Company, be classified as the “service recipient”
(as defined in the regulations under Code Section 409A) with respect to the
Optionee. For purposes of this definition, the term “control” (including, with
correlative meanings, the terms “controlling,” “controlled by” and “under common
control with”), as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities, by
contract or otherwise.
     Section 1.2 “Cause” shall mean (i) any material and uncorrected breach by
the Optionee of the terms of his or her employment agreement with the Company,
including, but not limited to, a violation of Section 13 thereof, (ii) any
willful fraud or dishonesty of the Optionee involving the property or business
of the Company, (iii) a deliberate or willful refusal or failure of the Optionee
to comply with any major corporate policy of the Company which is communicated
to the Optionee in writing or (iv) the Optionee’s conviction of, or plea of nolo
contendere to, any felony if such conviction or plea results in his or her
imprisonment; provided

--------------------------------------------------------------------------------

 

that, with respect to clauses (i), (ii) and (iii) above, the Optionee shall have
thirty (30) days following his or her receipt of written notice of the conduct
that is the basis for the potential termination for Cause within which to cure
such conduct to prevent termination for Cause by the Company; provided further
that, notwithstanding the foregoing, in the event that the Optionee is subject
to a definition of “Cause” in his or her employment agreement with the Company
that contains any terms that are more favorable to the Optionee, “Cause”
(including the related cure period) shall include such terms.
     Section 1.3 “Code” means the Internal Revenue Code of 1986, as amended, and
the regulations promulgated with respect thereto.
     Section 1.4 “Good Reason” means: (i) a reduction by the Company in the
Optionee’s base salary; (ii) a material reduction in the aggregate program of
employee benefits and perquisites to which the Optionee is entitled (other than
a reduction that generally affects all executives); (iii) a material decline in
the Optionee’s bonus or long term incentive award opportunities (other than a
decline that generally affects all executives); (iv) relocation of the
Optionee’s primary office by more than 50 miles from the location of the
Optionee’s primary office as specified in his or her employment agreement with
the Company; or (v) any material diminution or material adverse change in the
Optionee’s title, duties, responsibilities or reporting relationships. If the
Optionee does not give notice to the Company (as described in the Optionee’s
employment agreement with the Company) within ninety (90) days after an event
giving rise to Good Reason, the Optionee’s right to claim Good Reason
termination on the basis of such event shall be deemed waived. Notwithstanding
the foregoing, in the event that the Optionee is subject to a definition of
“Good Reason” in his or her employment agreement with the Company that is more
favorable to the Optionee, “Good Reason” (including any related notice period)
shall have the meaning described therein.
     Section 1.5 “Options” means the non-qualified options to purchase Common
Stock granted under this Agreement.
     Section 1.6 “Person” means an individual, partnership, corporation,
business trust, joint stock company, trust, unincorporated association, joint
venture, governmental authority or other entity of whatever nature.
     Section 1.7 “Plan” means the Patriot Coal Corporation 2007 Long-Term Equity
Incentive Plan, as it may be amended from time to time.
     Section 1.8 “Retirement” means retirement at or after age 55 with at least
ten (10) years of service with the Company.
     Section 1.9 “Subsidiary” means any corporation that (i) is in an unbroken
chain of corporations beginning with the Company if each of the corporations, or
group of commonly controlled corporations, other than the last corporation in
the unbroken chain, then owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in such
chain and (ii) would, together with the Company, be classified as a “service
recipient” (as defined in the regulations under Code Section 409A) with respect
to the Optionee.

2

--------------------------------------------------------------------------------

 

     Section 1.10 “Termination of Employment” means a termination of the
Optionee’s employment or service with the Company, a Subsidiary or an Affiliate
(regardless of the reason therefor).
ARTICLE 2
GRANT OF OPTIONS
     Section 2.1 Grant of Options. For good and valuable consideration, the
Company hereby grants to the Optionee an Option to purchase any part or all of
the number of shares of Common Stock set forth on the signature page hereof upon
the terms and subject to the conditions set forth in this Agreement.
     Section 2.2 Exercise Price. The exercise price of the shares of Common
Stock covered by the Option shall be such amount per share as set forth on the
signature page hereof (which shall not be less than the Fair Market Value (as
determined in accordance with guidance issued under Code Section 409A) of a
share of Common Stock on the Grant Date), subject to adjustment pursuant to
Section 6.1 of the Plan without commission or other charge.
     Section 2.3 No Obligation of Employment or Service. Nothing in this
Agreement or in the Plan shall confer upon the Optionee any right to continue in
the service of the Company or any Subsidiary or Affiliate or interfere with or
restrict in any way the rights of the Company and its Subsidiaries or
Affiliates, which are hereby expressly reserved, to terminate the service of the
Optionee at any time for any reason whatsoever, with or without Cause.
ARTICLE 3
EXERCISABILITY OF OPTIONS
     Section 3.1 Option Vesting. Unless otherwise provided in this Agreement,
this Option shall become exercisable on such dates as follows, provided that the
Optionee has remained continuously employed by the Company through such
applicable date:

          Date Option   Percentage of shares of Common becomes exercisable  
Stock as to which Option is exercisable
January 2, 2010
    33.33 %
January 2, 2011
    33.33 %
January 2, 2012
    33.34 %

This Option shall become exercisable, pursuant to the schedule above, with
respect to the nearest whole number of shares of Common Stock, as determined by
the Administrator in its sole discretion.
     Section 3.2 Acceleration Events. Notwithstanding anything in this Article 3
to the contrary, this Option shall become exercisable with respect to 100% of
the shares of Common Stock (but only to the extent such Option has not otherwise
terminated) upon (i) the Optionee’s Termination of Employment due to death or
Disability, or (ii) a Change of Control. Upon

3

--------------------------------------------------------------------------------

 

Optionee’s (i) Termination of Employment by the Company without Cause or (ii) by
the Optionee for Good Reason, this Option shall vest and become exercisable with
respect to the percentage of shares of Common Stock that would have otherwise
vested on the next vesting date as specified in Section 3.1 herein.
     Section 3.3 Effect of Termination of Employment. Except as otherwise
provided in Section 3.2, the Option shall not become exercisable as to any
additional shares of Common Stock following the Optionee’s Termination of
Employment, and the portion of the Option which is then unexercisable shall
terminate immediately.
     Section 3.4 Expiration of Options. This Option may not be exercised to any
extent by the Optionee after the first to occur of the following events:
     (a) The tenth anniversary of the date hereof; or
     (b) The first anniversary of the date of Termination of Employment (i) by
reason of death or Disability; (ii) by the Company without Cause or (iii) by the
Optionee for Good Reason; or
     (c) The fifth anniversary of the date of Termination of Employment by
reason of Retirement; or
     (d) The date of a Termination of Employment by the Optionee without Good
Reason (other than by reason of Retirement) or by the Company for Cause; or
     (e) Upon a Change of Control, if either
     (i) the Administrator terminates this Option by paying the Optionee an
amount equal to the product of (x) the difference between the Change of Control
price and the Exercise Price (unless the Exercise Price is greater than the
Change in Control price, in which case this Option shall be terminated) and
(y) the aggregate number of shares of Common Stock for which the Option is
exercisable, or
     (ii) the Optionee is permitted to exercise his or her Option prior to the
Change of Control.
ARTICLE 4
EXERCISE OF OPTION
     Section 4.1 Person Eligible to Exercise. During the lifetime of the
Optionee, only he or she, or in the event of Disability his or her
representative or conservator, may exercise this Option or any portion thereof.
After the death of the Optionee, the Option may, prior to the time when the
Option becomes unexercisable under Section 3.4, be exercised by his or her
beneficiary or estate or Permitted Transferee.

4

--------------------------------------------------------------------------------

 

     Section 4.2 Partial Exercise. Any exercisable portion of this Option or the
entire Option, if then wholly exercisable, may be exercised in whole or in part
at any time prior to the time when the Option or portion thereof becomes
unexercisable under Section 3.4; provided, however, that any partial exercise
shall be for whole shares of Common Stock only.
     Section 4.3 Manner of Exercise. The Option, or any exercisable portion
thereof, may be exercised solely by delivery to the Secretary of the Company or
designatee or his or her office (or any third party designated by the Secretary
of the Company to that effect) of all of the following prior to the time when
the Option or such portion becomes unexercisable under Section 3.4:
     (a) Notice in writing signed by the Optionee or another person then
entitled to exercise the Option or portion thereof, stating that the Option or
portion thereof is thereby exercised, such notice complying with all applicable
rules established by the Administrator;
     (b) Full payment (in cash, in shares of Common Stock, by check or by a
combination thereof) for the shares with respect to which such Option or portion
thereof is exercised;
     (c) Full payment to the Company of all amounts which, under federal, state
or local law, it is required to withhold upon exercise of the Option; and
     (d) In the event the Option or portion thereof is exercised pursuant to
Section 4.1 by any person or persons other than the Optionee, appropriate proof
of the right of such person or persons to exercise the option.
     Section 4.4 Conditions to Issuance of Stock Certificates. The shares of
Common Stock deliverable upon the exercise of an Option, or any portion thereof,
may be either previously authorized but unissued shares or issued shares that
have been reacquired by the Company. Such shares shall be fully paid and
nonassessable. The Company shall not be required to issue or deliver any
certificate or certificates for shares of Common Stock purchased upon the
exercise of an Option or portion thereof prior to fulfillment of both of the
following conditions:
     (a) The obtaining of approval or other clearance from any state or federal
governmental agency that the Administrator, in its absolute discretion,
determines to be necessary or advisable; and
     (b) The lapse of such reasonable period of time following the exercise of
the Option as the Administrator may establish from time to time for
administrative convenience.
     Section 4.5 Rights as Stockholder. The holder of an Option shall not be,
and shall not have any of the rights or privileges of, a stockholder of the
Company in respect of any shares purchasable upon the exercise of the Option or
any portion thereof unless and until the Option has been properly exercised and
certificates representing such shares have been issued by the Company to such
holder.

5

--------------------------------------------------------------------------------

 

ARTICLE 5
MISCELLANEOUS
     Section 5.1 Tax Consequences. Unless otherwise specifically provided in
another agreement between the Company and the Optionee, the Company shall not be
liable or responsible in any way for any tax (including any withholding tax)
consequences relating to the Options, and the Optionee agrees to undertake to
determine, and be responsible for, any and all tax (including any withholding
tax) consequences to himself or herself with respect to the Options.
Notwithstanding any other provision of this Agreement, shares of Common Stock
shall not be released to the Optionee unless the Optionee has paid to the
Company, or made arrangements satisfactory to the Company regarding the payment
of, any federal, state, local or foreign taxes of any kind required by law to be
withheld with respect to the Options.
     Section 5.2 Administration. The Administrator has the power to interpret
the Plan and this Agreement and to adopt such rules for the administration,
interpretation and application of the Plan as are consistent therewith and to
interpret or revoke any such rules. All actions taken and all interpretations
and determinations made by the Administrator in good faith shall be final and
binding upon the Optionee, the Company and all other interested persons. No
member of the Administrator shall be personally liable for any action,
determination or interpretation made in good faith with respect to the Plan or
the Options. In its absolute discretion, the Board of Directors may at any time
and from time to time exercise any and all rights and duties of the
Administrator under the Plan and this Agreement.
     Section 5.3 Options Not Transferable. Neither the Option nor any interest
or right therein or part thereof shall be liable for the debts, contracts or
engagements of the Optionee or his or her successors in interest or shall be
subject to disposition by transfer, alienation, anticipation, pledge,
encumbrance, assignment or any other means whether such disposition be voluntary
or involuntary or by operation of law by judgment, levy, attachment, garnishment
or any other legal or equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect; provided,
however, that this Section 5.3 shall not prevent transfers by will or by the
applicable laws of descent and distribution or transfers without consideration
to a Permitted Transferee to the extent permitted by the Plan.
     Section 5.4 Shares to Be Reserved. The Company shall at all times during
the term of the Option reserve and keep available such number of shares of
Common Stock as will be sufficient to satisfy the requirements of this
Agreement.
     Section 5.5 Notices. Any notice to be given under the terms of this
Agreement to the Company shall be addressed to the Company in care of its
Secretary, and any notice to be given to the Optionee shall be addressed to him
or her at the address given beneath his or her signature hereto. By a notice
given pursuant to this Section 5.5, either party may hereafter designate a
different address for notices to be given to him, her or it. Any notice that is
required to be given to the Optionee shall, if the Optionee is then deceased, be
given to the Optionee’s personal representative if such representative has
previously informed the Company of his, her or its status and address by written
notice under this Section 5.5. Any notice shall be deemed duly given when
enclosed in a properly sealed envelope or wrapper addressed as aforesaid,
deposited

6

--------------------------------------------------------------------------------

 

(with postage prepaid) in a post office or branch post office regularly
maintained by the United States Postal Service.
     Section 5.6 Titles. Titles and headings are provided herein for convenience
only and are not to serve as a basis for interpretation or construction of this
Agreement.
     Section 5.7 Pronouns. The masculine pronoun shall include the feminine and
neuter, and the singular the plural, where the context so indicates.
     Section 5.8 Applicability of Plan. The Option and the shares of Common
Stock issued to the Optionee upon exercise of the Option shall be subject to all
of the terms and provisions of the Plan, to the extent applicable to the Option
and such shares. In the event of any conflict between this Agreement and the
Plan, the terms of the Plan shall control.
     Section 5.9 Amendment. This Agreement may be amended only by a writing
executed by the parties hereto that specifically states that it is amending this
Agreement.
     Section 5.10 Dispute Resolution. Any dispute or controversy arising under
or in connection with this Agreement shall be resolved by arbitration.
Arbitrators shall be selected, and arbitration shall be conducted, in accordance
with the rules of the American Arbitration Association. The Company shall pay
any legal fees in connection with such arbitration in the event that the
Optionee prevails on a material element of his or her claim or defense.
Notwithstanding anything in this Section 5.10 to the contrary, payments made
under this Section 5.10 that are provided during one calendar year shall not
affect the amount of such payments provided during a subsequent calendar year,
payments under this Section 5.10 may not be exchanged or substituted for other
forms of compensation to the Optionee, and any such reimbursement or payment
will be paid within sixty (60) days after the Optionee prevails, but in no later
than the last day of Optionee’s taxable year following the taxable year in which
he incurred the expense giving rise to such reimbursement or payment. This
Section 5.1 shall remain in effect throughout the Optionee’s employment and for
a period of five (5) years following the Optionee’s Termination of Employment.
     Section 5.11 Governing Law. The laws of the State of Delaware shall govern
the interpretation, validity and performance of the terms of this Agreement
regardless of the law that might be applied under principles of conflicts of
laws.
[SIGNATURE PAGE FOLLOWS]

7

--------------------------------------------------------------------------------

 

     IN WITNESS WHEREOF, this Agreement has been executed and delivered by the
parties hereto, effective on the Grant Date.

              OPTIONEE   PATRIOT COAL CORPORATION    
 
           
 
  By        
 
           
 
      Richard M. Whiting    
 
      Its Chief Executive Officer    
 
           
 
           
Address
           
 
           
Optionee’s Taxpayer Identification Number:
  Aggregate number of shares of Common Stock for which the Option granted
hereunder is exercisable:_____________________    
 
           
______-______-______
                Exercise Price per share of Common Stock:    
 
  [•]