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Massey CEO Cashes In If He Loses His Job In A Takeover

Massey Energy Company Chief Executive Officer Don Blankenship visits Capitol Hill to answer questions before the Senate Health and Human Services subcommittee hearing on mine safety, May 20, 2010. (AP)

Massey Energy CEO Don Blankenship has a "golden parachute" worth $10 million if the sale of the company leaves him without a job.

Massey owns the Upper Big Branch coal mine in West Virginia, which was hit by a massive explosion in April that killed 29 mine workers. The nation's worst coal mine tragedy in 40 years, it has triggered civil and criminal investigations.

The Appalachian coal mining giant is set to report its third-quarter earnings after the stock market closes Tuesday. The third-quarter results come amid rampant Wall Street rumors that Massey is up for sale.

In a new filing with the Securities and Exchange Commission, Massey's board of directors describes a revised compensation package for Blankenship if he leaves the company — voluntarily or otherwise — in conjunction with a change in ownership.

Under Blankenship, Massey has had a contentious relationship with federal regulators, accusing the Mine Safety and Health Administration of causing some of the ventilation problems at Upper Big Branch that may be factors in the April explosion. Massey has also accused MSHA investigators of contaminating evidence in the mine.0

Selling Massey "offers an opportunity for the company to 'reset' its relationship with regulators," writes Michael Tian, a coal industry analyst for Morningstar.

Tian assessed the possible sale of the company on Morningstar's website. "We think it's a mistake for Massey to take such a hard line with MSHA, and the current situation offers little scope for improvement," Tian concludes. "But a new management team will have flexibility to change tack."

A spokeswoman for the company says the SEC filing is a coincidence and is not related to speculation Massey is exploring new ownership.

In a separate statement, the company said, "Our Board of Directors and management team are always focused on opportunities to create shareholder value. However, we do not comment on specific opportunities."

The SEC document is official notice that Blankenship and other executives have formally agreed to new "golden parachute" terms.

The biggest change makes the executives responsible for federal "golden parachute" taxes of 20 percent. The change is part of governance reforms adopted by Massey's board in August.

But the document also outlines Blankenship's departure package, which consists of a lump-sum cash payment of $5.5 million, plus 2.5 times his pay base of about $1 million and an additional $2 million, as guaranteed by his latest employment agreement.

That adds up to $10 million and its payable if a new owner fires Blankenship as it takes control. Blankenship would also get the payout if he quits after the company is sold but before the new owner officially assumes control. But he gets nothing if he's terminated "for cause." The agreement defines firing offenses, including "willful violation of any law, rule or regulation."

The agreement also includes a standard non-compete clause, which prevents Blankenship from quickly going to a Massey competitor.

Massey Energy stock tanked after the Upper Big Branch explosion. But the company owns valuable deposits of coal that are in high demand. Some of the coal is used in the production of steel and is valued at $1.5 billion. The stock price is considered undervalued given the value of the coal deposits.

That makes Massey a takeover target. A Wall Street Journal story last week quoted an unnamed source saying the sale of Massey is one option being considered by a committee reviewing the company's future.

That story fueled Wall Street speculation, and Massey stock has skyrocketed since.

Blankenship has been a Massey executive since 1992 and will mark his tenth year as chairman and CEO next month. His compensation package last year totaled $17.8 million, according to company documents filed with the SEC.

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