Arch Coal, Inc. Incentive Compensation Plan


Exhibit 99.1
1. Purpose of the Plan
     The purpose of the Arch Coal, Inc. for Executive Officers (as amended from time to time, the“Plan”) is to provide an opportunity for ExecutiveOfficers of Arch Coal, Inc. to earn competitive annual cashincentive awards through the achievement of pre-establishedperformance goals.
2. Definitions
     A. “Award” means the amount earned by anExecutive Officer for a Plan Year in accordance withSection 4.
     B. “Base Salary” means the actual base payearned by an Executive Officer during the Plan Year.
     C. “CEO” means the Chief Executive Officerof the Company.
     D. “Code” means the Internal Revenue Codeof 1986, as amended from time to time.
     E. “Committee” means the Personnel &Compensation Committee of the Board of Directors of Arch Coal,Inc.
     F. “Company” means Arch Coal, Inc. and itssubsidiaries.
     G. “Executive Officer” means the Presidentand CEO, the Chief Operating Officer, the Chief FinancialOfficer and each Vice President and other officer of the Companywho is subject to the reporting requirements of Section 16of the Securities Exchange Act of 1934, as amended.
     H. “Maximum Award Opportunity” shall bethe maximum annual incentive Award that an Executive Officer iseligible for under this Plan.
     I. “Performance Measures” means theCompany performance objectives determined by the Committeewithin 90 days of the beginning of each Plan year forExecutive Officers. Performance Measures may include, but arenot limited to, (i) net income; (ii) cash flow; (iii)earnings before interest, taxes, depreciation, depletion andamortization (EBITDA); (iv) operating income;(v) earnings per share (EPS); (vi) debt reduction;(vi) safety incident rate; (viii) cost reduction;(ix) production rates; (x) environmental compliance;and (xi) operating cost per ton. As determined by theCommittee, the Performance Measures shall be applied (A) inabsolute terms or relative to one or more other companies orindices and (B) to a business unit, geographic region, oneor more separately incorporated entities, or the Company as awhole.
     J. “Plan” means the Arch Coal, Inc. for Executive Officers, as it may beamended from time to time.
     K. “Plan Year” means the calendar year,commencing on January 1 and ending on December 31.
3. Eligibility
     A. The Committee shall establish, from time to time, Awardopportunities for Executive Officers.
     B. Awards to Executive Officers who begin participating inthe Plan after the beginning of a Plan Year will be proratedusing the ratio of months the Executive Officer is in the Plancompared to the total months in the Plan Year.
     C. Participants will cease to be participants in the Planeffective as of the date they no longer hold an ExecutiveOfficer position.


4. Awards
     A. Within 90 days of the beginning of each Plan Year,the Committee shall determine in writing (i) the ExecutiveOfficers who shall be eligible to receive an Award opportunityfor such Plan Year, (ii) the Performance Measuresapplicable to each such Executive Officer’s Awardopportunity and (iii) the formula for computing the amountof the Award payable to each Executive Officer if thePerformance Measures are achieved (such formula shall, unlessotherwise determined by the Committee, comply with therequirements applicable to performance-based compensation plansunder Section 162(m) of the Code and the related Treasuryregulations).
     B. The Maximum Award Opportunity for an Executive Officerfor any calendar year shall be $2,500,000. Any Award under thePlan that is intended to comply with the exception for“performance-based compensation” underSection 162(m) of the Code and the related Treasuryregulations shall be administered in accordance with Section162(m) and such regulations, and if any Plan provision is foundnot to be in compliance with Section 162(m) of the Code,the provision shall be deemed modified as necessary to so comply.
     C. Awards shall be calculated by the Committee at the endof each Plan Year based on the Award Opportunities of eachExecutive Officer and the achievement of the PerformanceMeasures set by the Committee with respect to Executive Officersfor the Plan Year. At the election of the Committee, an Awardmay be reduced for individual performance or any other reason;however, no Award under this Plan may exceed the Awardcalculated based on the Performance Measures established by theCommittee for such Plan Year. The Committee may, in itsdiscretion, make appropriate adjustments in the PerformanceMeasures established for a particular Plan Year to take accountof the effect of any unforeseen events that occur during suchPlan Year.
5. Payment of Award
     A. Except with respect to a reduction in force or pursuantto any written agreement between the Company and the ExecutiveOfficer, any rights an Executive Officer may have to receive anAward will be forfeited if the Executive Officer’semployment is terminated prior to the date of approval of theAward; however, the Committee shall determine to what extent, ifany, an Award shall be payable under the Plan and may elect tomake a pro rata payment (based on full months of participationduring the year or otherwise) in its sole discretion.
     B. The Award, if any, earned in accordance withSection 4 shall be paid in cash by the Company to theExecutive Officer within a reasonable period, which in mostcases will be thirty (30) days after the Committee’scertification that the Award was earned by the ExecutiveOfficer. The Company shall deduct from any Award paid under thePlan the amount of any taxes required to be withheld by thefederal or any state or local government.
6. Death or Disability
     In the event of an Executive Officer’s death or permanentand total disability prior to receiving his or her Award, a prorata payment of such Award (based on full months ofparticipation) shall be paid to the Executive Officer or to theExecutive Officer’s designated beneficiary (or to his orher estate in the event the Participant dies without previouslyhaving designated a beneficiary in writing to the Company)pursuant to Section 6.
7. Amendment or Termination of the Plan
     The Committee reserves the right to terminate or amend the Plan,in whole or in part, or waive any provision thereof at any timeand from time to time, provided that no amendment, terminationor waiver shall adversely affect any Award previously earned byan Executive Officer.