SVP Western Operations - Employment Agreement - Thomas Lien

EXHIBIT 10.20 EMPLOYMENT AGREEMENTTHIS EMPLOYMENT AGREEMENT ("Employment Agreement"), dated January 1, 2002, is byand between RAG American Coal Holding, Inc. a Delaware corporation (the"Company"), and Thomas Lien (the "Executive"). WITNESSETH THAT WHEREAS, the Company considers it essential to its success to fosterthe continued employment of key management personnel; and WHEREAS, the Company has determined that appropriate steps should betaken to reinforce and encourage the continued attention and dedication ofmembers of the Company's management, including the Executive, to their assignedduties, and WHEREAS, the Company further wishes to provide for the continuedemployment by the Company of the Executive, and the Executive wishes to servethe Company and its affiliated entities in the capacities and on the terms andconditions set forth in this Employment Agreement; and WHEREAS, this Employment Agreement is the entire agreement between theparties concerning the subject matter hereof and supersedes and terminates anyprior written agreements or oral representations, except as otherwise providedherein, concerning the same subject, including but not limited to the SeparationPlan for Certain Employees dated November 18, 1998 and the Retention Plan datedJuly 15, 1999. NOW THEREFORE, in consideration of the premises and the mutualcovenants herein contained, the Company and the Executive hereby agree asfollows:1. Employment Period. Subject to the right to terminate as providedherein, the Company shall employ the Executive, and the Executive shall servethe Company, on the terms and conditions set forth in this Employment Agreement,commencing on the date above written (the "Effective Date") and continuing untilDecember 31, 2004 ("Employment Period"). The Company shall give written noticeto the executive by March 31, 2004 regarding renewal of the Employment Agreementfor another three (3) year term. Any notice of non-renewal given by the Companyshall not result in a termination during the Employment Period for purposes ofSection 5(a) hereof.2. Position and Duties. -------------------(a) During the Employment Period, the Executive shall serve as Senior VicePresident Western Operations. The Executive's responsibilities as Senior VicePresident Western Operations shall include all aspects of the Company's and itssubsidiaries' businesses. The Executive shall serve in each such case as anemployee of the Company and with such duties and responsibilities as Executivecurrently holds and as are customarily assigned to such position, and such other duties and responsibilities not inconsistent therewith as mayfrom time to time be assigned to him by the President and Chief ExecutiveOfficer ("President/CEO").(b) During the Employment Period, and excluding any periods of vacation,holidays, and sick leave to which the Executive is entitled, the Executive shalldevote his full working time and attention to the business and affairs of theCompany and its affiliates, as directed by the President/CEO, and, to the extentnecessary to discharge the responsibilities assigned to the Executive under thisEmployment Agreement, use the Executive's reasonable best efforts to carry outsuch responsibilities faithfully and efficiently. It shall not be considered aviolation of the foregoing for the Executive to serve on corporate, industry,civic, or charitable boards or committees, so long as such activities do notinterfere with the performance of the Executive's responsibilities as anemployee of the Company in accordance with this Employment Agreement and anysuch corporate or industry activities are approved by the President/CEO.3. Compensation. The Executive's compensation during the Employment Periodshall be determined by, and in the sole discretion of the President/CEO, subjectto Sections 3(a), 3(b), Section 5 and Section 9 hereof.(a) Annual Base Salary. During the Employment Period, the Executives shallreceive an annual base salary of not less than $220,000 (the annual base salaryfor the Executive in effect from time to time, "Annual Base Salary"). The AnnualBase Salary shall be payable in accordance with the Company's regular payrollpractice for its senior officers, as in effect from time to time. During theEmployment Period, the Annual Base Salary shall be reviewed at least annuallyand, in the sole discretion of the President/CEO may be increased, but notdecreased. Any increase in the Annual Base Salary shall not limit or reduce anyother obligation of the Company under this Employment Agreement.(b) Benefits and Incentive Compensation. Executive shall be eligible toparticipate in bonus and incentive compensation plans, policies, andarrangements, retirement plans, savings plans, deferred compensation plans, andhealth and welfare benefit plans, in each case as they may be provided by theCompany, provided, that the Company is under no obligation to provide anyspecific level of discretionary awards or benefits. The target annual bonus forExecutive shall be the percentage for the applicable grade level of the AnnualBase Salary in effect for the Executive at the time of termination.4. Termination of Employment. -------------------------(a) Death or Disability. The Executive's employment shall terminateautomatically upon the Executive's Death. For purposes of the Company'sobligation, the date of Death shall be the Date of Termination. The Companyshall be entitled to terminate the Executive's employment because of theExecutive's Disability during the Employment Period. The Disability of theExecutive shall be determined in accordance with the Company's long-termdisability plan in effect from time to time.(b) By the Company. (i) The Company may terminate the Executive's employment during the Employment Period for Cause or without Cause, and 2 (ii) "Cause" means, (A) the Executive's conviction or plea of nolo contendere to a felony, or a misdemeanor involving moral turpitude, deceit, dishonesty or fraud, (B) the continued and willful, intentional or grossly negligent failure by the Executive to substantially perform the Executive's duties hereunder, or (C) the willful, intentional or grossly negligent conduct of the Executive which is demonstrably and materially injurious to the Company and its affiliates taken as a whole, monetarily or otherwise. For purposes of this subparagraph (ii), no act, or failure to act, onthe Executive's part shall be deemed willful, intentional or grossly negligentif the Executive acted in good faith and in a manner that the Executivereasonably believed to be in or not opposed to the best interests of theCompany.(c) Termination Procedures. ---------------------- (i) Notice of Termination. Any purported termination of the Executive's employment by the Company (other than by reason of Death or the expiration of the Employment Period) shall be communicated by written Notice of Termination from one party hereto to the other party hereto in accordance with Section 11(b) hereof. For purposes of this Employment Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Employment Agreement relied upon and, in the case of a termination for Disability or Cause, shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment. (ii) Date of Termination Except as otherwise provided in Section 10(c) of this Employment Agreement, "Date of Termination," with respect to any purported termination of the Executive's employment during the Employment Period (other than for Death), shall mean the date specified in the Notice of Termination. (iii) No Waiver. The failure to set forth any fact or circumstance in a Notice of Termination shall not constitute a waiver of the right to assert, and shall not preclude the party giving notice from assertion, such fact or circumstance in an attempt to enforce any right under or provision of this Employment Agreement.5. Obligations of the Company upon Termination. -------------------------------------------(a) Payments and Benefits Upon Termination By the Company Other than for Causeor Death or Disability. If, during the Employment Period, the Company terminatesthe Executive's employment other than for Cause or Death or Disability, theCompany shall pay to the Executive in a lump sum in cash within thirty (30) daysafter the Date of Termination, the greater of the following amounts calculatedin (i), (ii) or (iii) below, 3 (i) the sum of (A) any portion of the Executive's Annual Base Salary through the Employment Period not adjusted for merit increases; (B) with respect to any annual bonus plan contemplated under Section 3(b) of this Employment Agreement, an amount representing the target annual bonus for the remainder of the Employment Period; (C) any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon) that has not yet been paid; and (D) any accrued but unpaid incentive compensation and vacation pay; or (ii) any payments due the Executive under the Change of Control Agreement dated March 1, 2000 (the "COC Agreement"); or (iii) any severance payments due the Executive under the RAG American Coal Holding, Inc. Severance Program in effect at the time of Termination (the "Severance Program"); provided, however, that there shall be no duplication of payments under this Employment Agreement, the COC Agreement, the Severance Program and any other severance obligation of the Company, and the payment under this Section 5(a) shall be offset by any amount otherwise payable under any such agreement, program or obligation and any payment in lieu of notice of termination of employment required by federal, state or local law. After payment of the above amount, the Company shall have no further obligations under this Employment Agreement, the COC Agreement, the Severance Program or any other severance obligation of the Company.(b) Payments and Benefits Upon Death or Disability. If the Executive'semployment is terminated by reason of the Executive's Death or Disability duringthe Employment Period, the Company shall pay to the Executive or, in the case ofthe Executive's Death, to the Executive's designated beneficiaries (or, if thereis no such beneficiary, to the Executive's estate or legal representative) in alump sum in cash within thirty (30) days after the Date of Termination, the sumof the following amounts, any portion of the Executive's Annual Base Salarythrough the Date of Termination that has not yet been paid, (i) with respect to any annual bonus plan contemplated under Section 3(b) of this Employment Agreement, an amount representing the target annual bonus for the year in which the Date of Termination occurs, computed by taking the target level and multiplying that amount by the Annual Base Salary multiplied by a fraction, the numerator of which is the number of days in such period through the Date of Termination and the denominator of which is the total number of days in the relevant period, (ii) any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon) that has not yet been paid, and (iii) any accrued but unpaid incentive compensation and vacation pay; and the Company shall have no further obligations under this Employment Agreement, except as specified in Section 6 below.(c) Payments and Benefits By the Company for Cause. If the Executive'semployment is terminated by the Company for Cause during the Employment Period,the Company shall pay 4 the Executive the Annual Base Salary through the Date of Termination and theamount of any compensation previously deferred by the Executive (together withany accrued interest or earnings thereon), in each case to the extent not yetpaid, and the Company shall have not further obligations under this EmploymentAgreement, except as specified in Section 6 below.6. Non-Exclusivity of Rights. Except as otherwise expressly provided inthis Employment Agreement, nothing in this Employment Agreement shall prevent orlimit the Executive's continuing or future participation in any plan, program,policy or practice provided by the Company or any of its affiliated companiesfor which the Executive may qualify, provided that any such plan, program orpolicy may be amended or terminated by the Company in its sole discretion.Vested benefits and other amounts that the Executive is otherwise entitled toreceive under any other plan, policy, practice, or program of the Company or anyof its affiliated companies on or after the Date of Termination shall be payablein accordance with the terms of each such plan, policy, practice or program(subject to the Company's right to amend such terms), as the case may be, exceptas explicitly modified by this Employment Agreement.7. Full Settlement. The Company's obligation to make the payments providedfor in, and otherwise to perform its obligation under, this Employment Agreementshall not be affected by any set-off, counterclaim, recoupment, defense or otherclaim, right or action that the Company may have against the Executive orothers. In no event shall the Executive be obligated to seek other employment ortake any other action by way of mitigation of the amounts payable to theExecutive under any of the provisions of this Employment Agreement and theamount of any payment or benefit provided for in this Employment Agreement shallnot be reduced by any compensation earned by the Executive as the result ofemployment by another employer, by retirement benefits, by offset against anyamount claimed to be owed by the Executive to the Company or otherwise.8. Confidential Information. ------------------------(a) The Executive shall hold in a fiduciary capacity for the benefit of theCompany all secret or confidential information, knowledge or data relating tothe Company or any of its affiliated companies and their respective businessesthat the Executive obtains during the Executive's employment by the Company orany of its affiliated companies and that is not public knowledge (other than asa result of the Executive's violation of this Section 8) ("ConfidentialInformation"). The Executive shall not communicate, divulge, or disseminateConfidential Information at any time during or after the Executive's employmentwith the Company, except with the prior written consent of the Company or asotherwise required by law or legal process. In no event shall any assertedviolation of the provisions of this Section 8 constitute a basis for deferringor withholding any amounts otherwise payable to the Executive under thisEmployment Agreement.(b) The Executive acknowledges that if the Executive shall breach orthreaten to breach paragraph (a) of this Section 8, the damages to the Companyand its affiliates may be substantial, although difficult to ascertain, andmoney damages will not afford the Company and its affiliates an adequate remedy.Therefore, if the paragraph (a) of the Section 8 is violated, in whole or inpart, the Company and its affiliates shall be entitled to specific performanceand injunctive relief, 5 without prejudice to other remedies the Company and/or its affiliates may haveat law or in equity.9. Certain Additional Payment by the Company. -----------------------------------------(a) Anything in this Employment Agreement to the contrary notwithstanding,in the event it shall be determined that any payment or distribution to or forthe benefit of the Executive (whether paid or payable or distributed ordistributable pursuant to the terms of this Employment Agreement or any otherplan, arrangement or agreement with the Company), but determined without regardto any additional payments required under this Section 9 ("Payment"), would besubject to the excise tax imposed by Section 4999 of the Internal Revenue Codeof 1986, as amended (the "Code") or any interest or penalties are incurred bythe Executive with respect to such excise tax (such excise tax, together withany such interest and penalties, are hereinafter collectively referred to as the"Excise Tax"), then the Executive shall be entitled to receive an additionalpayment ("Gross-Up Payment") in an amount such that after payment by theExecutive of all taxes (including any interest or penalties imposed with respectto such taxes), including, without limitation, any income taxes (and anyinterest and penalties imposed with respect thereto) and Excise Tax imposed uponthe Gross-Up Payment, the Executive retains an amount of the Gross-Up Paymentequal to the Excise Tax imposed upon the Payments.(b) Subject to the provisions of paragraph (c) of this Section 9, alldeterminations required to be made under this Section 9, including whether andwhen a Gross-Up Payment is required and amount of such Gross-Up Payment and theassumptions to be utilized in arriving at such determination, shall be made by anationally recognized certified public accounting firm designated by the Company(the "Accounting Firm"), which shall provide detailed supporting calculationsboth to the Company and the Executive within fifteen (15) business days of thereceipt of notice from the Executive that there has been a Payment, or suchearlier time as is requested by the Company. All fees and expenses of theAccounting Firm shall be borne solely by the Company. Any Gross-Up Payment, asdetermined pursuant to this Section 9, shall be paid by the Company to theExecutive within five (5) days of the receipt of the Accounting Firm'sdetermination. Any determination by the Accounting Firm shall be binding uponthe Company and the Executive. As a result of the uncertainty in the applicationof Section 4999 of the Code at the time of the initial determination by theAccounting Firm hereunder, it is possible that Gross-Up Payments which will nothave been made by the Company should have been made ("Underpayment") consistentwith the calculations required to be made hereunder. In the event that theCompany exhausts its remedies pursuant to any challenge of Excise Tax, theAccounting Firm shall determine the amount of the Underpayment that has occurredand any such Underpayment shall be promptly paid by the Company to or for thebenefit of the Executive.(c) The Executive shall notify the Company in writing of any claim by theInternal Revenue Service that, if successful, would require the payment by theCompany of the Gross-Up Payment. Such notification shall be given as soon aspracticable but no later than ten business days after the Executive is informedin writing of such claim and shall apprise the Company of the nature of suchclaim and the date on which such claim is requested to be paid. The Executiveshall not pay such clai ...