exv10w2



 





Exhibit 10.2

2007 Patriot Award




EXTENDED LONG-TERM INCENTIVE AWARD

NON-QUALIFIED STOCK OPTION AGREEMENT




     THIS AGREEMENT, dated                      ___, 2007 (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” means (i) any material and uncorrected breach by Optionee of the
terms of his or her employment or service agreement with the Company, if any, including, but not
limited to, engaging in action in violation of any restrictive covenants therein, (ii) any willful
fraud or dishonesty of Optionee involving the property or business of the Company, (iii) a
deliberate or willful refusal or failure of Optionee to comply with any major corporate policy of
the Company which is communicated to Optionee in writing or (iv) Optionee’s conviction of, or plea
of nolo contendere to, any felony if such conviction results in his or her
imprisonment;



 









 




provided that with respect to clauses (i), (ii) or (iii) above, Optionee shall have 10 days
following 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.




     Section 1.3 — “Code” means the Internal Revenue Code of 1986, as amended.



     Section 1.4 — “Good Reason” means (i) a reduction by the Company in Optionee’s base
salary, (ii) a material reduction in the aggregate program of employee benefits and perquisites to
which Optionee is entitled (other than a reduction which affects all executives), (iii) relocation
by more than 50 miles from Optionee’s workplace, (iv) any material diminution or material adverse
change in Optionee’s duties, responsibilities or reporting relationships, which causes Optionee to
fall below the level of the executive team, or (v) a material decline in Optionee’s bonus
opportunity.



     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.



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.



2









 







     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 as follows:



	 	 	 	 	 	 
	Date Option	 	 	Percentage of shares of Common
	becomes exercisable	 	 	Stock as to which Option is exercisable
	Fifth anniversary of Grant Date
	 	 	 	50	%
	 
	 	 	 	 	 
	Sixth anniversary of Grant Date
	 	 	 	75	%
	 
	 	 	 	 	 
	Seventh anniversary of Grant Date
	 	 	 	100	%





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 or become exercisable) upon
(i) the Optionee’s Termination of Employment due to death or Disability, or (ii) a Change of
Control.



     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



3









 






     (d) The date of a Termination of Employment by the Company for Cause or by the Optionee
without Good Reason; or




     (e) The date of a Termination of Employment for any reason if the Option exercise price
per share of Common Stock, as set forth on the signature page hereof, is higher than the
fair market value per share of Common Stock on the date of the Termination of Employment; or




     (f) 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.



     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;



4









 






     (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.



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



5









 







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 (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



6









 







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 5.10 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	 	 	 	 
	 

[Optionee Name]

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 

	 	Its	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 


	 	 	 	 	 	 
	 

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: $                    	 	 







8