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EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into as of May 1,
1999 (the "Effective Date") by and between ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., an
individual ("Executive"), and Anker Energy Corporation, a Delaware corporation
(the "Company"), and is joined in by Anker Coal Group, Inc., a Delaware
corporation ("ACGI"), for the sole and limited purpose of agreeing to be bound
by the provisions of Section 3(b)(iii)(C) of this Agreement.
1. Employment by the Company and Term.
(a) Full Time and Best Efforts. Subject to the terms set forth
herein, the Company agrees to employ Executive as Chief Executive Officer and
Chairman of the Board of Directors (the "Board"), and Executive hereby accepts
such employment. Executive will render such other services for the Company and
corporations controlled by, under common control with, or controlling, directly
or indirectly, the Company, and to successor entities and assignees of the
Company, including without limitation ACGI (collectively, the "Company's
Affiliates") as the Company may from time to time reasonably request, consistent
with Executive's duties and experience. While employed by the Company, Executive
will devote substantially all of his business time and use his best efforts to
advance the business and welfare of the Company, and, except for dividends and
distributions which Executive may receive from investments which Executive has
on the Effective Date (the "Existing Permitted Investments"), a list of which
shall be provided by Executive to the Company upon execution of this Agreement,
will not engage in any other employment or business activities for any direct or
indirect remuneration that would be directly harmful or detrimental to, or that
would materially interfere with, his duties hereunder.
(b) Company Policies. The employment relationship between the
parties will be governed by the general employment policies and practices of the
Company, including but not limited to those relating to protection of
confidential information and assignment of inventions, except that when the
terms of this Agreement are in conflict with the Company's general employment
policies or practices, this Agreement will control.
(c) Term. The initial term of Executive's employment under
this Agreement will begin as of the Effective Date and end on December 31, 2002
(the "Initial Term"), subject to the provisions for termination set forth herein
and renewal as provided in Section 1(d) below.
(d) Renewal. Unless either party shall have given the other
notice that this Agreement will not be renewed at least 90 days prior to the end
of the Initial Term, the term of this Agreement will be automatically extended
for a period of one year, such procedure to be followed in each such successive
period. Each extended term will continue to be subject to the provisions for
termination set forth herein.
2. Compensation and Benefits.
(a) Base Salary. Executive will receive for services to be
rendered hereunder an annual base salary equal to Three Hundred Fifteen Thousand
Dollars ($315,000) payable at least as frequently as monthly and subject to
payroll deductions as may be necessary or
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customary in respect of the Company's salaried employees (the "Base Salary").
The Board of Employer shall increase the Base Salary commensurate with any cost
of living increases generally available for other employees.
(b) Participation in Benefit Plans. Executive will be entitled
to participate in any group insurance, hospitalization, medical, dental, health,
accident, disability, or similar plan or program of the Company now existing or
established hereafter to the extent that he is eligible under the general
provisions thereof. The Company may, in its sole discretion and from time to
time, amend, eliminate, or establish additional benefit programs as it deems
appropriate. Executive also may participate in all fringe benefits offered by
the Company to any of its executives at such executives' level.
(c) Vacation. Executive will be entitled to a period of annual
vacation time equal to three weeks per 12-month period, to accrue pro rata
during the course of each such 12-month period. The days selected for
Executive's vacation must be mutually and reasonably agreeable to Company and
Executive. In no event will Executive's total accrued vacation exceed three
weeks. When Executive's total accrued vacation reaches the maximum of three
weeks, Executive will stop accruing any further vacation and will only resume
accruing vacation when and to the extent Executive's total accrued vacation is
reduced below three weeks.
(d) Relocation Expenses. The Company will reimburse Executive
for actual and reasonable expenses incurred in connection with the relocation of
Executive's personal residence, up to a maximum reimbursement of $30,000. Items
that are eligible for reimbursement under the preceding sentence include packing
and moving expenses, storage, temporary living accommodations, and home sale and
home purchase closing costs (including without limitation real estate
commissions). In addition, if Executive decides to sell his current residence
located in Grundy, Virginia (the "Residence"), and puts the Residence on the
market on or before December 31, 1999, and subsequently sells the Residence, the
Company shall reimburse Executive an amount equal to (i) the appraised value of
the Residence as determined pursuant to a written appraisal prepared by an
independent real estate appraiser reasonably acceptable to the Company (the
"Appraised Value") less (ii) the selling price of the Residence, without
deduction of any commission, cost or expense (the "Selling Price"); provided,
however, that the amount of the reimbursement pursuant to this sentence shall
not exceed $35,000, and provided further that if the Selling Price equals or
exceeds the Appraised Value, Executive will not be entitled to any reimbursement
under this sentence. Reimbursements under this Section 2(d) will be reported as
compensation to Executive and may be subject to state and/or federal taxation.
To the extent reimbursement of such expenses pursuant to this Section 2(d) is
subject to state or federal taxation, the Company will pay an additional amount
(the "Gross-Up Payment") such that after payment of all state and federal taxes
on the reimbursement and the Gross-Up Payment, Executive will retain an amount
equal to the reimbursement. Executive will fully and completely cooperate with
the Company with respect to all matters associated with the taxation and
potential taxation of reimbursements made pursuant to this Section.
Notwithstanding anything else to the contrary, total reimbursement and Gross-Up
Payments pursuant to this Section will not exceed $125,000.00.
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3. Bonuses.
(a) Cash Bonus. The Company may from time to time, at the sole
discretion of the Board, award Executive cash bonuses to supplement his Base
Salary.
(b) Incentive Bonus.
(i) Definitions. For purposes of this Agreement, the
following definitions shall apply:
"Annual EBITDA" means, for a calendar year, the
consolidated earnings of ACGI and its direct and indirect subsidiaries for such
period, before provision is made for interest, taxes, depreciation or
amortization.
"Bonus" means the incentive bonus payable by the
Company to the Executive hereunder.
"Change of Control" means a transaction in which ACGI
shall sell, convey, or otherwise dispose of all or substantially all of the
property or business of ACGI and its direct and indirect subsidiaries or merge
into or consolidate with any other corporation (other than a wholly owned
subsidiary) or effect any other transaction or series of related transactions in
which more than fifty percent (50%) of the voting power of ACGI is disposed of,
provided that it shall not mean a merger effected solely for the purpose of
changing the domicile of ACGI.
"Equity Proceeds" means the aggregate proceeds that
would be receivable by all holders of ACGI's outstanding capital stock,
including preferred stock, in a Change of Control transaction, even if less than
all of such stockholders are transferring their shares in a Change of Control
transaction, and shall be determined by the Board of Directors of ACGI
contemporaneously with its approval of any Change of Control transaction, or, if
no such approval is required, upon the consummation of such transaction.
"Target EBITDA" means the average annual consolidated
EBITDA for ACGI and its direct and indirect subsidiaries for the calendar years
ending December 31, 2001 and December 31, 2002.
(ii) Vesting and Payment. The Executive will be
entitled to a Bonus vested and payable, if at all, upon the earlier of (A) a
Change of Control transaction, or (B) the expiration of the Initial Term (the
"Vesting Date").
(iii) Calculation. The Bonus will be calculated based
solely on the Equity Proceeds received in a Change of Control transaction, if
such a transaction occurs prior to the expiration of the Initial Term.
Otherwise, the Bonus will be calculated based solely on the Target EBITDA. The
Bonus will be payable as follows:
(A) If the Equity Proceeds are less than
$15,000,000, or the Target EBITDA is less than $25,000,000, no Bonus will be
payable.
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(B) If the Equity Proceeds are between
$15,000,000 and $45,000,000, or the Target EBITDA is between $25,000,000 and
$30,000,000, then the amount of the Bonus will be $1,000,000 plus the product of
either x and z or y and z, as applicable, where x equals Equity Proceeds in
excess of $15,000,000 divided by $30,000,000, y equals Target EBITDA in excess
of $25,000,000 divided by $5,000,000, and z equals $1,500,000; except that the
total Bonus in either case will not exceed $2,500,000.
(C) If the Equity Proceeds are greater than
$45,000,000 or the Target EBITDA is greater than $30,000,000, the amount of the
Bonus shall be equal to $2,500,000. In addition, ACGI shall upon the Vesting
Date grant to Executive an option to purchase up to 5% of the then outstanding
common stock of ACGI at an exercise price of $1.00 per share. Such options shall
be fully vested upon grant, shall be exercisable between the Vesting Date and
the tenth anniversary thereof and, notwithstanding any termination of
Executive's employment hereunder, shall not otherwise terminate.
4. Reasonable Business Expenses.
The Company will reimburse Executive in accordance with established
Company policy for all reasonable business expenses incurred by Executive in
promoting the business of the Company, provided that to the extent that such
expenditures qualify as proper income tax deductions, Executive will furnish to
the Company adequate documentation to substantiate each such expenditure as an
income tax deduction.
5. Termination of Employment. The date on which Executive's employment
by the Company ceases, under any of the following circumstances, will be defined
herein as the "Termination Date."
(a) Termination for Cause. The Board may terminate Executive's
employment with the Company at any time for Cause as defined below, immediately
upon notice to Executive of the circumstances leading to such termination for
Cause. In the event that Executive's employment is terminated for Cause,
Executive will receive payment for accrued Base Salary and benefits through the
Termination Date, which in this event will be the date upon which notice of
termination is given. The Company will have no further obligation to pay
severance of any kind whether under this Agreement or otherwise.
"Cause" means the occurrence or existence of any of the
following with respect to Executive, as determined in good faith by a majority
of the disinterested directors of the Board:
(i) a material breach by Executive of any of his
material obligations hereunder that remains uncured after the lapse of 30 days
following the date that the Company has given Executive written notice thereof;
(ii) a material breach by Executive of his duty not
to engage in any transaction that represents, directly or indirectly,
self-dealing that has not been approved by a majority of the disinterested
directors of the Board, if in any such case such material breach remains uncured
after the lapse of 30 days following the date that the Company has given
Executive written notice thereof;
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(iii) the repeated material breach by Executive of
any material duty referred to in clause (i) or (ii) above as to which at least
two written notices have been given pursuant to clause (i) or (ii) above;
(iv) any act of misappropriation, embezzlement,
intentional fraud, or similar conduct involving the Company or any of the
Company's Affiliates;
(v) the conviction or the plea of nolo contendere or
the equivalent in respect of a felony involving moral turpitude;
(vi) intentional infliction of any damage of a
material nature to any property of the Company or any of the Company's
Affiliates; or
(vii) the repeated non-prescription abuse of any
controlled substance or the repeated abuse of alcohol or any other
non-controlled substance that the Board reasonably determines renders Executive
unfit to serve in his capacity as an officer or employee of the Company or the
Company's Affiliates.
(b) Termination Upon Disability. The Company may terminate
Executive's employment in the event Executive suffers a disability that renders
Executive unable to perform the essential functions of his position, even with
reasonable accommodation, for 60 consecutive days or for 90 days within any
180-day period. After the Termination Date, which in this event will be the date
upon which notice of termination is given, no further compensation will be
payable under this Agreement except such Base Salary and benefits as have
accrued prior to the Termination Date, less standard withholdings for tax and
social security purposes.
(c) Termination Without Cause. The Company may terminate
Executive's employment at any time for other than Cause or disability, provided
that Executive will receive the accrued portion of any Base Salary and benefits
hereunder through the Termination Date and subject to the following termination
payment requirements:
(i) Termination payments during the Initial Term. In
the event that, during the first or second year of the Initial Term, Executive's
employment is terminated without Cause, the Company will pay Executive as
severance the amount of his Base Salary for the number of months that results
when the number of months that have elapsed since the Effective Date is
subtracted from 36. In the event that, during the third year of the Initial
Term, Executive's employment is terminated without Cause, the Company will pay
Executive as severance an amount equal to 12 months of his Base Salary. Except
as provided below, such severance, less standard withholdings for tax and social
security purposes, will be paid over the number of months on which the severance
is based in monthly pro rata payments commencing as of the Termination Date. For
purposes of this Section 5(c)(i), a Change of Control transaction which occurs
prior to the expiration of the Initial Term shall be deemed to be a termination
of Executive's employment without Cause. In that event, the severance payable
hereunder, less standard withholdings for tax and social security purposes,
shall be paid in one lump sum upon the Termination Date.
(ii) Termination payments after the Initial Term. In
the event that the term of this Agreement is extended pursuant to Section 1(d)
hereof and, at any time thereafter,
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Executive's employment is terminated by the Company without Cause, the Company
will pay Executive as severance an amount equal to 12 months of his then Base
Salary, less standard withholdings for tax and social security purposes, payable
over such 12-month period in monthly pro rata payments commencing as of the
Termination Date.
(iii) The Company will not be obligated to make any
termination payments under Sections 5(c)(i) or 5(c)(ii) above if Executive
breaches the provisions of Sections 6, 7, or 8 below.
(d) Termination by Executive. Executive may, at his election,
terminate his employment with the Company by giving written notice to the
Company to that effect. After the Termination Date, which in this event will be
the date upon which notice of termination is given, no further compensation will
be payable under this Agreement except such Base Salary and benefits as have
accrued prior to the Termination Date, less standard withholdings for tax and
social security purposes. Executive acknowledges and agrees that the provisions
of this Section 5(d) state his entire and exclusive rights, entitlements, and
remedies against the Company, the Company's Affiliates, and their successors,
assigns, employees, and representatives if he voluntarily terminates his
employment with the Company.
(e) Termination Upon Death. If Executive dies prior to the
expiration of the Initial Term, the Company will (i) continue coverage of
Executive's dependents (if any) under all benefit plans or programs of the type
listed above in Section 2(b) for a period of six months, and (ii) pay to
Executive's estate the accrued portion of any Base Salary and benefits through a
date six months after the Termination Date, less standard withholdings for tax
and social security purposes.
(f) Benefits Upon Termination. All benefits (other than fringe
benefits) provided under Section 2(b) hereof will be extended, at Executive's
election and cost, to the extent permitted by the Company's insurance policies
and benefit plans, for one year after Executive's Termination Date, except (a)
as otherwise required by law (e.g., COBRA health insurance continuation
election) or (b) in the event of a termination described in Section 5(a).
6. Proprietary Information Obligations.
During the term of employment under this Agreement, Executive
will have access to and become acquainted with the Company's and the Company's
Affiliates' confidential and proprietary information, including, but not limited
to, information or plans regarding the Company's and the Company's Affiliates'
financial operations and methods; trade secrets; formulas; devices; secret
inventions; processes; and other compilations of information, records, and
specifications (collectively "Proprietary Information"). Executive will not
disclose any of the Company's or the Company's Affiliates' Proprietary
Information directly or indirectly, or use it in any way, either during the term
of this Agreement or at any time thereafter, except as required in the course of
his employment for the Company or as authorized in writing by the Company. All
files, records, documents, computer-recorded information, drawings,
specifications, equipment, and similar items relating to the business of the
Company or the Company's Affiliates, whether prepared by Executive or otherwise
coming into his possession, will remain the exclusive property of the Company or
the Company's Affiliates, as the case may
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be, and must not be removed from the premises of the Company under any
circumstances whatsoever without the prior written consent of the Company,
except when (and only for the period) necessary to carry out Executive's duties
hereunder, and if so removed must be immediately returned to the Company upon
any termination of his employment; provided, however, that Executive may retain
copies of documents reasonably related to his interest as a shareholder and any
documents that were personally owned, which copies and the information contained
therein Executive agrees not to use for any business purpose. Notwithstanding
the foregoing, Proprietary Information shall not include (i) information that is
or becomes generally public knowledge or public except through disclosure by
Executive in violation of this Agreement and (ii) information that may be
required to be disclosed by applicable law.
7. Noninterference. While employed by the Company and for a period of
18 months after termination of Executive's employment with the Company for any
reason, Executive agrees not to interfere with the business of the Company or
any of the Company's Affiliates by directly or indirectly soliciting, attempting
to solicit, inducing, or otherwise causing any employee of the Company or any
Company Affiliate to terminate his or her employment in order to become an
employee, consultant, or independent contractor to or for any other employer.
8. Noncompetition. Executive agrees that while employed by the Company
and for as long as he receives severance from the Company (or would receive
severance, but for the provisions of Section 5(c)(iii)), or for a period of two
years after the termination of his employment pursuant to Section 5(a) or
Section 5(d), Executive will not, without the prior consent of the Company,
directly or indirectly, have an interest in, be employed by, or be connected
with, as an employee, consultant, officer, director, partner, stockholder, or
joint venturer, any person or entity owning, managing, controlling, operating,
or otherwise participating or assisting in any business that is in competition
with the business of the Company (i) during the term of his employment with the
Company, in any location, and (ii) for the two-year period following the
termination of his employment with the Company, in any county in which the
Company or any of the Company's Affiliates was conducting business at the date
of termination of Executive's employment and continues to do so thereafter;
provided, however, that the foregoing will not prevent Executive from
participating in the Existing Permitted Investments (as defined in Section 1(a))
or activities or investments otherwise approved by the Board, or from being a
stockholder of less than one percent of the issued and outstanding securities of
any class of a corporation listed on a national securities exchange or
designated as national market system securities on an interdealer quotation
system by the National Association of Securities Dealers, Inc.
9. Miscellaneous.
(a) Notices. Any notices provided hereunder must be in writing
and will be deemed effective upon the earlier of two days following personal
delivery (including personal delivery by telecopy or telex), or the fourth day
after mailing by first class mail to the recipient at the address indicated
below:
To the Company:
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Anker Energy Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President
With a copy to:
Anker Coal Group, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President
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And
First Reserve Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
To Executive:
▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
P. O. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
or to such other address or to the attention of such other person as the
recipient party will have specified by prior written notice to the sending
party.
(b) Severability. Any provision of this Agreement that is
deemed invalid, illegal, or unenforceable in any jurisdiction will, as to that
jurisdiction and subject to this Section 9(b) be ineffective to the extent of
such invalidity, illegality, or unenforceability, without affecting in any way
the remaining provisions hereof in such jurisdiction or rendering that or any
other provisions of this Agreement invalid, illegal, or unenforceable in any
other jurisdiction. If any covenant should be deemed invalid, illegal, or
unenforceable because its scope is considered excessive, such covenant shall be
modified so that the scope of the covenant is reduced only to the minimum extent
necessary to render the modified covenant valid, legal, and enforceable.
(c) Entire Agreement. This document and the list of Existing
Permitted Investments constitutes the final, complete, and exclusive embodiment
of the entire agreement and understanding between the parties related to the
subject matter hereof and supersedes and preempts any prior or contemporaneous
understandings, agreements, or representations by or between the parties,
written or oral. No amendments or other modifications to this Agreement may be
made except by a writing signed by both parties.
(d) Counterparts. This Agreement may be executed on separate
counterparts, any one of which need not contain signatures of more than one
party, but all of which taken together will constitute one and the same
agreement.
(e) Successors and Assigns. This Agreement is intended to bind
and inure to the benefit of and be enforceable by Executive and the Company, and
their respective successors and assigns, except that Executive may not assign
any of his duties hereunder and he may not assign any of his rights hereunder
without the prior written consent of the Company.
(f) Choice of Law. All questions concerning the construction,
validity, and interpretation of this Agreement will be governed by the laws of
the State of West Virginia without giving effect to principles of conflicts of
law.
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10. Arbitration. Any disputes or claims arising out of or
concerning Executive's employment or termination by the Company, whether arising
under theories of liability or damages based upon contract, tort, or statute,
will be determined exclusively by arbitration before a single arbitrator in
accordance with the employment arbitration rules of the American Arbitration
Association. The Company will pay the fees and expenses of the arbitrator. Each
party will pay its own attorney fees and costs including, without limitation,
fees and costs of any experts. However, attorney fees and costs incurred by the
party that prevails in any such arbitration or any judicial action or proceeding
seeking to enforce the agreement to arbitrate disputes or seeking to enforce any
order or award of any arbitration commenced pursuant to this Section 10 may be
awarded to the prevailing party in such manner as the arbitrator or the court
determines to be appropriate under the circumstances. If any party prevails on a
statutory claim that entitles the prevailing party to reasonable attorney fees
(with or without expert fees) as part of the costs, the arbitrator may award
reasonable attorney fees (with or without expert fees) to the prevailing party
in accord with such statute. Any controversy over whether a dispute is an
arbitrable dispute or as to the interpretation or enforceability of this Section
10 with respect to such arbitration will be determined by the arbitrator.
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the Effective Date.
ANKER ENERGY CORPORATION
By:
Name:
Title:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
ACGI hereby joins into this Agreement for the sole and limited purpose
of agreeing to the provisions of Section 3(b)(iii)(C) hereof.
ANKER COAL GROUP, INC.
By:
Name:
Title:
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