Document:

exv10w1

 

Exhibit 10.1

Employment Agreement 

June 1, 2005

Paul H. Vining

[Address]

Dear Mr. Vining:

     In order to encourage you to remain in the employ of the Company, this Agreement sets forth
those benefits which the Company will provide to you in the event your employment with the Company
(1) is Terminated without Cause during the term of this Agreement, or (2) you resign for Good
Reason following a Change in Control of the Company under the circumstances described below.

SECTION A. DEFINITIONS

     1. “Agreement” shall mean this letter agreement.

     2. “Average Annual Bonus” shall be the highest of (i) the most recent annual bonus paid to
you, (ii) if your date of termination occurs after the end of the calendar year but prior to the
payment of annual bonuses with respect to the prior year, the amount calculated as payable as your
annual bonus pursuant to the bonus targets approved by the Board of Directors of the Company for
such year compared to the actual performance of the Company for such year; or (iii) the average
annual bonus paid to you in the three full calendar years proceeding the Date of Termination. If
you have not been employed by the Company, for three full calendar years prior to the Date of
Termination, the average annual bonus for purposes of clause (iii) of this definition shall be a
percentage of your highest annual salary in effect at any time during the term of this Agreement
equal to the average percentage of annual base pay paid as an annual bonus by all executives of the
Company at your Incentive Compensation level in the three calendar years proceeding the Date of
Termination.

     3. “Board” shall mean the Company’s Board of Directors.

     4. “Cause” shall occur hereunder only upon (A) the willful and continued failure by you
substantially to perform your duties with the Company (other than any such failure resulting from
your incapacity due to physical or mental illness) after a written demand for substantial
performance is delivered to you by the Board which specifically identifies the manner in which the
Board believes that you have not substantially performed your duties, (B) the willful engaging by
you in gross misconduct materially and demonstrably injurious to the Company including, without
limitation, a violation of the Company’s Code of Business Conduct in effect from time to time, or
(C) your conviction of or the entering of a plea of nolo contendere to the commission of a felony.
For purposes of this paragraph, no act, or failure to act, on your part shall be considered
“willful” unless done, or omitted to be done, by you not in good faith and without reasonable
belief that your action or omission was in the best interest of the Company. Notwithstanding the
foregoing, you shall not be deemed to have been terminated for Cause unless and until there shall
have been delivered to you a copy of a resolution duly adopted by the affirmative vote of not less
than three-quarters of the entire membership of the Board at a meeting of the

 

 

Board called and held for the purpose, among others (after at least 20 days prior notice to you and
an opportunity for you, together with your counsel, to be heard before the Board), of finding that
(i) in the good faith opinion of the Board you failed to perform your duties or engaged in
misconduct as set forth above in subparagraph (A) or (B) of this paragraph, and, if applicable,
that you did not correct such failure or cease such misconduct after being requested to do so by
the Board, or (ii) as set forth in subparagraph (C) of this paragraph, you have been convicted of
or have entered a plea of nolo contendere to the commission of a felony.

     5. “Change in Control” shall be deemed to have occurred if (i) there shall be consummated (A)
any consolidation, merger, or share exchange of the Company in which the Company is not the
continuing or surviving corporation or pursuant to which shares of the Company’s Common Stock would
be converted into cash, securities or other property, other than a merger of the Company in which
the holders of the Company’s Common Stock immediately prior to the merger have substantially the
same proportionate ownership of common stock of the surviving corporation immediately after the
merger, or (B) any sale, lease, exchange or other transfer (in one transaction or a series of
related transactions) of all or substantially all of the assets of the Company, or (ii) the
shareholders of the Company shall approve any plan or proposal for the liquidation or dissolution
of the Company, or (iii) at any time during a period of two (2) consecutive years, “Continuing
Directors” shall cease for any reason to constitute at least a majority of the Board. For such
purpose, “Continuing Directors” shall be directors who were in office at the beginning of such two
year period and new directors whose election or nomination for election by the Company’s
shareholders was approved by a vote of at least two-thirds of the Continuing Directors then in
office.

     6. “COBRA” shall mean the Consolidated Omnibus Budget Reconciliation Act, as amended.

     7. “Common Stock” shall mean the common stock, par value $0.01 per share, of the Company.

     8. “Company” shall mean Arch Coal, Inc. and any successor to its business and/or assets which
executes and delivers the agreement provided for in Section F, paragraph 1 hereof or which
otherwise becomes bound by all the terms and provisions of this Agreement by operation of law.

     9. “Competitive Activity” shall have the meaning as set forth in Section D, paragraph 4.

     10. “Competitive Operation” shall have the meaning as set forth in Section D, paragraph 4.

     11. “Confidential Information” shall mean information relating to the Company’s, its
divisions’ and Subsidiaries’ and their successors’ business practices and business interests,
including, but not limited to, customer and supplier lists, business forecasts, business and
strategic plans, financial and sales information, information relating to products, process,
equipment, operations, marketing programs, research, or product development, engineering records,
computer systems and software, personnel records or legal records.

     12. “Constructive Termination” shall mean your resignation of employment with the Company
after the occurrence of any one of the following events: (i) a reduction in your base salary or
Incentive Compensation level or participation in any of the benefit plans or compensation plans of
the Company for which you are currently or become eligible during the term of this Agreement; (ii)
a diminution of your position, duties, title, status or responsibilities during the term of this
Agreement; (iii) a

 

 

failure by the Company to, in good faith, review the appropriateness of your base salary and
incentive compensation package on at least an annual basis; or (iv) any breach by the Company of
any material provision of this Agreement.

     13. “Date Of Termination” shall mean: (A) if this Agreement is terminated for Disability,
thirty (30) days after the Notice of Termination is given by the Company to you (provided that you
shall not have returned to the performance of your duties on a full-time basis during such thirty
(30) day period), (B) if your employment is terminated for Good Reason by you, the date specified
in the Notice of Termination, and (C) if your employment is Terminated for any other reason, the
date on which a Notice of Termination is received or delivered by you unless a later date is
specified.

     14. “Disability” shall occur when: if, as a result of your incapacity due to physical or
mental illness, you shall have been absent from your duties with the Company for six (6)
consecutive months and shall not have returned to full-time performance of your duties within
thirty (30) days after written notice is given to you by the Company.

     15. “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

     16. “Excise Tax” shall have the meaning as set forth in Section E.

     17. “Good Reason” shall mean:

(a) without your express written consent, the assignment to you after a Change in Control of
the Company, of any duties inconsistent with, or a significant diminution of, your position,
duties, responsibilities or status with the Company immediately prior to a Change in Control
of the Company, or a diminution in your title(s) as in effect immediately prior to a Change
in Control of the Company or any removal of you from, or any failure to reelect you to, any
of such positions;

(b) a reduction by the Company in your base salary in effect immediately prior to a Change
in Control of the Company or a failure by the Company to increase (within fifteen months of
your last increase in base salary) your base salary after a Change in Control of the Company
in an amount which is substantially similar, on a percentage basis, to the average
percentage increase in base salary for all corporate officers of the Company during the
preceding twelve (12) months;

(c) the failure by the Company to continue in effect any thrift, stock ownership, pension,
life insurance, health, dental and accident or disability plan in which you are
participating or are eligible to participate at the time of a Change in Control of the
Company (or plans providing you with substantially similar benefits), except as otherwise
required by the terms of such plans as in effect at the time of any Change in Control of the
Company, or the taking of any action by the Company which would adversely affect your
participation in or materially reduce your benefits under any of such plans or deprive you
of any material fringe benefits enjoyed by you at the time of the Change in Control of the
Company or the failure by the Company to provide you with the number of paid vacation days
to which you are entitled in accordance with the vacation policies of the Company in effect
at the time of a Change in Control of the Company, unless a comparable plan is substituted
therefor;

(d) the failure by the Company to continue in effect any incentive plan or arrangement
(including without limitation, the Company’s incentive compensation plan, annual bonus and

 

 

contingent bonus arrangements and credits and the right to receive performance awards and
similar incentive compensation benefits) in which you are participating at the time of a
Change in Control of the Company (or to substitute and continue other plans or arrangements
providing you with substantially similar benefits), or a reduction in your Incentive
Compensation level in effect at the time of a Change in Control of the Company except as
otherwise required by the terms of such plans as in effect at the time of any Change in
Control of the Company;

(e) the failure by the Company to continue in effect any plan or arrangement to receive
securities of the Company (including, without limitation, any plan or arrangement to receive
and exercise stock options, stock appreciation rights, restricted stock or grants thereof or
to acquire stock or other securities of the Company) in which you are participating at the
time of a Change in Control of the Company (or to substitute and continue plans or
arrangements providing you with substantially similar benefits), except as otherwise
required by the terms of such plans as in effect at the time of any Change in Control of the
Company, or the taking of any action by the Company which would adversely affect your
participation in or materially reduce your benefits under any such plan;

(f) the relocation of the Company’s principal executive offices to a location outside the
St. Louis metropolitan area, or the Company’s requiring you to be based anywhere other than
at your current location or at the location of the Company’s principal executive or
divisional offices, except for required travel on the Company’s business to an extent
substantially consistent with your present business travel obligations, or, in the event you
consent to any such relocation of the Company’s principal executive or divisional offices,
the failure by the Company to pay (or reimburse you for) all reasonable moving expenses
incurred by you relating to a change of your principal residence in connection with such
relocation and to indemnify you against any loss (defined as the difference between the
actual sale price of such residence and the greater of (a) your aggregate investment in such
residence, or (b) the fair market value of such residence as determined by a real estate
appraiser reasonably satisfactory to both you and the Company) realized in the sale of your
principal residence in connection with any such change of residence;

(g) any breach by the Company of any material provision of this Agreement; or

(h) any failure by the Company to obtain the assumption of this Agreement by any successor
or assign of the Company.

     18. “Gross-up Payment” shall have the meaning as set forth in Section E.

     19. “Notice of Termination” shall mean a notice which shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of your employment under the provision so
indicated.

     20. “Payment” shall have the meaning as set forth in Section E.

     21. “Person” shall have the meaning as set forth in Sections 13(d) and 14(d)(2) of the
Exchange Act.

     22. “Qualifying Termination” shall mean the termination of your employment after a Change in
Control of the Company while this Agreement is in effect, unless such termination is (a) by reason
of

 

 

your death or Disability, (b) by the Company for Cause, or (c) by you other than for Good
Reason.

     23. “Salary Continuation Period’’ shall have the meaning set forth in Section C,
paragraph 1.

     24. “Significant Stockholder” shall mean any shareholder of the Company who, immediately prior
to the Effective Date, owned more than 5% of the common stock of the company.

     25. “Subsidiary” shall mean any corporation of which more than 20% of the outstanding capital
stock having ordinary voting power to elect a majority of the board of directors of such
corporation (irrespective of whether or not at the time capital stock of any other class or classes
of such corporation shall or might have voting power upon the occurrence of any contingency) is at
the time directly or indirectly owned by the Company, by the Company and one or more other
Subsidiaries, or by one or more other Subsidiaries.

     26. “Termination” shall mean the actual or Constructive Termination of your employment
with the Company.

SECTION B. TERM AND BENEFITS

     This Agreement shall be in effect for a period of one (1) year from the date you accept this
Agreement and shall automatically renew for successive one (1) year periods unless terminated by
either party by at least one (1) year advance written notice prior to the commencement of the next
succeeding one (1) year period at which time the Agreement shall terminate at the end of the next
succeeding one (1) year period. During the term of employment hereunder, you agree to devote your
full business time and attention to the business and affairs of the Company and to use your best
efforts, skills and abilities to promote its interests.

     In the event of your retirement, at your election or in accordance with the Company’s
generally applicable retirement policies, as in effect from time to time, this Agreement shall
automatically terminate, without additional notice to you, as of the effective date of your
retirement. Notwithstanding the first sentence of this paragraph and the first sentence of this
Section B, if a Change in Control of the Company should occur while you are still an employee of
the Company and while this Agreement is in effect, then this Agreement shall continue in effect
from the date of such Change in Control of the Company for a period of two years. Prior to a Change
in Control of the Company, your employment may be terminated by the Company for Cause at any time
pursuant to a Notice of Termination. In such event, you shall not be entitled to the benefits
provided hereunder. No benefits shall be payable hereunder unless your employment is terminated
without Cause or there shall have been a Change in Control of the Company and your employment by
the Company shall thereafter terminate in accordance with Section D hereof.

SECTION C. TERMINATION PRIOR TO CHANGE IN CONTROL

     1. Compensation Prior to a Change in Control. If you are Terminated by the Company
without Cause during the term of this Agreement and prior to a Change in Control of the Company,
you shall be entitled to receive:

(a) payment of the higher of; (1) your salary immediately prior to your Date of Termination,
or (2) your highest salary during the prior three fiscal years preceding the fiscal year in
which your Date of Termination occurs, for a period of one (1) year after your Date of
Termination (“Salary

 

 

Continuation Period”);

(b) continuation of your and your eligible dependents’ existing participation at regular
employee rates, in effect from time to time, in all of the Company’s medical, dental and
group life plans and other programs in which you were participating immediately prior to
your Date of Termination during the Salary Continuation Period, after which time you and
your eligible dependents will be eligible for coverage under COBRA. In the event that your
continued participation in any such plan or program is for whatever reason impossible, the
Company shall arrange upon comparable terms to provide you with benefits substantially
equivalent on an after tax basis to those which you and your eligible dependents are, or
become, entitled to receive under such plans and programs;

(c) if and when payments are made, payment in cash of any pro-rata portion (up through your
Date Of Termination) of any amounts you would have received under the Company’s performance
unit/share plans, Annual Incentive Compensation Plan, and any other similar executive
compensation plan in which you were a participant immediately prior to your Date of
Termination;

(d) provide for payment in cash an amount equal to your Average Annual Bonus;

(e) continuation of your existing participation in the Company’s thrift plan, cash balance
pension plan, non-qualified supplemental pension plan, deferred compensation plan and
financial counseling services plan during the Salary Continuation Period (payments made
pursuant to paragraph 1(a) and 1(c) hereof shall be deemed includable compensation under
these plans to the same extent as if you had remained an active employee of the company and
the payments were made for base salary and annual bonus, respectively);

(f) outplacement services substantially similar to those historically offered by the Company
to displaced senior executives; for a period not to exceed the Salary Continuation Period;

(g) pay to you an amount equal to the value of all unused, earned and accrued vacation as of
your Date of Termination; and

(h) provide for the immediate vesting of all stock options held by you, as of your Date of
Termination, under any Company stock option plan and all such options shall be exercisable
during the Salary Continuation Period and for 120 days thereafter.

However, in the event that your employment with the Company is Terminated during the term of this
Agreement and prior to a Change in Control of the Company and such Termination is not a Termination
without Cause (including, without limitation, termination by reason of your voluntary termination
(other than Constructive Termination), retirement, death, or Disability), or if your employment is
terminated for Cause during the term of this Agreement, you shall not be entitled to receive any
benefits under this Agreement.

     2. Release. In exchange for the benefits herein, you completely release the Company
to the fullest extent permitted by law from all claims you may have against the Company on your
Date of Termination except claims related to (a) claims for benefits to which you are entitled
under this Agreement and (b) any applicable worker’s compensation or unemployment compensation.

 

 

     3. Payment of Benefits. Unless otherwise provided in this Agreement, in the
applicable compensation or stock option plan or program, or unless you otherwise elect, all
payments shall be made to you in a single lump sum within thirty (30) days after your Date of
Termination. Notwithstanding the payment of benefits hereunder in a lump sum, the benefits stated
herein to continue through the Salary Continuation Period shall continue through the period. These
benefits are in addition to all accrued and vested benefits to which you are entitled to under any
of the Company’s plans and arrangements, including but not limited to, the accrued vested benefits
to which you are eligible for and entitled to receive under any of the Company’s qualified and
non-qualified benefit or retirement plans, or any successor plans in effect on your Date of
Termination hereunder.

     4. No Duty to Mitigate. You shall not be required to mitigate the amount of any
payment provided for in this Section by seeking other employment or otherwise, nor shall the amount
of any payment provided for in this Section be reduced by any compensation earned by you as the
result of employment by another employer after your Date of Termination, or otherwise. Except as
provided herein, the Company shall have no right to set off against any amount owing hereunder any
claim which it may have against you.

SECTION D. TERMINATION FOLLOWING CHANGE IN CONTROL

     1. Qualifying Termination. If your termination is a Qualifying Termination, you shall
be entitled to receive the payments and benefits provided in this Section.

     2. Notice of Termination. Except as provided in Section F, paragraph 1, any
termination of your employment following a Change in Control of the Company shall be communicated
by written Notice of Termination to the other party hereto. No termination shall be effective
without such Notice of Termination.

     3. Compensation Upon Termination After a Change in Control.

(a) If your termination is a Qualifying Termination, then the Company shall pay to you as
severance pay (and without regard to the provisions of any benefit or incentive plan), in a
lump sum cash payment on the fifth (5th) day following your Date of Termination, an amount
equal to two (2) times the higher of; (1) your salary immediately prior to your Date of
Termination, or (2) your highest salary during the prior three (3) fiscal years preceding
the fiscal year in which your Date of Termination occurs or, if greater, the prior three (3)
fiscal years preceding the fiscal year in which the Change in Control of the Company occurs.

(b) If your termination is a Qualifying Termination, the Company shall, in addition to the
payments required by the preceding paragraph:

(i) provide for continuation of your and your eligible dependents’ participation at
regular employee rates, in effect from time to time, in all of the Company’s medical,
dental and group life plans and other programs in which you were participating
immediately prior to your Date of Termination for a period of two years from your
Date of Termination, after which time you and your eligible dependents will be
eligible for coverage under COBRA. In the event that your continued participation in
any such plan or program is for whatever reason impossible, the Company shall arrange
upon comparable terms to provide you with benefits substantially equivalent on an
after tax basis to those which you and your eligible

 

 

dependents are, or become, entitled to receive under such plans and programs;

(ii) provide for full payment in cash of any performance unit/share awards in
existence on your Date of Termination less any amounts paid to you under the
applicable performance unit/share plan upon a Change in Control of the Company
pursuant to the provisions of such plan; plus any pro rata portion (up through your
date of termination) of any amounts you would have received under the Company’s
Incentive Compensation Plan and any other similar executive compensation plan in
which you were a participant immediately prior to your Date of Termination;

(iii) provide for payment in cash of an amount equal to two times your Average Annual
Bonus;

(iv) provide those benefits or compensation under any compensation plan, arrangement
or agreement not in existence as of the date hereof but which may be established by
the Company prior to your Date of Termination at such time as payments are made
thereunder to the same extent as if you had been a full-time employee on the date
such payments would otherwise have been made or benefits vested;

(v) for two (2) years after your Date of Termination, provide and pay for
outplacement services, by a firm reasonably acceptable to you, that have historically
been offered to displaced employees generally by the Company under substantially the
same terms and fee structure as is consistent with an employee in your then current
position (or, if higher, your position immediately prior to the Change in Control of
the Company);

(vi) for two (2) years after your Date of Termination, provide and pay for financial
planning services, by a firm reasonably acceptable to you, that have historically
been offered to you under substantially the same terms and fee structure as is
consistent with an employee in your then current position (or, if higher, your
position immediately prior to the Change in Control of the Company);

(vii) pay to you an amount equal to the value of all unused, earned and accrued
vacation as of your Date of Termination pursuant to the Company’s policies in effect
immediately prior to the Change in Control of the Company; and

(viii) provide for the immediate vesting of all stock options held by you, as of your
Date of Termination, under any Company stock option plan and all such options shall
be exercisable for the remaining terms of the options.

(ix) payments made pursuant to paragraphs 3.(a) and 3.(b)(iii) hereof shall be deemed
includable compensation under the Company’s thrift plan, cash balance pension plan,
non-qualified supplemental pension plan and deferred compensation plan as if you had
remained an active employee of the Company and payments were made for base salary and
annual bonus, respectively.

     4. Release. In exchange for the benefits herein, you completely release the Company
to the fullest extent permitted by law from all claims you may have against the Company on your
Date of Termination except claims related to (a) claims for benefits to which you are entitled
under this Agreement

 

 

and (b) any applicable worker’s compensation or unemployment compensation.

     5. Payment of Benefits. Unless otherwise provided in this Agreement or in the
applicable compensation or stock option plan or program, or unless you otherwise elect, all
payments shall be made to you within thirty (30) days after your Date of Termination. These
benefits are in addition to all accrued and vested benefits to which you are entitled to under any
of the Company’s plans and arrangements, including but not limited to, the accrued vested benefits
to which you are eligible for and entitled to receive under any of the Company’s qualified and
non-qualified benefit or retirement plans, or any successor plans in effect on your Date of
Termination hereunder.

     6. No duty to Mitigate. You shall not be required to mitigate the amount of any
payment provided for in this Section by seeking other employment or otherwise, nor shall the amount
of any payment provided for in this Section be reduced by any compensation earned by you as the
result of employment by another employer after your Date of Termination, or otherwise. Except as
provided herein, the Company shall have no right to set off against any amount owing hereunder any
claim which it may have against you.

     7. Competitive Activity. In consideration of the foregoing, you agree that if your
employment is terminated during the term of this Agreement and after a Change in Control of the
Company, then during a period ending six (6) months following your Date of Termination you shall
not engage in any Competitive Activity; provided, you shall not be subject to the foregoing
obligation if the Company breaches a material provision of this Agreement. If you choose to engage
in any Competitive Activity during that period, the Company shall be entitled to recover any
benefits paid to you under this Agreement. For purposes of this Agreement, “Competitive Activity”
shall mean your participation, without the written consent of the General Counsel of the Company,
in the management of any business operation of any enterprise if such operation (a “Competitive
Operation”) engages in substantial and direct competition with any business operation actively
conducted by the Company or its divisions and Subsidiaries on your Date of Termination. For
purposes of this paragraph, a business operation shall be considered a Competitive Operation if
such business sells a competitive product or service which constitutes (i) 15% of that business’s
total sales or (ii) 15% of the total sales of any individual subsidiary or division of that
business and, in either event, the Company’s sales of a similar product or service constitutes (i)
15% of the total sales of the Company or (ii) 15% of the total sales of any individual Subsidiary
or division of the Company. Competitive Activity shall not include (i) the mere ownership of
securities in any enterprise, or (ii) participation in the management of any enterprise or any
business operation thereof, other than in connection with a Competitive Operation of such
enterprise.

SECTION E. ADDITIONAL PAYMENTS BY THE COMPANY

     Notwithstanding anything to the contrary in this Agreement, in the event that any payment or
distribution by the Company to or for your benefit, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise (a “Payment”), would be subject
to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended, or any
interest or penalties with respect to such excise tax (such excise tax, together with any such
interest or penalties, are hereinafter collectively referred to as the “Excise Tax”), the Company
shall pay to you an additional payment (a “Gross-up Payment”) in an amount such that after payment
by you of all taxes (including any interest or penalties imposed with respect to such taxes),
including any income, employment and Excise Tax imposed on any Gross-up Payment, you retain an
amount of the Gross-up Payment equal to the Excise Tax imposed upon the Payments. You and the
Company shall make an initial determination as to whether a Gross-up

 

 

Payment is required and the amount of any such Gross-up Payment. If you and the Company can
not agree on whether a Gross-up Payment is required or the amount thereof, then an independent
nationally recognized accounting firm, appointed by you, shall determine the amount of the Gross-up
Payment. The Company shall pay all expenses which you may incur in determining the Gross-up
Payment. You shall notify the Company in writing of any claim by the Internal Revenue Service
which, if successful, would require the Company to make a Gross-up Payment (or a Gross-up Payment
in excess of that, if any, initially determined by the Company and you) within ten days of the
receipt of such claim. The Company shall notify you in writing at least ten days prior to the due
date of any response required with respect to such claim if it plans to contest the claim. If the
Company decides to contest such claim, you shall cooperate fully with the Company in such action;
provided, however, the Company shall bear and pay directly or indirectly all costs and expenses
(including additional interest and penalties) incurred in connection with such action and shall
indemnify and hold you harmless, on an after-tax basis, for any Excise Tax or income tax, including
interest and penalties with respect thereto, imposed as a result of the Company’s action. If, as a
result of the Company’s action with respect to a claim, you receive a refund of any amount paid by
the Company with respect to such claim, you shall promptly pay such refund to the Company. If the
Company fails to timely notify you whether it will contest such claim or the Company determines not
to contest such claim, then the Company shall immediately pay to you the portion of such claim, if
any, which it has not previously paid to you.

SECTION F. MISCELLANEOUS

     1. Assumption of Agreement. The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation, share exchange or otherwise) to all or substantially
all of the business and/or assets of the Company, by agreement in form and substance satisfactory
to you, expressly to assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession had taken place.
Failure of the Company to obtain such agreement prior to the effectiveness of any such succession
shall be a breach of a material provision of this Agreement and shall entitle you to compensation
in the same amount and on the same terms as you would be entitled pursuant to Section D, except
that for purposes of implementing the foregoing, the date on which any such succession becomes
effective shall be deemed your Date of Termination without a Notice of Termination being given.

     2. Confidentiality. All Confidential Information which you acquire or have acquired in
connection with or as a result of the performance of services for the Company, whether under this
Agreement or prior to the effective date of this Agreement, shall be kept secret and confidential
by you unless (a) the Company otherwise consents, (b) the Company breaches any material provision
of this Agreement, or (c) you are legally required to disclose such Confidential Information by a
court of competent jurisdiction. This covenant of confidentiality shall extend beyond the term of
this Agreement and shall survive the termination of this Agreement for any reason. If you breach
this covenant of confidentiality, the Company shall be entitled to recover from any benefits paid
to you under this Agreement its damages resulting from such breach.

     3. Employment. You agree to be bound by the terms and conditions of this Agreement and
to remain in the employ of the Company during any period following any public announcement by any
Person of any proposed transaction or transactions which, if effected, would result in a Change in
Control of the Company until a Change in Control of the Company has taken place. However, nothing
contained in this Agreement shall impair or interfere in any way with the right of the Company to
terminate your employment for Cause prior to a Change in Control of the Company.

 

 

     4. Arbitration. Any controversy or claim arising out of or relating to this Agreement,
or the breach thereof, shall be settled exclusively by arbitration in accordance with the Center
for Public Resources’ Model ADR Procedures and Practices, and judgment upon the award rendered by
the arbitrator(s) may be entered in any court having jurisdiction thereof. Notwithstanding the
foregoing, the Company shall not be restricted from seeking equitable relief, including injunctive
relief as set forth in paragraph 5 of this Section, in the appropriate forum. Any cost of
arbitration will be paid by the Company. In the event of a dispute over the existence of Good
Reason or Cause after a Change in Control of the Company, the Company shall continue to pay your
salary, bonuses and plan benefits pending resolution of the dispute. If you prevail in the
arbitration, the remaining amounts due to you under this Agreement are to be immediately paid to
you.

     5. Injunctive Relief. You acknowledge and agree that the remedy of the Company at law
for any breach of the covenants and agreements contained in paragraph 2 of this Section and in
Section D, paragraph 4 will be inadequate, and that the Company will be entitled to injunctive
relief against any such breach or any threatened, imminent, probable or possible breach. You
represent and agree that such injunctive relief shall not prohibit you from earning a livelihood
acceptable to you.

     6. Notice. For the purposes of this Agreement, notices and all other communications
provided for in this Agreement shall be in writing and shall be deemed to have been duly given when
delivered or mailed by United States registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth on the first page of this Agreement, provided that
all notices to the Company shall be directed to the attention of the General Counsel of the
Company, or to such other address as either party may have furnished to the other in writing in
accordance herewith, except that notices of change of address shall be effective only upon receipt.

     7. Indemnification. The Company will indemnify you to the fullest extent permitted by
the laws of the State of Missouri and the existing By-laws of the Company, in respect of all your
services rendered to the Company and its divisions and Subsidiaries prior to your Date of
Termination. You shall be entitled to the protection of any insurance policies the Company now or
hereafter maintains generally for the benefit of its directors, officers and employees (but only to
the extent of the coverage afforded by the existing provisions of such policies) to protect against
all costs, charges and expenses whatsoever incurred or sustained by you in connection with any
action, suit or proceeding to which you may be made a party by reason of your being or having been
a director, officer or employee of the Company or any of its divisions or Subsidiaries during your
employment therewith.

     8. Further Assurances. Each party hereto agrees to furnish and execute such additional
forms and documents, and to take such further action, as shall be reasonably and customarily
required in connection with the performance of this Agreement or the payment of benefits hereunder.

     9. Miscellaneous. No provision of this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in writing signed by you and such
officer(s) as may be specifically designated by the Board. No waiver by either party hereto at any
time of any breach by the other party hereto of, or compliance with, any condition or provision of
this Agreement to be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements
or representations, oral or otherwise, express or implied, with respect to the subject matter
hereof have been made by either party which are not set forth expressly in this Agreement.

 

 

     10. Termination of other Agreements. Upon execution by both parties, this Agreement
shall terminate and shall replace all prior employment and severance agreements between you and the
Company and its divisions or Subsidiaries and the terms hereof shall govern as if executed on the
initial date of such prior employment and severance agreements.

     11. Severability. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.

     12. Counterparts. This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together will constitute one and the same
instrument.

     13. Legal Fees And Expenses. Any other provision of this Agreement notwithstanding,
the Company shall pay all legal fees and expenses which you may incur as a result of the Company’s
unsuccessful contesting of the validity, enforceability or your interpretation of, or
determinations under, any part of this Agreement.

     14. Governing Law. This Agreement shall be governed in all respects by the laws of the
State of Missouri.

     15. Agreement Binding on Successors. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns. This Agreement shall
inure to the benefit of and be enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If you should die while any
amounts would still be payable to you hereunder if you had continued to live, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to
your devisee, legatee, or other designee or, if there be no such designee, to your estate.

     16. Headings. All Headings are inserted for convenience only and shall not affect any
construction or interpretation of this Agreement.

     If this Agreement correctly sets forth our agreement on the subject matter hereof, please sign
and return to the Company the enclosed copy of this Agreement which will then constitute our
agreement on this matter.

	 	 	 	 	 	 	 	 	 
	 	 	Sincerely,	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	ARCH COAL, INC.	 	 
	 
	 	 	 	 	 	 	 	 
	

	 	By:
	 	/s/	 	Sheila B. Feldman	 	 
	 	 	 	 	 
	

	 	 	 	 	 	Sheila B. Feldman	 	 

 

 

ACCEPTED as of the day first above written

	 	 	 
	/s/ Paul H. Vining
	 	 
	

	 	 
	Paul H. Viningexv10w2

 

Exhibit 10.2

INDEMNITY AGREEMENT

     INDEMNITY AGREEMENT, dated as of June 1, 2005, by and among Arch Coal, Inc., a Delaware
corporation (the “Company”), and Paul H. Vining (the “Indemnitee”).

R E C I T A L S

     The Indemnitee is a director and/or officer of the Company and/or an Affiliate Indemnitee (as
hereinafter defined). Indemnitor and the Indemnitee recognize the increased risk of litigation and
other claims being asserted against directors and officers in today’s environment.

     The Bylaws of the Company require the Company to indemnify its directors and officers as
currently provided therein, and the Indemnitee is willing to serve as a director and/or officer of
the Company in part in reliance on such provisions. The Bylaws of the Indemnitor permit Indemnitor
to purchase and maintain insurance or to furnish similar protection or make other arrangements (any
such insurance, protection or arrangement, an “Indemnification Agreement”) on behalf of the
Indemnitee against personal liability (including, but not limited to, providing for Advanced
Amounts as hereinafter defined) asserted against the Indemnitee or incurred by or on behalf of the
Indemnitee in such capacity as a director or officer of such Indemnitor or as an Affiliate
Indemnitee, or arising out of the Indemnitee’s status as such, whether or not Indemnitor would have
the power to indemnify the Indemnitee against such liability under the provisions of this Agreement
or under the Delaware General Corporation Law (the “DGCL”), as it may then be in effect.

     In part to provide the Indemnitee with specific contractual assurance of substantial
protection against personal liability (regardless of, among other things, any amendment to or
revocation of the aforementioned provisions of any of the Indemnitor’s Bylaws or any change in the
composition of the Indemnitor’s Board of Director or control of such Indemnitor), the Indemnitor
desires to enter into this Agreement. DGCL Section 145(f) expressly recognizes that the
indemnification provisions of the DGCL are not exclusive of any other rights to which a person
seeking indemnification may be entitled under the Certificate of Incorporation or Bylaws of the
Indemnitor, or an agreement providing for indemnification, or a resolution of stockholders or
directors, or otherwise, and the Bylaws of the Indemnitor expressly recognize that the
indemnification provisions of such Bylaws shall not be deemed exclusive of, and shall not affect,
any other rights to which a person seeking indemnification may be entitled under any agreement, and
this Agreement is being entered into pursuant to the Bylaws of the Indemnitor, as permitted by the
DGCL.

     In order to induce the Indemnitee to serve as a director and/or officer of the Company and in
consideration of the Indemnitee’s so serving, the Indemnitor desires to hold harmless and indemnify
the Indemnitee and to make arrangements pursuant to which the Indemnitee may be advanced or
reimbursed expenses incurred by the Indemnitee in certain proceedings, in every case to the fullest
extent authorized or permitted by the DGCL, or any other applicable law, or by any amendment
thereof or other statutory provisions authorizing or permitting such indemnification which are
adopted after the date hereof (but, in the case of any such amendment, only to the extent that such
amendment permits the Indemnitor to provide broader indemnification rights than the DGCL, or other
applicable law, permitted Indemnitor to provide prior to such amendment).

     NOW, THEREFORE, in consideration of the foregoing recitals and of the Indemnitee’s continuing
to serve the Company as a director and/or officer, the parties hereby agree as follows:

     1. Indemnification. To the fullest extent allowed by law, the Indemnitor shall hold
harmless and indemnify the Indemnitee, the Indemnitee’s executors, administrators or assigns
against any and all expenses, liabilities and losses (including, without limitation, investigation
expenses, expert witnesses’ and attorneys’ fees and expenses, judgments, penalties, fines, amounts
paid or to be paid in settlement, any interest, assessments, or other charges imposed thereon and
any federal, state, local or foreign taxes imposed as a result of actual or deemed receipt of any
payment hereunder) actually incurred by the Indemnitee (net of any related insurance proceeds or
other amounts received by the Indemnitee or paid by or on behalf of Indemnitor on the Indemnitee’s
behalf in compensation of such expenses, liabilities or losses) in connection with any actual or
threatened action, suit or proceeding, whether civil, criminal, administrative or investigative or
in arbitration, to which the Indemnitee is a party or participant or is threatened to be made a
party or participant (“Proceeding”), as a plaintiff, defendant, respondent, witness or otherwise,
based upon, arising from, relating to or by reason of the fact that the Indemnitee: (a) is, was,
shall be or shall have been a director and/or officer of the Company, or (b) is or was serving,
shall serve, or shall have served at the request of the Company as a director, officer, partner,
trustee, fiduciary, employee or agent (“Affiliate Indemnitee”) of

 

 

another foreign or domestic corporation or non-profit corporation, cooperative, partnership, joint
venture, trust, employee benefit plan, or other incorporated or unincorporated enterprise or in any
way arising from, relating to or connected with any action or omission to act taken by the
Indemnitee in any of the foregoing capacities; provided, however, that, except as provided in
Section 9(b) hereof, Indemnitor shall indemnify the Indemnitee in connection with a Proceeding
initiated by the Indemnitee only if such Proceeding (or part thereof) was authorized by a
two-thirds vote of the Board of Directors of Indemnitor.

     The Indemnitee shall be presumed to be entitled to such indemnification under this
Agreement upon submission of a written claim pursuant to Section 4 hereof. Thereafter, the
Indemnitor shall have the burden of proof to overcome the presumption that the Indemnitee is so
entitled. Such presumption shall only be overcome by a judgment or other final adjudication, after
all appeals and all time for appeals has expired (“Final Determination”), which is adverse to the
Indemnitee and which establishes (i) that the Indemnitee’s acts were committed in bad faith, or
were the result of active and deliberate dishonesty, and were material to the cause of action so
adjudicated and (ii) that the Indemnitee in fact personally gained a financial profit or other
advantage to which he was not legally entitled. If the Indemnitee is not wholly successful in any
Proceeding but is successful on the merits or otherwise, as to one or more but less than all
claims, issues or matters in such Proceeding, the Indemnitor agrees to indemnify the Indemnitee to
the maximum extent permitted by law against all losses and expenses incurred by the Indemnitee in
connection with each successfully resolved claim, issue or matter. Neither the failure of the
Indemnitor (including its Board of Directors, legal counsel or stockholders) to have made a
determination prior to the commencement of such Proceeding that indemnification of the Indemnitee
is proper in the circumstances because such person has met the applicable standard of conduct set
forth in the DGCL, nor an actual determination by Indemnitor (including its Board of Directors, its
legal counsel or its stockholders) that the Indemnitee has not met the applicable standard of
conduct, shall be a defense to any action or create a presumption that the Indemnitee has not met
the applicable standard of conduct. The purchase, establishment or maintenance of any
Indemnification Arrangement shall not in any way diminish, restrict, limit or adversely affect the
rights and obligations of the Indemnitor or of the Indemnitee under this Agreement, except as
expressly provided herein, and the execution and delivery of this Agreement, by the Indemnitor and
the Indemnitee shall not in any way diminish, restrict, limit or adversely affect the Indemnitee’s
right to indemnification from the Indemnitor or any other party or parties under any other
Indemnification Arrangement, the Certificate of Incorporation or Bylaws of the Indemnitor, or the
DGCL.

     2. Period of Limitations. No legal action shall be brought and no cause of
action shall be asserted by or on behalf of Indemnitor or any affiliate of Indemnitor against the
Indemnitee, Indemnitee’s spouse, heirs, executors, or personal or legal representatives after the
expiration of two years from the date of accrual of such cause of action, or such longer period as
may be required by applicable law under the circumstances. Any claims or cause of action of the
Indemnitor or its affiliate shall be extinguished and deemed released unless asserted by the timely
filing of a legal action within such period; provided, however, that if any shorter period of
limitations is otherwise applicable to any such cause of action the shorter period shall govern.

     3. Insurance. Subject only to the provisions of this Section 3, as long as the
Indemnitee shall continue to serve as a director and/or officer of Indemnitor (or shall continue at
the request of Indemnitor to serve as an Affiliate Indemnitee) and, thereafter, as long as the
Indemnitee shall be subject to any possible Proceeding by reason of the fact that the Indemnitee
was a director and/or officer of the Company and/or AMC and/or ACI (or served in any of said other
capacities), the Indemnitor shall, unless no such policies are available in any market, purchase
and maintain in effect for the benefit of the Indemnitee, one or more valid, binding and
enforceable policies (the “Insurance Policies”) of directors’ and officers’ liability insurance
(“D&O Insurance”) providing adequate liability coverage for the Indemnitee’s acts as a director
and/or officer of the Indemnitor or as an Affiliate Indemnitee. Indemnitor shall promptly notify
the Indemnitee of any lapse, amendment or failure to renew said policy or policies or any provision
thereof relating to the extent or nature of coverage provided thereunder. In the event the
Indemnitor does not purchase and maintain in effect said policy or policies of D&O Insurance
pursuant to the provisions of this Section 3, Indemnitor shall, in addition to and not in
limitation of the other rights granted the Indemnitee under this Agreement, hold

 

 

harmless and indemnify the Indemnitee to the full extent of coverage which would otherwise have
been provided for the benefit of the Indemnitee pursuant to the Insurance Policies.

     4. Claims for Payment. The Indemnitee shall have the right to receive from the
Indemnitor on demand or, at the Indemnitee’s option, to have the Indemnitor pay promptly on the
Indemnitee’s behalf, in advance of a Final Determination of a Proceeding, all amounts payable by
the Indemnitor pursuant to the terms of this Agreement as corresponding amounts are expended or
incurred by the Indemnitee in connection with any Proceeding or otherwise (such amounts so expended
or incurred being referred to as “Advanced Amounts”). In making any claim for payment by the
Indemnitor of any amount, including any Advanced Amount, pursuant to this Agreement, the Indemnitee
shall submit to the Indemnitor a written request for payment (a “Claim”) which includes a schedule
setting forth in reasonable detail the dollar amount expended (or incurred or expected to be
expended or incurred). Each item on such schedule shall be supported by the bill, agreement, or
other documentation relating thereto, a copy of which shall be appended to the schedule as an
exhibit.

     Where the Indemnitee is requesting Advanced Amounts, the Indemnitee must also provide an
undertaking to repay such Advanced Amounts if a Final Determination is made that the Indemnitee is
not entitled to indemnification hereunder.

     5. Section 16(b) Liability. Indemnitor shall not be liable under this Agreement
to make any payment in connection with any claim made against the Indemnitee for an accounting of
profits made from the purchase or sale by the Indemnitee of securities of Indemnitor within the
meaning of Section 16(b) of the Securities Exchange Act of 1934, and amendments thereof, or similar
provisions of any state statutory law or common law.

     6. Continuation of Indemnity. All agreements and obligations of the Indemnitor
contained herein shall continue during the period the Indemnitee is a director and/or officer of
Indemnitor (or is serving at the request of Indemnitor as an Affiliate Indemnitee) and shall
continue thereafter so long as the Indemnitee shall be subject to any possible Proceeding by reason
of the fact that the Indemnitee was a director or officer of Indemnitor or served as such an
Affiliate Indemnitee.

     7. Successors; Binding Agreement. This Agreement shall be binding on, and shall inure
to the benefit of and be enforceable by, the Indemnitor’s successors and assigns and by the
Indemnitee’s personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. Indemnitor shall require any successor or assignee (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of Indemnitor, by written agreement in form and substance reasonably
satisfactory to Indemnitor and to the Indemnitee, expressly to assume and agree to perform this
Agreement in the same manner and to the same extent that Indemnitor would be required to perform if
no such succession or assignment had taken place.

     8. Notification and Defense of Claims. Promptly after receipt by the Indemnitee of
notice of the commencement of any Proceeding, the Indemnitee shall, if a claim in respect thereof
is to be made against Indemnitor under this Agreement, notify Indemnitor of the commencement
thereof, but the failure to so notify Indemnitor will not relieve the Indemnitor from any liability
that it may have to the Indemnitee. With respect to any such Proceeding:

     (a) Indemnitor shall be entitled to participate therein at its own expense;

     (b) Except with prior written consent of the Indemnitee, the Indemnitor shall not be entitled
to assume the defense of any Proceeding; and

     (c) Indemnitor shall not settle any Proceeding in any manner that would impose any penalty or
limitation on, or in any way be adverse to, the Indemnitee without the Indemnitee’s prior written
consent.

     The Indemnitee shall not settle any Proceeding with respect to which the Indemnitee has
received indemnified amounts or Advanced Amounts without the Indemnitor’s prior written consent,
nor will the Indemnitee unreasonably withhold consent to any proposed settlement.

     9. Enforcement. (a) Indemnitor has entered into this Agreement and assumed the
obligations imposed on Indemnitor hereby in order to induce the Indemnitee to act as a director
and/or officer of the Company or as an Affiliate Indemnitee and acknowledges that the Indemnitee is
relying upon this Agreement in continuing in such capacity.

     (b) All expenses incurred by the Indemnitee in connection with the preparation and
submission of the Indemnitee’s request for indemnification hereunder shall be borne by the

 

 

Indemnitor. In the event the Indemnitee has requested payment for any amount under this Agreement
and has not received payment thereof within thirty (30) days of such request, the Indemnitee may
bring any action to enforce rights or collect moneys due under this Agreement, and, if the
Indemnitee is successful in such action, the Indemnitor shall reimburse the Indemnitee for all of
the Indemnitee’s fees and expenses in bringing and pursuing such action. If it is determined that
the Indemnitee is entitled to indemnification for part (but not all) of the indemnification so
requested, expenses incurred in seeking enforcement of such partial indemnification shall be
reasonably prorated among the claims, issues or matters for which the Indemnitee is entitled to
indemnification and the claims, issues or matters for which the Indemnitee is not so entitled. The
Indemnitee shall be entitled to the advancement of such amounts to the full extent contemplated by
Section 4 hereof in connection with such Proceeding.

     10. Separability. If any provision or provisions of this Agreement shall be held
to be invalid, illegal or unenforceable for any reason whatsoever, (i) the validity, legality and
enforceability of the remaining provisions of this Agreement (including, without limitation, all
portions of any sections or subsections of this Agreement containing any such provision held to be
invalid, illegal or unenforceable, that are not by themselves invalid, illegal or unenforceable)
shall not in any way be affected or impaired thereby, and (ii) to the fullest extent possible, the
provisions of any section or subsections of this Agreement containing any such provisions held to
be invalid, illegal or unenforceable shall be construed so as to give effect to the intent of the
parties that the Indemnitors (or any of them) provide protection to the Indemnitee to the fullest
extent enforceable.

     11. Miscellaneous. No provision of this Agreement may be modified, waived or
discharged unless such modification, waiver or discharge is agreed to in writing signed by the
Indemnitee and an officer of the Indemnitor designated by the Board of Directors of Indemnitor. No
waiver by either party at any time of any breach by the other party of, or of compliance with, any
condition or provision of this Agreement to be performed by such other party shall be deemed a
waiver of similar or dissimilar provisions or conditions at the same time or at any prior or
subsequent time. The validity, interpretation, construction and performance of this Agreement
shall be governed by the laws of the State of Delaware, without giving effect to the principles of
conflicts of law thereof. The Indemnitee may bring an action seeking resolution of disputes or
controversies arising under, or in any way related to, this Agreement in the state or federal court
jurisdiction in which the Indemnitee resides or in which the Indemnitee’s place of business is
located and in any related appellate courts, and the Indemnitor hereby consents to the jurisdiction
of such courts and to such venue.

     12. Notices. For the purposes of this Agreement, notices and all other communications
provided for in the Agreement shall be in writing and shall be deemed to have been duly given when
delivered or mailed by United States certified or registered mail, return receipt requested,
postage prepaid, as follows:

	 	 	 	 	 
	

	 	If to the Indemnitee:
	 	At the address set below his signature hereto.
	 
	 	 	 	 
	

	 	If to the Company:
	 	Arch Coal, Inc.
	

	 	 	 	Suite 300
	

	 	 	 	CityPlace One
	

	 	 	 	St. Louis, Missouri 63141

or to such other address as either party may have furnished to the other in writing in accordance
herewith, except that notices of change of address shall be effective only upon receipt.

     13. Counterparts. This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together shall constitute one and the same
instrument.

 

 

     IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed as of the day
and year first above written.

	 	 	 
	

	 	ARCH COAL, INC.
	 
	 	 
	

	 	By: /s/ Robert G. Jones                                                                      
	

	 	Name: Robert G. Jones      
                                                                     
	

	 	Title:  Vice President-Law and General Counsel                         
	 
	 	 
	

	 	INDEMNITEE
	 
	 	 
	

	 	/s/ Paul H. Vining                                   
	 
	 	 
	

	 	Address: [Address]

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