Exhibit 10.2

[PEABODY ENERGY CORPORATION LETTERHEAD]

March 1, 2005

PERSONAL AND CONFIDENTIAL

Irl F. Engelhardt
901 Kent Road
St. Louis, MO 63124

Dear Irl:

This letter agreement (the “Letter Agreement”) will summarize the basic terms
which Peabody Energy Corporation (the “Company”) believes would be appropriate
to govern a continued employment relationship between you and the Company until
such time as you would relinquish your duties and responsibilities as the
Company’s Chief Executive Officer and continue as the Company’s Chairman of the
Board with expanded responsibilities as set forth in the attached Amended and
Restated Employment Agreement (as further described in this Letter Agreement)
and thereafter.

As you know, the Company has elected its new President and Chief Executive
Officer, to become effective January 1, 2006 (the “Effective Date”). The Company
believes that a gradual transfer of your duties and responsibilities as the
Company’s Chief Executive Officer to your successor over several calendar months
is an essential step to ensure a smooth transition in connection with your
succession. Therefore, the Company would greatly appreciate it if, throughout
the balance of this calendar year 2005, you would agree to acquaint your
successor with the duties and responsibilities associated with the Chief
Executive Officer position with the Company and perform such transition duties
as shall be approved by the Company’s Board of Directors (the “Board”) to ensure
a seamless transfer of your duties and responsibilities as the Company’s Chief
Executive Officer to your successor.

As a result, until the end of calendar year 2005, you would continue to be
employed by the Company as its Chief Executive Officer and Chairman of the Board
under the terms and conditions of the Employment Agreement made as of May 19,
1998, between you and the Company, as previously amended (the “Existing
Employment Agreement”). The gradual transfer of duties and responsibilities
between you and your successor and any Board-approved organizational
modifications relating thereto, as described in this Letter Agreement, would be
deemed not to constitute Good Reason for purposes of the Existing Employment
Agreement or any other relevant agreement between you and the Company.

In order to secure your continued services as a senior executive officer of the
Company and as Chairman of the Board on and after the Effective Date, the
Company agrees to

 

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Irl F. Engelhardt
March 1,2005
Page 2

enter into an Amended and Restated Employment Agreement for a two-year term
beginning on the Effective Date and ending on December 31, 2007, with possible
renewal periods, if mutually agreed upon, in the form attached hereto as
Exhibit A and incorporated herein by reference.

Please confirm your agreement with the foregoing (including, but not limited to,
the terms and conditions of the Amended and Restated Employment Agreement
attached hereto as Exhibit A and incorporated herein by reference) by signing
and dating the enclosed duplicate copy of this Letter Agreement and returning
that copy to me, or contact me with any questions or comments you may have. If
you terminate your employment with the Company at any time before the Effective
Date after having executed this Letter Agreement, the Amended and Restated
Employment Agreement attached hereto as Exhibit A would not be applicable.

              Very truly yours,
 
            PEABODY ENERGY CORPORATION
 
       

  By:   /s/ ROBERT B KARN

  Its:   Chairman of Compensation Committee

AGREED AND ACCEPTED:

    /s/ IRL F. ENGELHARDT
Signature
 
2/28/05
Date