Document:

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.

12

 

     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.

13

 

     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

14

 

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

15

 

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
 	 
	 

16exv10w18

 

Exhibit 10.18

PATRIOT COAL CORPORATION

EMPLOYEE STOCK PURCHASE PLAN

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	 
	SECTION 1. INTRODUCTION	 	 	3	 
	1.1
	 	Purpose	 	 	3	 
	1.2
	 	Stock Purchase Plan	 	 	3	 
	1.3
	 	Effective Date and Term	 	 	3	 
	1.4
	 	Participating Subsidiaries	 	 	3	 
	1.5
	 	Stock Subject to Plan	 	 	3	 
	SECTION 2. DEFINITIONS	 	 	4	 
	2.1
	 	“Beneficiary”	 	 	4	 
	2.2
	 	“Board”	 	 	4	 
	2.3
	 	“Change in Control”	 	 	4	 
	2.4
	 	“Code”	 	 	4	 
	2.5
	 	“Committee”	 	 	5	 
	2.6
	 	“Company”	 	 	5	 
	2.7
	 	“Compensation”	 	 	5	 
	2.8
	 	“Custodian”	 	 	5	 
	2.9
	 	“Effective Date”	 	 	5	 
	2.10
	 	“Employee”	 	 	5	 
	2.11
	 	“Fair Market Value”	 	 	5	 
	2.12
	 	“Offering Date”	 	 	5	 
	2.13
	 	“Offering Period”	 	 	5	 
	2.14
	 	“Option”	 	 	6	 
	2.15
	 	“Option Account”	 	 	6	 
	2.16
	 	“Participating Subsidiary”	 	 	6	 
	2.17
	 	“Plan”	 	 	6	 
	2.18
	 	“Stock”	 	 	6	 
	2.19
	 	“Subsidiary”	 	 	6	 
	2.20
	 	“Termination Date”	 	 	6	 
	SECTION 3. ENROLLMENT AND CONTRIBUTIONS	 	 	6	 
	3.1
	 	Eligibility for Enrollment	 	 	6	 
	3.2
	 	Enrollment Procedure	 	 	7	 
	3.3
	 	Contributions	 	 	7	 
	3.4
	 	Option Accounts	 	 	8	 
	3.5
	 	Withdrawal of Contributions	 	 	8	 
	3.6
	 	No Funding of Accounts	 	 	8	 
	SECTION 4. GRANT AND EXERCISE OF OPTION	 	 	9	 
	4.1
	 	Grant of Options; Terms	 	 	9	 
	4.2
	 	Exercise of Option; Exercise Price	 	 	9	 
	4.3
	 	Option Accounts	 	 	10	 
	4.4
	 	No Interest on Account Balances	 	 	10	 
	SECTION 5. TERMINATION OF ENROLLMENT	 	 	10	 
	5.1
	 	Termination of Enrollment	 	 	10	 
	5.2
	 	Distributions to Employee	 	 	11	 
	5.3
	 	Beneficiaries	 	 	12	 

 

 

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	 
	SECTION 6. PLAN ADMINISTRATION	 	 	12	 
	6.1
	 	Committee	 	 	12	 
	6.2
	 	Committee Powers	 	 	12	 
	6.3
	 	Committee Actions	 	 	12	 
	6.4
	 	Member Who is a Participant	 	 	13	 
	6.5
	 	Information Required from Company	 	 	13	 
	6.6
	 	Information Required from Employees	 	 	13	 
	6.7
	 	Uniform Rules and Administration	 	 	13	 
	SECTION 7. AMENDMENT AND TERMINATION	 	 	13	 
	7.1
	 	Amendment	 	 	13	 
	7.2
	 	Termination	 	 	14	 
	7.3
	 	Rights upon Plan Termination	 	 	14	 
	SECTION 8. GENERAL PROVISIONS	 	 	14	 
	8.1
	 	No Transfer or Assignment	 	 	14	 
	8.2
	 	Rights as Stockholder	 	 	15	 
	8.3
	 	Rights as Employee	 	 	15	 
	8.4
	 	Costs	 	 	15	 
	8.5
	 	Application of Funds	 	 	15	 
	8.6
	 	Reports	 	 	15	 
	8.7
	 	Actions by Company	 	 	15	 
	8.8
	 	Governmental Approval	 	 	15	 
	8.9
	 	Stockholder Approval	 	 	15	 
	8.10
	 	Applicable Law	 	 	15	 
	8.11
	 	Gender and Number	 	 	15	 
	8.12
	 	Headings	 	 	15	 

ii 

 

PATRIOT COAL CORPORATION

EMPLOYEE STOCK PURCHASE PLAN

SECTION 1. INTRODUCTION

     1.1 Purpose. The purpose of the Patriot Coal Corporation Employee Stock Purchase Plan is to
provide eligible employees of Patriot Coal Corporation (the “Company”) and its Participating
Subsidiaries the opportunity to acquire a proprietary interest in the Company and thereby provide
employees with an additional incentive to contribute to the long-term profitability and success of
the Company and its Subsidiaries. The Plan is for the exclusive benefit of eligible employees of
the Company and its Subsidiaries.

     1.2 Stock Purchase Plan. The Plan is a stock purchase plan that is intended to satisfy all
requirements of Section 423 of the Internal Revenue Code of 1986, as amended. Any provision of the
Plan inconsistent with Code Section 423 will, without further act or amendment by the Company, be
deemed reformed to comply with Code Section 423.

     1.3 Effective Date and Term. The Plan is effective on January 1, 2008 (the “Effective Date”).
The Plan shall continue in effect until the earlier of the date the Company terminates the Plan or
the date all of the shares of Stock subject to the Plan, as amended from time to time, are
purchased.

     1.4 Participating Subsidiaries. A Subsidiary of the Company as of the Effective Date will be
deemed to have adopted the Plan for its eligible Employees as of the Effective Date and any
corporation that becomes a Subsidiary after the Effective Date will be deemed to have adopted the
Plan for its eligible Employees immediately upon becoming a Subsidiary, unless the Company acts to
exclude the Subsidiary and its eligible Employees from participation in the Plan.

     1.5 Stock Subject to Plan.

     (a) The Stock subject to purchase under the Plan will be shares of the Company’s
authorized but unissued shares, or previously issued shares of Stock reacquired and held by
the Company, or shares acquired in the market. The aggregate number of shares of Stock that
may be purchased under the Plan shall not exceed one million (1,000,000) shares. All shares
of Stock purchased under the Plan will count against this limitation.

     (b) In case of a reorganization, recapitalization, stock split, reverse stock split,
stock dividend, combination of shares, merger, consolidation, offering of rights or other
change in the capital structure of the Company, the Committee may make such adjustment as it
deems appropriate in the number, kind and purchase price of shares of Stock available for
purchase under the Plan, subject to Section 7.1.

 

 

SECTION 2. DEFINITIONS

     For purposes of this Plan, the following words and phrases, whether or not capitalized, have
the meanings specified below, unless the context plainly requires a different meaning:

     2.1 “Beneficiary” means a person to whom all or a portion of the cash amounts due to the
Employee under this Plan will be paid if the Employee dies before receiving such cash amounts.

     2.2 “Board” means the Board of Directors of the Company.

     2.3 “Change in Control” means any one of the following:

     (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

4

 

     (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 not treated as a
change in the ownership of such assets if the assets are transferred to: (i) a shareholder
of the Company (immediately before the asset transfer) in exchange for or with respect to
its stock; (ii) an entity of which the Company owns, directly or indirectly, 50% or more of
the total value or voting power; (iii) 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 (iv) an entity of which a Person or group described in
clause (iii) above owns, directly or indirectly, at least 50% of the total value or voting
power).

     As used herein, 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).

     2.4 “Code” means the Internal Revenue Code of 1986, as amended, and any successor thereto.

     2.5 “Committee” means the group of individuals appointed by the Board to administer the Plan.

     2.6 “Company” means Patriot Coal Corporation and any successor thereto.

     2.7 “Compensation” means straight-time wages or base salary (inclusively) paid for services
rendered by an Employee to the Company or any Participating Subsidiary during the applicable period
specified in the Plan, including any such amounts contributed by the Employee to any plan or plans
established by the Company or Participating Subsidiary in accordance with Code Section 125 or
401(k). Bonuses, incentive compensation, overtime, commissions and shift premiums paid to an
Employee shall not be included in Compensation.

     2.8 “Custodian” means the custodian for the Plan appointed by the Company.

     2.9 “Effective Date” shall have the meaning set forth in Section 1.3.

     2.10 “Employee” means any employee (as defined for purposes of Code Section 423) of the
Company or a Participating Subsidiary.

     2.11 “Fair Market Value” means the fair market value of one share of Stock as of a particular
day, which shall be the closing price per share of Stock on the New York Stock Exchange on that
day, or, if such day is not a trading day, the last preceding trading day.

     2.12 “Offering Date” means the first day of the Offering Period.

     2.13 “Offering Period” means any of the following time periods: the Effective Date through
June 30, 2008; July 1, 2008 through December 31, 2008; and each consecutive six-month period
thereafter; or such other period designated by the Committee in its sole discretion.

5

 

     2.14 “Option” means an option to purchase shares of Stock under the Plan, based on the
contributions credited to each Employee’s Option Account.

     2.15 “Option Account” means the Account maintained on behalf of the Employee under Section 3.4
to which contributions to the Plan are credited and from which amounts are withdrawn to exercise
options on a Termination Date.

     2.16 “Participating Subsidiary” means a Subsidiary that is participating in the Plan in
accordance with Section 1.4.

     2.17 “Plan” means this Patriot Coal Corporation Employee Stock Purchase Plan, as described in
this document and as amended from time to time.

     2.18 “Stock” means the common stock, $0.01 par value, of the Company.

     2.19 “Subsidiary” means any corporation (other than the Company) 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 owns 50% or more of
the total combined voting power of all classes of stock in one of the other corporations in the
chain.

     2.20 “Termination Date” means the last day of an Offering Period or, if earlier, the date of a
Change in Control that occurs during such Offering Period.

SECTION 3. ENROLLMENT AND CONTRIBUTIONS

     3.1 Eligibility for Enrollment.

     (a) An Employee may enroll in the Plan for an Offering Period unless one of the
following applies:

     (i) The customary employment of the Employee on the Offering Date is twenty
(20) hours or fewer per week; or

     (ii) The customary employment of the Employee on the Offering Date is for not
more than five (5) months in any calendar year; or

     (iii) The Employee is not employed by the Company or a Participating Subsidiary
on the Offering Date; or

     (iv) The Employee would, immediately upon enrollment, own directly or
indirectly, or hold options or rights to acquire, an aggregate of five percent (5%)
or more of the total combined voting power or value of all outstanding shares of all
classes of stock of the Company or any Subsidiary, with ownership determined in
accordance with the rules of Code Section 424(d) and treating stock that the
Employee may purchase under outstanding options as owned by the Employee.

6

 

     (b) The Committee or its designee will notify an Employee that the Employee is first
eligible to enroll in the Plan and, except as otherwise provided herein with respect to the
Offering Period beginning on the Effective Date, make available to each eligible Employee
the necessary enrollment forms before the Offering Date.

     3.2 Enrollment Procedure.

     (a) To enroll in the Plan for an Offering Period, an Employee must file an enrollment
form with the Company and elect to make contributions under the Plan in accordance with
Section 3.3. The enrollment form must be received by the Company at least fifteen (15)
calendar days prior to the Offering Date and must state the contribution rate elected by the
Employee for the Offering Period. An Employee who does not enroll in the Plan for an
Offering Period will receive no shares of Stock under the Plan for such Offering Period.
Notwithstanding the foregoing, with respect to the Offering Period beginning on the
Effective Date, any Employee eligible to enroll in the Plan as of the Effective Date
pursuant to Section 3.1 shall be automatically enrolled in the Plan at the maximum
contribution rate permitted under Section 3.3(b), subject to such Employee’s right to
increase, decrease or discontinue contributions under Section 3.3(d).

     (b) An Employee whose enrollment in, and contributions under, the Plan continue
throughout an Offering Period will automatically be enrolled in the Plan for the next
Offering Period unless (i) the Employee files with the Company a written notice of
discontinuance of contributions before the Offering Date for the next Offering Period in
accordance with Section 5.1(a)(i), or (ii) on the Offering Date for such Offering Period the
Employee is described in Section 3.1(a). The contribution rate for an Employee who is
automatically enrolled for an Offering Period (other than the Offering Period beginning on
the Effective Date) pursuant to this Section will be the contribution rate in effect for the
immediately preceding Offering Period, unless the Employee files with the Company an amended
enrollment form designating a different contribution rate at least fifteen (15) calendar
days prior to the next Offering Period.

     3.3 Contributions.

     (a) To enroll for the first time in the Plan for an Offering Period (other than the
Offering Period beginning on the Effective Date), an Employee must elect to make a
contribution under the Plan, subject to the terms and conditions described below, by means
of payroll deduction for each payroll period within the Offering Period. Notwithstanding the
foregoing, with respect to the Offering Period beginning on the Effective Date,
contributions to the Plan by any Employee who is automatically enrolled in the Plan pursuant
to Section 3.2(a) shall be made by means of payroll deductions only for payroll periods
within such Offering Period that begin after the date of the effective registration
statement filed on Form S-8 under the Securities Act of 1933, as amended, with respect to
the shares of Stock available under the Plan (the “S-8 Registration Date”). An Employee may
make contributions to the Plan in the form of a check or payroll deductions (including
deductions at a rate higher than the maximum rate permitted under Section 3.3(b)) to make up
for the period from the Effective Date to the end of the pay period in which the S-8
Registration occurs. Such additional contributions may be made

7

 

at any time during the portion of such Offering Period beginning on the S-8
Registration Date and ending on the first Termination Date.

     (b) Except as otherwise provided in Section 3.3(a), an Employee may elect to make
payroll deduction contributions in amounts not less than one percent (1%) of Compensation
per payroll period and not more than the lesser of (i) fifteen percent (15%) of Compensation
per Offering Period (or such other amount as the Committee may establish from time to time
and communicate to Employees before the Offering Date) or (ii) a percentage of Compensation
for each payroll period that ensures that the limit on the purchase of shares of Stock
specified in Section 4.1 is not exceeded for the Offering Period.

     (c) Except as otherwise provided in Section 3.3(a), payroll deductions will commence
with the first payroll period that begins during the Offering Period and will be made in
conformity with the Company’s payroll deduction schedule and practices.

     (d) Except as provided in Section 5.1, an Employee may elect to increase, decrease or
discontinue contributions once each Offering Period as of the first day of the first payroll
period beginning in the Offering Period by giving written notice to the Committee at least
fifteen (15) calendar days before such date. Notwithstanding the foregoing, with respect to
the Offering Period beginning on the Effective Date, any Employee who is automatically
enrolled in the Plan pursuant to Section 3.2(a) shall have one opportunity to increase,
decrease or discontinue contributions at any time during the portion of such Offering Period
beginning on the S-8 Registration Date and ending fifteen (15) calendar days before the end
of such Offering Period.

     (e) Notwithstanding anything in the Plan to the contrary, contributions otherwise made
by an Employee to the Plan pursuant to the enrollment procedure described in Section 3.2
shall be automatically suspended to the extent, and for the period of time, required under
Code Section 401(k) and the regulations promulgated thereunder.

     3.4 Option Accounts. All contributions made by an Employee under the Plan will be credited to
an Option Account maintained by the Company or the Custodian on behalf of the Employee. The Company
will make the credit as soon as practicable after the contributions are withheld from the
Employee’s Compensation.

     3.5 Withdrawal of Contributions. An Employee may elect to withdraw contributions made during
an Offering Period by giving written notice to the Committee at least fifteen (15) calendar days
before the end of such Offering Period, in which case the cash credited to the Employee’s Option
Account will be refunded to the Employee without interest as soon as administratively feasible
after the Committee receives such notice, and the Employee may not re-enroll in the Plan until the
next Offering Period.

     3.6 No Funding of Accounts. No cash shall be set aside with respect to an Option Account
until it is credited thereto. Nothing contained in this Plan and no action taken pursuant to the
provisions hereof shall create or be construed to create a trust of any kind, or a fiduciary
relationship between the Company and any Employee or any other person with respect to an Option
Account. Amounts credited to an Option Account at any time and from time to time shall

8

 

be general assets of the Company. To the extent that any person acquires a right to receive
the benefit of amounts credited to an Option Account, such right shall be that of an unsecured
general creditor of the Company.

SECTION 4. GRANT AND EXERCISE OF OPTION

     4.1 Grant of Options; Terms. Enrollment in the Plan with respect to any Offering Period will
constitute the grant by the Company of an Option to purchase shares of Stock under the Plan during
such Offering Period. All Employees granted Options shall have the same rights and privileges as
required by Code Section 423(b)(5). Each Option will be subject to the following terms:

     (a) The exercise price will be as specified in Section 4.2

     (b) Except as limited in subsection (e) below, the number of shares of Stock subject to
the Option will equal the number of shares of Stock that can be purchased at the exercise
price specified in Section 4.2 with the aggregate amount credited to the Employee’s Option
Account as of the Termination Date.

     (c) The Option with respect to an Offering Period will be exercised on the Termination
Date of such Offering Period.

     (d) The payment by an Employee for the shares of Stock purchased upon exercise of an
Option will be made only through payroll deduction, unless otherwise provided herein with
respect to the Offering Period beginning on the Effective Date, all in accordance with
Section 3.3.

     (e) No Employee shall be granted an Option to the extent the number of shares of Stock
that may be purchased for such Employee (when taken together with all other options
exercisable by such Employee under any other stock purchase plan of the Company or a
Subsidiary that is qualified under Code Section 423) in the aggregate during a calendar year
exceeds twenty-five thousand dollars ($25,000) in Fair Market Value of such shares of Stock
determined on the Offering Date for the Offering Period with respect to which the purchase
is to be made.

     4.2 Exercise of Option; Exercise Price.

     (a) As soon as practicable after the Termination Date of each Offering Period, the
Company or the Custodian will apply to the purchase of the number of shares of Stock the
exercise price of which is covered by the amounts credited to each Employee’s Option Account
as of such Termination Date. In the event that the aggregate amount credited to the
Employees’ Option Accounts as of such Termination Date exceeds the exercise price of the
 shares available for purchase as of such date under this Plan, the Company or Custodian
shall purchase for each Employee his or her proportional share of the shares available for
purchase, based on the percentage that the cash allocated to his or her Option Account
represents of the total cash allocated to the Option Accounts of all Employees for the
Offering Period ending on such date, and the excess of the amount so credited shall be
returned to the Employee without interest. The Stock so purchased shall

9

 

be allocated to the Option Account for each Employee. The Stock shall be held by the
Custodian on behalf of the Employee and registered in the name of a nominee.

     (b) The exercise price of each share of Stock purchased with respect to any Offering
Period shall be the lower of:

     (i) Eighty-five percent (85%) of the Fair Market Value of the Stock on the
Offering Date for such Offering Period, or

     (ii) Eighty-five percent (85%) of the fair market value of the Stock on the
Termination Date for such Offering Period.

     4.3 Option Accounts.

     (a) All shares of Stock purchased on behalf of an Employee as of a Termination Date
shall be credited to such Employee’s Option Account as of such date. Dividends payable with
respect to shares of Stock credited to the Employee’s Option Account will be credited to the
Employee’s Option Account and, to the extent such dividends are paid in cash, will be used
by the Custodian to purchase additional shares of Stock on the open market as soon as
administratively feasible following receipt of the dividend payment by the Custodian.

     (b) The Committee may determine whether cash in an amount representing the price of a
fractional share shall be carried over to the next Offering Period or applied to the
purchase of a fractional share at the end of an Offering Period; provided that such
determination shall apply uniformly to all Employees for each Offering Period.

     4.4 No Interest on Account Balances. No interest or other earnings will be credited to any
Option Account with respect to (a) amounts credited thereto during an Offering Period or (b)
amounts to be returned to the Employee. Neither the Committee nor the Company shall have any
obligation to invest or otherwise manage amounts credited to an Option Account, other than to apply
such amounts to the purchase of Stock in accordance with the terms of this Plan.

SECTION 5. TERMINATION OF ENROLLMENT

     5.1 Termination of Enrollment.

     (a) An Employee’s enrollment in the Plan will terminate under the following
circumstances:

     (i) as of the beginning of the Offering Period that is at least fifteen (15)
calendar days after the Employee files with the Company a written notice of
discontinuance of contributions (except as provided in Section 5.1(a)(ii));

     (ii) immediately upon the Employee filing with the Company a written notice of
discontinuance of contributions with respect to the Offering Period beginning on the
Effective Date as provided in Section 3.3(d);

10

 

     (iii) upon the Employee’s termination of employment with the Company and all
Participating Subsidiaries;

     (iv) as of the date on which the Employee would own, directly or indirectly, or
hold options or rights to acquire, an aggregate of five percent (5%) or more of the
total combined voting power or value of all outstanding shares of all classes of the
Company or any Subsidiary, determined in accordance with Code Section 424(d); and

     (v) upon termination of the Plan or as of the date the relevant Participating
Subsidiary ceases to be a Subsidiary.

     (b) An Employee whose enrollment in the Plan terminates under this Section, other than
by reason of termination of the Plan, may again enroll in the Plan as of any subsequent
Offering Date if the Employee satisfies the eligibility conditions of Section 3.1 as of such
date.

     5.2 Distributions to Employee.

     (a) Subject to the eighteen (18) month holding period prescribed in subsection 5.2(c),
as soon as administratively feasible after an Employee’s enrollment in the Plan terminates
under Section 5.1:

     (i) The Company will pay to the Employee all cash credited to the Employee’s
Option Account as of the date of termination, without interest; and

     (ii) The Committee will direct the Custodian to distribute to the Employee
shares of Stock then credited to the Employee’s Option Account that have been
credited to the Employee’s Option Account for at least eighteen (18) months in the
form of certificates representing whole shares of Stock (and cash equal to the Fair
Market Value of any fractional share), or a nominee account, as requested by the
Employee or former Employee.

     (b) If an Employee’s enrollment terminates as a result of death, or if the Employee’s
death occurs before the Employee receives a distribution under this Section, all cash
amounts payable under this Section to the Employee will be paid to the Employee’s
Beneficiary; and shares of Stock credited to the Option Account of a deceased Employee may
be distributed to the personal representative of the deceased employee without regard to the
eighteen (18) month holding period described in Section 5.2(c).

     (c) An Employee or former Employee may, from time to time, request distribution of
shares of Stock then credited to the Employee’s Option Account that have been credited to
the Employee’s Option Account for at least eighteen (18) months. Notwithstanding the above,
in the event of a Change in Control an Employee or former Employee may request distribution
of shares of Stock then credited to the Employee’s Option Account. Distribution may be made
as soon as administratively practicable in the form of stock certificates representing whole
shares of Stock (and cash equal to the Fair

11

 

Market Value of any fractional share), or a nominee account, as requested by the
Employee or former Employee.

     5.3 Beneficiaries.

     (a) An Employee may designate a Beneficiary to receive his or her benefits under the
Plan following the Employee’s death. Any such designation must be made on a form provided by
the Company for this purpose, will be effective on the date received by the Company and may
be revoked by the Employee at any time.

     (b) If the Employee fails to designate a Beneficiary or if no designated Beneficiary
survives the Employee, then any amounts due to the Employee under the Plan shall be paid to
the Employee’s estate.

SECTION 6. PLAN ADMINISTRATION

     6.1 Committee. The Plan will be administered by the Committee.

     6.2 Committee Powers.

     (a) The Committee will have all powers appropriate to administer the Plan, including,
but not limited to, the following:

     (i) To resolve all questions that may arise under the Plan, including the power
to determine the rights or eligibility of Employees or their Beneficiaries;

     (ii) To construe the terms of the Plan and to remedy ambiguities,
inconsistencies or omissions;

     (iii) To adopt such rules of procedure and prescribe such forms that it
considers appropriate for the proper administration of the Plan and that are
consistent with the Plan;

     (iv) To enforce the Plan provisions and the rules of procedure that the
Committee adopts;

     (v) To employ agents, attorneys, accountants, actuaries or other persons, and
to allocate or delegate to them such powers, rights and duties as the Committee
considers appropriate for the proper administration of the Plan.

     (b) The Committee will have such further powers and duties as may be specified
elsewhere in the Plan.

     6.3 Committee Actions. The actions of the Committee may be taken at a meeting by a majority
of its members, in writing without a meeting if a majority of its members sign such writing or by
the use of a conference telephone or other communications equipment by means of which all persons
participating in the meeting can hear each other and participation in such a

12

 

meeting in this manner shall constitute attendance and presence in person at the meeting of
the person or persons so participating for all purposes. In taking action:

     (a) The Committee may allocate authority to a specific member or specific members of
the Committee to carry out such duties as the Committee may assign;

     (b) A member of the Committee may delegate, in writing, any or all of such member’s
rights, powers, duties and discretion to any other member of the Committee, with the consent
of such other member;

     (c) The Committee may delegate to any agents such duties and powers as it deems
appropriate, by an instrument in writing that specifies which duties are so delegated and to
whom each such duty is so delegated; and

     (d) When there is an even division of opinion among the members of the Committee as to
a matter, the Board of Directors of the Company will resolve the matter, provided, however,
that no member of the Board of Directors may vote on such a matter if it concerns such
member’s individual rights, privileges or obligations under the Plan.

     6.4 Member Who is a Participant. If a member of the Committee is an Employee, such member may
not decide any matter relating to the member’s participation or Option Account or how the Option
Account is to be paid to the member that the member would not have the right to decide in the
absence of membership on the Committee. No Employee will receive any compensation for services as
a member of the Committee.

     6.5 Information Required from Company. The Company will furnish the Committee with such data
and information as the Committee deems appropriate to administer the Plan. The records of the
Company as to an Employee’s Compensation will be conclusive and binding on all persons unless
determined by the Committee to be clearly incorrect.

     6.6 Information Required from Employees. Each person entitled to benefits under the Plan must
furnish the Company from time to time in writing such person’s mailing address, each change of
mailing address and such other data and information as the Committee deems appropriate to
administer the Plan. Any communication, statement or notice mailed with postage prepaid to any
person at the last mailing address filed with the Company will be binding upon such person for all
purposes of the Plan.

     6.7 Uniform Rules and Administration. The Committee will administer the Plan on a
nondiscriminatory basis and will apply uniform rules to all persons similarly situated.

SECTION 7. AMENDMENT AND TERMINATION

     7.1 Amendment.

     (a) The Company reserves the right to amend the Plan from time to time subject to the
following limitations:

     (i) To the extent necessary to comply with or obtain an exemption from any
provision of the Code, including regulations thereunder, or of the

13

 

Securities Exchange Act of 1934, as amended, no amendment will be made without
the prior approval of the stockholders of the Company if the amendment will (A)
increase the number of shares of Stock reserved for purchase under the Plan, or (B)
materially modify the eligibility conditions or materially increase the benefits
available under the Plan.

     (ii) No amendment will make any change in a previously granted and outstanding
Option that adversely affects the rights of an Employee with respect to such Option.

     (iii) No amendment will reduce the amount of an Employee’s Option Account
balance.

     (b) The Company may delegate to the Committee or its officers the power to amend the
Plan as the Company deems appropriate, subject to the limitations of this Section.

     7.2 Termination. The Plan is entirely voluntary on the part of the Company and the
continuance of the Plan should not be construed as a contractual obligation of the Company.
Accordingly, the Company reserves the right to terminate the Plan at any time. Unless sooner
terminated by the Company, the Plan shall terminate on the date all of the shares of Stock
specified in Section 1.5(a) are purchased, unless additional shares of Stock are authorized for the
Plan by the stockholders of the Company. No Option may be granted under the Plan after the Plan is
terminated.

     7.3 Rights upon Plan Termination.

     (a) If the Plan terminates, the Committee may elect to terminate all outstanding
Options either immediately or upon completion of the purchase of shares of Stock on the next
following Termination Date.

     (b) If the Committee terminates an Option prior to the expiration of the Option, all
amounts contributed to the Plan that remain in an Employee’s Option Account will be returned
to the Employee as soon as reasonably practicable.

SECTION 8. GENERAL PROVISIONS

     8.1 No Transfer or Assignment. The rights of an Employee under the Plan may not be sold,
pledged, assigned or transferred, voluntarily or involuntarily, in any manner other than by will or
the laws of descent and distribution. Any such attempted sale, pledge, assignment or transfer shall
be without effect. An Employee’s rights and all Options granted under the Plan shall be exercisable
only by such Employee during his or her lifetime.

     Furthermore, except as provided in Section 5.2(b), shares purchased for an Employee as of a
Termination Date may not be sold, exchanged, assigned, transferred, pledged, or otherwise disposed
of in any way by the Employee, other than by will or the laws of descent and distribution, until
after eighteen (18) months after such Termination Date. The Company may place controls on the
Account of the Employee to which such shares are credited as necessary or

14

 

appropriate to enforce such restrictions. Any such attempted assignment, transfer, pledge or
other disposition shall be without effect.

     8.2 Rights as Stockholder. The grant of an Option to purchase shares of Stock under the Plan
will not confer upon an Employee any rights as a stockholder of the Company with respect to shares
of Stock subject to the Option. An Employee will become a stockholder with respect to shares of
Stock subject to an Option under the Plan only when the purchase of such shares of Stock is
completed as of a Termination Date.

     8.3 Rights as Employee. The Plan is not a contract of employment, and the grant of an Option
to purchase shares of Stock under the Plan will not confer upon any Employee the right to be
retained in the employ of the Company or any Subsidiary.

     8.4 Costs. All costs and expenses incurred in the administration of the Plan will be paid by
the Company and its Subsidiaries. Any brokerage fees for the sale of shares of Stock by an Employee
will be borne by the Employee.

     8.5 Application of Funds. All proceeds received by the Company from the sale of Stock under
the Plan will be used for general corporate purposes.

     8.6 Reports. The Company will provide or cause to be provided to each Employee an annual
report of the Employee’s contributions under the Plan for each Plan Year and the shares of Stock
purchased with such contributions.

     8.7 Actions by Company. Any action taken by the Company with respect to the Plan will be by
resolution of its Board of Directors or by a person or persons authorized by resolution of its
Board of Directors.

     8.8 Governmental Approval. The Plan and any offering or sale made to Employees under the Plan
is subject to any governmental approvals or consents that are or may become applicable in
connection herewith.

     8.9 Stockholder Approval. The Plan is subject to approval by the holders of a majority of the
shares present in person or by proxy and voting at the meeting at which the Plan is considered and
shall not be effective without such approval within twelve (12) months before or after the adoption
of the Plan by the Board of Directors.

     8.10 Applicable Law. The Plan will be governed by the laws of the State of Delaware, without
regard to the law of conflicts of such state, to the extent that federal law does not preempt such
laws.

     8.11 Gender and Number. When the context permits, words in the Plan used in the masculine
gender include the feminine gender, words in the singular include the plural and words in the
plural include the singular.

     8.12 Headings. All headings in the Plan are included solely for ease of reference and do not
bear on the interpretation of the text.

[ADOPTION CERTIFICATION PAGE FOLLOWS]

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     The undersigned hereby certifies that this Plan was duly adopted by the shareholders of the
Company on October 12, 2007.

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

16

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