EXHIBIT 10.22
[GRAPHIC OF ARCH COAL, INC. LOGO APPEARS HERE]
ARCH COAL, INC.
INCENTIVE COMPENSATION PLAN
Effective: January 1, 1998
ARCH COAL, INC.
INCENTIVE COMPENSATION PLAN
1. PURPOSE OF THE PLAN
The purpose of the Arch Coal, Inc. Incentive Compensation Plan (the
"Plan") is to provide an opportunity for key employees of Arch Coal, Inc.
and its subsidiaries (the "Company") to earn competitive annual cash
incentive awards through the achievement of both Company and individual
performance goals.
2. DEFINITIONS
A. "Award" means the portion of the amount earned by a Participant for
a Plan Year in accordance with Section 5 and shall consist of the sum
of two parts: (i) the Individual Performance Portion; and (ii) the
Quantitative Performance Portion.
B. "Base Salary" means all cash pay earned by a Participant from the
Company for his or her personal services while a Participant during a
Plan Year, plus any amount contributed by the Participant pursuant to
the Company's Employee Thrift Plan for such year, less any Award or
incentive bonus earned or received during such year.
C. "CEO" means the Chief Executive Officer of the Company.
D. "Committee" means the Personnel & Compensation Committee of the
Board of Directors of Arch Coal, Inc.
E. "Company" means Arch Coal, Inc. and its subsidiaries.
F. "Corporate Participant" means a Participant employed at Arch Coal,
Inc. or a non-coal producing division thereof.
G. "Corporate Performance Measurement" shall mean the financial
performance goal which may be established by the Committee from time
to time for the Company.
H. "Division" means a coal producing subsidiary or unit of the
Company.
I. "Division Participant" means a participant employed at a Division.
J. "Group Heads" means those executive officers with responsibility
over multiple Divisions and/or Mines and Facilities.
K. "Individual Performance Portion" is the portion of an Award which
is based on the individual performance of the Participant.
L. "Maximum Award Opportunity" shall be the maximum annual incentive
Award that a Participant is eligible for under this Plan and shall be
determined as set forth in Section 4.
M. "Mine/Facility" means a coal producing unit or loading facility of
a Division.
N. "Mine/Facility Participant" means a participant who is employed at
a coal producing unit or loading facility of a Division.
O. "Participant" means an employee who has been recommended by the CEO
and approved by the Committee to participate in the Plan.
P. "Performance Goals" means those individual and/or Company
performance objectives determined at the beginning of each Plan year.
Q. "Performance Rating Percentage" is the subjective performance
rating established for each individual by his or her supervisor as
determined pursuant to Section 5(A) and confirmed by the CEO of the
Company.
R. "Plan" means the Arch Coal, Inc. Incentive Compensation Plan.
S. "Plan Year" means the current calendar year, commencing on January
1 and ending on December 31.
T. "Quantitative Performance Portion" is the portion of an actual or
potential Award which is based on the achievement of various
measurable goals.
3. ELIGIBILITY
A. All salaried employees of the Company are eligible to participate
in the Plan, subject to Committee approval of Plan Participants on an
annual basis. Six levels of participation in the Plan are hereby
established and a designated Maximum Award Opportunity has been
established for each level. Levels may be modified, added or
subtracted and the Committee may, in its discretion, include
Participants in different levels from time to time in their
discretion, regardless of the position actually held by the
Participant.
B. A new Participant may be entered into the Plan by the CEO at any
time during the Plan Year if such new Participant is taking a
position which has been previously approved for participation in the
Plan by the Committee.
C. Participants will cease to be participants in the Plan effective
as of the date they no longer hold an approved position for
participation in the Plan.
4. MAXIMUM AWARD OPPORTUNITY
The Maximum Award Opportunity is a percentage of the Base Salary of the
Participant and is different for each level of participation established
under the Plan. The Maximum Award Opportunity (expressed as a percentage
of Base Salary for each level of participation) shall be as follows:
------------------------------------------------------------
Maximum Award Opportunity
Level (As % of Base Salary)
I 100%
II 80%
III 60%
IV 40%
V 25%
VI 15%
------------------------------------------------------------
5. AMOUNT/PAYMENT OF AWARD
A Participant's Maximum Award under this Plan shall be the sum of two
parts: (i) an Individual Performance Portion calculated pursuant to
Section 5(A); and (ii) a Quantitative Performance Portion calculated
pursuant to Section 5(B).
A Participant's level of participation in the Plan will determine how much
of his/her Maximum Award Opportunity will be based on individual
performance criteria pursuant to Section 5(A) and how much will be based
on quantitative criteria pursuant to Section 5(B). The chart below shows
the weighting of each performance measure by Plan Level.
These percentages are as follows:
- ----------------------------------------------------------------------
Weighting Assigned to Performance Measures
- ----------------------------------------------------------------------
Mine
Executive Position Corporate Group Division Facility Individual
- ------------------ --------- ----- -------- -------- ----------
CORPORATE
Level I and II 90% 10%
Level III 80% 20%
All Others 80% 20%
GROUP HEADS
Level II 60% 30% 10%
DIVISION
Level III 40% 40% 20%
All Others 20% 40% 40%
MINE/FACILITY
All 20% 20% 40% 20%
- -------------------------------------------------------------------
A. Individual Performance Portion
At the beginning of each Plan Year, the Chief Executive Officer or
the Participant's immediate supervisor will meet with each
Participant to establish Performance Goals for each Participant for
the year. These goals should be signed by the Participant as an
acknowledgment of what is expected and approved by the Participant's
immediate supervisor.
The performance of the Participant for each Plan Year will be
evaluated with respect to achievement of the Performance Goals. A
Performance Rating Percentage for each Participant will be
determined. The Individual Performance Portion, if any, earned by the
Participant will be based on this final rating. The evaluation of a
Participant's performance in achieving his/her goals will be
subjective and the Individual Performance Portion deemed earned, as
determined by the CEO of the Company and approved by the Committee,
shall be conclusive.
The percentage of the Individual Performance Portion of the Award
earned will be based on the following chart:
---------------------------------------------------------
Performance Rating Percentage of
Percentage Individual Performance
Portion Earned
Less than 70 - 0-
70-74 30%
75-79 44%
80-84 58%
85-89 72%
90-94 86%
95 and above 100%
---------------------------------------------------------
A minimum Performance Rating Percentage of 70% will be required for
any Award to be earned for a Plan Year
B. Quantitative Performance Portion
The Quantitative Performance Portion of an Award will be determined
upon the achievement of various measurable corporate and/or
operational goals. These goals will be established by the Committee
prior to the beginning of each Plan Year. Awards will be based upon
the achievement of different goals and performance measurements,
depending on whether the Participant is a Corporate Participant,
Group Participant, Division Participant or Mine/Facility Participant
and the specific position held.
The following chart shows the weighting each goal has in the
determination of each Participant's potential Quantitative
Performance Portion:
- -------------------------------------------------------------------
PERFORMANCE MEASURES
Unit % Measurement Coverage
---- ------------- --------
Corporate: 100% Return on Equity
Group: 50% Economic Performance Measure* Of entire
25% Safety** group
25% Environmental Compliance***
Division: 50% Economic Performance Measure* Of entire
25% Safety** division
25% Environmental Compliance***
Mine: 50% Economic Performance Measure* Of specific
25% Safety** mine
25% Environmental Compliance***
* Transfer price-based profit divided by net assets employed
** Based upon Safety-related Key Performance Indicators
*** Based upon Environmentally-related Key Performance Indicators
C. Miscellaneous Rules
i. The goals established under Sections 5(A) and (B) for
Group Participants who possess responsibility for multiple
operations will equal the weighted average composite goal of the
Divisions, Mines and/or Facilities for which they are
responsible. The goals for Division Participants shall equal the
weighted average composite goal of all Divisions.
ii. The Committee shall approve any and all payments under
this Plan and reserves the discretionary right to increase,
decrease, modify or eliminate any Awards which would otherwise
be payable under the Plan.
iii. Awards determined under this Plan may only be paid if:
-- They are approved by the Committee; and
-- The Participant continues to be employed by the Company and
continues to perform in a satisfactory manner through the day
the approved Awards are actually paid.
iv. Any rights a Participant may have to receive an Award
will be forfeited if the Participant's full-time employment is
terminated prior to the actual date of payment; however, the
Committee shall determine to what extent, if any, an Award shall
be payable under the Plan and may elect to make a pro rata
payment (based on full months of participation during the year
or otherwise) in its sole discretion.
6. PAYMENT OF AWARD
The Award, if any, earned in accordance with Section 5 shall be paid in
cash by the Company to the Participant within a reasonable period, which
in most cases will usually be thirty (30) days after approval of the
Awards by the Committee.
7. DEATH OR DISABILITY
In the event of a Participant's death or permanent and total disability
prior to receiving his or her Award, a pro rata payment of such Award
(based on full months of participation) shall be paid to the Participant
or to the Participant's designated beneficiary (or to his or her estate in
the event the Participant dies without previously having designated a
beneficiary in writing to the Company) pursuant to Section 6.
8. AMENDMENT OR TERMINATION OF THE PLAN
The Committee reserves the right to terminate or amend the Plan, in whole
or in part, at any time and from time to time, provided that no amendment
or termination shall adversely affect any Award previously earned by a
Participant.
9. EFFECTIVE DATE OF THE PLAN
The Plan shall become effective and Awards hereunder may be earned on and
after January 1, 1998 and until such time as the Plan shall be terminated
by the Committee.
10. LIMITATION ON AWARDS
The maximum aggregate Awards payable under the Plan during any Plan Year
shall not exceed 7.5% of the Company's reported net income for that
calendar year.
IN WITNESS WHEREOF, the Company has executed this Plan this 27th day of
January, 1998.
ARCH COAL, INC.
By: /s/ Jeffry N. Quinn
ATTEST: Its: Sr. V.P.-Law & HR
/s/ Miriam Rogers Singer