Exhibit 10.2
PERFORMANCE UNITS AGREEMENT
     THIS AGREEMENT, effective January 5, 2009 (the “Grant Date”), is made by
and between PEABODY ENERGY CORPORATION, a Delaware corporation (the “Company”),
and the undersigned employee of the Company or a Subsidiary (as defined below)
or an Affiliate (as defined below) of the Company (the “Grantee”).
     WHEREAS, the Company wishes to afford the Grantee the opportunity to
participate in future increases in Company value;
     WHEREAS, the Company wishes to carry out the Plan (as hereinafter defined),
the terms of which are hereby incorporated by reference and made a part of this
Agreement; and
     WHEREAS, the Committee (as hereinafter defined) appointed to administer the
Plan has determined that it would be to the advantage and best interest of the
Company and its stockholders to grant the Performance Units provided for herein
to the Grantee as an incentive for increased efforts during his or her term of
office with the Company or its Subsidiaries or Affiliates, and has advised the
Company thereof and instructed the undersigned officer to issue said Performance
Units;
     NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
     Whenever the following terms are used in this Agreement, they shall have
the meanings specified below. Capitalized terms not otherwise defined in this
Agreement shall have the meanings specified in the Plan.
     Section 1.1 — “Affiliate” shall mean any other Person directly or
indirectly controlling, controlled by, or under common control with the Company.
For the purposes of this definition, the term “control” (including, with
correlative meanings, the terms “controlling”, “controlled by” and “under common
control with”), as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities, by
contract or otherwise.
     Section 1.2 — “Board of Directors” or “Board” shall mean the Board of
Directors of the Company.
     Section 1.3 — “Cause” shall mean “Cause” as defined in the Grantee’s
employment agreement with the Company.
     Section 1.4 — “Change of Control” shall mean, for purposes of this
Agreement and notwithstanding the definition set forth in the Plan:

 

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     (a) any Person (other than a Person holding securities representing ten
percent (10%) or more of the combined voting power of the Company’s outstanding
securities as of May 22, 2001, the Company, any trustee or other fiduciary
holding securities under an employee benefit plan of the Company, or any
corporation owned, directly or indirectly, by the shareholders of the Company in
substantially the same proportions as their ownership of stock of the Company),
becomes the beneficial owner, directly or indirectly, of securities of the
Company representing more than fifty percent (50%) of the combined voting power
of the Company’s then-outstanding securities (provided, however, that if any
Person is considered to own more than fifty percent (50%) of the total voting
power of the stock of the Company, the acquisition of additional stock by the
same Person is not considered to cause a change in the control of the Company);
     (b) during any period of twelve (12) consecutive months, a majority of the
members of the Company’s Board is replaced by directors whose appointment or
election is not endorsed by a majority of the members of the Board before the
date of the appointment or election;
     (c) consummation of any merger, consolidation, plan of arrangement,
reorganization or similar transaction or series of transactions in which the
Company is involved, other than such a transaction or series of transactions
which would result in the shareholders of the Company immediately prior thereto
continuing to own (either by remaining outstanding or by being converted into
voting securities of the surviving entity) more than fifty percent (50%) of the
combined voting power of the securities of the Company or such surviving entity
(or the parent, if any) outstanding immediately after such transaction(s) in
substantially the same proportions as their ownership immediately prior to such
transaction(s); or
     (d) the consummation of a sale or disposition by the Company of Company
assets that have a Total Gross FMV (as defined below) equal to or greater than
eighty-five percent (85%) of the Total Gross FMV of all of the assets of the
Company immediately before such sale or disposition (provided, however, that a
transfer of assets by the Company is not treated as a change in the ownership of
such assets if the assets are transferred to: (A) a shareholder of the Company
(immediately before the asset transfer) in exchange for or with respect to its
stock; (B) an entity of which the Company owns, directly or indirectly, 50% or
more of the total value or voting power; (C) a Person, or more than one Person
acting as a group, that owns, directly or indirectly, fifty percent (50%) or
more of the total value or voting power of all the outstanding stock of the
Company; or (D) an entity of which a Person or group described in clause
(C) above owns, directly or indirectly, at least fifty percent (50%) of the
total value or voting power).
     As used in this Section, the term “Person” (including a “group”) has the
meaning provided under Section 13(d) or 14(d) of the Securities Exchange Act of
1934, as amended (or any successor section thereto).
     As used in this Section, the term “Total Gross FMV” means the value of the
assets of the Company, or the value of the assets being disposed of, determined
by the Committee without regard to any liabilities associated with such assets.

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     Section 1.5 — “Committee” shall mean the Compensation Committee of the
Company, duly appointed by the Board as the Administrator under Section 2 of the
Plan.
     Section 1.6 — “Common Stock” shall mean the common stock of the Company,
par value $0.01.
     Section 1.7 — “Determination Date” shall mean the earliest to occur of the
following events: (i) December 31, 2011; (ii) a Termination of Employment on
account of death or Disability; or (iii) a Change of Control.
     Section 1.8 — “FMV per Share” shall mean the average of the closing prices
of the shares of Common Stock for the four (4) weeks immediately preceding the
Determination Date; notwithstanding the foregoing, in the event of a Change of
Control, “FMV per Share” shall mean the per share value of equity based on
amounts paid in the Change of Control.
     Section 1.9 — “Good Reason” shall mean “Good Reason” as defined in the
Grantee’s employment agreement with the Company.
     Section 1.10 — “Incentive Amount” shall mean the amount payable to the
Grantee hereunder with respect to the Performance Units, if any, as calculated
under Article IV.
     Section 1.11 — “Performance Units” shall mean the units granted on a
performance basis under this Agreement. The value of each Performance Unit shall
be equal to the FMV per Share as of the relevant Determination Date (as defined
below).
     Section 1.12 — “Person” shall mean an individual, partnership, corporation,
business trust, joint stock company, trust, unincorporated association, joint
venture, governmental authority or other entity of whatever nature.
     Section 1.13 — “Plan” shall mean the Peabody Energy Corporation 2004
Long-Term Equity Incentive Plan, as amended from time to time.
     Section 1.14 — Pronouns - The masculine pronoun shall include the feminine
and neuter, and the singular the plural, where the context so indicates.
     Section 1.15 — “Retirement” shall mean the Grantee’s retirement from the
Company on or after age fifty-five (55) with at least ten (10) years of service
with the Company.
     Section 1.16 — “Subsidiary” shall mean any corporation in an unbroken chain
of corporations beginning with the Company, if each of the corporations, or
group of commonly controlled corporations, other than the last corporation in
the unbroken chain then owns stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations below it in such chain.
     Section 1.17 — “Termination of Employment” shall mean a termination of the
Grantee’s employment with the Company, a Subsidiary or an Affiliate (regardless
of the reason therefor) that constitutes a “separation from service” as defined
in Section 409A of the Internal Revenue Code of 1986, as amended, or applicable
regulations or other guidance issued thereunder (“Section 409A”).

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ARTICLE II
GRANT OF PERFORMANCE UNITS
     Section 2.1 — Grant of Performance Units. For good and valuable
consideration, the Company hereby grants to the Grantee the number of
Performance Units set forth on the signature page hereof upon the terms and
subject to the conditions set forth in this Agreement.
     Section 2.2 — No Obligation of Employment. Nothing in this Agreement or in
the Plan shall confer upon the Grantee any right to continue in the employ of
the Company or any Subsidiary or Affiliate or interfere with or restrict in any
way the rights of the Company and its Subsidiaries or Affiliates, which are
hereby expressly reserved, to terminate the employment of the Grantee at any
time for any reason whatsoever, with or without Cause.
     Section 2.3 — Adjustments in Performance Units. In the event that shares of
Common Stock are, from time to time, changed into or exchanged for a different
number or kind of shares of the Company or other securities of the Company by
reason of a merger, consolidation, recapitalization event, reclassification,
stock split, stock dividend, combination of shares, or otherwise, the Committee
shall make an appropriate and equitable adjustment in the number and kind of
Performance Units, or other consideration payable hereunder, and the applicable
FMV per Share. Any such adjustment made by the Committee shall be final and
binding upon the Grantee, the Company and all other interested persons.
ARTICLE III
VESTING AND FORFEITURE OF PERFORMANCE UNITS
     Section 3.1 — Performance Units. Unless otherwise provided in this
Article III, the Performance Units shall vest on the fifteenth (15th) day of
each calendar month, in equal monthly increments, during the period beginning on
the Grant Date and ending on the Determination Date (the “Performance Cycle”).
     Section 3.2 — Effect of Certain Events. Notwithstanding the foregoing
Section 3.1, during the Performance Cycle:
     (a) upon a Termination of Employment on account of the Grantee’s death or
Disability, all of the Performance Units shall become immediately vested and the
Grantee shall become entitled to the Incentive Amount calculated and payable
pursuant to Article IV hereof with respect to the Performance Units that are
vested as of the date of Termination of Employment;
     (b) upon the earliest of (i) a Termination of Employment on account of
Retirement, (ii) a Termination of Employment by the Company without Cause, or by
the Grantee for Good Reason, or (iii) a Change of Control, the Performance Units
shall cease to vest, any and all Performance Units that remain unvested on the
date of such Termination of Employment or Change of Control shall terminate
immediately, and the Grantee shall become entitled to the Incentive Amount
calculated and payable pursuant to Article IV hereof with respect to the
Performance Units that are vested as of the date of such Termination of
Employment or Change of Control, as applicable; and

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     (c) upon the earlier of (i) a Termination of Employment by the Company for
Cause, and (ii) a Termination of Employment by the Grantee without Good Reason,
all Performance Units (whether or not they are vested) shall terminate and the
Grantee shall not be entitled to any Incentive Amount hereunder.
ARTICLE IV
CALCULATION AND PAYMENT OF INCENTIVE AMOUNT
     Section 4.1 — Calculation of Incentive Amount. The Incentive Amount, if
any, payable to the Grantee hereunder shall be calculated as of the
Determination Date. The Incentive Amount shall equal the number of Performance
Units that are vested as of the Determination Date pursuant to Article III
hereof, multiplied by the FMV per Share as of the Determination Date, and
further multiplied by the applicable percentage determined as of the
Determination Date based on the matrix below (the “Applicable Percentage”):
Applicable Percentage
(LOGO) [c52816c5281601.gif] 

                                                                 
75%ile
    100 %     110 %     130 %     140 %     152 %     176 %     188 %     200 %
 
                                                               
70%ile
    92 %     102 %     122 %     132 %     144 %     168 %     180 %     192 %
65%ile
    84 %     94 %     114 %     124 %     136 %     160 %     172 %     184 %
60%ile
    76 %     86 %     106 %     116 %     128 %     152 %     164 %     176 %
55%ile
    68 %     78 %     98 %     108 %     120 %     144 %     156 %     168 %
50%ile
    60 %     70 %     90 %     100 %     112 %     136 %     148 %     160 %
45%ile
    53 %     63 %     83 %     93 %     105 %     129 %     141 %     153 %
40%ile
    47 %     57 %     77 %     87 %     99 %     123 %     135 %     147 %
35%ile
    40 %     50 %     70 %     80 %     92 %     116 %     128 %     140 %    
35%ile     40%ile     50%ile     55%ile     60%ile     70%ile     75%ile    
80%ile

3 Year Cumulative TSR – Peer Group
where:
“3 Year Cumulative TSR – Peer Group” represents the Company’s average total
shareholder return (based on the average of the closing prices of the shares of
Common Stock for the four (4) weeks immediately preceding the Determination Date
compared to the average of the closing prices of the shares of Common Stock for
the four (4) weeks immediately following the Grant Date) expressed as a
percentage of an industry peer group index, which peer group shall include such
companies as shall be selected by the Committee in its sole discretion before
the awards to which the 3 Year Cumulative TSR – Peer Group applies are granted;
and

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“3 Year Cumulative TSR – S&P 500” represents the Company’s average total
shareholder return (based on the average of the closing prices of the shares of
Common Stock for the four (4) weeks immediately preceding the Determination Date
compared to the average of the closing prices of the shares of Common Stock for
the four (4) weeks immediately following the Grant Date) expressed as a
percentage of the Standard & Poor’s 500 Index.
     Notwithstanding the foregoing, in the event that the Company’s average
total shareholder return as of the Determination Date (based on the average of
the closing prices of the shares of Common Stock for the four (4) weeks
immediately preceding the Determination Date compared to the average of the
closing prices of the shares of Common Stock for the four (4) weeks immediately
following the Grant Date) is negative, (i) no Incentive Amount shall be paid
hereunder if the 3 Year Cumulative TSR – Peer Group (as defined above) is less
than fifty percent (50%) as of the Determination Date, and (ii) the Applicable
Percentage shall not exceed one hundred fifty percent (150%) if the 3 Year
Cumulative TSR – Peer Group (as defined above) equals or exceeds fifty percent
(50%) as of the Determination Date.
     Section 4.2 — Form and Time of Payment.
     (a) General. Subject to Section 4.3, the Incentive Amount shall be paid to
the Grantee in Common Stock (except as otherwise provided below in this
Section 4.2) as soon as administratively feasible but not later than the
ninetieth (90th) day following the Determination Date. The number of shares of
Common Stock to be distributed to the Grantee shall equal the quotient of
(i) the Incentive Amount, divided by (ii) the Fair Market Value of one share of
Common Stock on the payment date. Notwithstanding the foregoing, if the
Determination Date is triggered by a Change of Control, the Incentive Amount
(calculated in accordance with Section 4.1 using the per share value of equity
based on amounts paid in the Change of Control) shall be paid to the Grantee in
cash as soon as administratively feasible but not later than the ninetieth
(90th) day following the Determination Date.
     (b) Specified Employee. If the Determination Date is triggered by a
Termination of Employment other than due to death and the Grantee is a
“specified employee” (as such term is defined in Section 409A, but generally
meaning one of the Company’s key employees within the meaning of Code
Section 416(i)), the Incentive Amount shall be paid to the Grantee six
(6) months after the Determination Date.
     Section 4.3 — Conditions to Issuance of Stock Certificates. If the
Incentive Amount is to be distributed in shares of Common Stock as provided in
Section 4.2 and the Committee reasonably anticipates, in accordance with
Treasury Regulation Section 1.409A-2(b)(7)(ii)), that issuing Common Stock
within the 90-day period following the Determination Date will violate federal
securities laws or other applicable laws, the Company may delay issuing such
Common Stock, provided that the Company issues such Common Stock on the earliest
date on which the Committee reasonably anticipates that such issuance will not
violate federal securities laws or other applicable laws.

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     Section 4.4 — Stockholder Rights. The Grantee shall not be, or have any of
the rights or privileges of, a stockholder of the Company in respect of any
shares of Common Stock deliverable hereunder unless and until certificates
representing such shares shall have been issued by the Company to the Grantee.
ARTICLE V
MISCELLANEOUS
     Section 5.1 — Administration. The Committee has the power to interpret the
Plan and this Agreement and to adopt such rules for the administration,
interpretation and application of the Plan as are consistent therewith and to
interpret or revoke any such rules. All actions taken and all interpretations
and determinations made by the Committee shall be final and binding upon the
Grantee, the Company and all other interested persons. No member of the
Committee shall be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan or the Performance
Units. In its absolute discretion, the Board of Directors may at any time and
from time to time exercise any and all rights and duties of the Committee under
the Plan and this Agreement.
     Section 5.2 — Performance Units Not Transferable. Neither the Performance
Units nor any interest or right therein or part thereof shall be liable for the
debts, contracts or engagements of the Grantee or his or her successors in
interest or shall be subject to disposition by transfer, alienation,
anticipation, pledge, encumbrance, assignment or any other means whether such
disposition is voluntary or involuntary or by operation of law by judgment,
levy, attachment, garnishment or any other legal or equitable proceedings
(including bankruptcy), and any attempted disposition thereof shall be null and
void and of no effect; provided, however, that this Section 5.2 shall not
prevent transfers by will or by the applicable laws of descent and distribution.
     Section 5.3 — Withholding. No later than the date as of which an amount
payable hereunder first becomes includible in the Grantee’s gross income for tax
purposes, the Grantee shall pay to the Company, or make arrangements
satisfactory to the Company regarding the payment of, any applicable withholding
taxes. Any payment under Section 4.2 shall be conditioned upon the Grantee’s
compliance with this Section 5.3.
     Section 5.4 — Notices. Any notice to be given under the terms of this
Agreement to the Company shall be addressed to the Company in care of its
Secretary, and any notice to be given to the Grantee shall be addressed to him
or her at the address given beneath his or her signature hereto. By a notice
given pursuant to this Section 5.4, either party may hereafter designate a
different address for notices to be given to him, her or it. Any notice which is
required to be given to the Grantee shall, if the Grantee is then deceased, be
given to the Grantee’s personal representative if such representative has
previously informed the Company of his, her or its status and address by written
notice under this Section 5.4. Any notice shall be deemed duly given when
enclosed in a properly sealed envelope or wrapper addressed as aforesaid,
deposited (with postage prepaid) in a post office or branch post office
regularly maintained by the United States Postal Service.
     Section 5.5 — Titles. Titles are provided herein for convenience only and
are not to serve as a basis for interpretation or construction of this
Agreement.

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     Section 5.6 — Applicability of Plan. The Performance Units and the shares
of Common Stock issued to the Grantee, if any, shall be subject to all of the
terms and provisions of the Plan, to the extent applicable to the Performance
Units and such shares. In the event of any conflict between this Agreement and
the Plan, the terms of the Plan shall control.
     Section 5.7 — Amendment.
     (a) This Agreement may be amended only by a writing executed by the parties
hereto that specifically states that it is amending this Agreement.
     (b) This Agreement is intended to comply with Section 409A and shall, to
the extent practicable, be construed in accordance therewith. If either party to
this Agreement reasonably determines that any amount payable pursuant to this
Agreement would result in adverse tax consequences under Section 409A, then such
party shall deliver written notice of such determination to the other party, and
the parties hereby agree to work in good faith to amend this Agreement so it
complies with the requirements of Section 409A and preserves as nearly as
possible the original intent and economic effect of the affected provisions.
     Section 5.8 — Dispute Resolution. Any dispute or controversy arising under
or in connection with this Agreement shall be resolved by arbitration in St.
Louis, Missouri. Arbitrators shall be selected, and arbitration shall be
conducted, in accordance with the rules of the American Arbitration Association.
The Company shall pay or reimburse any legal fees in connection with such
arbitration in the event that the Grantee prevails on a material element of his
or her claim or defense. Payments or reimbursements of legal fees made under
this Section 5.8 that are provided during one calendar year shall not affect the
amount of such payments or reimbursements provided during a subsequent calendar
year, payments or reimbursements under this Section 5.8 may not be exchanged or
substituted for another form of compensation to the Grantee, and any such
reimbursement or payment will be paid within sixty (60) days after the Grantee
prevails, but in no event later than the last day of the Grantee’s taxable year
following the taxable year in which he incurred the expense giving rise to such
reimbursement or payment. This Section 5.8 shall remain in effect throughout the
Grantee’s employment with the Company and for a period of five (5) years
following the Grantee’s Termination of Employment.
     Section 5.9 — Governing Law. The laws of the State of Delaware shall govern
the interpretation, validity and performance of the terms of this Agreement
regardless of the law that might be applied under principles of conflicts of
laws.
[SIGNATURE PAGE FOLLOWS]

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     IN WITNESS WHEREOF, this Agreement has been executed and delivered by the
parties hereto.

              GRANTEE   PEABODY ENERGY CORPORATION    
 
           
 
  By    
 
   
 
[Grantee]
       
 
   
 
           
 
  Its        
 
     
 
   
 
           
 
           
Address
           
 
            Grantee’s Taxpayer Identification   Aggregate number of Performance
    Number:   Units granted hereunder:                         
                    -                    -                    
           

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