VP Development Employment Agreement - James A. Olsen

EXHIBIT 10.12 EMPLOYMENT AGREEMENT (JAMES A. OLSEN) EMPLOYMENT AGREEMENT (the "Agreement") dated July 30, 2004 byand between Foundation Coal Corporation (the "Company") and James A. Olsen("Executive"). WHEREAS, RAG Coal International AG and American CoalAcquisition Corp. ("ACA") have entered into a Stock Purchase Agreement, dated asof May 24, 2004 (the "Purchase Agreement") pursuant to which, after givingeffect to the transactions contemplated by the Purchase Agreement, the Companywill be a subsidiary of ACA or one of its affiliates; WHEREAS, Executive is currently employed by the Company andhas entered into an employment agreement between Executive and the Company (the"Prior Employment Agreement") and a change in control agreement betweenExecutive and the Company (together with the Prior Employment Agreement, the"Prior Agreements") and the Company desires that Executive continue to beemployed by the Company and to enter into this Agreement embodying the terms ofExecutive's employment; WHEREAS, Executive desires to continue to be employed by theCompany and to enter into this Agreement; In consideration of the premises and mutual covenants hereinand for other good and valuable consideration, the parties agree as follows: 1. Effectiveness; Term of Employment. a. Effectiveness. This Agreement shall constitute a bindingagreement between the parties as of the date hereof; provided, thatnotwithstanding any other provision of this Agreement, the operative provisionsof this Agreement shall become effective only upon the Closing Date (as definedin the Purchase Agreement (such date being hereinafter referred to as the"Effective Date")). In the event the Purchase Agreement is terminated for anyreason without the Closing Date having occurred, this Agreement shall beterminated without further obligation or liability of either party. b. Term. Subject to the provisions of Section 7 of thisAgreement, Executive shall be employed by the Company for a period commencing onthe Effective Date and ending on the second anniversary of the Effective Date(the "Employment Term") on the terms and subject to the conditions set forth inthis Agreement; provided, however, that commencing with the second anniversaryof the Effective Date and on each anniversary thereafter (each an "ExtensionDate"), the Employment Term shall be automatically extended for an additionalone-year period, unless the Company or Executive provides the other party hereto60 days' prior written notice before the next Extension Date that the EmploymentTerm shall not be so extended. 2 2. Position. a. During the Employment Term, Executive shall serve as theCompany's Senior Vice President, Development and Information Technology. In suchposition, Executive shall be the most senior executive of the Company, shallreport directly to the Board of Directors of the Company (the "Board") and theChief Executive Officer of the Company and shall have such duties and authorityas shall be determined from time to time by the Board. During the EmploymentTerm, Executive will devote Executive's full business time and best efforts tothe performance of Executive's duties hereunder and will not engage in any otherbusiness, profession or occupation for compensation or otherwise which wouldconflict or interfere with the rendition of such services either directly orindirectly, without the prior written consent of the Board; provided thatnothing herein shall preclude Executive from (i) subject to the prior approvalof the Board (which shall not unreasonably be withheld), accepting appointmentto or continue to serve on any board of directors or trustees of any businesscorporation, (ii) engaging in charitable activities and community affairs or(iii) managing his personal investments and affairs; provided in each case, andin the aggregate, that such activities do not conflict or interfere with theperformance of Executive's duties hereunder or conflict with Section 9. 3. Base Salary. During the Employment Term, the Company shallpay Executive a base salary at the annual rate of $183,855, payable in regularinstallments in accordance with the Company's usual payment practices. Executiveshall be entitled to increases (but not decreases) in Executive's base salary,if any, as may be determined from time to time in the sole discretion of theBoard and the Board shall be obligated to annually review Executive's basesalary for increases but not decreases. Executive's annual base salary, as ineffect from time to time, is hereinafter referred to as the "Base Salary." 4. Annual Bonus. With respect to each full calendar year ofthe Company during the Employment Term, Executive shall be eligible to earn anannual bonus award (an "Annual Bonus") based upon the achievement of certainindividual and Company performance targets established by the Board, inconsultation with Executive (such targets to be established no later than 90days following the beginning of the year in which they relate) as set forthbelow;- ---------------------------------------------------------------------------COMPANY PERCENT OF INDIVIDUAL PERCENT OFPERFORMANCE BASE SALARY PERFORMANCE BASE SALARY- ---------------------------------------------------------------------------125% of Target 83.33% Maximum 41.67%- ---------------------------------------------------------------------------100% of Target 33.33% Target 16.67%- ---------------------------------------------------------------------------85% of Target 16.67% Below Target 8.33%- ---------------------------------------------------------------------------Below 85% of Target 0.00%- ---------------------------------------------------------------------------Straight line interpolation between each percentage. 3provided, that Executive shall be eligible for an Annual Bonus for the fullcalendar year 2004 (the "2004 Bonus"); provided, that Executive agrees thatExecutive shall not be entitled to any other annual bonus for calendar year 2004under any other plan, program, agreement or arrangement of the Company. TheCompany Performance targets for the 2004 Bonus shall be based (i) two-thirds ontarget free cash flow (cash from operations and cash from investing activitiesplus net interest expense plus taxes paid plus the Capex True-Up (as defined inthe Purchase Agreement) (including related post-closing adjustments)) generatedfollowing the Effective Date through December 31, 2004, pursuant to the Q1forecast and (ii) one-third based on target EBITDA (as defined in the creditagreement among the Company, Citicorp North America, Inc and the other partiesthereto, dated July 30, 2004) for the entire 2004 calendar year, pursuant to theQ1 forecast. 5. Employee Benefits. a. During the Employment Term, Executive shall be entitledto participate in the Company's employee benefit plans (other than annual bonusplans) as in effect from time to time (collectively "Employee Benefits"), onterms no less favorable than those generally made available to other seniorexecutives of the Company. Executive will be provided with five (5) weeks ofpaid vacation. b. The Company shall be unconditionally obligated to issuethe options described on Exhibit A on the terms and conditions set forththerein, as soon as practicable following the date hereof. The Company andExecutive agree to document and finalize, or cause to be documented andfinalized, the grant of stock options pursuant to a stock incentive plan to beadopted by FC 1 Corp. (as well as any other supporting documentation) on termsset forth on Exhibit A as soon as practicable following the date hereof. 6. Business Expenses. During the Employment Term, reasonabletravel and other expenses incurred by Executive in the performance ofExecutive's duties hereunder shall be reimbursed by the Company in accordancewith Company policies. 7. Termination. The Employment Term and Executive's employmenthereunder may be terminated by either party at any time and for any reason;provided that Executive will be required to give the Company at least 60 days'advance written notice of any resignation of Executive's employment.Notwithstanding any other provision of this Agreement, the provisions of thisSection 7 shall exclusively govern Executive's rights upon termination ofemployment with the Company and its affiliates. a. By the Company For Cause or By Executive ResignationWithout Good Reason. (i) The Employment Term and Executive's employment hereundermay be terminated by the Company for Cause (as defined below) and shallterminate automatically upon Executive's resignation without Good Reason (asdefined in Section 7(c)). Any termination of Executive's employment by theCompany for Cause shall be effective only upon the vote of a majority of themembers of the Board (other than Executive). 4 (ii) For purposes of this Agreement, "Cause" shall mean (A)Executive's continued and willful, intentional or grossly negligent failure tosubstantially perform Executive's duties hereunder (other than as a result oftotal or partial incapacity due to physical or mental illness), (B) Executive'sconviction of, or plea of nolo contendere to a crime constituting (x) a felonyunder the laws of the United States or any state thereof or (y) a misdemeanorinvolving moral turpitude, deceit, dishonesty or fraud that relates to theCompany property, (C) the willful, intentional or grossly negligent conduct ofExecutive which is demonstrably and materially injurious to the Company,monetarily or otherwise or (D) Executive's material breach of the provisions ofSections 8 or 9 of this Agreement. For purposes of this definition of Cause, noact, or failure to act, on Executive's part shall be deemed willful, intentionalor grossly negligent if Executive acted in good faith and in a manner thatExecutive reasonably believed to be in, or not opposed to, the best interests ofthe Company. (iii) If Executive's employment is terminated by the Companyfor Cause, or if Executive resigns without Good Reason, Executive shall beentitled to receive: (A) the Base Salary through the date of termination; (B) any Annual Bonus earned but unpaid as of the date of termination for any previously completed fiscal year; (C) reimbursement for any unreimbursed business expenses properly incurred by Executive in accordance with Company policy prior to the date of Executive's termination; and (D) such Employee Benefits, if any, as to which Executive may be entitled under the employee benefit plans of the Company (the amounts described in clauses (A) through (D) hereof being referred to as the "Accrued Rights"). Following such termination of Executive's employment by theCompany for Cause or resignation by Executive without Good Reason, except as setforth in this Section 7(a)(iii), Executive shall have no further rights to anycompensation or any other benefits under this Agreement. b. Disability or Death. (i) The Employment Term and Executive's employment hereundershall terminate upon Executive's death. If Executive becomes physically ormentally incapacitated so as to be unable to perform the essential functions ofExecutive's duties (such incapacity is hereinafter referred to as "Disability"),then (A) the Board may allow another officer of the Company to performExecutive's duties and responsibilities during the period of such Disability,and (B) if such Disability continues for 120 consecutive days or 180 days duringany consecutive 360 day period, the Board may terminate Executive's employmentunder this Agreement. If any question shall arise as to whether, during anyperiod Executive is disabled so as to be unable to perform the essentialfunctions of Executive's then existing position or positions with or withoutreasonable accommodation, Executive may, and at the request of the Companyshall, submit to 5the Company a certification in reasonable detail by a physician selected by theCompany, to whom Executive or Executive's guardian has no reasonable objection,as to whether Executive is so disabled and how long such disability is expectedto continue, and such certification shall for the purposes of this Agreement beconclusive of the issue. Executive shall cooperate with any reasonable requestof the physician in connection with such certification. If such question shallarise and Executive shall fail to submit such certification, the Company'sdetermination of such issue shall be binding on Executive. Nothing in thisSection 7(b) shall be construed to waive Executive's rights, if any, underexisting law including, without limitation, the Family and Medical Leave Act of1993, 29 U.S.C. ss.2601 et seq. and the Americans with Disabilities Act, 42U.S.C. ss.12101 et seq. (ii) Upon termination of Executive's employment hereunder foreither Disability or death, Executive or Executive's estate (as the case may be)shall be entitled to receive: (A) the Accrued Rights; and (B) fifty percent (50%) of the Base Salary (the "Target Annual Bonus") multiplied by a fraction, the numerator of which is the number of days of the calendar year of termination that shall have elapsed through the date of Executive's termination of employment and the denominator of which is 365. Following Executive's termination of employment due to deathor Disability, except as set forth in this Section 7(b)(ii), Executive shallhave no further rights to any compensation or any other benefits under thisAgreement. c. By the Company Without Cause or Resignation by Executivefor Good Reason. (i) The Employment Term and Executive's employment hereundermay be terminated by the Company without Cause or by Executive's resignation forGood Reason. (ii) For purposes of this Agreement, "Good Reason" shall mean(A) the failure of the Company to pay or cause to be paid Executive's BaseSalary or Annual Bonus, when due hereunder or (B) any substantial diminution inExecutive's authority or responsibilities from those described in Section 2hereof, (C) the requirement by the Company that Executive's principal office belocated outside the greater Baltimore, Maryland metropolitan area or (D) anyfailure of the Company to obtain the assumption in writing of its obligation toperform this Agreement by any successor to all or substantially all of thebusiness or assets of the Company upon a merger, consolidation, sale or similartransaction (other than an assumption that occurs by operation of law); providedthat any of the events described in clauses (A) through (D) of this Section7(c)(ii) shall constitute Good Reason only if the Company fails to cure suchevent within 30 days after receipt from Executive of written notice of the eventwhich constitutes Good Reason. 6 (iii) If Executive's employment is terminated by the Companywithout Cause (other than by reason of death or Disability) or if Executiveresigns for Good Reason, Executive shall be entitled to receive: (A) the Accrued Rights; (B) the Target Annual Bonus multiplied by a fraction, the numerator of which is the number of days of the calendar year of termination that shall have elapsed through the date of Executive's termination of employment and the denominator of which is 365; and (C) subject to Executive's continued compliance with the provisions of Sections 8 and 9, the product of (i) the sum of (x) the Base Salary and (y) the Target Annual Bonus multiplied by (ii) a fraction, the numerator of which is the greater of (x) the number of full months remaining in the Employment Term and (y) twelve and the denominator of which is twelve, payable in equal bi-monthly installments over the Restricted Period (as defined in Section 8) in accordance with the Company's usual payroll practices; provided that the aggregate amount described in this clause (C) shall be reduced, but not below zero, by the present value of any other cash severance or cash termination benefits payable to Executive under any other plans, programs or arrangements of the Company or its affiliates, including, without limitation, any severance plan of the Company in which Executive is entitled to participate. Following Executive's termination of employment by the Companywithout Cause (other than by reason of Executive's death or Disability) or byExecutive's resignation for Good Reason, except as set forth in this Section7(c)(iii), Executive shall have no further rights to any compensation or anyother benefits under this Agreement. d. Expiration of Employment Term. (i) Election Not to Extend the Employment Term. In the eventeither party elects not to extend the Employment Term pursuant to Section 1,unless Executive's employment is earlier terminated pursuant to paragraphs (a),(b) or (c) of this Section 7, Executive's termination of employment hereunder(whether or not Executive continues as an employee of the Company thereafter)shall be deemed to occur on the close of business on the day immediatelypreceding the next scheduled Extension Date and Executive shall be entitled toreceive the Accrued Rights. Following such termination of Executive's employment hereunderas a result of either party's election not to extend the Employment Term, exceptas set forth in this Section 7(d)(i), Executive shall have no further rights toany compensation or any other benefits under this Agreement. (ii) Continued Employment Beyond the Expiration of theEmployment Term. Unless the parties otherwise agree in writing, continuation ofExecutive's employment with the Company beyond the expiration of the EmploymentTerm shall be deemed an employment at- 7will and shall not be deemed to extend any of the provisions of this Agreementand Executive's employment may thereafter be terminated at will by eitherExecutive or the Company; provided that the provisions of Sections 8, 9 and 10of this Agreement shall survive any termination of this Agreement or Executive'stermination of employment hereunder. e. Notice of Termination. Any purported termination ofemployment by the Company or by Executive (other than due to Executive's death)shall be communicated by written Notice of Termination to the other party heretoin accordance with Section 12(i) hereof. For purposes of this Agreement, a"Notice of Termination" shall mean a notice which shall indicate the specifictermination provision in this Agreement relied upon and shall set forth inreasonable detail the facts and circumstances claimed to provide a basis fortermination of employment under the provision so indicated. f. Board/Committee Resignation. Upon termination ofExecutive's employment for any reason, Executive agrees to resign, as of thedate of such termination and to the extent applicable, from the Board and theLLC Board (and any committees thereof) and the Board of Directors (and anycommittees thereof) of any of the Company's affiliates. 8. Non-Competition. a. Executive acknowledges and recognizes the highlycompetitive nature of the businesses of the Company and its affiliates andaccordingly agrees as follows: (1) During the Employment Term and for a period of nine monthsfollowing the date Executive ceases to be employed by the Company for anyreason, other than due to the Company's failure to renew the Employment Termpursuant to Section 1(b) (the "Restricted Period"), Executive will not, whetheron Executive's own behalf or on behalf of or in conjunction with any person,firm, partnership, joint venture, association, corporation or other businessorganization, entity or enterprise whatsoever ("Person"), directly or indirectlysolicit or assist in soliciting in competition with the Company, the business ofany customer of the Company or prospective customer of the Company: (i) with whom Executive had personal contact or dealings on behalf of the Company during the one year period preceding Executive's termination of employment; (ii) with whom employees reporting to Executive have had personal contact or dealings on behalf of the Company during the one year immediately preceding Executive's termination of employment; or (iii) for whom Executive had direct or indirect responsibility during the one year immediately preceding Executive's termination of employment. 8 (2) During the Restricted Period, Executive will not directlyor indirectly: (i) engage in any coal-related business that competes with the business of the Company or its affiliates (including, without limitation, businesses which the Company or its affiliates have specific plans to conduct in the future and as to which Executive is aware of such planning) in the United States (a "Competitive Business"); (ii) enter the employ of, or render any services to, any Person (or any division or controlled or controlling affiliate of any Person) who or which engages in a Competitive Business; (iii) acquire a financial interest in, or otherwise become actively involved with, any Competitive Business, directly or indirectly, as an individual, partner, shareholder, officer, director, principal, agent, trustee or consultant; or (iv) interfere with, or attempt to interfere with, business relationships (whether formed before, on or after the date of this Agreement) between the Company or any of its affiliates and customers, clients, suppliers partners, members or investors of the Company or its affiliates. (3) Notwithstanding anything to the contrary in thisAgreement, Executive may, directly or indirectly own, solely as an investment,securities of any Person engaged in the business of the Company or itsaffiliates which are publicly traded on a national or regional stock exchange oron the over-the-counter market if Executive (i) is not a controlling person of,or a member of a group which controls, such person and (ii) does not, directlyor indirectly, own 5% or more of any class of securities of such Person. (4) During the Employment Term and, for a period of two yearsfollowing the date Executive ceases to be employed by the Company, Executivewill not, whether on Executive's own behalf or on behalf of or in conjunctionwith any Person, directly or indirectly: (i) solicit or encourage any employee of the Company or its affiliates to leave the employment of the Company or its affiliates; or (ii) hire any such employee who was employed by the Company or its affiliates as of the date of Executive's termination of employment with the Company or who left the employment of the Company or its affiliates coincident with, or within one year prior to or after, the termination of Executive's employment with the Company. 9 (5) During the Restricted Period, Executive will not, directlyor indirectly, solicit or encourage to cease to work with the Company or itsaffiliates any consultant then under contract with the Company or itsaffiliates. b. It is expressly understood and agreed that althoughExecutive and the Company consider the restrictions contained in this Section 8to be reasonable, if a final judicial determination is made by a court ofcompetent jurisdiction that the time or territory or any other restrictioncontained in this Agreement is an unenforceable restriction against Executive,the provisions of this Agreement shall not be rendered void but shall be deemedamended to apply as to such maximum time and territory and to such maximumextent as such court may judicially determine or indicate to be enforceable.Alternatively, if any court of competent jurisdiction finds that any restrictioncontained in this Agreement is unenforceable, and such restriction cannot beamended so as to make it enforceable, such finding shall not affect theenforceability of any of the other restrictions contained herein. 9. Confidentiality; Intellectual Property. a. Confidentiality. (i) Executive will not at any time (whether during or afterExecutive's employment with the Company) (x) retain or use for the benefit,purposes or account of Executive or any other Person; or (y) disclose, divulge,reveal, communicate, share, transfer or provide access to any Person outside theCompany (other than its professional advisers who are bound by confidentialityobligations), any non-public, proprietary or confidential information- --including without limitation trade secrets, know-how, research anddevelopment, software, databases, inventions, processes, formulae, technology,designs and other intellectual property, information concerning finances,investments, profits, pricing, costs, products, services, vendors, customers,clients, partners, investors, personnel, compensation, recruiting, training,advertising, sales, marketing, promotions, government and regulatory activitiesand approvals -- concerning the past, current or future business, activities andoperations of the Company, its subsidiaries or affiliates and/or any third partythat has disclosed or provided any of same to the Company on a confidentialbasis ("Confidential Information") without the prior written authorization ofthe Board; provided, that Executive may disclose such information to Executive'slegal and/or financial advisor for the limited purpose of enforcing Executive'srights under this Agreement; provided, that Executive shall request that suchlegal and/or financial advisors not disclose such information. (ii) "Confidential Information" shall not include anyinformation that is (a) generally known to the industry or the public other thanas a result of Executive's breach of this covenant or any breach of otherconfidentiality obligations by third parties; (b) made legitimately available toExecutive by a third party without breach of any confidentiality obligation; or(c) required by law to be disclosed; provided that Executive shall give promptwritten notice to the Company of such requirement, disclose no more informationthan is so required, and cooperate with any attempts by the Company to obtain aprotective order or similar treatment. 10 (iii) Except as required by law, Executive will not discloseto anyone, other than Executive's immediate family, legal or financial advisorsor members of the Company's senior management, the existence or contents of thisAgreement; provided that Executive may disclose to any prospective futureemployer the provisions of Sections 8 and 9 of this Agreement provided theyagree to maintain the confidentiality of such terms. (iv) Upon termination of Executive's employment with theCompany for any reason, Executive shall (x) cease and not thereafter commenceuse of any Confidential Information or intellectual property (including withoutlimitation, any patent, invention, copyright, trade secret, trademark, tradename, logo, domain name or other source indicator) owned or used by the Company,its subsidiaries or affiliates; (y) immediately destroy, delete, or return tothe Company, at the Company's option, all originals and copies in any form ormedium (including memoranda, books, papers, plans, computer files, letters andother da ...