1
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made as of the first
day of August, 1996, by and among BRUCE SPARKS (the "Executive"), ANKER ENERGY
CORPORATION, a Delaware corporation ("Anker"), and ANKER COAL GROUP, INC., a
Delaware corporation ("Anker Coal Group").
WHEREAS, the Executive has been Executive Vice-President of Anker
and its parent company, Anker Group, Inc., a Delaware corporation ("AGI"), for a
number of years, and the services of the Executive, his managerial experience
and his knowledge of the affairs of Anker are of great value to Anker and Anker
Coal Group; and,
WHEREAS, Anker wishes to assure itself of the continued services of
the Executive for the period provided for in this Agreement, and the Executive
is willing to serve in the employ of Anker on a full time basis for said period
as herein provided;
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the parties agree as follows:
1. Employment. Anker hereby agrees to continue the Executive in its
employ, and the Executive agrees to remain in the employ of Anker, for the
period stated in paragraph 2 hereof upon the terms and conditions set forth in
this Agreement.
2. Term and Termination.
2.1 The term of this Agreement shall be for a period of six
(6) years beginning on the date of this Agreement
2
and continuing until 11:59 p.m. on July 31, 2002, unless sooner terminated as
provided in paragraphs 2.2 and 17.3 below.
2.2(a) This Agreement may be terminated by Anker at any time
"For Cause." Upon the termination of this Agreement For Cause by Anker, this
Agreement, other than paragraphs 8.3, 10 and 11 hereof, shall automatically
terminate, and Anker shall be under no further obligation to make any additional
payments to Executive, except that Anker shall (i) make the payments as required
in paragraph 11, (ii) pay the Executive for any accrued but unpaid salary and
such other amounts as Executive may be entitled to under the applicable employee
benefit plans in which Executive participates pursuant to paragraph 8 and (iii)
perform its obligation under paragraph 8.3. For purposes of this Agreement, the
parties expressly acknowledge and agree that the term "For Cause" shall include
only the following events:
(i) Conviction of Executive of a felony, other than a
felony associated with the mining or environmental operations of Anker and
the performance of Executive's duties hereunder; or
(ii) Gross failure of Executive to perform his material
duties hereunder or material breach by Executive of any of the terms of
this Agreement, and Executive's failure to satisfactorily cure or
adequately justify such failure or breach within ten (10) days of receipt
of a written notice to cure from the Board of Directors of Anker or Anker
Coal Group.
2
3
(b) This Agreement may be terminated by Anker in
the event the Executive becomes disabled as determined under the long-term
disability policy maintained by Anker with respect to the Executive. Upon the
termination of this Agreement by Anker under this paragraph 2.2(b), this
Agreement, other than paragraphs 8.3, 10 and 11 hereof, shall automatically
terminate, and Anker shall be under no further obligation to make any additional
payments to the Executive, except that Anker shall (i) make the payments
required under paragraph 11, (ii) pay the Executive for any accrued but unpaid
salary and such other amounts as the Executive may be entitled to under the
applicable employee benefit plans in which the Executive participates pursuant
to paragraph 8, (iii) continue to maintain and provide, at Anker's sole cost and
expense, the same life and health insurance coverage provided to Executive (and
Executive's dependents) as of the date of the termination of this Agreement
under this paragraph 2.2(b) until the Executive reaches the age of 65, and (iv)
perform its obligations under paragraph 8.3.
2.3(a) In the event Anker terminates this Agreement for any
reason other than as provided in paragraphs 2.2(a) or 2.2(b) at any time prior
to August 1, 2000, the Executive shall be entitled to receive the annual salary,
bonuses and other benefits which he would have received under this Agreement
through July 31, 2002, had Anker not terminated this Agreement.
(b) In the event Anker terminates this Agreement
for any reason other than as provided in paragraphs
3
4
2.2(a) or 2.2(b) at any time on or after August 1, 2000, the Executive shall
have the following two options, either of which may be selected by Executive in
his sole and absolute discretion: (i) Executive may elect to receive, within ten
(10) days of the date on which Anker terminated this Agreement, an amount equal
to two hundred fifty percent (250%) of Executive's then current annual salary;
or (ii) Executive may elect to receive the compensation, bonuses and other
benefits under this Agreement for a period of two (2) years from the date on
which Anker terminated this Agreement, and for any period after July 31, 2002,
the annual salary under paragraph 4, quarterly bonus under paragraph 5, bonus
compensation under paragraph 6 and benefits under paragraphs 8 and 9 shall be
calculated and paid in a manner consistent with the way in which said annual
salary, quarterly bonus, bonus compensation and benefits are calculated and paid
under this Agreement.
3. Position and Responsibilities.
3.1 During the period of his employment hereunder, Anker and
the Executive agree that the Executive shall serve as Executive Vice-President
of Anker.
3.2 The Executive shall perform such duties and have such
responsibilities and powers as are reasonably assigned to him by the Board of
Directors of Anker and which are consistent with the offices held by the
Executive under paragraph 3.1.
3.3 During the term of his employment hereunder, and except
for illness, reasonable vacation periods, reasonable
4
5
leaves of absence and reasonable amounts of time required to be devoted by
Executive to the business and operations of Zither Mining Company, Inc.,
Transocean Coal Company, Inc. or Apex Resources LLC in accordance with a
services agreement between each such company and Anker, the Executive shall
devote all of his business time, attention, skill and efforts to the faithful
performance of his duties under this Agreement and separate Employment
Agreements of even date herewith entered into by Executive and AGI (the "AGI
Agreement"), Executive and Anker Coal Group (the "Anker Coal Group Agreement"),
and Simba Group, Inc., a Delaware corporation and subsidiary of Anker Coal
Group, provided, however, that the determination of the reasonableness of the
amount of time devoted to the business and operations of such companies shall be
made by the Board of Directors of Anker, and in no event shall such activities
be permitted if they substantially and materially prevent Executive from
performing his obligations hereunder. Except as permitted by the preceding
sentence, the Executive shall not, during the term of this Agreement, directly
or indirectly own, manage, operate, be employed by or control, or participate in
the ownership, management, operation or control of, any entity engaged, directly
or indirectly, in the business of mining, producing, marketing or selling coal,
except that this paragraph 3.3 shall not prohibit the Executive from acquiring
not more than two percent (2%) of any outstanding class of securities of any
company whose shares are publicly traded on any exchange or in any established
over-the-counter market.
5
6
3.4 The Executive shall (i) notify the Board of Directors of
Anker in writing reasonably in advance of any proposed transaction between Anker
or any other direct or indirect subsidiary of AGI and Executive, any member of
Executive's family or any entity in which the Executive or any member of
Executive's family shall have any interest and (ii) not effect any such
transaction and shall use his best efforts to cause his family members and any
such entity to not effect any such transaction unless the transaction has been
approved by the Board of Directors of Anker Coal Group. For purposes of this
paragraph 3.4, the members of Executive's family shall be limited to the
Executive's spouse, parents, siblings and children.
4. Annual Salary. During the term of this Agreement, Anker shall pay
Executive for each twelve-month period set forth below the salary set opposite
said period:
Period Annual Salary
------ -------------
8/1/1996 through 7/31/1997 $250,000
8/1/1997 through 7/31/1998 $257,500
8/1/1998 through 7/31/1999 $265,200
8/1/1999 through 7/31/2000 $273,200
8/1/2000 through 7/31/2001 $281,200
8/1/2001 through 7/31/2002 $289,600
Anker shall pay Executive his annual salary in equal installments on a bi-weekly
basis. The increase in the annual salary from period to period as reflected in
the foregoing table is based on a cost of living adjustment equal to
approximately three percent (3%). In the event the rate of inflation in the
United States of America exceeds three percent (3%) for any of the periods
6
7
identified above, Anker agrees to consider making a reasonable increase to
Executive's annual salary for the following period. In the event any such
increase is made to the Executive's annual salary as provided in the preceding
sentence, the annual salary for each of the subsequent periods shall be
increased by an equal amount.
5. Quarterly Bonus. In addition to his annual salary as provided in
paragraph 4 above, Anker shall pay Executive $3,750 upon the execution of this
Agreement and $3,750 on the first day of each subsequent calendar quarter during
the term of this Agreement.
6. Bonus Compensation.
6.1 For purposes of this Agreement, the term "Anker Coal Group
EBITDA" ("ACGE") shall mean with respect to a particular year the audited
consolidated net income of Anker Coal Group, plus interest, taxes, depreciation,
depletion and amortization, based on the audited annual consolidated financial
statements of Anker Coal Group certified by its independent certified public
accountants. ACGE shall not include extraordinary and unusual items shown as
extraordinary and unusual items on said audited annual consolidated financial
statements of Anker Coal Group, unless such extraordinary and unusual items were
included in ACGBE (as defined below). The Board of Directors of Anker Coal Group
may also exclude from ACGE gains or losses resulting from sales outside the
ordinary course of business, unless such gains or losses were included in ACGBE.
The term "Anker Coal Group Budgeted EBITDA" ("ACGBE") shall mean
7
8
with respect to a particular year the consolidated net income of Anker Coal
Group, plus interest, taxes, depreciation, depletion and amortization, based on
the annual budget of Anker Coal Group adopted by its Board of Directors. The
parties acknowledge and agree that ACGBE for the calendar year 1996 shall equal
$27,500,000 less an amount equal to all costs and expenses related to the
recapitalization of the ownership of AGI and the refinancing of the indebtedness
of AGI, and not contemplated in the 1996 budget of AGI adopted by its Board of
Directors, including, without limitation, the fees and expenses of attorneys,
accountants, consultants, appraisers, valuation firms and other professionals,
the direct and indirect expenses relating to the negotiation, preparation,
execution and delivery of all documentation associated with said
recapitalization and refinancing, and the direct and indirect expenses
(including bonuses) relating to the issuance of common stock of AGI to Bruce
Sparks.
6.2 In addition to his annual salary and quarterly bonus as
provided in paragraphs 4 and 5 above, Anker shall pay Executive for each year
during the term of this Agreement an annual bonus equal to a percentage of the
Executive's annual salary for said year, which percentage shall be calculated
based upon the relationship of ACGE to ACGBE. If ACGE for a particular year is
equal to or less than 75% of ACGBE for that year, then Executive shall not be
entitled to receive any annual bonus for that year. If ACGE for a particular
year is greater than 75% of ACGBE for that year, then Anker shall pay
8
9
Executive a bonus for that year in an amount equal to the result of the
following formula:
{[(ACGE/ACGBE) - 0.50] x 0.80} x Executive's annual salary for such year.
6.3 Where the Executive is employed hereunder for only a
portion of a calendar year, and, pursuant to the terms of this Agreement, is
entitled to receive a bonus payment under paragraph 6.2 hereof, the Executive's
bonus shall be computed based upon ACGE for such year and shall be pro-rated
based upon the number of days Executive is employed hereunder during such year.
All calculations of ACGE, ACGBE and bonus payments under this paragraph 6 shall
be made by the chief financial officer of Anker subject to the review and
confirmation by the Compensation Committee of the Board of Directors of Anker
Coal Group and, upon such confirmation, shall be final and binding upon all
parties hereto. Each bonus payment shall be paid to the Executive on or before
the later of (i) April 17 of the year following the year to which such bonus
applies or (ii) the 30th day after Anker Coal Group's independent certified
public accountants certify Anker Coal Group's audited annual consolidated
financial statements for the year to which such bonus applies.
7. Expenses. Anker agrees to reimburse the Executive for all
ordinary, necessary and reasonable expenses incurred by him in the performance
of his duties and responsibilities under this Agreement, provided that the
Executive submits receipt vouchers or other evidences of payment of expenses in
such form
9
10
and within such reasonable time periods as may be required by Anker.
8. Executive Benefits.
8.1 Following the commencement of the term of this Agreement
and during the term hereof, Anker shall maintain all life, health, director and
officer, disability (short and long-term) and liability insurance coverage
provided to the Executive on the date hereof and shall allow the Executive to
participate in any pension, profit-sharing or other employee benefit plans of
Anker to the extent he is eligible under the terms of those plans. Anker shall
update such coverage and plans from time to time to provide such benefits to the
Executive on a basis consistent with the coverage and plans provided to other
senior executives of Anker.
8.2 Throughout the term of this Agreement, Anker shall, at its
expense, provide Executive with a suitable vehicle and such country club
memberships and other prerequisites as the Board of Directors of Anker shall
deem reasonable and commensurate with the positions and responsibilities of the
Executive under this Agreement.
8.3 Anker and Anker Coal Group hereby jointly and severally
agree to indemnify, defend and hold the Executive harmless from and against any
and all claims, demands, suit, actions, proceedings, judgments, losses,
liabilities, damages, fines, amounts paid in settlement, costs and expenses of
every kind and nature (including, without limitation, reasonable attorneys'
fees) incurred or suffered in connection with the fact
10
11
that Executive is or was a director, officer, employee or agent of Anker, AGI or
Anker Coal Group, or is or was serving at the request of Anker, AGI or Anker
Coal Group as a director, officer, manager, employee or agent of another
corporation, partnership, limited liability company, joint venture, trust or
other entity or enterprise; provided, however, that Anker and Anker Coal Group
shall have no obligation to indemnify the Executive under this paragraph 8.3 for
gross negligence or willful and wanton misconduct. Notwithstanding anything in
this Agreement to the contrary, the parties expressly acknowledge and agree that
the covenant of indemnification under this paragraph 8.3 is independent of all
other covenants in this Agreement and shall survive the expiration or
termination of this Agreement without limit.
9. Vacation. Executive shall be entitled, in the aggregate, to four
weeks paid vacation for each year during the term of this Agreement. If the
Executive does not use this allotted time for vacation, he will not be
compensated in lieu of vacation time.
10. Confidential Information. In the course of his employment, the
Executive has had and will have access to confidential financial and business
records, data, specifications, supplier and customer lists and other proprietary
information owned by Anker Coal Group and its direct and indirect subsidiaries
(collectively, the "Companies") and used in the course of their respective
business, including, without limitation, information of a business or technical
nature
11
12
imparted to or learned by the Executive in the course of his employment,
irrespective of whether the same has been formally stamped "confidential"
(collectively, "Proprietary Information"). Proprietary Information shall not
include any information which is known generally to the public or which can be
determined from publicly-available sources. The Executive agrees that during the
term of his employment and for a period of three (3) years immediately following
the expiration or termination of this Agreement, he shall not use, divulge,
furnish or make accessible to anyone (other than an authorized representative of
any of the Companies or unless required in the ordinary course of business of
any of the Companies) any knowledge or information with respect to Proprietary
Information. All records, files, drawings, documents, equipment and the like
relating to the business of any of the Companies which the Executive shall
prepare, use or come into contact with shall remain the sole property of the
Companies. The Executive further agrees that upon expiration or termination of
this Agreement, he will return to the Companies all tangible property relating
to the Proprietary Information of which he has custody, including, but not
limited to, all business records, notebooks, documents, drawings, photographs
and copies thereof. The provisions of this paragraph 10 shall survive the
termination or expiration of this Agreement for the aforesaid three-year period.
11. Non-Competition. The Executive agrees that during the term of
the Executive's employment under this Agreement he shall abide by the provisions
of paragraph 3.3 above. In
12
13
addition, and for a period of one(1) year immediately following the expiration
or termination of this Agreement, the Executive will not, directly or
indirectly, own, manage, operate, be employed by or control, or participate in
the ownership, management, operation or control of, any entity, directly or
indirectly, engaged in the business of mining, producing, marketing or selling
coal in West Virginia or Maryland, nor will the Executive during such one-year
period solicit, induce or attempt to persuade any employee of Anker or the other
direct or indirect subsidiaries of Anker Coal Group to leave its employ or
solicit any customer of Anker or the other direct or indirect subsidiaries of
Anker Coal Group with respect to the business of mining, producing, marketing or
selling coal in West Virginia or Maryland on behalf of any other person or
entity, and Executive expressly acknowledges and agrees that the foregoing
restrictions are reasonable both in scope and duration; provided, however, that
the provisions of this paragraph 11 shall not apply to Executive following the
expiration of this Agreement on July 31, 2002, or the termination of this
Agreement under paragraph 2.2(a) or paragraph 2.2(b) unless Anker elects in its
sole discretion to pay (either in lump sum or through installments on a
bi-weekly basis) the Executive in respect of said one-year period an amount
equal to the annual salary which the Executive was receiving at the time of the
termination or expiration hereof. This paragraph 11 shall not prohibit the
Executive (i) from acquiring not more than two percent (2%) of any outstanding
class of securities of any company whose shares are publicly-traded on any
exchange or
13
14
in any established over-the-counter market or (ii) with the prior written
consent of the Board of Directors of Anker Coal Group, providing services under
a consulting arrangement to persons or entities engaged in the business of
mining, producing, marketing or selling coal. The provisions of this paragraph
11 (other than the first sentence hereof) shall survive the termination or
expiration of this Agreement for the aforesaid one-year period.
12. Enforcement; Covenants Independent; Survival.
12.1 Enforcement. The Executive hereby acknowledges and agrees
that an award of money damages alone is likely to be an inadequate remedy for
breach by the Executive of any of the covenants set forth in paragraphs 10 and
11, and that in the event of any breach of these covenants the Executive hereby
agrees and consents that Anker and Anker Coal Group shall be entitled to the
remedies of injunction, specific performance, mandamus or other equitable relief
to enforce the performance of such covenants in addition to seeking money
damages.
12.2 Covenants Independent; Survival. The covenants of the
Executive contained in paragraphs 10 and 11 shall be construed as independent of
all other provisions contained in this Agreement. The Executive agrees that, to
the extent set forth in such paragraphs, the provisions of such paragraphs shall
survive the termination of this Agreement and his employment with Anker in
accordance with and upon all of the terms and conditions of this Agreement.
13. Guaranty. Anker Coal Group hereby absolutely, unconditionally
and irrevocably guarantees to the Executive, as
14
15
primary obligor and not merely as surety, the full and prompt payment and
performance of all present and future liabilities and obligations of Anker under
this Agreement, together with all costs and expenses incurred by the Executive
in connection with the enforcement of all of the obligations under this
Agreement, including, without limitation, all of the Executive's reasonable
attorney's fees and legal expenses; provided, however, that Anker Coal Group
shall be liable for such enforcement expenses only to the extent that Executive
prevails in any such enforcement action.
14. Reimbursement. For each year during the term of this Agreement,
Anker agrees to reimburse the Executive, up to a maximum of $3,000, for all
fees, costs and expenses incurred by him in connection with obtaining
accounting, tax and legal services, provided that the Executive submits bills,
receipt vouchers or other evidences of payment of expenses to Anker in such form
as may be required by Anker. Anker shall reimburse the Executive within thirty
(30) days after the Executive submits acceptable bills, receipt vouchers or
other evidences of payment to Anker.
15. Notice. All notices, requests, elections and other
communications under this Agreement shall be made in writing and shall be deemed
to have been given when delivered personally, or when mailed by certified mail,
postage prepaid, addressed in the case of service upon the Executive, to the
residence of the Executive as listed in Anker's records, and in the case of
service upon Anker or Anker Coal Group, to its
15
16
principal office or, in any case, at such other address as any party hereto may
furnish to the others in accordance with this paragraph.
16. Arbitration. Other than a dispute or controversy arising solely
under paragraph 10 or 11, any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration,
conducted before an arbitrator (or arbitrators) in West Virginia who is (are)
mutually acceptable to the Executive and Anker in West Virginia in accordance
with the rules of the American Arbitration Association then in effect or, if the
Executive and Anker are unable to agree on an arbitrator (or arbitrators),
before an arbitrator in West Virginia chosen in accordance with the rules of the
American Arbitration Association. Judgment may be entered on the award of the
arbitrator or arbitrators in any court in the State of West Virginia having
jurisdiction.
17. Miscellaneous.
17.1 Binding Effect and Benefit. All rights and obligations
under this Agreement shall inure to the benefit of and shall be binding upon the
parties hereto, the successors and assigns of Anker and Anker Coal Group, and
the personal representative of the estate of the Executive. The parties hereto
further agree that the terms and conditions of this Agreement are to be fully
assumed by any party succeeding to the interest of Anker or Anker Coal Group, as
the case may be, including, but not limited to, any party succeeding to such
16
17
interest by reason of a consolidation, merger, reorganization, transfer of
assets, liquidation or dissolution.
17.2 Withholding. Anker shall be responsible for complying
with all Federal and state laws concerning withholding of income and other taxes
required to be withheld from the compensation of the Executive. All payments to
be made to Executive pursuant to this Agreement shall be reduced by all
applicable withholding and other taxes, as determined by Anker and Anker Coal
Group.
17.3 Additional Termination Events. This Agreement shall
terminate upon the effective date of Executive's resignation of employment with
Anker or upon Executive's death; provided, however, that Executive may resign
from Anker upon no less than thirty (30) days prior written notice (or such
earlier notice as may be agreed to between the parties hereto), which notice
shall set forth the date of resignation (the "Resignation Date"). As soon as
practicable following the Resignation Date or date of death, Anker shall pay to
Executive or Executive's estate, as applicable, any accrued but unpaid salary,
such amounts as Executive may be entitled to under the applicable employee
benefit plans in which Executive participates pursuant to paragraph 8 hereof and
the amounts required under paragraph 11, and thereafter Anker shall be under no
further obligation to make any additional payments to Executive hereunder
(except as may be required under paragraph 8.3).
17.4 Entire Agreement and Amendment. This Agreement (together
with the AGI Agreement and the Anker Coal
17
18
Group Agreement) constitute the entire agreement between the parties hereto with
respect to the subject matter hereof and supersede all prior or contemporaneous
negotiations, promises, covenants, agreements or representations of every nature
whatsoever with respect thereto. This Agreement may not be changed except by
written instrument duly executed by all of the parties hereto.
17.5 Waiver. Waiver by any party of any breach of the terms
and conditions of this Agreement, or of any election available to that party
hereunder, shall not be deemed to be a waiver of any subsequent breach of any
term or condition of this Agreement or a waiver of a similar or dissimilar
provision or condition at the same time or at any prior or subsequent time, or
of the right of the applicable party to make any subsequent election under this
Agreement.
17.6 Severability. If, for any reason, any provision or part
thereof, of this Agreement, is held invalid, such invalidity shall not affect
any other provision, or any other part of such provision, not held to be
invalid, and each such other provision, or part thereof, shall to the full
extent consistent with law continue in full force and effect.
17.7 Governing Law. The validity, performance and enforcement
of this Agreement shall be governed by, and construed and interpreted in
accordance with, the laws of the State of West Virginia.
17.8 Headings. The headings and subheadings appearing in this
Agreement are solely for convenience in
18
19
reference and shall have no effect upon the meaning and construction of this
Agreement.
17.9 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
17.10 Decisions of the Board of Directors. The Executive may
participate in any discussions of the Board of Directors of Anker or Anker Coal
Group regarding any decision required to be made pursuant to this Agreement, but
Executive will abstain or excuse himself from any vote of the Board of Directors
of Anker or Anker Coal Group with respect to any such matter.
IN WITNESS WHEREOF, the Executive, Anker and Anker Coal Group have
executed this Agreement as of the date first above written.
/s/ Bruce Sparks
-------------------------------------
BRUCE SPARKS
ANKER ENERGY CORPORATION
By /s/ John J. Faltis
---------------------------------
Its President
---------------------------------
ANKER COAL GROUP, INC.
By /s/ John J. Faltis
---------------------------------
Its President
---------------------------------
19
20
SHAREHOLDER APPROVAL
The undersigned, having been provided with full disclosure of all
material facts concerning the payments to be made pursuant to the foregoing
Employment Agreement, hereby approves all such payments.
ANKER GROUP, INC.
By /s/ John J. Faltis
---------------------------------
Its President
---------------------------------