UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.          )

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Soliciting Material under §240.14a-12

 

ARCH COAL, INC.

(Name of Registrant as Specified In Its Charter)

 

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GRAPHIC
  JOHN W. EAVES
President and Chief Executive Officer

March 12, 2013

Dear fellow stockholder:

        You are cordially invited to attend our annual meeting of stockholders on Thursday, April 25, 2013. We will hold the meeting at 8:00 a.m., Mountain time, at the Wright Hotel, located at 300 Reata Drive, Wright, Wyoming 82732.

        In connection with the annual meeting, we have enclosed a notice of the meeting, a proxy statement and a proxy card. We have also enclosed a copy of our annual report for 2012 which contains detailed information about us and our operating and financial performance.

        I hope that you will be able to attend the meeting, but I know that not every stockholder will be able to do so. Whether or not you plan to attend, I encourage you to vote your shares. You may vote by telephone or via the Internet, or complete, sign and return the enclosed proxy card in the postage-prepaid envelope, also enclosed. The prompt execution of your proxy will be greatly appreciated.

        Thank you for your continued support of Arch Coal. We look forward to seeing you on April 25th.

    Sincerely,

 

 


GRAPHIC

 

 

JOHN W. EAVES
President and Chief Executive Officer

   

ARCH COAL, INC.
1 CityPlace Drive, Suite 300                    St. Louis, Missouri 63141                    t: (314) 994-2700


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GRAPHIC

One CityPlace Drive, Suite 300
St. Louis, Missouri 63141

March 12, 2013

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held April 25, 2013

        The annual meeting of stockholders (the "Annual Meeting") of Arch Coal, Inc., a Delaware corporation (the "Company"), will be held at the Wright Hotel, located at 300 Reata Drive, Wright, Wyoming on Thursday, April 25, 2013 at 8:00 a.m., Mountain time, to:

        The close of business on March 1, 2013 has been fixed as the record date for the determination of stockholders entitled to receive notice of and to vote at the Annual Meeting or any adjournment(s) or postponement(s) thereof. As of the record date, there were 212,268,294 shares of common stock outstanding. If you own shares of common stock as of March 1, 2013, you may vote those shares via the Internet, by telephone or by attending the Annual Meeting and voting in person. If you received your proxy materials by mail, you may also vote your shares by completing and mailing your proxy/voting instruction card.

        An admittance card or other proof of ownership is required to attend the Annual Meeting.    If you are a stockholder of record, please retain the admission card printed on your Notice of Internet Availability of Proxy Materials or your proxy card for this purpose. Also, please indicate your intention to attend the Annual Meeting by checking the appropriate box on the proxy card, or, if voting by the Internet or by telephone, when prompted. If you have shares held by a bank or broker, you will need to ask that record holder for an admission card in the form of a confirmation of beneficial ownership. If you do not receive a


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confirmation of beneficial ownership or other admittance card from your bank or broker, you must bring proof of share ownership (such as a copy of the brokerage statement) to the Annual Meeting.

        Your vote is important. Whether or not you plan to attend the Annual Meeting, please cast your vote by telephone or the Internet. If you received a proxy card by mail, you may complete, date and sign the proxy card and return it in the enclosed envelope.

    By Order of the Board of Directors

 

 

 
   
GRAPHIC
    ROBERT G. JONES
Senior Vice President-Law, General Counsel and Secretary

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PROXY STATEMENT
TABLE OF CONTENTS

 
  Page

QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING

  1

When and Where Is the 2013 Annual Meeting of Stockholders Being Held?

  1

Why Did I Receive a Notice in the Mail Regarding the Internet Availability of Proxy Materials This Year Instead of a Full Set of Proxy Materials?

  1

Who May Vote at the Annual Meeting?

  1

Who Can Attend the Annual Meeting?

  1

What Items Will Be Voted On at the Annual Meeting?

  2

What Are the Board's Voting Recommendations?

  2

How Do I Vote?

  2

May I Change My Vote?

  3

How Many Votes Do I Have?

  4

Is My Vote Confidential?

  4

What Are Broker Non-Votes and How Are They Counted?

  4

What Is the Voting Requirement To Approve Each of the Proposals?

  4

What "Quorum" Is Required for the Annual Meeting?

  5

What Is Householding?

  5

Where Can I Find the Voting Results?

  5

DIRECTORS AND CORPORATE GOVERNANCE PRACTICES

  6

Overview

  6

Corporate Governance Guidelines and Code of Business Conduct

  6

Director Independence

  7

Leadership Structure

  7

Director Qualifications, Diversity and Biographies

  8

Board Meetings and Committees

  19

Director Retirement/Resignation Policies

  22

Conflicts of Interest

  22

Compensation Committee Interlocks and Insider Participation

  23

Nomination Process for Election of Directors

  23

Communicating With the Board of Directors

  23

ELECTION OF DIRECTORS (PROPOSAL NO. 1)

  24

Recommendation of the Board

  24

APPROVAL OF THE ARCH COAL, INC. OMNIBUS INCENTIVE PLAN (FORMERLY KNOWN AS THE ARCH COAL, INC. 1997 STOCK INCENTIVE PLAN)
(PROXY ITEM NO. 2)

  25

Administration

  26

Summary of Award Terms and Conditions

  26

Eligibility and Limitation on Awards

  29

Awards Granted Under the Omnibus Plan

  30

Shares Subject to the Omnibus Plan

  30

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  Page

Anti-Dilution Protections

  30

Clawback Provisions

  31

Amendment and Termination

  31

No Repricing

  31

Federal Income Tax Consequences

  31

Effective Date

  33

Vote Required

  33

Recommendation of the Board

  33

RATIFICATION OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PROPOSAL NO. 3)

  34

Fees Paid to Auditors

  34

Recommendation of the Board

  35

ADVISORY RESOLUTION TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION (PROPOSAL NO. 4)

  36

Recommendation of the Board

  36

OTHER MATTERS

  37

EXECUTIVE COMPENSATION

  37

Compensation Discussion and Analysis

  37

Summary Compensation Table

  52

Grants of Plan-Based Awards for the Year Ended December 31, 2012

  55

Outstanding Equity Awards at December 31, 2012

  56

Option Exercises and Stock Vested for the Year Ended December 31, 2012

  58

Pension Benefits

  58

Non-Qualified Deferred Compensation

  60

Potential Payments Upon Termination of Employment or Change-in-Control

  61

DIRECTOR COMPENSATION

  68

PERSONNEL AND COMPENSATION COMMITTEE REPORT

  71

AUDIT COMMITTEE REPORT

  72

EQUITY COMPENSATION PLAN INFORMATION

  73

SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS

  74

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

  75

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

  75

STOCKHOLDER PROPOSALS FOR THE 2014 ANNUAL MEETING

  76

INTERNET AVAILABILITY OF PROXY MATERIALS

  77

PROXY SOLICITATION

  77

DIRECTIONS TO THE ANNUAL MEETING

  77

APPENDIX A — Omnibus Incentive Plan (formerly the 1997 Stock Incentive Plan)

  A-1

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PROXY SUMMARY

        This summary highlights information contained in this Proxy Statement. The summary does not contain all of the information that you should consider, and you should read the entire Proxy Statement carefully before voting.

Annual Meeting of Stockholders  

Time and date: 8:00 a.m. Mountain time, April 25, 2013

 

Place:

 

Wright Hotel
300 Reata Drive
Wright, Wyoming 82732

 

Record Date: March 1, 2013

 

Voting: Stockholders as of the record date are entitled to vote. Each share of common stock is entitled to one vote for each director nominee and one vote for each of the other proposals.

Voting items (with board recommendations in parentheses)

 

Election of three directors (FOR EACH NOMINEE)

 

Approval of the Arch Coal,  Inc. Omnibus Incentive Plan (formerly known as the Arch Coal, Inc. 1997 Stock Incentive Plan) (FOR)

 

Ratification of the appointment of Ernst & Young LLP, independent registered public accounting firm, as our independent auditors for the year ending December 31, 2013 (FOR)

 

Advisory resolution to approve named executive compensation (FOR)

Board nominees

 

Paul T. Hanrahan. Chief Executive Officer, American Capital Infrastructure Management, LLC, and former President and Chief Executive Officer, The AES Corporation. Director since 2012.

 

Steven F. Leer. Chairman of the Board of Directors, Arch Coal, Inc., and former Chief Executive Officer, Arch Coal, Inc. Director since 1992.

 

Theodore D. Sands. President, HAAS Capital, LLC, and former Managing Director, Investment Banking for Global Metals/Mining Group, Merrill Lynch & Co. Director since 1999.

 

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Other directors   Term expiring in 2014

 

John W. Eaves. President and Chief Executive Officer, Arch Coal, Inc. Director since 2006.

 

Douglas H. Hunt. Director of Acquisitions, Petro-Hunt, LLC. Director since 1995.

 

J. Thomas Jones. Chief Executive Officer, West Virginia United Health System. Director since 2010.

 

George C. Morris III. President, Morris Energy Advisors, Inc., and former Managing Director, Merrill Lynch & Co. Director since 2012.

 

*A. Michael Perry. Former Chairman and Chief Executive Officer of Bank One, West Virginia, N.A. Director since 1998.


 

 

*Mr. Perry will be retiring immediately after the Annual Meeting.

 

 

Term expiring in 2015

 

Governor David D. Freudenthal. Senior Counsel, Crowell & Moring, LLC, and former Governor, State of Wyoming. Director since 2011.

 

Patricia F. Godley. Senior Counsel and Consultant, Van Ness Feldman. Director since 2004.

 

Wesley M. Taylor. Former President, TXU Generation. Director since 2005.

 

Peter I. Wold. President, Wold Oil Properties, Inc., and Director, Oppenheimer Funds, Inc. New York Board. Director since 2010.

Key elements of our compensation program

 

Pay for performance. A significant portion of compensation is tied to key performance-based metrics of Arch Coal, Inc. For a discussion on the performance-based metrics used, please see the discussion under "Compensation Discussion and Analysis," beginning on page 37.

 

Mix of short-term and long-term incentives. Our incentive program has a mix of annual and long-term incentives.

 

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Award caps. There are maximum limits on the short-term and long-term performance based awards.

 

Share ownership requirements. We have in place stock ownership requirements for our senior officers and directors. During 2012, the share ownership requirement for our Chief Executive Officer was increased to five-times base salary.

 

New change-in-control agreements. In 2012, each senior officer amended and restated their change-in-control agreement to eliminate tax gross-up provisions.

 

Independent compensation consulting firm. The Personnel and Compensation Committee utilizes an independent compensation consulting firm, which provides no other services to the Company.

 

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QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING


When and Where Is the 2013 Annual Meeting of Stockholders Being Held?

        The 2013 annual meeting of stockholders (the "Annual Meeting") of Arch Coal, Inc., a Delaware corporation ("Arch" or the "Company"), will be held on Thursday, April 25, 2012. The Annual Meeting will be held at 8:00 a.m., Mountain time, at the Wright Hotel, located at 300 Reata Drive, Wright, Wyoming 82732.


Why Did I Receive a Notice in the Mail Regarding the Internet Availability of Proxy Materials This Year Instead of a Full Set of Proxy Materials?

        In accordance with the rules and regulations adopted by the Securities and Exchange Commission (the "SEC"), instead of mailing a printed copy of our proxy materials to each stockholder of record, we may furnish proxy materials, including this proxy statement and the Arch 2012 Annual Report, by providing access to them via the Internet. We believe this allows us to provide our stockholders with the information they need, while lowering the costs.

        Most stockholders will not receive printed copies of the proxy materials unless they request them. Instead, a Notice of Internet Availability of Proxy Materials (the "Notice") was mailed that will tell you how to access and review all of the proxy materials on the Internet. The Notice also tells you how to submit your proxy on the Internet or by telephone. If you would like to receive a paper or email copy of our proxy materials, you should follow the instructions for requesting them in the Notice. We began providing access to this proxy statement and a form of proxy card on or about March 12, 2013.


Who May Vote at the Annual Meeting?

        Stockholders of the Company at the close of business on March 1, 2013, the record date for the Annual Meeting, are entitled to receive notice of and to vote at the Annual Meeting or any adjournments or postponements of the Annual Meeting. On the record date, Arch had 212,268,294 shares of common stock outstanding.


Who Can Attend the Annual Meeting?

        All Arch stockholders on the record date are invited to attend the Annual Meeting. Each stockholder planning to attend the Annual Meeting will be asked to present valid photo identification, such as a driver's license or passport. In addition, each stockholder must present his or her admission card, or other proof of ownership. Your admission card is printed on the Notice or attached to your proxy card or voting instruction form.

        If you own shares in street name, you will need to ask your bank or broker for an admission card in the form of a confirmation of beneficial ownership. You will need to bring a confirmation of beneficial ownership with you to vote at the Annual Meeting. If you do not receive your confirmation of beneficial ownership in time, please bring your most recent brokerage statement with you to the Annual Meeting. We can use that to verify your ownership of common stock and admit you to the meeting. The Company

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reserves the right to deny admittance to anyone who cannot adequately show proof of share ownership as of the record date.

        No cameras, camcorders, videotaping equipment, other recording devices or large packages will be permitted in the Annual Meeting. Photographs and/or video may be taken by Arch employees or independent contractors at the Annual Meeting, and those photographs and video images may be used by Arch. By attending the Annual Meeting, you will be agreeing to Arch's use of those images and waive any claim or rights with respect to those images and their use.


What Items Will Be Voted On at the Annual Meeting?

        Stockholders will vote on four items at the Annual Meeting:


What Are the Board's Voting Recommendations?

        The Board recommends you vote your shares:


How Do I Vote?

        If you are a registered stockholder, there are four different ways you can vote:

        By Internet —  You can vote over the Internet at www.proxyvote.com by following the instructions provided (you will need the Control Number from the Notice or proxy card you receive).

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        By Telephone —  You can vote by telephone by calling the toll-free number indicated on your proxy card or voting instruction card (you will need the Control Number from the Notice or proxy card you receive).

        By Mail —  If you received your proxy materials by mail, you can vote by signing, dating and returning the accompanying proxy card.

        In Person —  You can vote in person by written ballot at the Annual Meeting.

        When your proxy is properly submitted, your shares will be voted as you indicate. If you do not indicate your voting preference, the appointed proxies (John W. Eaves and Robert G. Jones) will vote your shares FOR Proposal Nos. 1 - 4. If your shares are owned in joint names, all joint owners must vote by the same method, and if joint owners vote by mail, all of the joint owners must sign the proxy card. The deadline for voting by telephone or via the Internet, except with respect to shares held through the Arch Coal, Inc. Employee Thrift Plan as described below, is 11:59 p.m., Eastern time, on the day before the Annual Meeting.

        If you are a beneficial owner of shares held in street name, follow the instructions provided by your nominee to vote your shares. In most instances, you will be able to vote by the same methods as indicated above. You must have a legal proxy from the stockholder of record in order to vote the shares in person at the Annual Meeting.

        If your shares are held through the Arch Coal, Inc. Employee Thrift Plan, you may also vote as set forth above, except that Plan participants may not vote their Plan shares in person at the Annual Meeting. If you provide voting instructions by Internet, telephone or written proxy card, Mercer Trust Company, the Plan's Trustee, will vote your shares as you have directed. If you do not provide specific voting instructions, the Trustee will vote your shares in the same proportion as shares for which the Trustee has received instructions. Please note that you must submit voting instructions to the Trustee no later than April 22, 2013 at 11:59 p.m., Eastern time, in order for your shares to be voted by the Trustee at the Annual Meeting.


May I Change My Vote?

        You may revoke your proxy and change your vote at any time before the voting deadline for the Annual Meeting. After your initial vote, you may vote again on a later date any time prior to the Annual Meeting via the Internet or by telephone (only your latest Internet or telephone proxy submitted prior to the voting deadline for the Annual Meeting will be counted), by signing and returning a new proxy card or voting instruction form with a later date, or by attending the Annual Meeting and voting in person. However, your attendance at the Annual Meeting will not automatically revoke your proxy unless you vote again at the Annual Meeting or specifically request in writing that your prior proxy be revoked.

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How Many Votes Do I Have?

        You have one vote for each share of our common stock that you owned at the close of business on the record date. These shares include:


Is My Vote Confidential?

        Yes. Voting tabulations are confidential except in extremely limited circumstances. Such limited circumstances include contested solicitation of proxies, when disclosure is required by law, to defend a claim against us or to assert a claim by us and when a stockholder's written comments appear on a proxy or other voting material.


What Are Broker Non-Votes and How Are They Counted?

        A broker non-vote occurs when a broker, bank, or other nominee holding shares on behalf of a beneficial owner is prohibited from exercising discretionary voting authority for a beneficial owner who has not provided voting instructions. Brokers, banks, and other nominees may vote without instruction only on "routine" proposals. On "non-routine" proposals, nominees cannot vote without instructions from the beneficial owner, resulting in so-called "broker non-votes." Proposal No. 3, the ratification of Ernst & Young, LLP as the Company's independent registered public accounting firm, is the only routine proposal on the ballot for the Annual Meeting. All other proposals are non-routine. If you hold your shares with a broker, bank, or other nominee, they will not be voted on non-routine proposals unless you give voting instructions to such nominee. Broker non-votes are counted as present and entitled to vote for purposes of determining a quorum at the meeting, but are not counted for purposes of determining the number of shares present and entitled to vote on non-routine matters.


What Is the Voting Requirement To Approve Each of the Proposals?

        For Proposal No. 1, the three nominees receiving the highest number of affirmative votes of the shares entitled to be voted will be elected as directors to serve until their terms expire and until their successors are duly elected and qualified. Abstentions are not counted for the purpose of the election of directors, and neither abstentions nor broker non-votes will have any effect on the voting results.

        Approval of Proposal No. 2 requires the affirmative vote of a majority of the shares present or represented by proxy and voting at the Annual Meeting; and the total vote cast on the proposal also must represent over 50% in interest of all of our securities entitled to vote on the proposal in order for the proposal to be approved. Abstentions and broker non-votes are not treated as votes cast. Accordingly, abstentions and broker non-votes will have the effect of votes against the proposal to the extent that the

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total vote cast on the proposal does not represent over 50% in interest of all of our securities entitled to vote on the proposal but otherwise will not affect the outcome of the voting on Proposal No. 2.

        Approval of Proposal No. 3 requires the affirmative vote of a majority of the shares present or represented by proxy and voting at the Annual Meeting. Abstentions and broker non-votes are not treated as votes cast. Accordingly, neither abstentions nor broker non-votes will affect the outcome of the voting on Proposal No. 3.

        Approval of Proposal No. 4 requires the affirmative vote of a majority of the shares present or represented by proxy and voting at the Annual Meeting. The vote on Proposal No. 4, the approval of the Company's named executive officer compensation, is a non-binding advisory vote only. Abstentions and broker non-votes are not treated as votes cast. Accordingly, neither abstentions nor broker non-votes will affect the outcome of the voting on Proposal No. 4.

        If a submitted proxy does not specify how to vote, the shares represented by that proxy will be considered to be voted in favor of Proposal Nos. 1 - 4. Unless a shareholder checks the box on the proxy card or provides instructions to withhold discretionary voting authority, the appointed proxies may use their discretion to vote on any other matters properly brought before the meeting. As of the date of this proxy statement, we know of no other matter that will be presented for consideration at the Annual Meeting other than those matters discussed in this proxy statement.


What "Quorum" Is Required for the Annual Meeting?

        In order to have a valid stockholder vote, a quorum must exist at the Annual Meeting. For the Company, a quorum exists when stockholders holding a majority of the outstanding shares of common stock are present or represented at a meeting. For these purposes, shares that are present or represented by proxy at the Annual Meeting will be counted toward a quorum, regardless of whether the holder of the shares or proxy fails to vote on a particular matter or whether a broker with discretionary voting authority fails to exercise such authority with respect to any particular matter.


What Is Householding?

        As permitted by the SEC, we may only deliver one copy of this proxy statement to stockholders residing at the same address, unless the stockholders have notified the Company of their desire to receive multiple copies of the proxy statement. This is known as householding.

        The Company will promptly deliver, upon request, a separate copy of the proxy statement to any stockholder residing at an address to which only one copy was mailed. Requests for additional copies for the current year or future years should be directed to the Secretary, Arch Coal, Inc., One CityPlace Drive., Suite 300, St. Louis, Missouri, 63141, or by telephone at (314) 994-2700.


Where Can I Find the Voting Results?

        We intend to announce preliminary voting results at the Annual Meeting. We will publish the final results in a Current Report on Form 8-K, which we expect to file within four business days after the Annual Meeting is held. You can obtain a copy of the Form 8-K by logging on to our website at archcoal.com, by calling the Securities and Exchange Commission (SEC) at 800-SEC-0330 for the location of the nearest public reference room, or through the EDGAR system at sec.gov. Information on our website does not constitute part of this proxy statement.

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DIRECTORS AND CORPORATE GOVERNANCE PRACTICES

Overview

        Arch is dedicated to being a global leader in the coal industry and to creating superior long-term stockholder value. It is our policy to conduct our business with integrity and an unrelenting passion for providing the best value to our customers. All of our corporate governance materials, including the Corporate Governance Guidelines, our Code of Business Conduct and our board committee charters, are published under "Corporate Governance" in the Investors section of our website at archcoal.com. Information on our website does not constitute part of this proxy statement. The Board regularly reviews these materials, Delaware law, the rules and listing standards of the New York Stock Exchange and SEC regulations, as well as best practices suggested by recognized governance authorities, and modifies the materials as warranted.

        Our certificate of incorporation and bylaws provide for a Board that is divided into three classes as equal in size as possible. The classes have three-year terms, and the term of one class expires each year in rotation at that year's annual meeting. The size of the Board can be changed by a two-thirds vote of its members. There are currently 12 members of the Board:

John W. Eaves   Steven F. Leer
David D. Freudenthal   George C. Morris III
Patricia Fry Godley   *A. Michael Perry
Paul T. Hanrahan   Theodore D. Sands
Douglas H. Hunt   Wesley M. Taylor
J. Thomas Jones   Peter I. Wold

*
Mr. Perry will be retiring from the Board immediately after the Annual Meeting.

        The Board met nine times during 2012. Each current director attended at least 75% of the aggregate of all of the meetings of the Board and committees on which he or she served and attended the Company's 2012 annual stockholders meeting. Under the Company's Corporate Governance Guidelines, each director is expected to spend the time needed and meet as frequently as necessary to properly perform his or her duties and responsibilities, including attending annual and special meetings of the stockholders, the Board and committees of which he or she is a member.


Corporate Governance Guidelines and Code of Business Conduct

        The Board has adopted Corporate Governance Guidelines, which set forth a framework within which the Board, assisted by its committees, directs the affairs of the Company. These Guidelines address, among other items, the composition and functions of the Board, director independence, stock ownership by and compensation of directors, and director qualification standards.

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        The Company has adopted the Code of Business Conduct, which is applicable to all employees of the Company, including the principal executive officer, the principal financial officer and the principal accounting officer, as well as all directors of the Company.

        The Corporate Governance Guidelines and the Code of Business Conduct are available on the Company's website under the "Corporate Governance" heading in the "Investors" section at archcoal.com and in print to any stockholder who requests them from the Company's Secretary. We intend to post amendments to or waivers from (to the extent applicable to one of our directors or executive officers) the Code of Business Conduct at the same location on our website. Information on our website does not constitute part of this proxy statement.


Director Independence

        It is the Board's objective to have a substantial number of directors who are independent. The Corporate Governance Guidelines incorporate the criteria established by the New York Stock Exchange to assist the Board in determining whether a director is independent. The Board has determined, in its judgment, that all but two members, Steven F. Leer and John W. Eaves, meet the New York Stock Exchange standards for independence. The independent members of the Board meet regularly without any members of management present. These sessions are normally held following or in conjunction with regular Board meetings.

        All members of our Audit, Nominating and Corporate Governance and Personnel and Compensation Committees must be independent directors in accordance with our Corporate Governance Guidelines. Members of the Audit Committee must also satisfy a separate SEC independence requirement, which provides that they may not accept, directly or indirectly, any consulting, advisory or other compensatory fee from us or any of our subsidiaries other than their directors' compensation.


Leadership Structure

        Mr. Leer has served as the chairman of our Board since being appointed as chairman in April 2006, and served as chief executive officer of the Company until his retirement from that position in April 2012. The Board has no fixed policy with respect to the separation of the offices of chairman and chief executive officer. Instead, the Board retains the discretion to make this determination on a case-by-case basis from time to time as it deems to be in the best interest of the Company and our stockholders at any given time. The Company's current structure is that Mr. Leer continues to serve as chairman of the Board, and Mr. Eaves serves as chief executive officer of the Company. In weighing the structure of the chairman's role, the Board believed that continuing to appoint Mr. Leer as chairman of the Board was appropriate because of Mr. Leer's deep knowledge of the Company, and continued service as a liaison between the Board and management.

        In addition, the Corporate Governance Guidelines provide that, if the chairman of the Board is the chief executive officer, or is not an independent director, the independent directors of the Board shall elect a lead

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director to lead executive session meetings of the independent members of the Board. James R. Boyd was the Board's lead director until his resignation from the Board in February 2013. Wesley M. Taylor has been appointed as the lead director of the Board, beginning February 2013.

        The entire Board is responsible for oversight of the Company's risk management processes. Our Vice President of Enterprise Risk Management oversees risk management efforts, provides periodic reports to the Board's Audit Committee and provides reports to our Board at least once per year. In addition, the Board and its standing committees periodically request supplemental information or reports as they deem appropriate.


Director Qualifications, Diversity and Biographies

        The Corporate Governance Guidelines provide that our Nominating and Corporate Governance Committee and Board will nominate candidates for our board of directors who possess the following principal qualities: strength of character, an inquiring and independent mind, practical wisdom, and mature judgment. In addition to these qualities, the selection criteria for nomination include recognized achievement, an ability to contribute to some aspect of our business, and the willingness to make the commitment of time and effort required of a director.

        As described in more detail below, our Board believes that each of our directors meets such criteria and has attributes and experience that make him or her well qualified to serve. While we do not have a formal diversity policy, in order to find the most valuable talent available to meet these criteria, our Board generally considers candidates diverse in geographic origin, gender, ethnic background, and professional experience (private, public, and non-profit), pursuant to our Corporate Governance Guidelines. Our goal is to include members with the skills and characteristics that, taken together, will assure a strong Board.

        Our directors have diverse backgrounds and provide experience and expertise in a number of critical areas. The Nominating and Corporate Governance Committee considers the particular experience, attributes, reputation and qualifications of directors standing for re-election and potential nominees for election, as well as the needs of our Board as a whole and its individual committees. In nominating candidates for election by our stockholders, both the Nominating and Corporate Governance Committee and the Board act pursuant to these guidelines. Both the Nominating and Corporate Governance Committee and the Board assess the effectiveness of corporate governance policies, including with respect to diversity, through completion of an annual evaluation process.

        The Nominating and Corporate Governance Committee has identified nine areas of expertise that are particularly relevant to service on the Board and has identified the directors whose key areas of expertise qualify them for each of the listed categories. The categories identified by the Nominating and Corporate Governance Committee are:

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        The following is a list of our directors, their ages as of March 1, 2013, their occupation during the last five years and certain other biographical information, including the areas of expertise where each director or nominee is most skilled:

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CLASS I DIRECTORS WHO ARE UP FOR ELECTION AT THE ANNUAL MEETING

Director
  Areas of Expertise   Occupation and Other Information
Paul T. Hanrahan
Age 55
Director since 2012
  CEO/Senior Management
Energy Environmental & Safety
Finance and Accounting
Governance/Board
Government Relations
Marketing
Human Resources and
Compensation
Strategic Planning
  Since October 2012, Mr. Hanrahan has served as the Chief Executive Officer of American Capital Infrastructure Management, LLC, a company which invests in global energy infrastructure assets. From 2002 until 2011, Mr. Hanrahan served as President and Chief Executive Officer of The AES Corporation, a global power company headquartered in Arlington, Virginia, and as its Executive Vice President and Chief Operating Officer from 2000 to 2002. Mr. Hanrahan also served as President and Chief Executive Officer of AES China Generating Co. for more than five years. He currently serves on the boards of Ingredion Incorporated, Seven Seas Water Corporation, and GreatPoint Energy,  Inc.

 

 

 

 

Mr. Hanrahan contributes to the mix of experience and qualifications the Board seeks to maintain through his current position as Chief Executive Officer of a company investing in energy infrastructure assets, as well as his former senior management positions with The AES Corporation. Serving in these capacities has provided Mr. Hanrahan with a strong understanding of the energy industry and the regulatory issues our clients face. In addition, Mr. Hanrahan brings to our Board experience in leading public companies as they expand internationally, having served as the Chief Executive Officer of a global public company. Finally, Mr. Hanrahan's experience serving on other boards provides him with valuable governance and oversight experience.

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Director
  Areas of Expertise   Occupation and Other Information
Steven F. Leer
Age 60
Director since 1992
  CEO/Senior Management
Energy
Environmental and Safety
Finance and Accounting
Governance/Board
Government Relations
Marketing
Human Resources and
Compensation
Strategic Planning
  Mr. Leer has been the Chairman of our board of directors since 2006. From 1992 until April 2012, Mr. Leer served as our Chief Executive Officer, and from 1992 to 2006, Mr. Leer also served as our President. Mr. Leer also serves on the boards of the Norfolk Southern Corporation, USG Corp., Parsons Corporation, the University of the Pacific, Washington University and is past chairman of the Coal Industry Advisory Board. Mr. Leer is past chairman of the boards of the Center for Energy and Economic Development, the National Coal Council and the National Mining Association.

 

 

 

 

Mr. Leer contributes to the mix of experience and qualifications the Board seeks to maintain primarily through his position as Chairman of the Company and as the prior Chief Executive Officer of the Company. As a prior Chief Executive Officer of the Company and as the Company's Chairman, Mr. Leer has in-depth knowledge of all aspects of the Company's business and close working relationships with all of the Company's senior executives.

Theodore D. Sands
Age 67
Director since 1999

 

Energy
Finance and Accounting
Governance/Board
Human Resources and
Compensation
Strategic Planning

 

Since 1999, Mr. Sands has served as President of HAAS Capital, LLC, a private consulting and investment company. Mr. Sands served as Managing Director, Investment Banking for the Global Metals/Mining Group of Merrill Lynch & Co. from 1982 until 1999. Mr. Sands has also served as a member of the board of directors for several other companies.

 

 

 

 

Mr. Sands contributes to the mix of experience and qualifications the Board seeks to maintain primarily through his prior role at Merrill Lynch and as the head of a private investment company. In leading an investment company in today's economy, Mr. Sands has a strong understanding of the financial hurdles public companies face, as well as an in-depth knowledge of the various financing avenues available for a company. In addition, his past experience as a board member for several other companies adds valuable prior oversight experience to our existing board of directors.

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THE FOLLOWING CLASSES OF DIRECTORS ARE NOT UP FOR ELECTION AT THE ANNUAL MEETING

CLASS II DIRECTORS WHOSE TERM EXPIRES AT THE 2014 ANNUAL MEETING

Director
  Areas of Expertise   Occupation and Other Information
John W. Eaves
Age 55
Director since 2006
  CEO/Senior Management
Energy
Environmental and Safety
Governance/Board
Government Relations
Marketing
Human Resources and
Compensation
Strategic Planning
  Mr. Eaves currently serves as our President and Chief Executive Officer. Mr. Eaves served as our President and Chief Operating Officer from 2006 until he was elected as our Chief Executive Officer in April 2012. From 2002 to 2006, Mr. Eaves served as our Executive Vice President and Chief Operating Officer. Mr. Eaves is currently the chairman of the National Coal Council, and also serves on the boards of COALOGIX, National Mining Association, the Business Roundtable, the American Coalition for Clean Coal Electricity and the Business Council.

 

 

 

 

Mr. Eaves contributes to the mix of experience and qualifications the Board seeks to maintain primarily through his position as President and Chief Executive Officer of the Company. As President and Chief Executive Officer, and as a result of the experience he has gained during his tenure with the Company, Mr. Eaves has intimate knowledge of all aspects of the Company's business and close working relationships with all of the Company's senior executives. In addition, Mr. Eaves has an extensive understanding of the Company's industry and customer base.

Douglas H. Hunt
Age 60
Director since 1995

 

CEO/Senior Management
Energy
Environmental and Safety

 

Since 1995, Mr. Hunt has served as Director of Acquisitions of Petro-Hunt, LLC, a private oil and gas exploration and production company.

 

 

Finance & Accounting
Human Resources and Compensation
Strategic Planning

 

Mr. Hunt contributes to the mix of experience and qualifications the Board seeks to maintain primarily through his long-time position as a senior officer for Petro-Hunt, LLC. As Director of Acquisitions of Petro-Hunt, LLC, Mr. Hunt has significant experience as a senior officer in the energy industry and in the strategic planning of companies as they look to grow their business.

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Director
  Areas of Expertise   Occupation and Other Information
J. Thomas Jones
Age 63
Director since 2010
  CEO/Senior Management
Finance & Accounting
Governance/Board
Government Relations
Human Resources and
Compensation
Strategic Planning
  Mr. Jones has been Chief Executive Officer of West Virginia United Health System located in Fairmont, West Virginia since 2002. From 2000 to 2002, Mr. Jones served as Chief Executive Officer of Genesis Hospital System in Huntington, West Virginia. Mr. Jones is also a director of Premier, Inc. and Health Partners Network.

 

 

 

 

Mr. Jones contributes to the mix of experience and qualifications the Board seeks to maintain primarily through his services as Chief Executive Officer of health systems in the State of West Virginia. Being in charge of companies in a heavily regulated industry, Mr. Jones brings the valuable experience of assisting a company navigate through an ever changing regulatory background. In addition, as a senior officer, Mr. Jones brings strong experience in handling key financial decisions for the long-term benefit of a company.

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Director
  Areas of Expertise   Occupation and Other Information
George C. Morris III
Age 57
Director since 2012
  CEO/Senior Management
Energy
Finance and Accounting
Governance/Board
Strategic Planning
  Since March 2009, Mr. Morris has served as President of Morris Energy Advisors, Inc., and its successor Morris Energy Advisors, LLC. From 2006 until his retirement in March 2009, Mr. Morris served as a managing director at Merrill Lynch & Co. Prior to 2006, Mr. Morris served as a managing director of investment banking at Petrie Parkman & Co. until its acquisition by Merrill Lynch & Co. in 2006, and also previously served as a managing director of investment banking at Simmons & Company International, as a director of investment banking at Merrill Lynch & Co., and as a director of investment banking at The First Boston Corporation. Mr. Morris also serves on the board of directors of Calumet GP, LLC, the general partner of Calumet Specialty Products Partners, L.P.

 

 

 

 

Mr. Morris contributes to the mix of experience and qualifications the Board seeks to maintain primarily through his experience and roles with a variety of investment companies, including his most recent role as a managing director at Merrill Lynch & Co. His experience in advising clients of investment companies provides Mr. Morris with a strong understanding of the financial hurdles public companies face, including the various financing avenues available for a company. In addition, his board member experience adds additional valuable management and oversight knowledge to our Board.

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Director
  Areas of Expertise   Occupation and Other Information
*A. Michael Perry
Age 76
Director since 1998
  CEO/Senior Management
Energy
Finance and Accounting
Governance/Board
Government Relations
Strategic Planning
  Mr. Perry served as Chairman of Bank One, West Virginia, N.A. from 1993 and as its Chief Executive Officer from 1983 until his retirement in 2001. Mr. Perry also serves on the board of directors of Champion Industries, Inc.

 

 

 

 

Mr. Perry contributes to the mix of experience and qualifications the Board seeks to maintain primarily through his service with Bank One, West Virginia, N.A., together with his membership on other boards. As a result of this experience, Mr. Perry brings to the Board a strong finance and accounting background, and has experience in handling, as a senior executive in charge of a financial institution and as a board member of other companies, the long-term strategic planning of a corporation.

*
Mr. Perry will be retiring from the Board immediately after the Annual Meeting.

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CLASS III DIRECTORS WHOSE TERM EXPIRES AT THE 2015 ANNUAL MEETING

Director
  Areas of Expertise   Occupation and Other Information
Governor David D. Freudenthal
Age 62
Director since 2011
  CEO/Senior Management
Energy
Governance/Board
Government Relations
Strategic Planning
  Since June 2011, Governor Freudenthal has been Senior Counsel with the law firm of Crowell & Moring, LLC. Governor Freudenthal served as the Governor of Wyoming from 2003 until January 2011. Prior to his service as Governor, he served as U.S. Attorney for the District of Wyoming. Governor Freudenthal currently serves as an Adjunct Professor at the University of Wyoming.

 

 

 

 

Governor Freudenthal contributes to the mix of experience and qualifications the Board seeks to maintain primarily through his experience as Governor for the State of Wyoming. This experience has provided Governor Freudenthal with a significant understanding of the regulatory and governmental issues facing the Company in our daily operations.

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Director
  Areas of Expertise   Occupation and Other Information
Patricia F. Godley
Age 64
Director since 2004
  Energy
Environmental and Safety
Governance/Board
Government Relations
Human Resources and
Compensation
Strategic Planning
  From 1998 until July 2012, Ms. Godley served as a partner with the law firm of Van Ness Feldman, practicing in the areas of economic and environmental regulation of electric utilities and natural gas companies. Ms. Godley retired as a partner effective July 2012, and now serves as Senior Counsel and Consultant to the firm. Ms. Godley is also a director of the United States Energy Association, which is the U.S. arm of the World Energy Council.

 

 

 

 

Ms. Godley contributes to the mix of experience and qualifications the Board seeks to maintain primarily through her work as an attorney in the areas of economic and environmental regulations. This experience has provided Ms. Godley with an in-depth knowledge of the ever changing regulatory environment that the Company faces, and dealing with governmental agencies in this regulatory environment. From her work in this area, she also has an extensive background in the energy industry and the environmental issues facing the Company.

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Director
  Areas of Expertise   Occupation and Other Information
Wesley M. Taylor
Age 70
Director since 2005
  CEO/Senior Management
Energy
Environmental and Safety
Finance & Accounting
Governance/Board
Government Relations
Human Resources and
Compensation
Marketing
Strategic Planning
  Mr. Taylor was appointed lead director of the Board in February 2013. Mr. Taylor was President of TXU Generation, a company engaged in electricity infrastructure ownership and management. Mr. Taylor served at TXU for 38 years prior to his retirement in 2004. Mr. Taylor also serves on the board of directors of FirstEnergy Corporation.

 

 

 

 

Mr. Taylor contributes to the mix of experience and qualifications the Board seeks to maintain primarily through his experience with TXU Generation, as well as his service as a member of the board of directors of FirstEnergy Corporation. Mr. Taylor's experience has provided him with a strong background in the energy industry. In addition, as President of TXU Generation, Mr. Taylor brings to our Board the experience of guiding a company in all aspects of its day-to-day operations.

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Director
  Areas of Expertise   Occupation and Other Information
Peter I. Wold
Age 65
Director since 2010
  CEO/Senior Management
Energy
Environmental and Safety
Finance and Accounting
Governance/Board
Government Relations
Strategic Planning
  Mr. Wold is President and co-owner of Wold Oil Properties, Inc., an oil and gas exploration and production company. He is also Vice President of American Talc Company, a corporation that mines and processes talc in Western Texas. He is a director of the Oppenheimer Funds, Inc. New York Board. Mr. Wold has also served in the Wyoming House of Representatives, as a director of the Denver Branch of the Kansas City Federal Reserve Bank, and recently completed six years on the Wyoming Enhanced Oil Recovery Commission.

 

 

 

 

Mr. Wold contributes to the mix of experience and qualifications the Board seeks to maintain primarily through his experience as President of Wold Oil Properties, Inc., as well as his positions with Oppenheimer Funds, Inc. and the Kansas City Federal Reserve Bank. This experience has provided Mr. Wold with a deep understanding of the financial hurdles and constraints companies face in today's economy. In addition, as head of an energy company, Mr. Wold has a strong understanding of the environmental and other regulatory issues the Company faces, particularly in the West.


Board Meetings and Committees

        The Board has the following five committees: Nominating and Corporate Governance, Finance, Personnel and Compensation, Audit and Energy and Environmental Policy. The table below contains information concerning the membership of each of the committees as of December 31, 2012, and the number of times the Board and each committee met during 2012. Each director attended at least 75% of the total

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number of meetings of the Board and of the committees on which he or she serves. In addition, all directors attended last year's annual meeting.

 
  Board of Directors   Nominating and Corporate Governance   Finance   Personnel and Compensation   Audit   Energy and Environmental Policy

Mr. Boyd*

  M   C           M    

Mr. Eaves

  M       M           M

Gov. Freudenthal*

  M   M       M       M

Ms. Godley*

  M   M           M   C

Mr. Hunt

  M   M       M       M

Mr. Hanrahan#

  M   M           M    

Mr. Jones

  M       M       M    

Mr. Leer

  C       M           M

Mr. Morris

  M       M       M    

Mr. Perry

  M   M           C    

Mr. Potter*

  M       M   M        

Mr. Sands

  M   M   C   M        

Mr. Taylor

  M   M       C        

Mr. Wold

  M           M       M

Number of 2012 meetings

  9   6   5   6   6   5

C            Chair            M            Member

*
Effective February 1, 2013, Mr. Boyd and Mr. Potter resigned from the Board. Ms. Godley replaced Mr. Boyd as Chair of the Nominating and Corporate Governance Committee, and Gov. Freudenthal became Chair of the Energy and Environmental Policy Committee. Ms. Godley remained a member of the Energy and Environmental Policy Committee.
#
Effective February 28, 2013, Mr. Hanrahan was appointed Vice-Chairman of the Audit Committee.

        The Nominating and Corporate Governance Committee is responsible for the following items:

        The Board has determined, in its judgment, that the Nominating and Corporate Governance Committee is composed entirely of independent directors as defined in the New York Stock Exchange listing standards. The Nominating and Corporate Governance Committee operates under a written charter adopted by the Board, a copy of which is published under "Corporate Governance" in the Investors section of our website at archcoal.com.

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        The Finance Committee reviews and approves fiscal policies relating to our financial structure, including our debt, cash and risk management policies. The Finance Committee also reviews and recommends to the Board appropriate action with respect to significant financial matters, including dividends on our capital stock, major capital expenditures and acquisitions, and funding policies of our employee benefit plans.

        The Personnel and Compensation Committee is responsible for the following items:

        The Board has determined, in its judgment, that the Personnel and Compensation Committee is composed entirely of independent directors as defined in the New York Stock Exchange listing standards and operates under a written charter adopted by the Board, a copy of which is published under "Corporate Governance" in the Investors section of our website at archcoal.com. The report of the Personnel and Compensation Committee can be found under "Personnel and Compensation Committee Report" in this proxy statement.

        The Audit Committee is responsible for the following items:

        The Audit Committee is directly responsible for the appointment, compensation and oversight of the work of our independent registered public accounting firm. The Board has determined, in its judgment, that the Audit Committee is composed entirely of independent directors in compliance with the New York Stock Exchange listing standards and Rule 10A-3 of the Securities Exchange Act of 1934. The Audit Committee operates under a written charter adopted by the Board, a copy of which is published under "Corporate Governance" in the Investors section of our website at archcoal.com.

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        The Board has also determined, in its judgment, that Mr. Hanrahan is an "audit committee financial expert" and that each member of the Audit Committee is "financially literate." Our Corporate Governance Guidelines do not currently restrict the number of audit committees of public companies on which members of our Audit Committee may serve. The Board has determined that none of the members of the Audit Committee currently serves on the audit committees of more than three public companies. The report of the Audit Committee can be found under "Audit Committee Report" in this proxy statement.

        The Energy and Environmental Policy Committee reviews, assesses and provides advice to the Board on current and emerging energy and environmental policy trends and developments that affect or could affect us. In addition, the Energy and Environmental Policy Committee makes recommendations concerning whether, and to what extent, we should become involved in current and emerging energy and environmental policy issues.


Director Retirement/Resignation Policies

        Our Board has a policy requiring members to resign from their position on the Board effective at the Company's annual meeting immediately following a member's 72nd birthday. Vacancies on the Board may be filled by a majority of the remaining directors. A director elected to fill a vacancy, or a new directorship created by an increase in the size of the Board, serves for the remainder of the full term of the class of directors in which the vacancy or newly created directorship occurred. As a result of this policy, Mr. Perry is retiring from the Board, effective immediately after the Annual Meeting.

        The Corporate Governance Guidelines requires any nominee for director in an uncontested election who receives a greater number of votes "withheld" from his or her election than votes "for" such election to offer his or her resignation to the Board. In the event a resignation is tendered, the Nominating and Corporate Governance Committee and the Board will evaluate the best interests of the Company and its stockholders and make a determination on the action to be taken with respect to such offered resignation, which may include (i) accepting the resignation, (ii) maintaining the director but addressing the underlying cause of the withheld votes, (iii) resolving that the director will not be re-nominated in the future for election, or (iv) rejecting the resignation. Following a determination by the Board, the Company will disclose the Board's decision in a filing with the SEC, a press release, or other broadly disseminated means of communication. Each nominee for election at the Annual Meeting has agreed to follow this policy as set forth in the Corporate Governance Guidelines.


Conflicts of Interest

        Our code of conduct reflects our policy that all of our employees, including the named executive officers, and directors must avoid any activity that creates, or may create, a conflict of interest that might interfere with the proper performance of their duties or that might be hostile, adverse or competitive with our business. In addition, each of our directors and executive officers is encouraged to notify our Board when confronted with any situation that may be perceived as a conflict of interest, even if the person does

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not believe that the situation would violate our Code of Business Conduct or Corporate Governance Guidelines. The Board will then determine, after consultation with counsel, whether a conflict of interest exists. Directors who have a material personal interest in a particular issue may not vote on any matters with respect to that issue.


Compensation Committee Interlocks and Insider Participation

        Gov. Freudenthal, Mr. Hunt, Mr. Potter, Mr. Sands, Mr. Taylor and Mr. Wold each served on the Personnel and Compensation Committee during the 2012 calendar year. None of the directors who served on the Personnel and Compensation Committee during 2012 has been an officer or employee of Arch. None of our executives has served on the Board or compensation committee of any other entity that has or has had one or more executives serving as a member of our Board or compensation committee.


Nomination Process for Election of Directors

        The Nominating and Corporate Governance Committee has responsibility for assessing the need for new directors to address specific requirements or to fill a vacancy. The committee initiates a search for a new candidate seeking input from our chairman and from other directors. The committee may retain an executive search firm to identify potential candidates. All candidates must meet the requirements specified in our Corporate Governance Guidelines. Candidates who meet those requirements and otherwise qualify for membership on our Board are identified, and the committee initiates contact with preferred candidates. The committee regularly reports to the Board on the progress of the committee's efforts. The committee meets to consider and approve final candidates who are then presented to the Board for consideration and approval. Our chairman or the chairman of the Nominating and Corporate Governance Committee may extend an invitation to join the Board.

        Stockholder recommendations should be submitted in writing to Robert G. Jones, our Secretary, and should include information regarding nominees required under our bylaws. Individuals recommended by stockholders will receive the same consideration received by individuals identified to the Nominating and Corporate Governance Committee through other means.


Communicating With the Board of Directors

        Our Board has established procedures intended to facilitate communication by stockholders and interested parties directly with the Board as a whole, any of our Board committees, our lead director, any other individual director or group of directors, including our non-employee directors as a whole. Such communications may be confidential or anonymous, and may be reported by phone to our confidential hotline at 866-519-1881 or by writing to the individual directors or group in care of Arch Coal, Inc., One CityPlace Drive, Suite 300, St. Louis, Missouri 63141, Attention: Senior Vice President-Law, General Counsel and Secretary. All such communications are promptly communicated to the Chairman, lead director, the chairman of the Audit Committee or our Director of Internal Audit, as appropriate.

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ELECTION OF DIRECTORS
(PROPOSAL NO. 1)

        A total of three directors are up for election at the Annual Meeting. The terms of each of these directors will expire at the Annual Meeting. Our Board has nominated each of those individuals for re-election for a three-year term that will expire in 2016.

        To the knowledge of the Board, no nominee will be unwilling or unable to serve as a director. All nominees have consented to be named in the proxy statement and to serve if elected. If, however, a nominee is unavailable for election, your proxy authorizes us to vote for a replacement nominee if the Board names one. As an alternative, the Board may reduce the number of directors to be elected at the Annual Meeting.


Recommendation of the Board

        The Board recommends a vote "FOR" each nominee.

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APPROVAL OF THE ARCH COAL, INC. OMNIBUS INCENTIVE PLAN
(FORMERLY KNOWN AS THE ARCH COAL, INC. 1997 STOCK INCENTIVE PLAN)
(PROXY ITEM NO. 2)

        The Company currently maintains the Arch Coal, Inc. 1997 Stock Incentive Plan, as amended and restated October 21, 2010 (the "Current Plan"). The Board believes that the Current Plan has been effective in attracting and retaining highly-qualified employees and other key contributors to the Company's business, and that the awards granted under the Current Plan have provided an incentive that aligns the economic interests of plan participants with those of our stockholders. The Personnel and Compensation Committee (the "Committee"), with the assistance of the Committee's independent compensation consultant, has reviewed the Current Plan to determine whether it remains a flexible and effective source of incentive compensation in terms of the number of shares of stock available for awards and in terms of its design, as well as whether it generally conforms with best practices in today's business environment.

        Based on its review, the Committee recommended that the Current Plan be amended and restated to:

        Accordingly, the Board approved, and recommends that the Company's stockholders approve, the Arch Coal, Inc. Omnibus Incentive Plan (formerly known as the Arch Coal, Inc. 1997 Stock Incentive Plan), as amended and restated effective January 1, 2013 (the "Omnibus Plan"). Upon approval of the Omnibus Plan by the Company's stockholders, the Omnibus Plan will replace the Current Plan and no new awards will be made under the terms of the Current Plan. However, any outstanding awards previously granted under the Current Plan will continue in effect after approval of the Omnibus Plan and will not be deemed amended or modified by the adoption and approval of the Omnibus Plan. If the Omnibus Plan is not approved by the Company's stockholders, the Current Plan will remain in effect according to its terms and the Company may continue to grant awards under that plan.

        Stockholder approval of the Omnibus Plan also is desired to ensure the tax deductibility by the Company of certain performance-based awards granted under the Omnibus Plan for purposes of Section 162(m) of the United States Internal Revenue Code of 1986, as amended (the "Code"), and to meet the listing requirements of the New York Stock Exchange.

        Currently there are 22,500,000 shares authorized under the Current Plan; however only a total of 4,542,538 shares remain available for issuance under the Current Plan. Based on the number of shares required to grant annual equity awards to our existing population of eligible employees based on historical grants, we project that this share pool will be exhausted in less than two years. The Company believes that the additional shares, in addition to the remaining share pool under the Current Plan, would create a share pool that will be sufficient for annual grants to eligible employees for approximately four years. Based on

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ISS's methodology, we have calculated that our three-year average equity expenditures (sometimes called "burn rate"), is 0.65%, which is significantly lower than ISS's applicable policy guidelines maximum burn rate of 4.02% for the Company's industry group. Given our burn rate, we believe that our share usage is reasonable in relation to our industry peers. Without the ability to provide equity compensation to our employees, the alignment between our stockholders and total compensation levels for our employees will be diminished.

        In addition, we periodically review the dilutive effect of our stock plans on stockholders (sometimes called "overhang"). As of February 1, 2013, assuming approval of the Omnibus Plan, the 8,400,000 additional shares proposed to be reserved for grants under the Omnibus Plan represent an overhang of 3.96%, and the overhang for the total shares reserved under the Omnibus Plan subject to outstanding awards or available for new grants would be 8.89%.

        For purposes of calculating the overhang in the previous paragraph, we are using "fully diluted overhang," which equals Amount A divided by Amount B, where Amount A equals the sum of all outstanding stock options, unvested restricted stock and restricted stock units, plus shares available for future grants under the plan, and Amount B equals the sum of total shares of our common stock outstanding plus Amount A. As of February 1, 2013: (i) the number of outstanding stock options and unvested restricted stock and restricted stock units equals 5,938,425; (ii) the number of shares available for future grants under the plan assuming approval of the Omnibus Plan equals 12,942,538; and (iii) the number of shares of our common stock outstanding equals 212,277,265.

        The material features of the Omnibus Plan are summarized below. The summary is qualified in its entirety by reference to the specific provisions of the Omnibus Plan, the full text of which is set forth as Appendix A to this proxy statement.


Administration

        The Omnibus Plan is administered by the Committee. Subject to the express provisions of the Omnibus Plan, the Committee has the authority, in its discretion, to interpret the Omnibus Plan, establish rules and regulations for its operation, select eligible individuals to receive awards and determine the form and amount and other terms and conditions of such awards.


Summary of Award Terms and Conditions

        Awards under the Omnibus Plan may include incentive stock options, nonqualified stock options, stock appreciation rights, restricted shares of common stock, restricted stock units, other stock-based awards and cash-based incentive awards.

        The Committee may grant to a participant options to purchase Company common stock that qualify as incentive stock options for purposes of Section 422 of the Code ("incentive stock options"), options that do not qualify as incentive stock options ("nonqualified stock options") or a combination thereof. The

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terms and conditions of stock option grants, including the quantity, price, vesting periods, and other conditions on exercise will be determined by the Committee.

        The exercise price for stock options will be determined by the Committee in its discretion, but may not be less than 100% of the fair market value of one share of the Company's common stock on the date when the stock option is granted. Additionally, in the case of incentive stock options granted to a holder of more than 10% of the total combined voting power of all classes of stock of the Company on the date of grant, the exercise price may not be less than 110% of the fair market value of one share of common stock on the date the stock option is granted. On March 1, 2013, the market price per share of the Company's common stock was $4.90 based on the closing price of the common stock on the New York Stock Exchange on such date.

        Stock options must be exercised within a period fixed by the Committee that may not exceed ten years from the date of grant, except that in the case of incentive stock options granted to a holder of more than 10% of the total combined voting power of all classes of stock of the Company on the date of grant, the exercise period may not exceed five years. The Omnibus Plan provides for earlier termination of stock options upon the participant's termination of service, unless extended by the Committee, but in no event may the options be exercised after the scheduled expiration date of the options.

        At the Committee's discretion, payment for shares of common stock on the exercise of stock options may be made in cash, shares of the Company's common stock held by the participant or in any other form of consideration acceptable to the Committee (including one or more forms of "cashless" or "net" exercise).

        The Committee may grant to a participant an award of stock appreciation rights, which entitles the participant to receive, upon its exercise, a payment equal to (i) the excess of the fair market value of a share of common stock on the exercise date over the stock appreciation right exercise price, multiplied by (ii) the number of shares of common stock with respect to which the stock appreciation right is exercised.

        The exercise price for a stock appreciation right will be determined by the Committee in its discretion, but may not be less than 100% of the fair market value of one share of the Company's common stock on the date when the stock appreciation right is granted. Stock appreciation rights must be exercised within a period fixed by the Committee that may not exceed ten years from the date of grant. Upon exercise of a stock appreciation right, payment may be made in cash, shares of Company stock or a combination of cash and stock.

        The Committee may award to a participant shares of common stock subject to specified restrictions ("restricted shares"). Restricted shares are subject to forfeiture if the participant does not meet certain conditions such as continued employment over a specified forfeiture period and/or the attainment of specified performance targets over the forfeiture period.

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        The Committee also may award to a participant units representing the right to receive shares of common stock in the future subject to the achievement of one or more goals relating to the completion of service by the participant and/or the achievement of performance or other objectives ("restricted units"). The terms and conditions of restricted share and restricted unit awards are determined by the Committee.

        For participants who are subject to Section 162(m) of the Code, the performance targets described in the preceding two paragraphs may be established by the Committee, in its discretion, based on one or more of the following measures (the "Performance Goals"):

Operating Income   Net Income
Debt Reduction   Earnings Per Share
Cash Flow   Cost Reduction
EBITDA   Environmental Compliance
Safety Performance   Operating Cost Per Ton
Production Rates   Total Stockholder Return
Financial Return Measures    

        The Performance Goals may be measured with respect to the Company or any one or more of its subsidiaries, divisions or affiliates, either in absolute terms or as compared to another company or companies, or an index established or designated by the Committee. The above terms will have the same meaning as in the Company's financial statements, or if the terms are not used in the Company's financial statements, either as applied pursuant to generally accepted accounting principles, or as used in the industry, as applicable.

        The Committee may grant equity-based or equity-related awards, referred to as "other stock-based awards," other than options, stock appreciation rights, restricted shares or restricted units. Such awards may include stock purchase rights, phantom stock arrangements, performance units or awards valued in whole or in part by reference to the Company's common stock. The terms and conditions of each other stock-based award will be determined by the Committee. With respect to participants subject to Section 162(m) of the Code, any applicable performance targets will be established, in the Committee's discretion, based on one or more of the Performance Goals described under the section titled "Restricted Shares and Restricted Units" above. Payment under any other stock-based awards will be made in common stock, cash or a combination of stock and cash, as determined by the Committee.

        The Omnibus Plan authorizes performance-based cash incentive compensation to be paid to "covered employees" within the meaning of Section 162(m) of the Code. The material terms of the cash-based incentive compensation feature of the Omnibus Plan are as follows:

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        The Committee may provide for the payment of dividend equivalents with respect to any stock-based awards under the Omnibus Plan other than options and stock appreciation rights. Any dividend equivalents payable with respect to performance-based awards will be subject to the same vesting and forfeiture conditions as the award itself.

        In the event of a "change in control" of the Company (as defined in the Omnibus Plan) or other corporate transactions having a similar effect on the Company, outstanding awards will be subject to the specific terms as may be set forth in the applicable award agreement, which may include assumption or substitution of such awards with equivalent awards, accelerated vesting (either on the change in control or the occurrence of both a change in control and other events such as the participant's involuntary termination), or settlement in cash or cash equivalents.

        Stock-based awards other than options and stock appreciation rights granted under the Omnibus Plan will vest over or have a minimum forfeiture period of no less than three years. However, if awards are performance-based, the minimum vesting or forfeiture period may be one year. In addition, the minimum vesting or forfeiture requirements will not apply to awards that are (i) granted to non-employee directors or consultants, (ii) accelerated or waived as a result of the participant's death, disability or other involuntary termination, or in the event of a change of control, or (iii) granted in connection with new hires. The Committee also will have discretion to award up to 5% of the shares reserved under the Omnibus Plan without regard to these minimum vesting or forfeiture periods.


Eligibility and Limitation on Awards

        The Committee may grant awards to any employee, non-employee director or consultant of the Company or any of its participating subsidiaries. While the selection of participants is within the discretion of the Committee, it is currently expected that participants will be primarily officers and salaried management level employees, as well as non-employee directors of the Company. It is presently contemplated that approximately 98 persons will be eligible to receive awards under the Omnibus Plan.

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        The maximum awards that can be granted under the Omnibus Plan to a single participant in any calendar year are (i) 1,250,000 shares in the form of options or stock appreciation rights, (ii) 500,000 shares in the form of restricted shares or restricted units, (iii) 500,000 shares in the form of other stock-based awards, and (iv) $5,000,000 in the form of cash-based awards. However, these limits will not apply if the Committee expressly determines that an award is not intended to qualify as performance-based under Section 162(m) of the Code.


Awards Granted Under the Omnibus Plan

        The future amounts that will be received by participants under the Omnibus Plan are not determinable. The stock awards granted to the Company's named executive officers under the Current Plan and outstanding as of December 31, 2012 are set forth in the Outstanding Equity Awards at December 31, 2012 Table found under "Executive Compensation." As of February 1, 2013, (i) the Company's executive officers as a group (nine officers) held outstanding stock option grants for 3,053,100 shares and restricted stock unit grants for 326,000 shares, (ii) the Company's non-employee directors as a group (twelve directors) held restricted stock unit grants for 28,960 shares, and (iii) our employees other than our executive officers (147 employees) held outstanding stock option grants for 2,185,378 shares and restricted stock unit grants for 156,197 shares.


Shares Subject to the Omnibus Plan

        The number of shares of the Company's common stock reserved for issuance with respect to awards under the Current Plan is 22,500,000. As of December 31, 2012, 4,542,538 shares remain available for new awards. The Board has authorized, subject to stockholder approval, an additional 8,400,000 shares of the Company's common stock to be available for new awards under the Omnibus Plan.

        Shares of common stock underlying awards granted under the Omnibus Plan or the Current Plan that expire or are forfeited or terminated for any reason (as a result, for example, of the lapse of an option or a forfeiture of restricted shares), as well as any shares underlying an award that is settled in cash rather than stock, will be available for future grants under the Omnibus Plan. In addition, shares of stock that are surrendered to or withheld by us in payment or satisfaction of the exercise price of an award or any tax withholding obligation with respect to an award will be available for future grants. Shares issued with respect to awards assumed by the Company in connection with acquisitions do not count against the total number of shares available for new awards under the Omnibus Plan. Shares to be issued under the Omnibus Plan will be authorized but unissued shares of common stock or shares of stock reacquired by the Company.


Anti-Dilution Protections

        In the event of any reorganization, merger, or consolidation, subdivision or consolidation of shares of stock or other capital readjustment, payment of stock dividend, stock split, spin-off, combination of shares or recapitalization or other increase or reduction of the number of shares of stock outstanding, or any similar event, the Committee is empowered to make appropriate and equitable adjustments to (i) the

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number and kind of shares of stock available under the Omnibus Plan, (ii) the number and kind of shares of stock subject to outstanding awards, (iii) the per-share exercise or other purchase price under any outstanding award, and (iv) the annual award or other maximum award limits applicable under the Omnibus Plan.


Clawback Provisions

        The Omnibus Plan provides that in the event of a restatement of the Company's financials due to material noncompliance with any financial reporting requirements under the law, a participant will be required to reimburse the Company for any amounts earned or payable in connection with an incentive award under the plan to the extent required by law and any applicable Company policies.


Amendment and Termination

        The Board may suspend, terminate, modify or amend the Omnibus Plan, provided that any amendment that would (i) increase the aggregate number of shares of stock which may be issued under the Omnibus Plan, (ii) change the method of determining the exercise price of option awards, or (iii) materially modify the eligibility requirements for the Omnibus Plan, will be subject to the approval of our stockholders, except for modifications or adjustments relating to the anti-dilution protection described above. No suspension, termination, modification or amendment of the Omnibus Plan may terminate a participant's existing award or materially and adversely affect a participant's rights under such award without the participant's consent. However, these provisions do not limit the Board's authority to amend or revise the Omnibus Plan to comply with applicable laws or governmental regulations.


No Repricing

        The Omnibus Plan specifically prohibits the repricing of stock options or stock appreciation rights without stockholder approval. For this purpose, a "repricing" means any of the following (or any other action that has the same effect as any of the following): (i) changing the terms of a stock option or stock appreciation right to lower its exercise price; (ii) any other action that is treated as a "repricing" under generally accepted accounting principles; and (iii) repurchasing for cash or canceling a stock option or stock appreciation right at a time when its exercise price is greater than the fair market value of the underlying stock in exchange for another award, unless the cancellation and exchange occurs in connection with a change in capitalization or similar change. Such cancellation and exchange would be considered a "repricing" regardless of whether it is treated as a "repricing" under generally accepted accounting principles and regardless of whether it is voluntary on the part of the participant.


Federal Income Tax Consequences

        The federal income tax consequences of the issuance and exercise of awards under the Omnibus Plan are as described below. The following information is only a summary of the tax consequences of the awards, and participants should consult with their own tax advisors with respect to the tax consequences inherent in the ownership or exercise of the awards, and the ownership and disposition of any underlying securities.

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        Incentive Stock Options.    A participant who is granted an incentive stock option will not recognize any taxable income for federal income tax purposes on either the grant or exercise of the incentive stock option. If the participant disposes of the shares purchased pursuant to the incentive stock option more than two years after the date of grant and more than one year after the exercise of the option by the participant (the required statutory "holding period"), (i) the participant will recognize long-term capital gain or loss, as the case may be, equal to the difference between the selling price and the exercise price; and (ii) the Company will not be entitled to a deduction with respect to the shares of stock so issued. If the holding period requirements are not met, any gain realized upon disposition will be taxed as ordinary income to the extent of the lesser of (1) the excess of the fair market value of the shares at the time of exercise over the exercise price, and (2) the gain on the sale. Also in that case, the Company will be entitled to a deduction in the year of disposition in an amount equal to the ordinary income recognized by the participant. Any additional gain will be taxed as short-term or long-term capital gain depending upon the holding period for the stock. A sale for less than the exercise price results in a capital loss. The excess of the fair market value of the shares on the date of exercise over the exercise price is, however, includable in the participant's income for alternative minimum tax purposes.

        Nonqualified Stock Options.    A participant who is granted a nonqualified stock option under the Omnibus Plan will not recognize any income for federal income tax purposes on the grant of the option. Generally, on the exercise of the option, the participant will recognize taxable ordinary income equal to the excess of the fair market value of the shares on the exercise date over the option price for the shares, subject to certain limits on the deductibility of compensation under the Code. The Company generally will be entitled to a deduction on the date of exercise in an amount equal to the ordinary income recognized by the participant. Upon disposition of the shares purchased pursuant to the stock option, the participant will recognize long-term or short-term capital gain or loss, as the case may be, equal to the difference between the amount realized on such disposition and the basis for such shares, which basis includes the amount previously recognized by the participant as ordinary income.

        Stock Appreciation Rights.    A participant who is granted stock appreciation rights will normally not recognize any taxable income on the receipt of the award. Upon the exercise of a stock appreciation right, (i) the participant will recognize ordinary income equal to the amount received (the increase in the fair market value of one share of our stock from the date of grant of the award to the date of exercise), and (ii) the Company will be entitled to a deduction on the date of exercise in an amount equal to the ordinary income recognized by the participant.

        Restricted Stock.    A participant will not be taxed at the date of an award of restricted shares, but will be taxed at ordinary income rates on the fair market value of any restricted shares as of the date that the restrictions lapse, unless the participant, within 30 days after transfer of such restricted shares to the participant, elects under Section 83(b) of the Code to include in income the fair market value of the restricted shares as of the date of such transfer. The Company will be entitled to a corresponding deduction, subject to certain limits on the deductibility of compensation under the Code. Any disposition of shares after the restrictions lapse will be subject to the regular rules governing long-term and short-term capital gains and losses, with the basis for this purpose equal to the fair market value of the shares at the

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end of the restricted period (or on the date of the transfer of the restricted shares, if the employee elects to be taxed on the fair market value upon such transfer). To the extent dividends are payable during the restricted period under the applicable award agreement, any such dividends will be taxable to the participant at ordinary income tax rates and will be deductible by the Company unless the participant has elected to be taxed on the fair market value of the restricted shares upon transfer, in which case they will thereafter be taxable to the participant as dividends and will not be deductible by the Company.

        Restricted Share Units.    A participant will normally not recognize taxable income upon an award of restricted share units, and the Company will not be entitled to a deduction until the lapse of the applicable restrictions. Upon the lapse of the restrictions and the settlement of the award, the participant will recognize ordinary taxable income in an amount equal to any cash received and the fair market value of any common stock received and the Company will be entitled to a deduction in the same amount, subject to certain limits on deductibility of compensation under the Code. Any disposition of shares after restrictions lapse will be subject to the regular rules governing long-term and short-term capital gains and losses, with the basis for this purpose equal to the fair market value of the shares at the end of the restricted period.

        Other Stock-Based Awards and Cash-Based Awards.    Normally, a participant will not recognize taxable income upon the grant of other stock-based awards or cash-based awards under the Omnibus Plan. Subsequently, when the conditions and requirements for the grants have been satisfied and the payment determined, any cash received and the fair market value of any common stock received will constitute ordinary income to the participant. The Company also will then be entitled to a deduction in the same amount, subject to certain limits on deductibility of compensation under the Code.


Effective Date

        The Omnibus Plan will be effective as of January 1, 2013, if approved by the stockholders of the Company. If not approved by the stockholders, no awards will be made under the Omnibus Plan and the Current Plan will continue in effect, subject to its existing terms and conditions.


Vote Required

        Approval of the Omnibus Plan will require the affirmative vote of a majority of the shares present and entitled to vote at the meeting, provided that the total vote cast on the proposal represents over 50% in interest of all of our securities entitled to vote on the proposal and assuming the presence of a quorum. If the stockholders do not approve the Omnibus Plan, it will not be implemented, but the Company reserves the right to adopt such other compensation plans and programs as it deems appropriate and in the best interests of the Company and its stockholders.


Recommendation of the Board

        The Board recommends a vote "FOR" Proposal No. 2.

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RATIFICATION OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
(PROPOSAL NO. 3)

        Ernst & Young LLP was our independent registered public accounting firm for 2012. The Audit Committee has appointed Ernst & Young LLP as our independent registered public accounting firm for 2013. The Audit Committee and the Board are requesting that stockholders ratify this appointment. In the event the stockholders do not ratify the selection of Ernst & Young LLP, the Audit Committee will reconsider its selection. Even if the selection is ratified, the Audit Committee, in its discretion, may direct the appointment of a different independent registered public accounting firm at any time during the fiscal year if the Audit Committee believes such a change would be in our best interests and the best interests of our stockholders. Representatives of Ernst & Young LLP are expected to be available at the Annual Meeting to make a statement if they desire to do so and to be available to respond to appropriate questions.


Fees Paid to Auditors

        The following table sets forth the fees accrued or paid to Ernst & Young LLP, the Company's independent registered public accounting firm, for the years ended December 31, 2012 and December 31, 2011:

 
  Fee  
Service
  2012   2011  

Audit(1)

  $ 2,367,143   $ 2,399,372  

Audit-Related(2)

    76,000     46,500  

Tax(3)

        151,136  

All Other

         

(1)
Audit services performed by Ernst & Young LLP in 2012 and 2011 included the annual financial statement audit (including required quarterly reviews) and other procedures performed by Ernst & Young LLP to form an opinion on our consolidated financial statements and to issue their consent to include their audit opinion in registration statements we filed with the SEC. Audit services in 2012 and 2011 also included the deliverance of comfort letters by Ernst & Young LLP in connection with the issuance of senior notes in November 2012 and with the issuance of common stock and senior notes in June 2011. Audit services in 2012 also include fees related to the statutory audits of our international subsidiaries.

(2)
Audit-related fees in 2012 relate to the audit of a carve-out entity in anticipation of a divestiture and in 2011 relate to due diligence procedures performed by Ernst & Young LLP in connection with potential business acquisitions.

(3)
Fees for tax services and related expenses in 2011 related to tax advice and tax planning services performed by Ernst & Young LLP.

        The Audit Committee has adopted an audit and non-audit services pre-approval policy that requires the Audit Committee, or the chairman of the Audit Committee, to pre-approve services to be provided by our independent registered public accounting firm. The Audit Committee will consider whether the services to be provided by the independent registered public accounting firm are prohibited by the SEC's rules on auditor independence and whether the independent registered public accounting firm is best positioned to

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provide the most effective and efficient service. The Audit Committee is mindful of the relationship between fees for audit and non-audit services in deciding whether to pre-approve such services. The Audit Committee has delegated to the chairman of the Audit Committee pre-approval authority between meetings, and the chairman must report any pre-approval decisions to the full Audit Committee at the next regularly scheduled meeting. All non-audit services performed by Ernst & Young LLP in 2012 and 2011 were pre-approved in accordance with the procedures established by the Audit Committee.


Recommendation of the Board

        The Board recommends a vote "FOR" Proposal No. 3.

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ADVISORY RESOLUTION TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION
(PROPOSAL NO. 4)

        The Board has adopted a policy to hold an annual advisory vote on executive compensation until the next required vote on the frequency of such advisory votes. We are required to hold such frequency votes at least every six years. We are seeking advisory stockholder approval of the compensation of named executive officers as disclosed in the section of this proxy statement entitled "Executive Compensation." Stockholders are being asked to vote on the following advisory resolution:

        "RESOLVED, that the stockholders advise that they approve the compensation of Arch Coal, Inc.'s named executive officers, as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission (which disclosure includes the Compensation Discussion and Analysis, the compensation tables, and any related material)."

        The compensation of our named executive officers (NEOs) is designed to tie a substantial percentage of a NEO's compensation to the attainment of financial and other performance measures that, the Board believes, promote the creation of long-term stockholder value and position the Company for long-term success. As described more fully in the Compensation Discussion and Analysis (CD&A), the total mix of compensation that the Company offers its NEOs is designed to enable the Company to attract and maintain top talent while, at the same time, creating a close relationship between performance and compensation. The Personnel and Compensation Committee and the Board believe that the design of the program, and as a result the compensation awarded to NEOs under the current program, fulfills this objective.

        Stockholders are urged to read the CD&A section of this proxy statement, which discusses in detail how our compensation policies and procedures implement our compensation philosophy.

        Although the vote on this Proposal No. 4 is non-binding, the Board will review the voting results in connection with its ongoing evaluation of the Company's compensation program. The final decision on the compensation and benefits of our NEOs remains with the Board.


Recommendation of the Board

        The Board recommends a vote "FOR" the following resolution at the Annual Meeting:

"RESOLVED, that the stockholders advise that they approve the compensation of Arch Coal, Inc.'s named executive officers, as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission (which disclosure includes the Compensation Discussion and Analysis, the compensation tables, and any related material)."

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OTHER MATTERS

        The Company knows of no other matters to be submitted to the stockholders at the Annual Meeting. If any other matters properly come before the stockholders at the Annual Meeting, it is the intention of the persons named on the proxy to vote the shares represented thereby on such matters in accordance with their best judgment.


EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

        This Compensation Discussion and Analysis describes the material elements of compensation to each of the following named executive officers of Arch Coal, Inc. (the "named executive officers" or "NEOs"), for fiscal year 2012:

Name
 
Title
  *Years of Service
John W. Eaves   President and Chief Executive Officer   30

John T. Drexler

 

Senior Vice President and Chief Financial Officer

 

15

Paul A. Lang

 

Executive Vice President and Chief Operating Officer

 

28

David N. Warnecke

 

Senior Vice President — Marketing and Trading

 

29

Robert G. Jones

 

Senior Vice President — Law, General Counsel and Secretary

 

21

Steven F. Leer(1)

 

Chairman and Former Chief Executive Officer

 

32

(1)
Mr. Leer retired as Chief Executive Officer effective as of April 26, 2012.

*
Includes the following years of service attributable to employment with one or more of our predecessor entities: Mr. Eaves — 15 years, Mr. Lang — 13 years, Mr. Jones — 6 years, Mr. Warnecke — 13 years and Mr. Leer — 16 years.

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        Our compensation programs are designed to attract, motivate and retain highly talented executives. We believe that our success in creating long-term value for our stockholders depends on our ability to closely align the interests of our named executive officers with the interests of our stockholders. We encourage sustained long-term profitability and increased stockholder value by linking a significant portion of each named executive officer's compensation to our achievement of financial and operating performance, which are not guaranteed. We use equity-based awards and other mechanisms to align the long-term interests of our named executive officers with those of our stockholders.

        We have determined the type and amount of compensation for each NEO after considering a variety of factors, including the executive's position and level of responsibility within our organization, comparative market data and other external market-based factors. The Committee uses this information when establishing compensation in order to achieve a comprehensive package that emphasizes pay-for-performance and is competitive in the marketplace. For the 2012 fiscal year, the pay mix at target for the CEO and other NEOs for fiscal 2012 is displayed below.

GRAPHIC


(1)
Pay mix for Mr. Eaves, based on compensation levels set after being appointed as CEO, effective April 26, 2012. Does not include pay mix for Mr. Leer, who retired as Chief Executive Officer effective as of April 26, 2012. The pay mix at target levels for Mr. Leer prior to April 26, 2012 was 18% base salary, 20% annual incentive and 62% long-term incentive.

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GRAPHIC


(2)
Average pay mix for Mr. Drexler, Mr. Jones, Mr. Lang and Mr. Warnecke.

        During 2012 we employed the following compensation practices, which highlight the Company's effort to align the interests of our named executive officers with the interests of our stockholders.

        The Committee uses current compensation levels, performance, long-term career goals, future leadership potential and succession planning, among other factors, in determining appropriate compensation levels for our NEOs. The Committee does not use a formula to weight these factors, but instead uses these factors to provide context within which to assess the significance of comparative market data and to differentiate the level of compensation among our NEOs.

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        After the end of the performance period to which a particular incentive award relates, the Committee reviews our performance relative to the applicable performance targets and recommends payouts based on that performance. The Committee generally retains discretion to recommend payouts that are above or below actual performance levels for the applicable performance period. However, with respect to awards intended to qualify as performance-based compensation under Section 162(m) of the Code, the Committee retains only the discretion to reduce award payouts. For purposes of determining the amount of a payout to recommend, the Committee may also consider infrequent or non-recurring items that are not reflective of ongoing operations or the effects of major corporate transactions or other items that the Committee determines, in its judgment, significantly distort the comparability of our actual performance against the performance targets.

        Annually, the Committee reviews the design of our named executive officer compensation program, including whether the risks arising from our compensation policies and practices are reasonably likely to have a material adverse effect on us. In doing so, the Committee assesses whether compensation programs used in prior years have successfully achieved our compensation objectives. The Committee also considers the extent to which our compensation program is designed to achieve our long-term financial and operating goals. The Committee has retained the independent compensation consulting firm listed below under "Role of Compensation Consultants" to help analyze certain comparative market data. Certain members of management participate in this process by assembling and summarizing data used by the Committee. The Committee and its compensation consultant reviewed our compensation policies and practices, and the Committee has determined that the risks arising from our compensation policies and practices are not reasonably likely to have a material adverse effect on the Company.

        During 2012, the Committee retained Meridian Compensation Partners, LLC ("Meridian") as an independent compensation consulting firm to provide the Committee advice on executive compensation matters. Meridian assisted the Committee in the development of a compensation peer group, which is described in more detail below. Meridian also advised the Committee on competitive compensation practices, mix of compensation elements and comparative market data, which the Committee considered in addressing and determining the appropriate levels of compensation for each NEO relative to the marketplace.

        The Committee has reviewed the independence of Meridian and has determined that Meridian has no conflicts of interest. In particular, Meridian does not provide any other services to the Company. The Committee has sole authority to retain or replace Meridian in its role as its consultant. The Committee regularly reviews the performance and independence of Meridian, as well as fees paid. A representative of Meridian attends committee meetings as requested to serve as a resource on compensation matters. In order to encourage independent review and discussion of compensation matters, the Committee has the authority to, and does from time to time, meet with Meridian in executive session.

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        Our chief executive officer and vice president of human resources receive compensation peer group information from our compensation consultant, and then provide the Committee with compensation recommendations for our NEOs, other than the chief executive officer, including base salary, annual cash incentive opportunity and long-term incentive opportunities. Management provides a current market value for each proposed element and for the total targeted value, as well as the median and other select percentile market values for the named executive officers' peers. Management obtains the comparative market information primarily from materials provided by our compensation consultant. Our chief executive officer does not recommend his own base salary or target or actual payout amounts under our annual or long-term incentive awards.

        Annually, the Committee reviews the performance of our chief executive officer and makes recommendations to the Board regarding his compensation. In doing so, the Committee uses information provided by our compensation consultant and certain historical financial and operating performance data provided by management. The Committee believes that the compensation opportunities granted to our chief executive officer, while higher in the aggregate than compensation granted to our other executives, are appropriate taking into consideration our chief executive officer's overall leadership responsibilities.

        For the 2012 compensation program, based on information provided by Meridian, the Committee evaluated and defined three appropriate peer groups: (i) the Coal/Mining Peer Group; (ii) the Energy Peer Group; and (iii) General Industry Peer Group. Each of these peer groups are described below.

        Coal/Mining Peer Group.    Based on the uniqueness of the mining industry and the limited number of direct peer companies available, the Committee approved the use of three compensation peer groups to be reviewed together. The primary peer group, the Coal/Mining Peer Group, consisted of companies within

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the coal/mining industry. These companies were selected because they are the most direct competitors for industry talent. The Coal/Mining Peer Group consisted of the following companies:

Name:
  2011 Revenue
($ in thousands)
 
Alliance Resource Partners, L.P.      1,610  
Alpha Natural Resources, Inc.      3,917  
Cliffs Natural Resources, Inc.      4,694  
Cloud Peak Energy, Inc.      1,371  
CONSOL Energy Inc.      5,163  
Martin Marietta Materials     1,783  
Minerals Technologies, Inc.      1,002  
Natural Resource Partners L.P.      301  
Patriot Coal Corporation     2,035  
Peabody Energy Corporation     6,860  
Vulcan Materials Company     2,559  
Walter Energy, Inc.      1,588  
   
75th Percentile     4,111  
Median     1,909  
25th Percentile     1,533  
Arch Coal, Inc.     3,186  

        Energy Peer Group.    Due to the limited number of peer companies in the Coal/Mining Peer Group, and our size relative to the median of that peer group, the Committee developed a second peer group, the Energy Peer Group, from which to derive additional benchmarking data. This peer group was selected by

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narrowing the Energy and Utilities GICS codes to companies within a relevant revenue range compared to Arch. The Energy Peer Group consisted of the following companies:

Name:
  2011 Revenue
($ in thousands)
 

AGL Resources, Inc. 

    2,373  

ALON USA Energy, Inc. 

    3,976  

Ameren Corporation

    7,638  

Cameron International Corporation

    6,135  

Diamond Offshore Drilling, Inc. 

    3,323  

DTE Energy Company

    8,557  

El Paso Corporation

    4,616  

Noble Energy, Inc. 

    2,904  

Pioneer Natural Resources Company

    1,803  

PNM Resources, Inc. 

    1,674  

Pride International, Inc. 

    1,460  

Questar Corporation

    1,124  

Sempra Energy

    9,003  

Southern Union Company

    2,490  

Southwestern Energy Company

    2,611  
   

75th Percentile

    5,375  

Median

    2,904  

25th Percentile

    2,088  

Arch Coal, Inc.

    3,186  

        General Industry Peer Group.    Lastly, general industry compensation data was reviewed by the Committee to provide an additional reference point. This data was based on a broad spectrum of public companies (excluding financial services and retail companies) that had median revenues similar to Arch.

        The Committee assesses the appropriateness of the peer groups used to benchmark our compensation programs on an annual basis and adds or subtracts members of the peer groups as appropriate.

        When establishing or modifying our compensation programs and arrangements for 2012 and our ongoing compensation philosophies and practices, the Committee took into account the results of the stockholder advisory vote on executive compensation, or "say on pay" vote, that occurred at our annual meeting in 2012. In that vote, approximately 97% of the votes cast approved our compensation programs and policies. The Committee believes that the strong support from our stockholders for the say on pay vote is evidence that the Company's stockholders overall believe that our pay-for-performance policies are working and that those policies are aligned with our stockholders' interests.

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        We use the following compensation elements to achieve the compensation objectives established by the Committee:

        The Committee believes that a higher percentage of total compensation for those executives with a greater ability to influence the achievement of our financial and operating objectives should be variable and, therefore, subject to greater risk. In general, as the position and amount of responsibility for an executive increases, a greater percentage of that executive's total compensation will be variable. Executives with the highest level and amount of responsibility generally have the lowest percentage of their total compensation fixed as base salary and the highest percentage of their total compensation dependent upon our performance, as reflected in short- or long-term incentive awards.

        The following table shows the allocation of total targeted compensation for each NEO for each of the last three years:

 
  % of Target 2010 Compensation(1)   % of Target 2011 Compensation(1)   % of Target 2012 Compensation(1)  
 
  Fixed   Performance-
Based(2)
  Fixed   Performance-
Based(2)
  Fixed   Performance-
Based(2)
 
 
  Base
Salary
  Annual   Long-
Term
  Base
Salary
  Annual   Long-
Term
  Base
Salary
  Annual   Long-
Term
 

John W. Eaves

    19 %   15 %   66 %   18 %   17 %   65 %   18 %   18 %   64 %

John T. Drexler

    23 %   14 %   63 %   22 %   18 %   60 %   22 %   18 %   60 %

Paul A. Lang

    23 %   14 %   63 %   22 %   18 %   60 %   21 %   17 %   62 %

David N. Warnecke

    23 %   14 %   63 %   23 %   14 %   63 %   23 %   14 %   63 %

Robert G. Jones

    25 %   13 %   62 %   25 %   13 %   62 %   24 %   15 %   61 %

Steven F. Leer(3)

    18 %   18 %   64 %   18 %   20 %   62 %   18 %   20 %   62 %

(1)
For purposes of determining total compensation, we have included base salary, targeted annual cash incentives and the value of targeted long-term incentive awards. We have not considered the increased value of other compensation elements such as pension plans, nor have we assigned cash values to perquisites.

(2)
In determining the percentages shown above, the annual cash incentives and the long-term incentive awards are assumed to be paid at target levels.

(3)
Mr. Leer retired as Chief Executive Officer effective as of April 26, 2012. The percentage amounts in this table reflect the percentages for Mr. Leer prior to his resignation as Chief Executive Officer.

        Base Salary —  We provide each named executive officer with an annual base salary. Base salaries for our named executive officers depend on the executives' experience and scope of responsibilities as well as the median market data for comparable job positions. We increase base salary primarily in response to notable

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achievements or for changes in scope of responsibilities. In addition, we may increase base salary to remain competitive in the marketplace.

        Annual Cash Incentive Program —  The Committee intends for our annual cash incentive program to focus our organization on meeting certain financial and operating objectives by rewarding those key employees with the greatest ability to influence our results.

        Early each year, the Committee considers whether annual cash incentives should be awarded. If so, the Committee recommends to the board of directors the group of employees eligible to receive an award for that year. Annual cash incentive awards contain various incentive levels based on the participant's accountability and impact on our performance, with target opportunities established as a percentage of base salary.

        The following table shows the target opportunities available to the NEOs as a percentage of their base salaries and the actual payouts as a percentage of their base salaries each of the last three years:

 
  2010   2011   2012  
Name
  Target as % of
Base Salary
  Actual Payout
as % of Base
Salary
  Target as % of
Base Salary
  Actual Payout
as % of Base
Salary
  Target as % of
Base Salary
  Actual Payout
as % of Base
Salary
 

John W. Eaves

    80 %   136 %   90 %   98 %   98 %   33 %

John T. Drexler

    60 %   102 %   80 %   87 %   80 %   27 %

Paul A. Lang

    60 %   102 %   80 %   83 %   84 %   28 %

David N. Warnecke

    60 %   102 %   60 %   66 %   60 %   20 %

Robert G. Jones

    50 %   85 %   50 %   55 %   60 %   20 %

Steven F. Leer(1)

    100 %   170 %   110 %   120 %   94 %   32 %

(1)
Actual payout for Mr. Leer in 2012 represent actual payout divided by base salary for Mr. Leer for the full 2012 calendar year.

        Payouts under our annual cash incentive program depend upon our earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA), earnings per share, safety and environmental performance and, for some employees, our production costs per ton. Some or all of these performance measures may be used for our other employees, and the performance measures may differ for various groups or classifications of employees. By identifying meaningful performance measures and by assigning certain measures greater weight, we are able to more closely align compensation to the achievement of those business objectives over which particular employees have the greatest impact.

        We establish the financial performance levels based on budgeted earnings for the upcoming year. We establish safety and environmental performance targets based on our prior performance history and the prior performance history of our peers, with the objective of promoting improvements in those areas. In order to inspire performance above the targets set and to acknowledge certain levels of performance below those targets, annual cash incentive awards contain threshold, target and maximum levels for each performance measure. Payouts under the awards depend upon the achievement of our objectives.

        If the target level of performance is achieved with respect to a particular performance measure, the applicable payout percentage for that performance measure will equal 100%. Achievement at the threshold

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or maximum performance level results in an applicable payout percentage that varies based on the performance measure, as shown in the table below. We may prorate payouts under the annual cash incentive awards for performance levels that fall between the threshold, target and maximum performance levels.

Performance Measure
  Threshold   Target   Maximum  

Adjusted EBITDA

    25 %   100 %   200 %

Earnings per share

    25 %   100 %   200 %

Safety Incident Rate

    50 %   100 %   225 %

Environmental

    50 %   100 %   225 %

        The following table shows the relative weighting of the performance measures and the threshold, target and maximum levels of performance used for annual incentive awards paid to the NEOs for the 2012 fiscal year:

 
   
  Performance Goals  
 
  Relative
Weighting
 
Performance Measure(1)
  Threshold   Target   Maximum  

Adjusted EBITDA

    50 % $ 912,030,000   $ 1,172,610,000   $ 1,563,480,000  

Earnings per share

    20 % $ 1.27   $ 1.63   $ 2.17  

Safety Incident Rate

    15 %   2.32     2.21     2.03  

Environmental

    15 %   74 NOVs     70 NOVs     66 NOVs  

(1)
The performance measures are defined and evaluated based on the following:

"Adjusted EBITDA" is determined based on our earnings before interest, taxes, depreciation and amortization, determined on a consolidated basis in accordance with generally accepted accounting principles;

"Earnings per share" is determined based on our earnings per share of our common stock outstanding, determined on a consolidated basis in accordance with generally accepted accounting principles;

"Safety Incident Rate" is determined based on our historical performance, and is the number of reportable injuries per 200,000 man hours. There is no payout for this performance measure if there is a fatality during the fiscal year; and

"Environmental" is determined based on our historical performance, and NOVs, or Notices of Violation, are determined based on the number of actual Notices of Violation received by the Company and its subsidiaries.

        In early 2013, the Committee evaluated the level of achievement of the various performance measures for 2012 and made the following determinations:

Performance Measure
  Actual Performance   Applicable Payout
Percentage
  Relative
Weighting
  Weighted Payout
Percentage
 

Adjusted EBITDA

  $ 688,454,000     0 %   50 %   0 %

Earnings per share

  $ (3.24 )   0 %   20 %   0 %

Safety Incident Rate

    1.46 (1)   0 %   15 %   0 %

Environmental

    17 NOVs     225 %   15 %   33.75 %

(1)
There is no payout on Safety Incident Rate due to a fatality in 2012.

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        Based on the actual performance as set forth above, the following cumulative amounts of payouts were made under the annual cash incentive plan for the Company's 2012 performance:

Name
  Target as % of
Base Salary
  Actual
Payout
as % of Base
Salary
  Dollar Amount
of Payout
 

John W. Eaves

    98 %   33 % $ 257,085  

John T. Drexler

    80 %   27 % $ 121,500  

Paul A. Lang

    84 %   28 % $ 170,156  

David N. Warnecke

    60 %   20 % $ 81,000  

Robert G. Jones

    60 %   20 % $ 73,913  

Steven F. Leer

    94 %   32 % $ 271,485  

        Long-Term Incentive Program —  Our long-term incentive program is designed to achieve the compensation objectives established by the Committee. The Committee intends for our long-term incentive program to promote decision-making that creates long-term value for our stockholders. The Committee believes that an effective long-term incentive program should also create strong retention incentives for those key employees who are most likely to influence our long-term performance. In addition, we attempt to align the long-term interests of our executives with those of our stockholders by tying a portion of total compensation to appreciation in the value of our common stock.

        The Committee has retained flexibility in the types of awards that it may use to implement our long-term incentive program. We have used performance units and performance-contingent phantom stock in order to promote the achievement of our long-term financial and operating performance objectives. In addition, we have used restricted stock, restricted stock units, stock options and other awards tied to the value of our common stock in order to align the long-term interests of our executives and our stockholders and for retention purposes. In determining the aggregate value of long-term awards and the mix of those awards for our executives, the Committee considers the executives' scope of responsibility, peer group market data, market competition for the particular position, relative internal equity and leadership continuity.

        The following table shows the types of awards that we have included as a component of our long-term incentive program for each of the last three years and for 2013, and the percentage of targeted long-term compensation associated with each award:

Compensation Objective
  2010   2011   2012   2013  

Performance units

    50 %   20 %   30 %   30 %

Restricted stock/restricted stock units

        20 %   35 %   35 %

Stock options

    50 %   60 %   35 %   35 %

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        The following is a description of each of these types of awards and the performance or vesting provisions included in the 2012 awards:

        Performance Units —  We use performance units as a component of our long-term incentive program in order to motivate our NEOs and other key employees to focus on our operating performance over a multi-year period. Performance units generally provide an opportunity for key employees to earn compensation upon the successful achievement of our objectives over a three-year period. The Committee has also retained discretion to further align the long-term interests of our stockholders and executives by providing that payouts under performance units may be in the form of cash, stock or a combination of the two.

        Payouts under the performance units granted will depend upon our achievement of certain safety and environmental objectives over a three-year period. For 2012, the Board, upon the recommendation of the Committee, determined to use performance units for 30% of the value of the long-term incentive program. The actual number of performance units granted to each NEO is set forth in the table under "Grants of Plan-Based Awards for the Year Ended December 31, 2012." Below is a table that shows the target and maximum performance goals for performance units granted in 2012. No payout is made for results below the target level. Half of the performance units granted to each NEO are tied to achievement of safety performance goals and half of the performance units are tied to achievement of environmental performance goals.

 
   
 
Environmental Compliance
 
Safety Incident Rate
   
  Notices of Violation  
Payout Factor
  Incident Rate  
Payout Factor
 
Target (100%)   2.17   Target (100%)     56  
Maximum (200%)   2.06 +(1)   Maximum (200%)     53  

(1)
To achieve Safety Incident Rate maximum payout, the incident rate must be 2.06 or lower and the Safety Incident Rate must be better than the three-year average of our competitors.

        As indicated above, performance units represented 50% of the long-term incentive program for 2010. In early 2013, the Committee evaluated the level of achievement of the various performance measures for the 2010-2012 performance period and made the following determinations:

Performance Measure
  Target   Actual
Performance
  Relative
Weighting
  Weighted Payout
Percentage
 

Total Shareholder Return

  50th Percentile   29th Percentile     70 %   11 %

Safety Incident Rate

  2.41   1.87     15 %   30 %

Environmental

  57 NOVs   34 NOVs     15 %   30 %

        Total amounts paid to each NEO under the 2010 long-term incentive awards for the Company's 2010-2012 performance are set forth on page 53.

        Restricted Stock Units and Restricted Stock —  We use restricted stock and restricted stock units as a component of our long-term incentive program designed to align the long-term interests of our stockholders and our executives and for retention purposes. Restricted stock units and restricted stock can provide a significant retention incentive since they have real, current value that an executive may forfeit if his or her

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employment terminates before the awards vest. In addition, restricted stock units and restricted stock satisfy our compensation objectives by promoting long-term decision-making that results in appreciation in the value of our common stock.

        When awarded, we generally condition receipt of the common stock underlying these awards on the executive's continued employment. Restricted stock units and restricted stock usually all vest at the end of a specific period, generally three or four years. In determining the conditions associated with these types of awards, the Committee considers the market competition for the executive's position, the ability of the executive to influence our long-term financial and operating performance and succession planning. The Committee has retained discretion whether or not to consider the number of shares of our common stock held by an executive in recommending subsequent awards of restricted stock units or restricted stock. The Board, upon the recommendation of the Committee, awarded restricted stock units as a component of the long-term incentive plan for 2012 in an amount equal to 35% of the overall long-term incentive. The actual number of shares of restricted stock units granted to each NEO is set forth in the table under "Grants of Plan-Based Awards for the Year Ended December 31, 2012." All restricted stock awards granted in 2012 were subject to a three-year cliff vesting schedule.

        Stock Options —  In 2012, the Board, upon the recommendation of the Committee, determined to use stock options as 35% of the value of the long-term incentive program. The actual number of stock options granted to each NEO is set forth in the table under "Grants of Plan-Based Awards for the Year Ended December 31, 2012." In making its recommendation, the Committee determined that long-term stock price appreciation was reflective of our achievement of the long-term performance objectives established by our Board.

        Stock options represent the opportunity to buy shares of our common stock at a fixed price at a future date. Under the terms of our stock incentive plan, the exercise price of stock options cannot be less than the fair market value of a share of our common stock on the date of grant. As such, stock options have value for our executives only if the price of our common stock increases after the date of grant.

        Our policy is to issue stock options on the dates on which the awards are approved by the Board and to set the exercise prices of those awards equal to the closing market price of our common stock on that date. In order to provide a retention incentive, our stock options vest over a stated period measured from the date of grant. Depending upon the strength of the retention incentive intended by the Committee, stock options may vest over three or four years. The stock options awarded in 2012 vest in one-third increments over the next three years. As is typical, the stock options we grant expire after ten years, except in limited circumstances.

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        Perquisites and Other Benefits —  We provide a limited number of perquisites and other benefits to our NEOs. The purpose of perquisites and other benefits of a similar nature is to attract and retain executives with a comprehensive compensation package. We provide the following perquisites to a limited number of our executives:

        Financial, Estate and Tax Planning Services —  We provide our NEOs with financial, estate and tax planning services in order to assist them with the complexities of the various compensation arrangements that we maintain, retirement planning and compliance with our stock ownership guidelines.

        Club Membership Dues —  We provide a limited number of NEOs with memberships for country clubs. We intend for these club memberships to provide access to facilities that our NEOs may use for more private business and business entertainment meetings.

        Other Perquisites —  We provide certain NEOs with a limited personal use of our corporate aircraft. For more information about these perquisites, including the incremental cost to us for providing them, refer to the table included as a footnote to the Summary Compensation Table below.

        The above perquisites are taxable to the executives. Executives do not receive any tax gross up payments on perquisites.

        Participation in Benefit Plans and Other Compensation Arrangements —  Each of our NEOs is eligible to participate in the same health and welfare plans as our other eligible employees. These plans include medical and dental insurance, life, travel and accidental death and dismemberment insurance, short-and long-term disability coverage and participation in our qualified defined benefit pension plan and qualified defined contribution plan. In addition, each of our NEOs is eligible to participate in our supplemental retirement plan and non-qualified deferred compensation plan, and each of our NEOs is subject to a change-in-control agreement.

        The following is a summary of certain benefit plans and other compensation arrangements available to our NEOs but for which our other employees may not be eligible:

        Supplemental Retirement Plan Benefits —  We sponsor a tax-qualified defined benefit plan covering all of our eligible employees, including our executives. The Internal Revenue Code limits the amount of qualified retirement benefits we may provide for certain employees. As a result, we sponsor a supplemental retirement plan that provides eligible employees, including the executives named in this proxy statement, with additional retirement benefits that would otherwise be available under our defined benefit pension plan but for the limitations contained in the Internal Revenue Code. For more information about our defined benefit pension plan and our supplemental retirement plan, including the accumulated benefits attributable to the executives named in this proxy statement, you should see "Pension Benefits" below.

        Non-Qualified Deferred Compensation Plan —  We sponsor a tax-qualified defined contribution plan covering all of our eligible employees, including the NEOs. Under this plan, eligible employees, including the NEOs, may contribute up to 50% of their base salaries to the plan, subject to certain limitations contained in the Internal Revenue Code. We contribute one dollar for each dollar contributed by our employees, up to a maximum of 6% of employees' base salaries. The Internal Revenue Code limits the

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amount certain of our employees may contribute to our tax-qualified defined contribution plan in any tax year. As a result, we sponsor a non-qualified deferred compensation plan that allows eligible employees, including the executives named in this proxy statement, to defer receipt of a portion of their base salaries and certain annual and long-term cash incentive awards not subject to these limits. The deferred compensation plan provides higher-paid employees with the full company matching contribution to which they would otherwise be entitled under our defined contribution plan but for the limitations contained in the Internal Revenue Code. For more information about our deferred compensation plan, including information about amounts attributable to the executives named in this proxy statement, you should see "Non-Qualified Deferred Compensation" below.

        Change-in-Control Agreements —  In order to provide certain key employees, including the NEOs, with some financial security in the event their employment with our organization is terminated without cause or under certain circumstances following a change of control, we provide those employees with change of control agreements that provide for cash payments and certain other severance benefits upon a qualifying termination. We believe that the change of control agreements we maintain with our key employees provide a meaningful mechanism by which to retain those individuals who are most capable of affecting our future performance. All NEOs have amended and restated their change of control agreements in 2012 to eliminate tax gross up provisions. For more information about the change of control agreements with the executives named in this proxy statement, you should see "Potential Payments Upon Termination of Employment or Change-in-Control" below.

        Stock Ownership Guidelines —  Our Board has adopted stock ownership guidelines that are intended to promote meaningful stock ownership by our executives. These guidelines specify a number of shares of our common stock, including unvested restricted stock, unvested restricted stock units, shares held through our qualified defined contribution plan and hypothetical shares of our common stock held through our non-qualified deferred compensation plan, that our executives must accumulate within five years of becoming an executive officer of the Company. The specific share holding guidelines are determined based on a multiple of base salary ranging from one to five times, with the higher multiples applicable to the executives having the highest levels of responsibility. In 2012, the Company increased the stock ownership guidelines for the CEO to five times base salary, which was previously set at three times base salary. As of December 31, 2012, each of the NEOs are in compliance with the stock ownership goals adopted by the Board.

Impact of Tax Considerations on Compensation

        The Internal Revenue Code limits the amount of the tax deduction we are entitled to take for compensation paid to the executives named in this proxy statement for a particular year unless the compensation meets specific standards. We may deduct compensation in excess of $1 million if compensation is "performance-based" and is paid pursuant to a plan that is stockholder approved and meets certain requirements. In developing, implementing and administering our executive compensation program, the Committee considers the impact of these limits and balances the desire to maximize the deductibility of compensation with the goal of attracting, motivating and retaining highly-talented executives.

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        We generally seek to maximize the tax deductibility of all elements of compensation. However, in light of the need to maintain flexibility in administering our executive compensation program, the Committee retains discretion to recommend to the board of directors compensation in excess of the limits, even if a portion of it may not be deductible.


Summary Compensation Table

        The following table is a summary of compensation information for our chief executive officer, our chief financial officer and each of the other three most highly compensated executives for the fiscal year ended December 31, 2012, and for our former chief executive officer:

Name and
Principal Position
  Year   Salary
($)(1)
  Bonus
($)
  Stock
Awards
($)(2)
  Option
Awards
($)(2)
  Non-Equity
Incentive Plan
Compensation
($)(3)
  Change in
Pension
Value and
Non-Qualified
Deferred
Compensation
Earnings
($)(4)
  All Other
Compensation
($)(5)
  Total
($)
 
John W. Eaves     2012   $ 779,712       $ 912,743   $ 944,313   $ 923,695   $ 261,526   $ 128,476   $ 3,950,465  

President, Chief

    2011     635,000         432,117     1,218,932     1,186,114     325,555     127,060     3,924,778  

Operating Officer

    2010     535,000             856,439     727,600     151,377     62,142     2,332,558  

John T. Drexler

 

 

2012

 

 

450,000

 

 


 

 

413,721

 

 

406,234

 

 

473,940

 

 

102,150

 

 

46,425

 

 

1,892,470

 

Senior Vice President and

    2011     450,000         240,426     679,181     690,300     117,411     43,668     2,220,986  

Chief Financial Officer

    2010     360,000             452,743     367,200     43,010     37,919     1,260,872  

Paul A. Lang

 

 

2012

 

 

600,962

 

 


 

 

590,041

 

 

615,482

 

 

542,176

 

 

197,276

 

 

57,123

 

 

2,603,060

 

Executive Vice President

    2011     484,846         255,046     716,554     717,469     256,611     49,059     2,479,585  

and Chief Operating Officer

    2010     380,000             478,210     387,600     119,610     32,457     1,397,877  

David N. Warnecke

 

 

2012

 

 

400,000

 

 


 

 

367,752

 

 

361,248

 

 

443,230

 

 

161,331

 

 

35,992

 

 

1,769,553

 

Senior Vice President —

    2011     400,000         214,434     603,716     567,450     207,743     34,284     2,027,627  

Marketing and Trading

    2010     370,000             465,476     377,400     129,568     44,352     1,385,546  

Robert G. Jones

 

 

2012

 

 

365,000

 

 


 

 

305,067

 

 

299,730

 

 

380,963

 

 

127,389

 

 

36,617

 

 

1,514,766

 

Senior Vice President — Law, General Counsel and Secretary

                                                       

Steven F. Leer

 

 

2012

(6)

 

857,212

 

 


 

 

1,140,170

 

 

1,120,329

 

 

1,330,585

 

 

461,597

 

 

184,355

 

 

5,094,248

 

Chairman and Former

    2011     975,000         662,796     1,871,521     2,064,206     780,969     212,331     6,566,822  

Chief Executive Officer

    2010     850,000             1,360,587     1,445,000     390,617     118,069     4,164,273  

(1)
Amounts shown include amounts that the executives named in this proxy statement elected to defer, on a discretionary basis, pursuant to our deferred compensation plan.

(2)
Amounts shown represent the aggregate grant date fair value of all stock or stock option awards, as applicable, made to each executive during the year indicated. We have determined the grant date fair value in accordance with FASB ASC Topic 718 (formerly referred to as Statement of Financial Accounting Standards No. 123R, Share-Based Payment). The determination of the grant date fair value is subject to certain estimates and assumptions described in Note 16 to our consolidated financial statements for the year ended December 31, 2012 and under the heading "Stock-Based Compensation" in the section entitled "Critical Accounting Policies" included in our Annual Report on Form 10-K for the year ended December 31, 2012. Amounts shown do not necessarily represent the actual value that may ultimately be received by the executives.

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(3)
Amounts shown include the following payouts:

 
Name
  Year   Annual Cash Incentive Awards   Performance Unit Awards(#)  
  John W. Eaves     2012   $ 257,085   $ 666,610  
        2011     624,364     561,750  
        2010     727,600      

 

John T. Drexler

 

 

2012

 

 

121,500

 

 

352,440

 
        2011     393,300     297,000  
        2010     376,200      

 

Paul A. Lang

 

 

2012

 

 

170,156

 

 

372,020

 
        2011     403,969     313,500  
        2010     387,600      

 

David N. Warnecke

 

 

2012

 

 

81,000

 

 

362,230

 
        2011     262,200     305,250  
        2010     377,400      

 

Robert G. Jones

 

 

2012

 

 

73,913

 

 

307,050

 

 

Steven F. Leer

 

 

2012

 

 

271,485

 

 

1,059,100

 
        2011     1,171,706     892,500  
        2010     1,445,000      

 
Performance Measure
  Relative Weighting   Threshold   Target   Maximum
 

Total Shareholder Return

    70 % 26th Percentile   50th Percentile   90th Percentile
 

Safety Incident Rate

    15 %   2.41   2.34
 

Environmental

    15 %   57 NOVs   53 NOVs
(4)
Amounts shown represent the changes in the actuarial present value of the accumulated benefits for the executives named in this proxy statement under our defined benefit pension plans, including our supplemental retirement plan, computed in accordance with FASB ASC Topic 715 (formerly referred to as Statement of Financial Accounting Standards No. 87, Employer's Accounting for Pensions). The present value of accumulated benefits is subject to certain actuarial assumptions described in Note 14 to our consolidated financial statements for the year ended December 31, 2012 and under the heading "Employee Benefit Plans" in the section entitled "Critical Accounting Policies" included in our Annual Report on Form 10-K for the year ended December 31, 2012.

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(5)
Amounts shown include the following:

Name
  Year   Matching
Contribution
to Plan
  Credits Under
Deferred
Compensation
Plan
  Dividends/
Dividend
Equivalents
  Financial
Planning
Services
  Club
Membership
Dues
  Tax
Reimbursement
  Other*   Total  

John W. Eaves

    2012   $ 13,817   $ 23,613   $ 2,660   $ 12,998   $ 9,000       $ 66,388   $ 128,476  

President and Chief

    2011     14,441     17,680     10,385     12,310     12,500         59,745     127,060  

Executive Officer

    2010     14,420     16,852     8,463     5,950     9,000         7,456     62,142  

John T. Drexler

   
2012
   
10,385
   
16,615
   
1,480
   
10,145
   
7,800
   
   
   
46,425
 

Senior Vice President

    2011     10,343     11,631     3,182     9,998     8,514             43,668  

and Chief Financial

    2010     9,969     10,052         9,954     7,844     99 **       37,919  

Officer

                                                       

Paul A. Lang

   
2012
   
12,261
   
15,364
   
7,570
   
1,900
   
   
   
20,028
   
57,123
 

Executive Vice

    2011     13,727     9,471     16,276     2,300             7,286     49,059  

President and Chief

    2010     13,329     7,894         9,508             1,725     32,457  

Operating Officer

                                                       

David N. Warnecke

   
2012
   
14,898
   
9,984
   
1,320
   
9,790
                     
35,992
 

Senior Vice

    2011     14,002     7,719     2,838     9,725                 34,284  

President —

    2010     14,481     7,673         16,117         3,433 **   2,648     44,352  

Marketing and Trading

                                                       

Robert G. Jones

   
2012
   
10,318
   
11,876
   
1,100
   
13,323
   
   
   
   
36,617
 

Senior Vice

                                                       

President — Law,

                                                       

General Counsel

                                                       

and Secretary

                                                       

Steven F. Leer

   
2012
   
13,636
   
44,896
   
4,080
   
10,047
   
8,525
   
   
103,171
   
184,355
 

Chairman and

    2011     13,547     37,528     15,770     14,318     12,600         118,568     212,331  

Former Chief

    2010     13,472     36,877     12,695     14,607     9,000     961 **   30,457     118,069  

Executive Officer

                                                       

*
Other items shown in the table above include personal use of corporate aircraft and a matching contribution to an institution of higher education in 2012 for Mr. Leer. For 2012, we determined the aggregate incremental cost of the personal use of corporate aircraft by reference to a cost-per-flight-hour charge developed by a nationally-recognized and independent service. The cost-per-flight-hour charge reflects the direct operating cost of the aircraft, including fuel, aircraft landing and parking, as well as an allocable allowance for maintenance and engine restoration. Fixed costs that do not change based on usage, such as pilot salaries, depreciation and insurance are not included.

**
Represents reimbursement in 2010 for tax preparation services performed in 2009.

(6)
2012 totals for Mr. Leer includes compensation for full 2012 calendar year, including compensation as Chairman of our board of directors. Upon his retirement as Chief Executive Officer on April 26, 2012, the Company agreed to pay Mr. Leer an annual base salary of $800,000 (prorated in 2012), and participation in the annual incentive plan at 85% of base salary and participation in the long-term incentive plan at 100% of base salary. Since Mr. Leer was granted long term incentive awards in 2012 prior to his retirement as Chief Executive Officer, no additional long term awards were granted in 2012 under his compensation arrangement as Chairman.

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Grants of Plan-Based Awards for the Year Ended December 31, 2012

        The following table shows information relating to the grants of certain equity and non-equity awards made to the NEOs during 2012:

 
   
  Estimated Future Payouts Under
Non-Equity Incentive Plan Awards
  All Other
Stock Awards:
Number of
Shares of
Stock or
Units
(#)
  All Other
Option Awards:
Number of
Securities
Underlying
Options
(#)(1)
   
   
 
 
   
  Exercise or
Base Price
of Option
Awards
($/Sh)
  Grant Date
Fair Value
of Stock and
Option
Awards(2)
 
Name
  Grant
Date
  Threshold
($)
  Target
($)
  Maximum
($)
 

John W. Eaves

    2/23/2012 (3) $ 247,563   $ 761,732   $ 1,580,594                          

    2/23/2012                       53,300               $ 742,469  

    2/23/2012                             134,650   $ 13.93     729,813  

    2/23/2012 (4)         666,750     1,333,500                          

    4/26/2012                       17,700                 170,274  

    4/26/2012                             48,200     9.62     214,500  

    4/26/2012 (4)         154,650     309,300                          

John T. Drexler

    2/23/2012 (3)   117,000     360,000     747,000                          

    2/23/2012                       29,700                 413,721  

    2/23/2012                             74,950     13.93     406,234  

    2/23/2012 (4)         371,250     742,500                          

Paul A. Lang

    2/23/2012 (3)   163,854     504,167     1,046,146                          

    2/23/2012                       33,000                 459,690  

    2/23/2012                             83,300     13.93     451,492  

    2/23/2012 (4)         412,500     825,000                          

    4/26/2012                       13,550                 188,752  

    4/26/2012                             36,850     9.62     163,990  

    4/26/2012 (4)         118,200     236,400                          

David N. Warnecke

    2/23/2012 (3)   78,000     240,000     498,000                          

    2/23/2012                       26,400                 413,721  

    2/23/2012                             66,650     13.93     729,813  

    2/23/2012 (4)         330,000     660,000                          

Robert G. Jones

    2/23/2012 (3)   71,175     219,000     454,425                          

    2/23/2012                       21,900                 305,067  

    2/23/2012                             55,300     13.93     299,730  

    2/23/2012 (4)         273,750     547,500                          

Steven F. Leer

    2/23/2012 (3)   261,430     804,399     1,669,128                          

    2/23/2012                       81,850                 1,140,171  

    2/23/2012                             206,700     13.93     1,120,329  

    2/23/2012 (4)         1,023,750     2,047,500                          

(1)
Amounts represent the number of stock options we granted to the NEOs during 2012. Refer to the information under the heading "Elements of Our Compensation Program" in the sub-section entitled "Compensation Discussion and Analysis" for more information about our stock option awards.

(2)
Amounts represent the grant date fair value of restricted stock, restricted stock units or stock options we awarded to the NEOs for 2012 determined in accordance with FASB ASC Topic 718 (formerly referred to as Statement of Financial Accounting Standards No. 123R, Share-Based Payment). The determination of grant date fair value is subject to certain estimates and assumptions described in Note 16 to our consolidated financial statements for the year ended December 31, 2012 and under the heading "Stock-Based Compensation" in the section entitled "Critical Accounting Policies" included in our Annual Report on Form 10-K for the year ended December 31, 2012.

(3)
Amounts represent the potential amounts payable to each NEO under the annual cash incentive awards for 2012 assuming threshold, target and maximum levels of performance. Amounts paid to each NEO under our annual cash incentive awards for 2012 have been included under the column entitled "Non-Equity Incentive Plan Compensation" in the Summary Compensation Table.

(4)
Amounts represent the potential amounts payable in 2015 to each NEO under performance units awarded in 2012 assuming target and maximum levels of performance for the 2012 - 2014 performance period. You should see the information under the hearing "Elements of Our Compensation Program" in the sub-section entitled "Compensation Discussion and Analysis" for more information about our performance unit awards.

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Outstanding Equity Awards at December 31, 2012

        The following table shows information relating to the equity awards previously made to the NEOs which remain outstanding at December 31, 2012.

 
  Option Awards   Stock Awards  
Name
  Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
  Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
  Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
  Option
Exercise
Price
($)
  Option
Expiration
Date
  Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)
  Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)(1)
  Equity
Incentive
Plan Awards:
Number of
Unearned
Shares,
Units or
Other Rights
That Have
Not Vested
(#)
  Equity
Incentive
Plan Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other Rights
That Have
Not Vested
($)
 

John W. Eaves

    0 (2)   48,200 (2) 0   $ 9.62     4/26/2022     0     0.00   0     0.00  

    0 (3)   134,650 (3) 0   $ 13.93     2/23/2022     0     0.00   0     0.00  

    97,763 (4)   32,587 (4) 0   $ 14.05     2/19/2019     0     0.00   0     0.00  

    45,400 (5)   45,400 (5) 0   $ 22.65     2/18/2020     0     0.00   0     0.00  

    28,267 (6)   56,533 (6) 0   $ 32.49     2/24/2021     0     0.00   0     0.00  

    86,200 (7)   0 (7) 0   $ 32.99     2/22/2017     0     0.00   0     0.00  

    80,000 (8)   0 (8) 0   $ 52.69     2/21/2018     0     0.00   0     0.00  

    42,750 (9)   0 (9) 0   $ 52.69     2/21/2018     0     0.00   0     0.00  

    0     0   0                 13,300 (10) $ 97,356.00   0     0.00  

    0     0   0                 53,300 (11) $ 390,156.00   0     0.00  

    0     0   0                 17,700 (12) $ 129,564.00   0     0.00  
                                           

Total

    380,380     317,370   0                 84,300   $ 617,076.00   0     0.00  
                                           

John T. Drexler

   
0

(3)
 
74,950

(3)

0

 
$

13.93
   
2/23/2022
   
0
   
0.00
 

0

   
0.00
 

    47,738 (4)   15,912 (4) 0   $ 14.05     2/19/2019     0     0.00   0     0.00  

    5,400 (13)   0 (12) 0   $ 16.10     7/22/2014     0     0.00   0     0.00  

    24,000 (5)   24,000 (5) 0   $ 22.65     2/18/2020     0     0.00   0     0.00  

    15,750 (6)   31,500 (6) 0   $ 32.49     2/24/2021     0     0.00   0     0.00  

    8,700 (7)   0 (7) 0   $ 32.99     2/22/2017     0     0.00   0     0.00  

    4,650 (8)   0 (8) 0   $ 52.69     2/21/2018     0     0.00   0     0.00  

    34,400 (14)   0 (14) 0   $ 56.84     4/24/2018     0     0.00   0     0.00  

    0     0   0                 7,400 (10) $ 54,168.00   0     0.00  

    0     0   0                 29,700 (11) $ 217,404.00   0     0.00  
                                           

Total

    140,638     146,362   0                 37,100   $ 271,572.00   0     0.00  
                                           

Paul A. Lang

   
0

(2)
 
36,850

(2)

0

 
$

9.62
   
4/26/2022
   
0
   
0.00
 

0

   
0.00
 

    0 (3)   83,300 (3) 0   $ 13.93     2/23/2022     0     0.00   0     0.00  

    50,400 (4)   16,800 (4) 0   $ 14.05     2/19/2019     0     0.00   0     0.00  

    25,350 (5)   25,350 (5) 0   $ 22.65     2/18/2020     0     0.00   0     0.00  

    16,617 (6)   33,233 (6) 0   $ 32.49     2/24/2021     0     0.00   0     0.00  

    56,750 (7)   0 (7) 0   $ 32.99     2/22/2017     0     0.00   0     0.00  

    42,900 (8)   0 (8) 0   $ 52.69     2/21/2018     0     0.00   0     0.00  

    0     0   0                 30,000 (15) $ 219,600.00   0     0.00  

    0     0   0                 7,850 (10) $ 57,462.00   0     0.00  

    0     0   0                 33,000 (11) $ 241,560.00   0     0.00  

    0     0   0                 13,550 (12) $ 99,186.00   0     0.00  
                                           

Total

    192,017     195,533   0                 84,400   $ 617,808.00   0     0.00  
                                           

David N. Warnecke

   
0

(3)
 
66,650

(3)

0

 
$

13.93
   
2/23/2022
   
0
   
0.00
 

0

   
0.00
 

    49,050 (4)   16,350 (4) 0   $ 14.05     2/19/2019     0     0.00   0     0.00  

    24,675 (5)   24,675 (5) 0   $ 22.65     2/18/2020     0     0.00   0     0.00  

    14,000 (6)   28,000 (6) 0   $ 32.49     2/24/2021     0     0.00   0     0.00  

    62,200 (7)   0 (7) 0   $ 32.99     2/22/2017     0     0.00   0     0.00  

    42,300 (8)   0 (8) 0   $ 52.69     2/21/2018     0     0.00   0     0.00  

    0     0   0                 6,600 (10) $ 48,312.00   0     0.00  

    0     0   0                 26,400 (11) $ 193,248.00   0     0.00  
                                           

Total

    192,225     135,675   0                 33,000   $ 241,560.00   0     0.00  
                                           

                                                   

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Table of Contents

 
  Option Awards   Stock Awards  
Name
  Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
  Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
  Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
  Option
Exercise
Price
($)
  Option
Expiration
Date
  Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)
  Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)(1)
  Equity
Incentive
Plan Awards:
Number of
Unearned
Shares,
Units or
Other Rights
That Have
Not Vested
(#)
  Equity
Incentive
Plan Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other Rights
That Have
Not Vested
($)
 

Robert G. Jones

    0 (3)   55,300 (3)

0

  $ 13.93     2/23/2022     0     0.00  

0

    0.00  

    41,588 (4)   13,862 (4) 0   $ 14.05     2/19/2019     0     0.00   0     0.00  

    20,925 (5)   20,925 (5) 0   $ 22.65     2/18/2020     0     0.00   0     0.00  

    11,617 (6)   23,233 (6) 0   $ 32.49     2/24/2021     0     0.00   0     0.00  

    53,250 (7)   0 (7) 0   $ 32.99     2/22/2017     0     0.00   0     0.00  

    34,700 (8)   0 (8) 0   $ 52.69     2/21/2018     0     0.00   0     0.00  

    0     0   0                 5,500 (10) $ 40,260   0     0.00  

    0     0   0                 21,900 (11) $ 160,308   0     0.00  
                                           

Total

    162,080     113,320   0                 27,400   $ 200,568   0     0.00  
                                           

Steven F. Leer

   
0

(3)
 
206,700

(3)

0

 
$

13.93
   
2/23/2022
   
0
   
0.00
 

0

   
0.00
 

    154,650 (4)   51,550 (4) 0   $ 14.05     2/19/2019     0     0.00   0     0.00  

    72,125 (5)   72,125 (5) 0   $ 22.65     2/18/2020     0     0.00   0     0.00  

    43,400 (6)   86,800 (6) 0   $ 32.49     2/24/2021     0     0.00   0     0.00  

    133,050 (7)   0 (7) 0   $ 32.99     2/22/2017     0     0.00   0     0.00  

    127,100 (8)   0 (8) 0   $ 52.69     2/21/2018     0     0.00   0     0.00  

    64,100 (9)   0 (9) 0   $ 52.69     2/21/2018     0     0.00   0     0.00  

    0     0   0                 20,400 (10) $ 149,328.00   0     0.00  

    0     0   0                 81,850 (11) $ 599,142.00   0     0.00  
                                           

Total

    594,425     417,175   0                 102,250   $ 748,470.00   0     0.00  
                                           

(1)
Calculated using the closing price for our common stock as reported on the New York Stock Exchange on December 31, 2012.

(2)
Stock options vest at the rate of 331/3% per year, with vesting dates of April 26, 2013, April 26, 2014 and April 26, 2015.

(3)
Stock options vest at the rate of 331/3% per year, with vesting dates of February 23, 2013, February 23, 2014 and February 23, 2015.

(4)
Stock options vest at the rate of 25% per year, with vesting dates of February 19, 2010, February 19, 2011,
February 19, 2012, and February 19, 2013.

(5)
Stock options vest at the rate of 25% per year, with vesting dates of February 18, 2011, February 18, 2012,
February 18, 2013, and February 18, 2014.

(6)
Stock options vest at the rate of 331/3% per year, with vesting dates of February 24, 2012, February 24, 2013 and February 24, 2014.

(7)
Stock options vest at the rate of 331/3% per year, with vesting dates of February 22, 2008, February 22, 2009 and February 22, 2010.

(8)
Stock options vest at the rate of 331/3% per year, with vesting dates of February 21, 2009, February 21, 2010 and February 21, 2011.

(9)
One-half of the stock options vest on each of February 21, 2011 and February 21, 2012.

(10)
Restricted stock vests on February 24, 2014.

(11)
Restricted stock units vest on February 23, 2015.

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Table of Contents

(12)
Restricted stock units vest on April 26, 2015.

(13)
Stock options vest at the rate of 331/3 per year, with vesting dates of July 22, 2005, July 22, 2006, and July 22, 2007.

(14)
Stock options vest at the rate of 331/3 per year, with vesting dates of April 24, 2009, April 24, 2010, and April 24, 2011.

(15)
Restricted stock vests on February 19, 2013.


Option Exercises and Stock Vested for the Year Ended December 31, 2012

        The following table shows information relating to the exercise or vesting of certain equity awards previously made to the executives named in this proxy statement during 2012.

 
  Option Awards   Stock Awards  
Name
  Number of Shares
Acquired on
Exercise (#)
  Value Realized on
Exercise ($)(1)
  Number of Shares
Acquired on
Vesting (#)
  Value Realized on
Vesting ($)(2)
 

John W. Eaves

    71,900   $ 72,720     10,850   $ 153,528  

John T. Drexler

      $       $  

Paul A. Lang

      $       $  

David N. Warnecke

      $       $  

Robert G. Jones

    58,400   $ 29,200       $  

Steven F. Leer

    218,900   $ 1,042,365     16,275   $ 230,291  

(1)
Amounts shown represent the value realized upon exercise of outstanding stock options calculated by multiplying the number of shares acquired upon exercise by the difference between the option exercise price and the fair market value of our common stock on the date of exercise.

(2)
Amounts shown represent the value realized upon vesting of outstanding awards calculated by multiplying the number of shares that vested by the fair market value of our common stock on the date of vesting.


Pension Benefits

        Defined Benefit Pension Plan.    We sponsor a defined benefit pension plan covering all of our eligible employees, including our NEOs. Employees become eligible to participate in the plan after working 1,000 hours. A cash balance account is established for each participant. Participants become vested in their cash balance accounts after serving three years with us. Upon retirement or upon termination of employment following three years of service with us, participants or their beneficiaries may elect to receive benefits in a lump sum, in installments over a period of time or at a later date. Under the terms of the plan, normal retirement occurs on the first day of the month following the date a participant turns 65.

        We credit each participant's cash balance account with an interest amount based on the U.S. Treasury rate, subject to an annual minimum rate of 4.25%. In addition, we provided transition credits to employees who participated in certain predecessor plans for a period up to the number of years of credited service with the predecessor plan, subject to certain maximum amounts depending upon the particular plan. All credits to transition employees end on December 31, 2012. The transition contribution rates ranged from 1% to 4% of compensation, depending upon the participant's age at the end of the year. Annually, we also credit each participant's cash balance account with an amount, reflected as a percentage of compensation, based on the participant's age at the end of the year. For purposes of determining the contribution amount,

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compensation includes salary, regular wages, overtime pay, earned vacation pay, short-term incentive compensation payments and amounts contributed by the participant to a qualified defined contribution plan or cafeteria plan maintained by us, subject to certain limits imposed under the Code. The following table shows the percentages of compensation we contribute to each participant's account, based on the participant's age at the end of the year:

Age at End of Year
  Contribution Rate
(% of Compensation)
 

Less than 30

    3 %

30-39

    4 %

40-44

    5 %

45-49

    6 %

50-54

    7 %

55 and over

    8 %

        Supplemental Retirement Plan.    We sponsor a supplemental retirement plan covering all of our eligible employees, including our NEOs, whose retirement benefits under our defined benefit pension plan are limited by the Code. Under our supplemental retirement plan, each eligible employee is entitled to receive a lump sum amount equal to the difference between the amount that would have been paid under our defined benefit pension plan but for the limitations contained in the Code and the actual amount that the employee is entitled to receive under our defined benefit pension plan after taking into account the limitations imposed by the Code. Subject to the limitations contained in the Code, benefits under the supplemental retirement plan will be paid six months after termination.

        The following table shows information relating to the accumulated benefits to which the NEOs are entitled under our defined benefit pension plans at December 31, 2012:

Name
  Plan Name   Number of Years
Credited Service
(#)(1)
  Present Value of
Accumulated Benefit
($)(2)
  Payments During
Last Fiscal Year
($)

John W. Eaves

  Arch Coal, Inc. Retirement Account Plan     30     1,295,297  

  Arch Coal, Inc. Supplemental Retirement Plan     30     303,320  

John T. Drexler

  Arch Coal, Inc. Retirement Account Plan     15     256,642  

  Arch Coal, Inc. Supplemental Retirement Plan     15     123,039  

Paul A. Lang

  Arch Coal, Inc. Retirement Account Plan     28     803,641  

  Arch Coal, Inc. Supplemental Retirement Plan     28     245,186  

David N. Warnecke

  Arch Coal, Inc. Retirement Account Plan     29     1,024,175  

  Arch Coal, Inc. Supplemental Retirement Plan     29     155,817  

Robert G. Jones

  Arch Coal, Inc. Retirement Account Plan     21     734,058  

  Arch Coal, Inc. Supplemental Retirement Plan     21     108,499  

Steven F. Leer

  Arch Coal, Inc. Retirement Account Plan     32     1,726,630  

  Arch Coal, Inc. Supplemental Retirement Plan     32     2,337,172  

(1)
Under our defined benefit pension plans, certain executives named in this proxy statement have been credited with additional years of service attributable to employment with one or more predecessor entities as follows: Mr. Eaves — 15 years, Mr. Lang — 13 years, Mr. Jones — 6 years, Mr. Warnecke — 13 years and Mr. Leer — 16 years. In addition to an annual credit to our defined benefit pension plans, Mr. Leer received a transition credit ranging from 1% to 4% of his compensation as a result of the additional years of service.

(2)
Amounts shown for each named executive officer represent the actuarial present value of the named executive's accumulated benefit under our defined benefit pension plans as of December 31, 2012, computed in accordance with FASB ASC Topic 715 (formerly known as Statement of Financial Accounting Standards No. 87, Employer's Accounting for Pensions). The present value of accumulated benefits is subject to certain actuarial assumptions described in Note 14 to our consolidated financial statements for the year ended December 31, 2011 and under the heading "Employee Benefit Plans" in the section entitled "Critical Accounting Policies" included in our Annual Report on Form 10 K for the year ended December 31, 2012.

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Non-Qualified Deferred Compensation

        We maintain a deferred compensation plan that allows an eligible employee to defer receipt of his or her base salary and/or annual incentive payment until the date or dates elected by the participant. The amounts deferred are invested in cash accounts that mirror the gains and/or losses of a number of different investment funds, including a hypothetical investment in shares of our common stock. The deferred compensation plan offers participants a wide-range of publicly-available investment funds, including international, U.S. equity, bond and money market funds. These investment funds are substantively similar to the investment alternatives offered to participants of our defined contribution plan. The plan does not offer any above-market rates of return to any of our NEOs.

        Participants in the plan may defer up to 85% of their base salaries and up to 100% of their annual incentive awards. The plan also allows participants to defer receipt of up to 100% of the shares issuable under any restricted stock units or performance-contingent phantom stock awards granted to executives under our long-term incentive program. Participants are always vested in their deferrals to the plan and any related earnings. We contribute one dollar for each dollar of base salary deferred by participants in the plan, up to a maximum of 6% of the participant's base salaries. We have established a grantor trust to fund our obligations under the deferred compensation plan. The trust has purchased corporate-owned life insurance to offset these obligations. Participants have an unsecured contractual commitment by us to pay the amounts due under the deferred compensation plan.

        Under the plan, we credit each participant's account with the number of units equal to the number of shares or units that the participant could purchase or receive with the amount of compensation deferred under the plan on the date we credit the participant's account, based upon the fair market value of the underlying investment on that date. We will pay the amount of compensation deferred under the plan to the participant (or to his or her designated beneficiary in the event of death) in annual installments or in a lump sum, at the participant's election, following the participant's termination of employment or on the date or dates specified by the participant in his or her payment election. The amount we pay will be based on the number of units credited to each participant's account, valued on the basis of the fair market value of an equivalent number of shares or units of the underlying investment on the date payment occurs. We may also pay a participant the amount of compensation deferred under the plan prior to the date the participant initially elected to receive payment if we determine that the employee has a demonstrated financial hardship.

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        The following table shows information relating to the activity in the deferred compensation plan accounts for the executives named in this proxy statement during 2012:

Name
  Executive
Contributions in
Last Fiscal Year
($)
  Registrant
Contributions in
Last Fiscal Year
($)(1)
  Aggregate Earnings
in Last Fiscal Year
($)
  Aggregate
Withdrawals/
Distributions ($)
  Aggregate Balance
at Last Fiscal Year
End ($)(2)
 

John W. Eaves

  $ 118,993   $ 23,613     (637,750 )     $ 3,072,498  

John T. Drexler

    27,692     16,615     (29,933 )       92,689  

Paul A. Lang

    88,711     15,364     53,030     (45,520 )   568,849  

David N. Warnecke

    50,557     9,984     62,485     (18,571 )   707,270  

Robert G. Jones

    43,800     11,876     (125,865 )       766,778  

Steven F. Leer

    304,762     44,896     (2,918,806 )       9,205,002  

(1)
Amounts shown represent credits we made under our deferred compensation plan to the named executive's account that are intended to provide the named executive with the full company matching contributions to which they would otherwise be entitled under our defined contribution plan but for certain limitations contained in the Code. We have included these amounts in the column entitled "All Other Compensation" contained in the Summary Compensation Table.

(2)
Amounts shown include the following that we have reported as compensation for 2012 in the Summary Compensation Table: Mr. Eaves — $23,613; Mr. Drexler — $16,615; Mr. Lang — $15,364; Mr. Warnecke — $9,984; Mr. Jones — $11,875; and Mr. Leer — $44,895.


Potential Payments Upon Termination of Employment or Change-in-Control

        We maintain certain agreements or arrangements with each of the NEOs that provide for the payment or acceleration of certain benefits in the event that such executive's employment is terminated without cause prior to or following a change-in-control. In addition to the benefits described below, the executives named in this proxy statement would also be entitled to receive certain benefits under our defined benefit and contribution plans, supplemental retirement plan and deferred compensation plan. You should see the sub-section entitled "Pension Benefits" for more information on the benefits accumulated under our defined benefit pension plan and our supplemental retirement plan that are attributable to each of the NEOs and the sub-section entitled "Non-Qualified Deferred Compensation" for more information on the aggregate balance maintained under our deferred compensation plan by each of the NEOs.

        We maintain change-in-control agreements with each of our executives, including the NEOs, and certain other key employees. Each of the change-in-control agreements has a term of one year that is automatically extended for successive one-year periods unless either party terminates the agreement upon at least one year notice prior to the end of any one-year term. Under the change-in-control agreements and certain other arrangements we have with the NEOs, we may be required to provide compensation in the event of a termination of employment. As a condition to each executive's entitlement to receive payments under the change-in-control agreements, the executive is required to execute a waiver of claims against us and to abide by certain non-disclosure, non-competition and non-solicitation requirements. These restrictions prohibit executives from engaging in any business that competes with any of our business operations

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for a period of six months following the date of termination and from soliciting for employment, hiring or retaining any of our employees for a period of one year following the date of termination.

        Voluntary termination and termination for cause —  Each of the NEOs may terminate his or her employment at any time. In addition, we may terminate the employment of the NEOs for cause at any time. Under the terms of the change-in-control agreements with each NEO, a termination is for cause if it is for any of the following reasons:

        If we terminate an executive's employment for cause or if an executive terminates his or her employment for any reason prior to a change of control or for other than good reason following a change of control, then we will pay the executive an amount equal to the executive's accrued and unpaid base salary and unused vacation time. If we terminate an executive's employment for cause or if the executive terminates his or her employment for any reason without our consent, then all of the unexpired, unvested restricted stock, restricted stock units, performance units, stock options, performance-contingent phantom stock or other awards granted to the executive under our stock incentive plan that remain outstanding on the date of termination shall automatically be forfeited. If we terminated each of the executives named in this proxy statement for cause or if each of the NEOs terminated his or her employment on December 31, 2012, then the executives would not have been entitled to receive any amounts from us.

        Termination without cause prior to a change of control —  Each of the NEOs may be entitled to certain benefits if we terminate the executive's employment for reasons other than cause. If we terminate an executive without cause prior to a change of control, then under the terms of the change-in-control agreement we will pay the executive a lump sum cash amount equal to the following:

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        In addition, if we terminate an executive for reasons other than for cause prior to a change of control, all unexpired stock options held by the executive on the date of termination will immediately vest and become exercisable by the executive in accordance with the terms of our stock incentive plan and related stock option award agreements. Also, we have agreed to reimburse the executives named in this proxy statement for the cost of financial counseling services (up to a maximum of $5,000) for a period of 12 months (24 months for Mr. Eaves and Mr. Leer), the cost of reasonable outplacement services for a period of 12 months (24 months for Mr. Eaves and Mr. Leer).

        The following table shows the amounts each of the executives named in this proxy statement would receive if we terminated his or her employment for reasons other than for cause prior to a change of control on December 31, 2012:

 
  John W. Eaves   John T. Drexler   Paul A. Lang   David N. Warnecke   Robert G. Jones   Steven F. Leer  

Cash payments:

                                     

Cash severance

  $ 2,236,350   $ 744,000   $ 970,575   $ 640,200   $ 553,848   $ 2,562,730  

Healthcare coverage

    31,572     21,048     21,048     21,048     21,048     31,572  

Life insurance premiums

    2,246     648     865     576     526     2,469  

Incentive awards(1)

    2,268,110     1,143,750     1,377,719     1,005,417     863,167     3,088,149  

Retirement benefits

    496,408     104,135     191,906     130,779     118,172     717,378  

Financial counseling and outplacement services

    30,000     20,000     20,000     20,000     20,000     30,000  

Accrued salary and accrued vacation

    0     0     0     0     0     0  

Acceleration of equity awards:

                                     

Restricted stock units and restricted stock

    201,113     95,547     339,339     85,031     70,650     263,345  

Stock options

    0     0     0     00     0     0  
                           

Total

    5,265,799     2,129,128     2,921,452     1,903,050     1,647,410     6,695,643  
                           

(1)
For purposes of estimating the amounts payable by us under our annual cash incentive awards or our long-term cash and equity-based incentive awards, we have assumed that we achieved target levels of performance under those awards.

        Termination in connection with a change of control —  Each of the NEOs may be entitled to certain benefits if we terminate the executive's employment for reasons other than cause following a change of control or if the executive terminates his or her employment for good reason during the two years following a change of control. Under the change-in-control agreements, no amount would be payable to an NEO solely because of a change of control. Under the terms of the change-in-control agreements with the NEOs, a termination is for good reason if it is for any of the following reasons:

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        Under the terms of the change-in-control agreements with each NEO, a change of control means any of the following:

        If we terminate an executive for reasons other than for cause following a change of control or if the executive terminates his or her employment for good reason during the two years following a change of control, then under the terms of the change-in-control agreement we will pay the executive a lump sum cash amount equal to the following:

        In addition to the foregoing, if we terminate an executive for reasons other than for cause following a change of control, all unexpired stock options held by the executive on the date of termination will

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immediately vest and become exercisable by the executive in accordance with the terms of our stock incentive plan and related equity award agreements. Also, we have agreed to reimburse each NEO for the cost of financial counseling services (up to a maximum of $5,000) for a period of 24 months (36 months for Mr. Eaves and Mr. Leer), the cost of reasonable outplacement services for a period of 24 months (36 months for Mr. Eaves and Mr. Leer).

        The following table shows the amounts each NEO would receive if we terminated their employment on December 31, 2012 for reasons other than for cause following a change of control or if each of the executives named in this proxy statement terminated his or her employment on December 31, 2012 for good reason following a change of control:

 
  John W. Eaves   John T. Drexler   Paul A. Lang   David N. Warnecke   Robert G. Jones   Steven F. Leer  

Cash payments:

                                     

Cash severance

  $ 4,159,049   $ 1,488,000   $ 1,941,150   $ 1,280,400   $ 1,107,696   $ 5,288,191  

Healthcare coverage

    31,572     31,572     31,572     31,572     31,572     31,572  

Life insurance premiums

    3,368     1,296     1,731     1,152     1,051     3,703  

Incentive awards(1)

    761,732     360,000     504,167     240,000     219,000     804,399  

Retirement benefits

    709,819     187,249     335,185     249,596     216,345     1,057,612  

Financial counseling and outplacement services

    40,000     30,000     30,000     30,000     30,000     40,000  

Accrued salary and accrued vacation

    0     0     0     0     0     0  

Acceleration of equity awards:

                                     

Restricted stock units and restricted stock

    617,076     271,572     617,808     241,560     200,568     748,470  

Stock options(2)

    0     0     0     0     0     0  
                           

Total

    6,322,616     2,369,689     3,461,613     2,074,280     1,806,232     7,973,947  
                           

(1)
For purposes of estimating the amounts payable by us under our annual cash incentive awards, we have assumed that we achieved target levels of performance under those awards. Payouts under performance units would be triggered upon a change of control and, accordingly, we have not included those payouts in the table above. Instead, payouts under performance units have been included in the table below under the heading "Potential Payments Upon Change-in-Control."

(2)
All outstanding options become fully exercisable upon a change of control and, accordingly, have not been included in the table above. Instead, the value has been included in the table below under the heading "Potential Payments Upon Change-in-Control."

        Retirement, death and disability —  In the event an executive's employment is terminated as a result of his or her retirement, death or disability, then we will pay the executive an amount equal to the executive's accrued and unpaid base salary, unused vacation time and all other amounts, including payouts under our annual cash incentive awards, that the executive has earned but which have not yet been paid. If an executive's employment is terminated as a result of his or her retirement, all unvested stock options will continue to vest on schedule, and all stock options must be exercised before the earlier of (i) five years from the vesting date or (ii) the expiration date. If an executive's employment is terminated as a result of death or disability, all vested stock options must be exercised within one year of separation, and all unvested stock options will continue to vest on schedule and must be exercised within one year of the vesting date. In the event of retirement, death or disability, any restricted stock, restricted stock units, performance units,

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performance-contingent phantom stock or other awards granted to the executive during or after 2012 under our stock incentive plan that remain outstanding on the date of termination may be retained on a prorated basis and will continue to vest on schedule. Any restricted stock, restricted stock units, performance units, performance-contingent phantom stock or other awards granted to the executive prior to 2012 under our stock incentive plan that remain outstanding on the date of termination are forfeited.

        The following table shows the amounts each NEO would receive if the employment of the executive terminated on December 31, 2012 as a result of his or her retirement, death or disability:

 
  John W. Eaves   John T. Drexler   Paul A. Lang   David N. Warnecke   Robert G. Jones   Steven F. Leer  

Cash payments:

                                     

Cash severance

                                     

Healthcare coverage

                                     

Life insurance premiums

                                     

Incentive awards(1)

  $ 761,732   $ 360,000   $ 504,167   $ 240,000   $ 219,000   $ 804,399  

Retirement benefits

                                     

Financial counseling and outplacement services

                                     

Accrued salary and accrued vacation

                                     

Acceleration of equity awards:

                                     

Restricted stock units and restricted stock

    201,113     95,547     339,339     85,031     70,650     263,345  

Stock options

    0     0     0     0     0     0  
                           

Total

    962,845     455,547     843,506     325,031     289,650     1,067,744  

(1)
For purposes of estimating the amounts payable by us under our annual cash incentive awards, we have assumed that we achieved target levels of performance under those awards.

        Under the terms of our stock incentive plan and the agreements governing the various awards outstanding at December 31, 2012, each NEO would be entitled to certain benefits in the event a change in control occurs. Under the terms of our stock incentive plan, all outstanding stock options will become fully exercisable and will remain exercisable for the original term of the options, all outstanding restricted stock and restricted stock units will become fully vested and be distributed to the executive, and all of the performance units and performance-contingent phantom stock will be paid out in the event a change of control occurs.

        Under the terms of the stock incentive plan, a change in control means any change in control that would be required to be reported as such with the Securities and Exchange Commission, including without limitation any of the following:

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        The following table shows the amounts each NEO would receive if we had undergone a change of control on December 31, 2012.

 
  John W. Eaves   John T. Drexler   Paul A. Lang   David N. Warnecke   Robert G. Jones   Steven F. Leer  

Cash payments:

                                     

Cash severance

                                     

Healthcare coverage

                                     

Life insurance premiums

                                     

Incentive awards(1)

  $ 4,404,270   $ 2,227,500   $ 2,628,810   $ 2,117,500   $ 1,775,000   $ 6,387,500  

Retirement benefits

                                     

Financial counseling and outplacement services

                                     

Accrued salary and accrued vacation

                                     

Acceleration of equity awards:

                                     

Restricted stock units and restricted stock(2)

    617,076     271,572     617,808     241,560     200,568     748,470  

Stock options

    0     0     0     0     0     0  
                           

Total

    5,021,346     2,499,072     3,246,618     2,359,060     1,975,568     7,135,970  
                           

(1)
For purposes of estimating the amounts payable by us under performance unit awards, we have assumed that we achieved maximum levels of performance under those awards.

(2)
For purposes of estimating the amounts payable under the stock incentive plan in the event of a change of control, we have calculated the value of accelerated vesting of restricted stock units and restricted stock by multiplying the number of shares underlying unvested restricted stock units outstanding at December 31, 2012 by the closing price of our common stock on December 31, 2012.

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DIRECTOR COMPENSATION

        Our director compensation program is designed to compensate our non-employee directors, through a simple and understandable structure, for the amount of work required for a company of our size and scope and to align the interests of our non-employee directors with the long-term interests of our stockholders. Mr. Eaves, who is also an employee, does not receive separate retainers or attendance fees for his service as a director, and his compensation is discussed under "Executive Compensation" above. Mr. Leer who retired as Chief Executive Officer effective April 26, 2012, did not receive separate retainers or attendance fees for his service as a director while he served as Chief Executive Officer. Mr. Leer's compensation after retiring as Chief Executive Officer for serving as Chairman is discussed under "Executive Compensation" above.

        The Nominating and Corporate Governance Committee has historically reviewed periodically the compensation structure and amounts for our non-employee directors. Our human resources department supports the Nominating and Corporate Governance Committee by researching the structures and amounts of compensation programs sponsored by other similarly-sized public companies and compiling the results of that research for the Nominating and Corporate Governance Committee. From time to time, the Nominating and Corporate Governance Committee may engage a compensation consultant to provide survey or proxy data on the structure and amount of director compensation for other companies. In February 2013, the Board delegated the responsibility of reviewing the compensation structure and amounts for our non-employee directors to the Personnel and Compensation Committee.

        Compensation.    Our Board has adopted the following compensation structure for our directors. All fees outlined below are paid on a quarterly basis and, except for the new director fee, are prorated for any new director or change to committee membership during the calendar year.

Annual retainer

  $ 120,000  

Additional retainer — Lead Director

  $ 15,000  

Additional retainer — Chairman of the Audit Committee

  $ 30,000  

Additional retainer — Chairman of P & C Committee

  $ 15,000  

Additional retainer — Chairman of other committees

  $ 10,000  

Additional committee retainer fee — Audit Committee

  $ 15,000  

Additional committee retainer fee — all other committees

  $ 10,000  

New director fee

  $ 60,000 (1)

Restricted Stock Units

    2,500  

(1)
Non-employee directors must defer 100% of the new director fee into a hypothetical investment in Arch Coal common stock pursuant to a deferred compensation plan for non-employee directors described below.

        Deferred Compensation Plan.    Our Board has adopted a deferred compensation plan for non-employee directors. Under the plan, non-employee directors may choose to defer receipt of any or all of the compensation paid to them in a cash account that mirrors the gains and/or losses of a number of different investment funds, one of which is a hypothetical investment in shares of our common stock. We credit each non-employee director's account with the number of units equal to the number of shares or units that the non-employee director could purchase or receive with the amount of compensation deferred under the

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plan on the date we credit the non-employee director's account, based upon the fair market value of the underlying investment on that date.

        When a director terminates his or her service as a director, we will pay the amount of compensation deferred under the plan to the director (or to his or her designated beneficiary in the event of death) in annual installments or in a lump sum, at the director's election. The amount we pay will be based on the number of units credited to each director's account, valued on the basis of the fair market value of an equivalent number of shares or units of the underlying investment on the date payment occurs. We may also pay a director the amount of compensation deferred under the plan prior to the termination of a director's service as a director if the board of directors determines that the director has a demonstrated financial hardship.

        Other Compensation Arrangements.    In addition to the compensation elements described above, we sponsor a director matching gift program. Under our matching gift program, we donate $2.00 for each dollar contributed by a director to accredited institutions of higher education up to a maximum of $6,000 each year. We have included the matching gifts paid on behalf of each of our non-employee directors for 2012 in the table below. We have included the matching gifts paid on behalf of Mr. Leer in the column titled "All Other Compensation" in the Summary Compensation Table above. During 2012, we did not pay any matching gifts on behalf of Mr. Eaves. Upon a director's retirement or other departure from the Board, the Board may approve a one-time donation to a charitable institution in the name of such director for recognition of that director's service and dedication to the Board. During 2012, the Board authorized a donation in Mr. Jennings' name as disclosed under the column titled "All Other Compensation" below.

        We also reimburse each director for their travel expenses incurred in connection with attendance at board and committee meetings and other matters related to service on the Board and for the costs of attending continuing education seminars, and pay the premiums for directors' liability insurance and travel accident insurance for each director. These amounts are not included in the table below since they are deemed to be business-related payments and not perquisites. We do not maintain a directors' retirement plan, and non-employee directors do not participate in our health, welfare or benefit plans.

        Stock Ownership Guidelines.    In order to more closely align the interests of our non-employee directors with the long-term interests of our stockholders, the Board has adopted stock ownership guidelines for non-employee directors. The guidelines establish a goal for each of our non-employee directors to own a number of shares of our common stock equal in value to $300,000. Each non-employee director is expected to satisfy this goal within five years of becoming a director. As of December 31, 2012, each of the non-employee directors who has been on the Board for at least five years satisfied the stock ownership goal. See the table under the heading "Security Ownership of Directors and Executive Officers" for more information about the beneficial ownership of our common stock by our non-employee directors.

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        The following table sets forth compensation paid to each non-employee director during 2012.

Name
  Fees Earned
or Paid in
Cash ($)(1)
  Stock
Awards ($)(2)
  All Other
Compensation
($)(3)
  Total ($)  

James R. Boyd

  $ 170,000   $ 34,825   $ 6,000   $ 210,825  

David D. Freudenthal

    147,500     34,825         182,325  

Patricia F. Godley

    165,000     34,825     5,000     204,825  

Paul T. Hanrahan

    108,333     8,556           116,889  

Douglas H. Hunt

    145,000     34,825     6,000     185,825  

Brian J. Jennings

    131,250     34,825     25,000     191,075  

J. Thomas Jones

    145,000     34,825         179,825  

George C. Morris III

    144,583     29,625         174,208  

A. Michael Perry

    160,000     34,825         194,825  

Robert G. Potter

    149,583     34,825         184,408  

Theodore D. Sands

    160,000     34,825     5,000     199,825  

Wesley M. Taylor

    147,500     34,825         182,325  

Peter I. Wold

    145,833     34,825     6,000     186,658  

(1)
Amounts shown include amounts that the directors elected to defer, on a discretionary basis, pursuant to our deferred compensation plan for non-employee directors described above.

(2)
Amounts shown constitute restricted stock units granted under the Company's 1997 Stock Incentive Plan as payment of the restricted stock unit portion of the non-employee director annual retainer, reported at grant date fair value on the date of grant, as determined under FASB ASC Topic 718. The grant date for all non-employee directors other than Mr. Hanrahan and Mr. Morris was February 23, 2012. The grant dates for Mr. Hanrahan and Mr. Morris were June 12, 2012 and March 7, 2012, respectively. Each restricted stock unit grants vest upon the retirement of such director from the Board.

(3)
Amounts shown for all non-employee directors other than Mr. Jennings represent contributions under our director matching gift program. Amount shown for Mr. Jennings represents one-time charitable donation to the Christopher and Dana Reeve Foundation made in Mr. Jennings' name.

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PERSONNEL AND COMPENSATION COMMITTEE REPORT

        The Personnel and Compensation Committee is comprised entirely of independent directors and has the responsibility for reviewing and recommending changes in our executive compensation policies and programs to the board of directors. The committee also reviews and makes recommendations for all compensation payments to our chief executive officer and other executives, which are approved by the board of directors as a whole.

        The Personnel and Compensation Committee has reviewed and met with management to discuss the disclosures contained in the section of this proxy statement entitled "Executive Compensation — Compensation Discussion and Analysis." Based on that review and discussions with management, the Personnel and Compensation Committee recommended to the board of directors, and the board of directors approved, including the disclosures contained in the section entitled "Compensation Discussion and Analysis" in this proxy statement and, by incorporating that section by reference, in the Annual Report on Form 10-K for the year ended December 31, 2012 for filing with the Securities and Exchange Commission.

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AUDIT COMMITTEE REPORT

        The Audit Committee oversees the Company's financial reporting process on behalf of the board of directors. Management is primarily responsible for the financial statements and reporting process, including the systems of internal controls, while the independent registered public accounting firm is responsible for performing an independent audit of our financial statements in accordance with auditing standards generally accepted in the United States and expressing an opinion on the conformity of those financial statements with accounting principles generally accepted in the United States.

        In this context, the Audit Committee has reviewed the Company's audited consolidated financial statements and has met with and held discussions with management, our internal auditors and with Ernst & Young LLP, the Company's independent registered public accounting firm, to discuss those financial statements and related matters. The Audit Committee reviewed with our internal and independent auditors the overall scope and plans for their respective audits. The Audit Committee also met, at least quarterly, with the auditors, with and without management present, to discuss the results of their examinations, their evaluations of the Company's internal controls and the overall quality of the Company's financial reporting. The Audit Committee also reviewed with the independent auditors their judgment as to the quality and the appropriateness of the Company's accounting principles and financial controls and such other matters as are required to be discussed with the Audit Committee under auditing standards generally accepted in the United States.

        The Company's independent registered public accounting firm also provided to the Audit Committee the written disclosures and the letter prescribed by applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accounting firm's communications with the Audit Committee concerning independence, and the Audit Committee discussed with the independent auditors that firm's independence, including those matters required to be discussed by Statement on Auditing Standards No. 61. The Audit Committee considered whether the performance by Ernst & Young LLP of non-audit services was compatible with their independence.

        In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the board of directors, and the board of directors approved, including the audited consolidated financial statements in the Annual Report on Form 10-K for the year ended December 31, 2012 for filing with the Securities and Exchange Commission. The Audit Committee has retained Ernst & Young LLP as the Company's independent registered public accounting firm for 2013.

        While the Audit Committee has the responsibilities and powers set forth in its charter, it is not the duty of the Audit Committee to plan or conduct audits or to determine that the Company's financial statements are complete and accurate or are in accordance with generally accepted accounting principles. This is the responsibility of management and the independent auditor.

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EQUITY COMPENSATION PLAN INFORMATION

        The Arch Coal, Inc. 1997 Stock Incentive Plan, which was approved by our stockholders, is the sole plan under which the Company currently is authorized to issue shares of its common stock to employees. The following table provides information as of December 31, 2012, regarding the number of shares of Company common stock that may be issued under the Company's equity compensation plans.

Plan category
  Number of securities
to be issued upon exercise
of outstanding options,
warrants and rights
(a)
  Weighted-average
exercise price of
outstanding options,
warrants and rights
(b)
  Number of securities
remaining available
for future issuance
under equity
compensation plans
(excluding securities
reflected in column (a))
(c)
 

Equity compensation plans approved by security holders

    5,756,735   $ 26.13     4,542,538  

Equity compensation plans not approved by security holders

      $      
               

Total

    5,756,735   $ 26.13     4,542,538  
               

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SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS

        The following table sets forth, as of March 1, 2013, information concerning the beneficial ownership of our common stock by each director, each of the executives named in this proxy statement and all current directors and executive officers as a group. Under rules of the Securities and Exchange Commission, persons who have power to vote or dispose of securities, either alone or jointly with others, are deemed to be the beneficial owners of such securities. Each person reflected in the table below has both sole voting and investment power with respect to the shares included in the table, except as described in the footnotes below: