exv10w17



 





Exhibit 10.17




PATRIOT COAL CORPORATION




2007 LONG-TERM EQUITY INCENTIVE PLAN




ARTICLE 1

PURPOSE AND EFFECTIVE DATE




     1.1 Purpose. Patriot Coal Corporation (the “Company”) hereby establishes the Patriot
Coal Corporation 2007 Long-Term Equity Incentive Plan (the “Plan”) to enable and encourage
officers, key employees, directors, independent contractors and other service providers that serve
the Company and such subsidiaries of the Company as the Administrator designates to acquire shares
of common stock, $0.01 par value, of the Company (the “Common Stock”), or to receive
monetary payments based on the value of such Common Stock or based on the achievement of certain
goals on a basis mutually advantageous to such individuals and the Company and therefore to provide
an incentive for such individuals to contribute to the success of the Company and align their
interests with the interests of the Company shareholders.



     1.2 Effective Date. This Plan shall be effective as of the date it is adopted by the Board of
Directors of the Company (the “Board”), subject only to approval by the stockholder(s) of
the Company within twelve months before or after the adoption of the Plan by the Board (which is
expected to occur before the Company is spun off from Peabody Energy Corporation).



ARTICLE 2

ADMINISTRATION




     2.1 Administrator. The Plan shall be administered by the Board or the Compensation Committee
of the Board as determined by the Board (the “Administrator”). To the extent required by
law, insofar as the Administrator is responsible for granting Awards (as defined in Article 5) to
Participants (as defined in Article 4), it shall consist solely of two or more directors, each of
whom is a “non-employee director” within the meaning of Rule 16b-3 under the Securities Exchange
Act of 1934, as amended, and an “outside director” within the contemplation of Section 162(m) of
the Internal Revenue Code of 1986, as amended (the “Code”).



     2.2 Award Administration. The authority to select persons eligible to participate in the
Plan, to grant Awards in accordance with Article 5 of the Plan, and to establish the timing,
pricing, amount and other terms and conditions of such Awards (which need not be uniform with
respect to the various Participants or with respect to different Awards to the same Participant),
shall be exercised by the Administrator in its sole discretion. An Award under this Plan shall be
evidenced by an Award agreement that shall set forth the terms and conditions applicable to that
Award. In the event of any inconsistency between the terms of such an Award agreement and terms of
this Plan, the terms of the Plan shall prevail.



     2.3 Administrator Authority. Subject to the other provisions of the Plan, the Administrator
shall have exclusive authority to interpret and administer the Plan, to establish appropriate rules
relating to the Plan, to delegate some or all of its authority under the Plan to the



 









 







extent permitted by law, and to take all such steps and make all such determinations in
connection with the Plan and the benefits granted pursuant to the Plan as it may deem necessary or
advisable. Any decision of the Administrator in the interpretation and administration of the Plan,
as described herein, which is made in good faith, shall lie within its sole and absolute discretion
and shall be final, conclusive and binding on all parties concerned (including, but not limited to,
Participants and their beneficiaries or successors). The Administrator shall have the full power
and authority to establish the terms and conditions of any Award consistent with the provisions of
the Plan and to waive any such terms and conditions at any time (including, without limitation,
accelerating or waiving any vesting conditions).



ARTICLE 3

STOCK AVAILABLE UNDER PLAN




     3.1 Number of Shares. Subject to the provisions of Section 6.1 (relating to adjustment for
changes in capital stock), an aggregate number of two million six hundred thousand (2,600,000)
shares of Common Stock of the Company shall be available for issuance under the Plan. The shares
of Common Stock issued under the Plan may be authorized but unissued shares or shares reacquired by
the Company, including shares purchased in the open market or in private transactions.
Notwithstanding anything herein to the contrary, the aggregate number of shares of Common Stock
available for issuance under the Plan may be increased only by the Board, subject to the approval
of the Company’s shareholders, in accordance with Section 9.2.



     The term “Plan Maximum,” as used in the Plan, means the number of shares of Common
Stock that are available for issuance under the Plan. Stock underlying outstanding Awards will
reduce the Plan Maximum. Shares of Common Stock underlying expired, canceled or forfeited Awards
shall be added back to the Plan Maximum. The following additional rules shall apply to shares of
Common Stock underlying the specified types of Awards:




     (a) Stock Options. When the exercise price of stock options is paid by
delivery of shares of Common Stock of the Company, or if the Administrator approves the
withholding of shares from a distribution in payment of the exercise price and/or applicable
tax withholding, the Plan Maximum shall be reduced by the net (rather than the gross) number
of shares of Common Stock issued pursuant to such exercise. If the Administrator approves
the payment of cash to an optionee equal to the difference between the Fair Market Value and
the exercise price of stock subject to an option, the number of shares with respect to which
such payment is applicable shall be added back to the Plan Maximum.




     (b) Stock Appreciation Rights. When a stock appreciation right is exercised
and paid in shares of Common Stock, the Plan Maximum shall be reduced by the net number of
shares of Common Stock issued pursuant to such exercise (rather than the gross number of
shares of Common Stock underlying such Award). If a stock appreciation right is exercised
for or otherwise settled in cash, the number of shares with respect to which such payment is
applicable shall be added back to the Plan Maximum.



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     (c) Restricted Stock. Restricted Stock issued pursuant to the Plan will reduce
the Plan Maximum while such stock is outstanding, even while it is subject to restrictions.
Shares of Restricted Stock shall be added back to the Plan Maximum if such Restricted Stock
is forfeited or is returned to the Company as part of an exchange or a restructuring of
Awards granted pursuant to this Plan or to the extent the Administrator approves of the
withholding of a portion of such shares to satisfy tax withholding requirements.




     (d) Other Awards. If an Award that otherwise reduces the Plan Maximum is
settled in cash, the number of shares with respect to which such payment is applicable shall
be added back to the Plan Maximum.



     3.2 Individual Award Limitation. The maximum number of shares of Common Stock or stock-based
units subject to any Awards that may be granted under this Plan in any calendar year to any
individual shall not exceed seven hundred and fifty thousand (750,000) shares or units (as adjusted
in accordance with Section 6.1).



ARTICLE 4

ELIGIBILITY AND PARTICIPATION




     The individuals eligible to participate in the Plan consist of such officers, key employees,
directors, independent contractors and other service providers of the Company or any designated
subsidiary as the Administrator in its sole discretion determines (with such individuals who are
selected to receive Awards referred to herein as “Participants”); provided, however, that,
in the case of NQSOs and SARs, a designated subsidiary shall include only a subsidiary that would,
together with the Company, be classified as the “service recipient” (as defined in the regulations
under Code Section 409A) with respect to a Participant. Designation of a Participant in any year
shall not require the Administrator to designate such person to receive an Award in any other year
or to receive the same type or amount of Awards as granted to the Participant in any other year or
as granted to any other Participant in any year. The Administrator shall consider such factors as
it deems pertinent in selecting Participants and in determining the type and amount of their
respective Awards.



ARTICLE 5

TYPES OF AWARDS




     The following benefits (“Awards”) may be granted under the Plan: (i) restricted stock
(“Restricted Stock”); (ii) incentive stock options (“ISOs”); (iii) nonqualified
stock options (“NQSOs”); (iv) stock appreciation rights (“SARs”); (v) performance
awards (“Performance Awards”); (vi) restricted stock units (“Restricted Stock
Units”); and (vii) deferred stock units (“Deferred Stock Units”), all as described
below.



     5.1 Restricted Stock. Restricted Stock is Common Stock of the Company issued or transferred
under the Plan (other than upon exercise of stock options or as Performance Awards) at any purchase
price less than the Fair Market Value thereof on the date of issuance or transfer, or as a bonus,
subject to such terms and conditions set forth in a Restricted Stock agreement as



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may be established by the Administrator in its sole discretion. In the case of any Restricted
Stock Award:




     (a) The purchase price, if any, will be determined by the Administrator.




     (b) The restriction period shall be established by the Administrator.




     (c) Restricted Stock may be subject to (i) restrictions on the sale or other
disposition thereof; (ii) rights of the Company to reacquire such Restricted Stock at the
purchase price, if any, originally paid therefor upon termination of the Participant’s
service within specified periods; (iii) representation by the Participant that he or she
intends to acquire Restricted Stock for investment and not for resale; (iv) forfeiture
provisions or vesting requirements based on the Participant’s continued service or the
attainment of specified performance objectives; and (v) such other restrictions, conditions
and terms as the Administrator deems appropriate. Notwithstanding the foregoing, with
respect to any Restricted Stock grant, the Administrator shall not establish a period of
restriction or vesting period of less than two years following the date such Restricted
Stock is granted, subject to such accelerated vesting or lapse of restriction on the basis
of death, Disability, or Change of Control as the Administrator shall deem appropriate.




     (d) Unless otherwise provided by the Administrator, the Participant shall be entitled
to all dividends paid with respect to Restricted Stock during the period of restriction and
shall not be required to return any such dividends to the Company in the event of the
forfeiture of the Restricted Stock.




     (e) Unless otherwise provided by the Administrator, the Participant shall be entitled
to vote the Restricted Stock during the period of restriction.




     (f) The Administrator shall determine whether Restricted Stock is to be delivered to
the Participant with an appropriate legend imprinted on the certificate or whether the
shares are to be issued in the name of a nominee or deposited in escrow pending removal of
the restrictions.



     5.2 Incentive Stock Options. ISOs are options to purchase shares of Common Stock that satisfy
the requirements of Code Section 422. ISOs are awarded to employees of the Company or any of its
subsidiaries (as defined in Code Section 424(f)) to purchase shares of Common Stock at not less
than 100% of the Fair Market Value of the shares on the date the option is granted (110% if the
optionee owns stock possessing more than 10% of the combined voting power of all owners of stock of
the Company or a subsidiary), subject to such terms and conditions set forth in an option agreement
as may be established by the Administrator in its sole discretion or that are required to conform
to the requirements of Code Section 422 (including the requirement that no ISO be exercisable more
than ten years (five years if the Participant owns stock possessing more than 10% of the total
combined voting power of the outstanding stock of the Company or a subsidiary) after the date the
ISO is granted. Such purchase price may be paid: (i) in cash or a cash equivalent; (ii) in the
discretion of the Administrator, by the delivery of shares of Common Stock already owned by the
participant for at least six months; (iii) in the



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discretion of the Administrator, unless otherwise prohibited by law, by using shares of Common Stock that
the Participant otherwise would have received upon exercise of the option (which method may be
restricted to a cashless exercise procedure involving a broker or dealer approved by the
Administrator); or (iv) in the discretion of the Administrator, by a combination of any of the
foregoing, in the manner and subject to the restrictions provided in the option agreement.



     The maximum number of shares of Common Stock that may be granted in the form of an ISO in any
calendar year to any individual shall not exceed one hundred thousand (100,000) shares (as adjusted
in accordance with Section 6.1). The aggregate fair market value (determined as of the time an
option is granted) of the stock with respect to which ISOs are exercisable for the first time by an
optionee during any calendar year (under all option plans of the Company and its subsidiary
corporations) shall not exceed $100,000.



     An option agreement shall indicate on its face whether it is intended to be an agreement for
an ISO or an NQSO (as described below). The grant of a stock option shall be effective on the date
determined by the Administrator.



     5.3 Nonqualified Stock Options. NQSOs are stock options to purchase shares of Common Stock
that do not constitute ISOs and are awarded at purchase prices established by the Administrator on
the date the options are granted, subject to such terms and conditions set forth in an option
agreement as may be established by the Administrator in its sole discretion; provided, however,
that the purchase price with respect to any option granted under this Section 5.3 shall not be less
than 100% of the Fair Market Value of the underlying shares of Common Stock on the date the option
is granted. The purchase price may be paid: (i) in cash or a cash equivalent; (ii) in the
discretion of the Administrator, by the delivery of shares of Common Stock already owned by the
Participant for at least six months; (iii) in the discretion of the Administrator, unless otherwise
prohibited by law for the Company or the Participant, by using shares of Common Stock that the
Participant otherwise would have received upon exercise of the option (which method may be
restricted to a cashless exercise procedure involving a broker or dealer approved by the
Administrator); or (iv) in the discretion of the Administrator, by a combination of any of the
foregoing, in the manner and subject to the restrictions provided in the option agreement.



     5.4 Stock Appreciation Rights. A SAR is the right to receive all or a portion of the
difference between the Fair Market Value of a share of Common Stock at the time of exercise of the
SAR and the exercise price of the SAR established by the Administrator, subject to the terms and
conditions set forth in a SAR agreement as established by the Administrator in its sole discretion;
provided, however, that the exercise price shall not be less than 100% of the Fair Market Value of
a share of Common Stock on the date of grant. At the time of grant, the Administrator may
establish, in its sole discretion, a maximum amount per share that will be payable upon exercise of
a SAR, and may impose conditions on exercise of a SAR. At the discretion of the Administrator,
payment for SARs may be made in cash or shares of Common Stock of the Company, or in a combination
thereof. SARs will be exercisable not later than ten years after the date they are granted and
will expire in accordance with the terms established by the Administrator.



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     5.5 Performance Awards.




     (a) Performance Conditions. The right of a Participant to exercise or receive
a grant or settlement of any Award, and its timing, may be subject to performance conditions
specified by the Administrator. The Administrator may use business criteria and other
measures of performance it deems appropriate in establishing any performance conditions, and
may exercise its discretion to reduce or increase amounts payable under any Award subject to
performance conditions, except as limited under Section 5.5(b) and 5.5(c) hereof in the case
of a Performance Award intended to qualify under Code Section 162(m).




     (b) Performance Awards Granted to Designated Covered Employees. If the
Administrator determines that a Performance Award to be granted to a person the
Administrator regards as likely to be a “covered employee” within the meaning of Code
Section 162(m) (“Covered Employee”) should qualify as “performance-based compensation” for
purposes of Code Section 162(m), the grant and/or settlement of such Performance Award shall
be contingent upon achievement of pre-established performance goals and other terms set
forth in this Section 5.5(b).




     (i) Performance Goals Generally. The performance goals for such Performance
Awards shall consist of one or more business criteria and a targeted level or levels
of performance with respect to such criteria, as specified by the Administrator
consistent with this Section 5.5(b). Performance goals shall be objective and shall
otherwise satisfy the requirements of Code Section 162(m), including the requirement
that the level or levels of performance targeted by the Administrator result in the
performance goals being “substantially uncertain.” The Administrator may determine
that more than one performance goal must be achieved as a condition to settlement of
such Performance Awards. Performance goals may differ for Performance Awards
granted to any one Covered Employee or to different Covered Employees.




     (ii) Business Criteria. The Administrator shall use one or more of the
following business criteria for the Company, on a consolidated basis, and/or for
specified subsidiaries or business units of the Company (except with respect to the
total stockholder return and earnings per share criteria), in establishing
performance goals for Performance Awards: (1) total stockholder return; (2) such
total stockholder return as compared to total return (on a comparable basis) of a
publicly available index; (3) net income; (4) pre-tax earnings; (5) EBITDA; (6)
pre-tax operating earnings after interest expense and before bonuses, service fees,
and extraordinary or special items; (7) operating margin; (8) earnings per share;
(9) return on equity; (10) return on capital; (11) return on investment; (12)
operating income; (13) earnings per share; (14) working capital; or (15) total
revenues.




     (iii) Performance Period; Timing for Establishment of Performance Goals.
Achievement of performance goals in respect of Performance Awards



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shall be measured
over the period(s) specified by the Administrator. Performance goals
shall be established on or before the dates that are required or permitted for
“performance-based compensation” under Code Section 162(m). Notwithstanding the
foregoing, with respect to any Performance Award grant, the Administrator shall not
establish a period of restriction or vesting period of less than two years following
the date such Performance Award is granted, subject to such accelerated vesting or
lapse of restrictions on the basis of death, Disability or Change of Control as the
Administrator shall deem appropriate.




     (iv) Settlement of Performance Awards; Other Terms. Settlement of Performance
Awards may be in cash or Common Stock, or other Awards, or other property, in the
discretion of the Administrator. The Administrator may, in its discretion, reduce
the amount of a settlement otherwise to be made in connection with such Performance
Awards, but may not exercise discretion to increase any such amount payable in
respect of a Performance Award subject to this Section 5.5(b). The Administrator
shall specify the circumstances in which such Performance Awards shall be forfeited
or paid in the event of a termination of employment prior to the end of a
performance period or settlement of Performance Awards, and other terms relating to
such Performance Awards. The Performance Award agreement shall specify the time and
form of payment of the Performance Awards, including the six-month payment delay for
specified employees, if applicable, in accordance with Code Section 409A and the
regulations and other guidance in effect thereunder.




     (c) Written Determinations. All determinations by the Administrator as to the
establishment of performance goals and the potential Performance Awards related to such
performance goals and as to the achievement of performance goals relating to such Awards
shall be made in writing in the case of any Award intended to qualify under Code Section
162(m). The Administrator may not delegate any responsibility relating to such Performance
Awards.



     5.6 Restricted Stock Units. A Restricted Stock Unit is a hypothetical share of Common Stock
of the Company with a value equal to the Fair Market Value of a share of Common Stock. A
Participant who receives a Restricted Stock Unit Award has the right to receive the value of the
Restricted Stock Units, subject to the terms and conditions set forth in a Restricted Stock Unit
agreement as established by the Administrator in its sole discretion. At the discretion of the
Administrator, payment for Restricted Stock Units may be made in cash or shares of Common Stock of
the Company, or in a combination thereof. In the case of any Restricted Stock Unit Award:




     (a) The restriction period shall be established by the Administrator.




     (b) Restricted Stock Units may be subject to (i) forfeiture provisions or vesting
requirements based on the Participant’s continued service or the attainment of specified
performance objectives and (ii) such other restrictions, conditions and terms as the
Administrator deems appropriate. Notwithstanding the foregoing, with respect to any



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Restricted Stock Unit grant, the Administrator shall not establish a period of restriction
or vesting period of less than two years following the date of such Restricted Stock Unit
grant, subject to such accelerated vesting or lapse of restriction on the basis of death,
Disability, or Change of Control as the Administrator shall deem appropriate.




     (c) The Administrator may, in its discretion, provide for payments in cash or
adjustment in the number of Restricted Stock Units equivalent to the dividends the
Participant would have received if he or she held shares of Common Stock instead of
Restricted Stock Units. Any such dividend equivalents paid in cash shall be credited to a
bookkeeping account in the Participant’s name and shall be subject to all of the forfeiture
provisions, vesting requirements and other restrictions, conditions and terms that apply to
the Restricted Stock Units.




     (d) The Restricted Stock Unit agreement shall specify the time and form of payment of
the Restricted Stock Units, including the six-month payment delay for specified employees,
if applicable, in accordance with Code Section 409A and the regulations and other guidance
in effect thereunder.



     5.7 Deferred Stock Units. A Deferred Stock Unit is a hypothetical share of Common Stock of
the Company with a value equal to the Fair Market Value of a share of Common Stock. A Participant
who receives a Deferred Stock Unit Award has the right to receive the value of the Deferred Stock
Units, subject to the terms and conditions set forth in a Deferred Stock Unit agreement as
established by the Administrator in its sole discretion. At the discretion of the Administrator,
payment for Deferred Stock Units may be made in cash or shares of Common Stock of the Company, or
in a combination thereof, and such payment shall be made at the time or times specified in the
Deferred Stock Unit agreement. In the case of any Deferred Stock Unit Award:




     (a) Deferred Stock Units may be subject to (i) forfeiture provisions or vesting
requirements based on the Participant’s continued service or the attainment of specified
performance objectives and (ii) such other restrictions, conditions and terms as the
Administrator deems appropriate.




     (b) The Administrator may, in its discretion, provide for payments in cash or
adjustment in the number of Deferred Stock Units equivalent to the dividends the Participant
would have received if he or she held shares of Common Stock instead of Deferred Stock
Units. Any such dividend equivalents paid in cash shall be credited to a bookkeeping
account in the Participant’s name and shall be subject to all of the forfeiture provisions,
vesting requirements and other restrictions, conditions and terms that apply to the Deferred
Stock Units.




     (c) The Deferred Stock Unit agreement shall specify the time and form of payment of the
Deferred Stock Units, including the six-month payment delay for specified employees, if
applicable, in accordance with Code Section 409A and the regulations and other guidance in
effect thereunder.



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     (d) At the discretion of the Administrator, a Participant may elect to defer payment of
a Deferred Stock Unit granted to such Participant until the earlier of a Specified
Distribution Date, or, subject to the six-month delay for specified employees, the 30 days
after the date the Participant incurs a Termination of Employment. All deferral elections
under this Section 5.7(d) shall be submitted to the Administrator by the Participant in
writing on a Deferral Election Form to be supplied and approved by the Administrator (the
provisions of which Deferral Election Form are hereby incorporated herein by reference and
made a part hereof) and shall be effective upon receipt and acceptance by the Administrator.
A deferral election with respect to a Deferred Stock Unit shall be made not later than
December 31 of the calendar year preceding the calendar year in which such Deferred Stock
Unit is granted. All Deferral Election Forms filed under this Section 5.7(d) shall be
irrevocable.



ARTICLE 6

AWARD ADJUSTMENT, SUBSTITUTION AND ASSUMPTION




     6.1 Adjustment or Substitution. Subject to Section 6.3, in the event of any Company stock
dividend, stock split, combination or exchange of shares, recapitalization or other change in the
capital structure of the Company, corporate separation or division of the Company (including, but
not limited to, a split-up, spin-off, split-off or distribution to Company stockholders other than
a normal cash dividend), sale by the Company of all or a substantial portion of its assets
(measured on either a stand-alone or consolidated basis), reorganization, rights offering, partial
or complete liquidation, or any other corporate transaction, Company share offering or other event
involving the Company and having an effect similar to any of the foregoing, the Administrator shall
make such substitution or adjustments in the (i) number and kind of shares that may be delivered
under the Plan, (ii) additional maximums imposed in the Plan, (iii) number and kind of shares
subject to outstanding Awards, (iv) exercise price of outstanding stock options and stock
appreciation rights and (v) other characteristics or terms of the Awards as it may deem appropriate
in its sole discretion to equitably reflect such corporate transaction, share offering or other
event; provided, however, that the number of shares subject to any Award shall always be a whole
number.



     6.2 Award Issuance or Assumption in Transaction Context. Notwithstanding any other provision
of this Plan, and without affecting the number of shares reserved or available hereunder, the Board
may authorize the issuance of Awards or assumption of benefits in connection with any merger,
consolidation, acquisition of property or stock, or reorganization upon such terms and conditions
as it may deem appropriate.



     6.3 Code Section 409A Compliance. Any adjustment, substitution, issuance or assumption made
pursuant to this Article 6 shall be made in such a manner as to ensure that, after such adjustment,
substitution, issuance or assumption, the Awards continue not to be deferred compensation subject
to Code Section 409A or, with respect to Awards that are already subject to Code Section 409A, so
as not to violate Code Section 409A.



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ARTICLE 7

TRANSFER OF AWARDS




     7.1 Limited Transferability. No Award granted under the Plan to a Participant shall be
transferable other than by will or the laws of descent and distribution; provided, however, that
NQSOs granted under the Plan may be transferred, without consideration, to a Permitted Transferee
(as defined below). Awards granted under the Plan shall be exercisable during the Participant’s
lifetime only by the Participant or a Permitted Transferee. In the event of the death of a
Participant, exercise or payment shall be made only:




     (a) by or to the Permitted Transferee, executor or administrator of the estate of the
deceased Participant or the person or persons to whom the deceased Participant’s rights
under the Award pass by will or the laws of descent and distribution; and




     (b) to the extent that the deceased Participant or the Permitted Transferee, as the
case may be, was entitled thereto at the date of his or her death.



     7.2 Permitted Transferee. For purposes of this Article, the term “Permitted
Transferee” shall include any child, stepchild, grandchild, parent, stepparent, grandparent,
spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law or sister-in-law of a Participant (including adoptive
relationships); any person sharing the Participant’s household (other than a tenant or employee);
any trust in which the Participant and any of these persons have all of the beneficial interest;
any foundation in which the Participant and any of these persons control the management of the
assets; any corporation, partnership, limited liability Company or other entity in which the
Participant and any of these other persons are the direct and beneficial owners of all of the
equity interests (provided the Participant and these other persons agree in writing to remain the
direct and beneficial owners of all such equity interests); and any personal representative of the
Participant upon the Participant’s death for purposes of administration of the Participant’s estate
or upon the Participant’s incompetency for purposes of the protection and management of the
Participant’s assets.



ARTICLE 8

TAXES




     The Company shall be entitled to withhold or to require the Participant or other applicable
person to pay the amount necessary to enable the Company to remit to the appropriate government
entity or entities the amount of any tax required to be withheld from wages attributable to any
amounts payable or shares deliverable under the Plan, after notice to the person entitled to
receive such payment or delivery. The obligations of the Company under the Plan shall be
conditioned on such withholding or payment. The person entitled to any such delivery may, unless
the Administrator specifies otherwise, by notice to and upon consent of the Administrator at the
time the requirement for such delivery is first established, elect to satisfy or have such
withholding satisfied by (i) payment of cash equal to the withholding amount, (ii) delivery of
shares of Common Stock with a Fair Market Value at the time of delivery equal to the withholding
amount, (iii) reduction of the number of otherwise deliverable shares of



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Common Stock, with such reduction to be calculated based on the Fair Market Value of the shares on the
date of delivery, or (iv) a sale (by the Company, the person or an appropriate agent) of a number
of shares of Common Stock sufficient to satisfy the tax withholding requirement.



ARTICLE 9

DURATION, AMENDMENT AND TERMINATION




     9.1 Duration of Plan. Unless the Plan is discontinued earlier by the Board as provided
herein, no Award shall be granted hereunder on or after the date that is ten years after the date
of adoption of this Plan by the Board.



     9.2 Plan Amendment or Termination. The Board may amend, alter, or terminate the Plan at any
time in its sole discretion, but no amendment, alteration or termination shall be made that would
adversely affect the rights of a Participant under an Award theretofore granted without the
Participant’s consent, except an amendment (i) made to avoid an expense charge to the Company or
any of its subsidiaries, or (ii) made to permit the Company or any of its subsidiaries a deduction
under the Code. No such amendment shall be made without the approval of the Company’s shareholders
to the extent such approval is required by law, agreement or the rules of any stock exchange or
market on which the Common Stock is listed.



     9.3 Award Modification. The Administrator may amend the terms of any Award agreement
previously granted, prospectively or retroactively, but no such amendment shall adversely affect
the rights of the holder thereof without the holder’s consent. Also, by mutual agreement between
the Company and a Participant hereunder, stock options or other benefits may be granted to such
Participant in substitution and exchange for, and in cancellation of, any benefits previously
granted to such Participant under this Plan; provided, however, that any substitution or exchange
shall be made in such a manner as to ensure that, after such substitution or exchange, the stock
options or other benefits continue not to be deferred compensation subject to Code Section 409A
(or, if such Awards are already subject to Code Section 409A, so as not to violate Code Section
409A). To the extent that any Award granted under the Plan would qualify under present or future
laws for tax treatment that is beneficial to a recipient, then any such beneficial treatment shall
be considered within the intent, purpose and operational purview of the Plan and the discretion of
the Administrator and, to the extent that any such Award would so qualify within the terms of the
Plan, the Administrator shall have full and complete authority to grant Awards that so qualify
(including the authority to grant, simultaneously or otherwise, Awards that do not so qualify) and
to prescribe the terms and conditions (which need not be identical for all recipients) in respect
to the grant or exercise of any such Awards under the Plan.



ARTICLE 10

MISCELLANEOUS




     10.1 No Limitation on Other Arrangements. Nothing contained in the Plan shall prevent the
Company or any of its subsidiaries from adopting other or additional compensation arrangements for
its employees.



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     10.2 Participant Representation and Share Restrictions and Legends. The Administrator may
require each person purchasing or receiving shares pursuant to an Award to
represent to and agree with the Company in writing that such person is acquiring the shares
without a view to the distribution thereof. The certificates for such shares may include any
legend which the Administrator deems appropriate to reflect any restrictions on transfer. All
certificates for shares of Common Stock or other securities delivered under the Plan shall be
subject to such stock transfer orders and other restrictions as the Administrator may deem
advisable under the rules, regulations and other requirements of the Securities Exchange
Commission, any stock exchange or market on which the Common Stock is then listed and any
applicable federal or state securities law, and the Administrator may cause a legend or legends to
be put on any such certificates to make appropriate reference to such restrictions.



     10.3 Beneficiary Designation. The Administrator shall establish such procedures as it deems
appropriate for a Participant to designate a beneficiary to whom any amounts payable in the event
of the Participant’s death are to be paid.



     10.4 Offset. Unless otherwise prohibited or restricted by Code Section 409A or the
regulations or other guidance in effect thereunder, in which case the offset shall not occur or
shall be structured to comply with Code Section 409A, any amounts owed to the Company or any of its
subsidiaries by a Participant of whatever nature may be offset by the Company from the value of any
shares of Common Stock, cash or other thing of value to be transferred to the Participant under
this Plan or an Award agreement.



     10.5 Business Decisions. The grant of an Award shall in no way affect the right of the
Company to adjust, reclassify, reorganize or otherwise change its capital or business structure or
to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or
assets, or to effectuate other similar corporate transactions.



     10.6 Conformity with Rules in Foreign Jurisdictions. To the extent that the Administrator
determines that the restrictions imposed by the Plan preclude the achievement of the material
purposes of the Awards in jurisdictions outside the United States, the Administrator in its
discretion may modify those restrictions as it determines to be necessary or appropriate to conform
to applicable requirements or practices of jurisdictions outside of the United States.



     10.7 Headings. The headings contained in this Plan are for reference purposes only and shall
not affect the meaning or interpretation of this Plan.



     10.8 Severability. If any provision of this Plan is for any reason held to be invalid or
unenforceable, such invalidity or unenforceability shall not effect any other provision herein and
this Plan shall be construed as if such invalid or unenforceable provision were omitted.



     10.9 Assignment. This Plan shall inure to the benefit of and be binding upon each successor
and assign of the Company. All obligations imposed upon a Participant, and all rights granted to
the Company hereunder, shall be binding upon the Participant’s heirs, legal representatives and
successors.



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     10.10 Employment Agreement Supersedes Award Agreement. In the event a Participant is a party to an employment agreement with the Company or a
subsidiary that provides for vesting or extended exercisability of equity compensation Awards on
terms more favorable to the Participant than the Participant’s Award agreement or this Plan, the
employment agreement shall be controlling; provided that (a) if the Participant is subject to
potential liability under Section 16(b) of the Exchange Act, any terms in the employment agreement
requiring Compensation Committee of the Board, Board or stockholder approval in order for an
exemption from Section 16(b) of the Exchange Act to be available shall have been approved by the
Compensation Committee of the Board, the Board or the stockholders, as applicable, and (b) the
employment agreement shall not be controlling to the extent the Participant and the Company agree
it shall not be controlling.



     10.11 Entire Agreement. Except as provided in Section 10.10, this Plan and each agreement
granting an Award constitute the entire agreement with respect to the subject matter hereof and
thereof, provided that in the event of any inconsistency between this Plan and such agreement, the
terms and conditions of the Plan shall control.



     10.12 No Right to Continued Service. A Participant’s right, if any, to continue to serve the
Company and its subsidiaries as an officer, employee, or otherwise, shall not be enlarged or
otherwise affected by his or her designation as a Participant under the Plan.



     10.13 Disclosure Obligations. None of the Company, its subsidiaries or the Administrator
shall have any duty or obligation to disclose affirmatively to a record or beneficial holder of
Common Stock or an Award, and such holder shall have no right to be advised of, any material
non-public information regarding the Company or any of its subsidiaries at any time prior to, upon
or in connection with receipt or the exercise of an Award or the Company’s purchase of Common Stock
or an Award from such holder in accordance with the terms hereof.



     10.14 Unfunded Status of Plan. This Plan is intended to be an “unfunded” plan for incentive
compensation. The Administrator may authorize the creation of trusts or other arrangements to
satisfy the obligations created under this Plan to deliver Common Stock or make payments, provided
that, unless the Administrator otherwise determines, the existence of such trusts or other
arrangements is consistent with the “unfunded” status of this Plan.



     10.15 Code Section 409A. Any Restricted Stock, ISO, NQSO or SAR Award granted pursuant to
this Plan is intended to be exempt from the application of Code Section 409A, and the Plan and the
terms of such Awards shall be interpreted accordingly. With respect to any Award granted under the
Plan that constitutes “deferred compensation” under Code Section 409A, if any provision of the Plan
or an Award contravenes any regulations or Treasury guidance in effect under Code Section 409A or
could cause an Award to be subject to the penalties and interest under Code Section 409A, such
provision of the Plan or Award shall be modified to maintain, to the maximum extent practicable,
the original intent of the applicable provision without violating Code Section 409A.



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     10.16 Governing Law. The validity, construction, and effect of the Plan shall be determined
in accordance with the laws of the State of Delaware (other than its law respecting choice of law).



ARTICLE 11

DEFINITIONS




     11.1 Change of Control. Unless otherwise provided in an Award agreement, the term “Change
of Control” means:




     (a) any Person (other than the Company, any trustee or other fiduciary holding
securities under an employee benefit plan of the Company, or any company owned, directly or
indirectly, by the shareholders of the Company in substantially the same proportions as
their ownership of stock of the Company), becomes the beneficial owner, directly or
indirectly, of securities of the Company representing 50% or more of the combined voting
power of the Company’s then-outstanding securities (provided, however, that if any Person is
considered to own more than 50% of the total voting power of the stock of the Company, the
acquisition of additional stock by the same Person is not considered to cause a change in
the ownership or control of the Company);




     (b) during any period of twelve consecutive months, individuals who at the beginning of
such period constitute the Board, and any new director (other than (i) a director nominated
by a Person who has entered into an agreement with the Company to effect a transaction
described in paragraph (a), (c) or (d), or (ii) a director nominated by any Person
(including the Company) who publicly announces an intention to take or to consider taking
actions (including, but not limited to, an actual or threatened proxy contest) which if
consummated would constitute a Change in Control) whose election by the Board or nomination
for election by the Company’s shareholders was approved by a vote of the shareholders or a
vote of at least three-fourths (3/4) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute at least a majority of the Board;




     (c) the consummation of any merger, consolidation, plan of arrangement, reorganization
or similar transaction or series of transactions in which the Company is involved, other
than such a transaction or series of transactions that would result in the shareholders of
the Company immediately prior thereto continuing to own (either by remaining outstanding or
by being converted into voting securities of the surviving entity) more than 50% of the
combined voting power of the securities of the Company or such surviving entity (or the
parent, if any) outstanding immediately after such transaction(s) in substantially the same
proportions as their ownership immediately prior to such transaction(s); or




     (d) the consummation of a sale or disposition by the Company of all or substantially
all of the Company’s assets, other than a liquidation of the Company into a wholly owned
subsidiary (provided, however, that a transfer of assets by the Company is



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not treated as a
change in the ownership of such assets if the assets are transferred to: (A) a shareholder
of the Company (immediately before the asset transfer) in exchange for or with respect to
its stock; (B) an entity of which the Company owns, directly or indirectly, 50% or more of the total value or voting power; (C) a Person, or more than one Person
acting as a group, that owns, directly or indirectly, 50% or more of the total value or
voting power of all the outstanding stock of the Company; or (D) an entity of which a Person
or group described in clause (C) above owns, directly or indirectly, at least 50% of the
total value or voting power).


As used in this Section 11.1, the term “Person” (including a “group”), has the meaning
assigned to such term for purposes of Section 13(d) or 14(d) of the Securities Exchange Act of
1934, as amended (or any successor section thereto).




     11.2 Deferral Election Form. The term “Deferral Election Form” means the form
supplied and approved by the Administrator that the Participant submits to the Administrator to
make a deferral election under Section 5.7(d).



     11.3 Disability. Unless otherwise provided in an Award agreement, the term
“Disability” means (a) a Participant’s inability to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment that can be expected
to result in death or can be expected to last for a continuous period of not less than twelve (12)
months or (b) the Participant’s receipt of income replacement benefits for a period of not less
than 3 months under an accident and health plan covering employees of the Company due to any
medically determinable physical or mental impairment which can be expected to last for a continuous
period of not less than 12 months, both as determined by the Committee.



     11.4 Fair Market Value. The term “Fair Market Value” means, as of any given date, the
fair market value of the Common Stock as determined by the Administrator in accordance with Code
Section 409A. Unless otherwise determined by the Administrator, the Fair Market Value per share of
Common Stock shall be the closing sale price per share of Common Stock on the New York Stock
Exchange (or the principal stock exchange or market on which the Common Stock is then traded) on
the date as of which such value is being determined or the last preceding day on which a sale was
reported.



     11.5 Specified Distribution Date. The term “Specified Distribution Date”, as used
with respect to a Deferred Stock Unit deferred by a Participant in accordance with Section 5.7(d),
means the date specified by the Participant on the applicable Deferral Election Form as the date
such Deferred Stock Unit shall be paid to the Participant. The Specified Distribution Date with
respect to a Deferred Stock Unit must be the last business day of a calendar year following the
calendar year in which such Deferred Stock Unit is granted. Notwithstanding the foregoing, (i) in
the case of a Participant who is a non-employee director of the Company or any designated
subsidiary, the Specified Distribution Date with respect to a Deferred Stock Unit shall not be
earlier than the last business day of the second calendar year and no later than the last business
day of the seventh calendar year following the calendar year in which such Deferred Stock Unit is
granted and (ii) in the case of each other Participant not described in



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clause (i) above, such Specified Distribution Date shall be no later than the last business day of the fifth calendar year
following the calendar year in which such Deferred Stock Unit is granted.




     11.6 Termination of Employment. The term “Termination of Employment” means a
termination of the Participant’s employment or service with the Company or its subsidiary or
affiliate (regardless of the reason therefor) that constitutes a “separation from service” as
defined in Code Section 409A or applicable regulations or other guidance in effect thereunder.



     The undersigned hereby certifies that this Patriot Coal Corporation 2007 Long-Term Equity
Incentive Plan was adopted by the Board at its meeting on October 12, 2007.



	 	 	 	 	 
	 	 	 
	 	By:  	Richard M. Whiting
 	 
	 	 	Title:  	President & Chief Executive Officer
 	 
	 	 	Date:  	October 22, 2007
 	 
	 




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