Exhibit 10.1

 

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701 Market Street
St. Louis, Missouri 63101-1826
314.342.7755
Fax 314.588.2743
sfiehler@peabodyenergy.com

PEABODY ENERGY

 

 

 

SHARON D. FIEHLER

Executive Vice President

Human Resources & Administration

May 4, 2007

 

PERSONAL AND CONFIDENTIAL

 

Richard M. Whiting

c/o Peabody Energy
701 Market Street

Saint Louis, Missouri 63101

 

Dear Rick:

 

This letter agreement (the “Letter Agreement”) summarizes the basic terms of
your anticipated transition from employment with Peabody Energy Corporation
(“Peabody”) to employment with a new entity that Peabody has proposed to
establish and spin off. As you know, Peabody is contemplating the creation of a
separate publicly owned corporation (referred to in this Letter Agreement as
“Gemini”) through a spin-off of certain of Peabody’s operations, and Peabody
would like you to serve as the President and Chief Executive Officer of Gemini.
The spin-off is expected to be effective during the second half of 2007, and the
spin-off effective date also will be the effective date of your employment with
Gemini (the “Effective Date”). Prior to the Effective Date, you will continue to
be employed by Peabody subject to the terms and conditions of your current
employment agreement (the “Existing Employment Agreement”).

 

To induce you to continue to serve Peabody prior to the Effective Date, and to
secure your services as Gemini’s new President and Chief Executive Officer on
and after the Effective Date, Peabody agrees to cause Gemini to enter into the
employment agreement with you in substantially the form attached hereto (the
“New Employment Agreement”), effective on the Effective Date. Your employment
with Peabody will end on the day immediately preceding the Effective Date and
you will begin employment with Gemini on the Effective Date under the terms of
the New Employment Agreement, it being understood that the transition will be
handled in a manner that is designed to continue your benefits coverage. You
acknowledge and agree that you are voluntarily assuming the position of
President and Chief Executive Officer with Gemini and that the transfer of your
employment from Peabody to Gemini does not constitute a termination of your
employment, give rise to a Good Reason for your termination (as defined in your
Existing Employment Agreement) or give rise to a constructive discharge or other
circumstance that would entitle you to any payments described in Section 6 of
the Existing Employment Agreement or any accelerated vesting or payment under
any of your outstanding equity compensation awards except as provided in the
paragraph below.

 

Peabody agrees that if you execute the New Employment Agreement and commence
employment with Gemini on the Effective Date, then:

 

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Richard M. Whiting

May 4, 2007

Page 2

 

 

 

 

1.

Service Credit. Except as limited below, Gemini will credit service with Peabody
and its affiliates, as they may change from time to time, as though such service
were rendered to Gemini for purposes of vesting, eligibility for benefits and
certain other purposes under the Gemini benefit plans and arrangements in which
you are eligible to participate, provided that the comparable Peabody plans
recognize such service and such service crediting does not result in the
duplication of benefits.

 

 

2.

Stock Options Granted Before 2006. You currently have outstanding options to
purchase 591,475 shares of Peabody common stock. As of the Effective Date, those
options will be adjusted to take the spin-off into account based on a formula
determined by Peabody’s Compensation Committee in accordance with the applicable
plan terms.

 

 

a.

Your Peabody options that are scheduled to vest by January 3, 2008 will continue
to vest as long as you remain employed with Gemini. These options, to the extent
they are vested, shall cease to be exercisable and expire on July 3, 2008. The
options otherwise shall remain subject to the terms and conditions of the
applicable award agreement as in effect immediately prior to the Effective Date.

 

 

b.

Your Peabody options that are scheduled to vest after January 3, 2008 will be
converted to a dollar value, based on the closing price of Peabody common stock
on the Effective Date, and that value will be distributed to you as soon as
practicable on or after the Effective Date in the form of registered shares of
Peabody common stock based on the closing price of Peabody common stock on the
Effective Date.

 

 

3.

Stock Options Granted During 2006 or 2007. Your Peabody options that were
granted during 2006 or 2007 (vested or unvested) and have not been exercised by
the Effective Date will be converted into a number of registered shares of
Peabody common stock determined by dividing the targeted compensation value used
at the time of grant to determine the number of shares subject to the options by
the closing price of Peabody common stock on the applicable grant date. This
number will then be adjusted to take the spin-off into account based on a
formula determined by Peabody’s Compensation Committee. Such registered shares
will be distributed to you as soon as practicable on or after the Effective
Date.

 

 

4.

Performance Units. The number of performance units that remain outstanding
immediately prior to the Effective Date shall be adjusted to take the spin-off
into account based on a formula determined by Peabody’s Compensation Committee
in accordance with the applicable plan terms.

 

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Richard M. Whiting

May 4, 2007

Page 3

 

 

 

a.

Your performance units that are scheduled to vest by January 3, 2008 will
continue to vest as long as you remain employed with Gemini. The performance
units shall remain subject to the terms and conditions of the applicable award
agreement as in effect immediately prior to the Effective Date.

 

 

b.

Your performance units that are scheduled to vest after January 3, 2008 shall
become payable at their full value (without proration) based on Peabody’s actual
performance results as of December 31, 2007. Such payment shall be made in the
form of registered shares of Peabody common stock as soon as practicable on or
after December 31, 2007, but no later than March 15, 2008.

 

 

5.

Annual Incentive Awards. For calendar year 2007, you will receive your annual
bonus for the full year, calculated as follows: sixty percent (60%) of your
annual bonus will be nondiscretionary and based on Peabody’s performance in
accordance with the terms of Peabody’s annual incentive plan and forty percent
(40%) of your annual bonus will be discretionary and based on Gemini’s
performance in accordance with standards established by Gemini. Your annual
bonus will be paid as soon as practicable on or after December 31, 2007, but no
later than March 15, 2008. Your bonus will be calculated and paid in accordance
with the existing guidelines used by Peabody in calculating and paying such
bonuses.

 

 

6.

Qualified Defined Benefit Plan. Your benefits under Peabody’s qualified defined
benefit plan shall be paid in accordance with the terms of such plan, treating
the spin-off as a termination of your employment.

 

 

7.

Non-Qualified Defined Benefit Plan. Your benefits under Peabody’s non-qualified
defined benefit plan shall be paid in accordance with the terms of such plan,
treating the spin-off as a termination of your employment.

 

 

8.

Qualified Defined Contribution Plan. Your account balances under Peabody’s
qualified defined contribution plan shall be transferred as soon as practicable
after the Effective Date into a mirror plan established by Gemini and thereafter
shall be governed by the terms of the Gemini plan.

 

 

9.

Non-Qualified Defined Contribution Plan. Your benefits under Peabody’s
non-qualified defined contribution plan shall remain an obligation of Peabody
and will be paid in accordance with the terms of such plan following the
termination of your employment from Gemini.

 

 

10.

Health Care Flexible Spending Account. If you have an account balance under the
Peabody health care flexible spending account plan as of the Effective Date,
your account balance shall be transferred within a reasonable time after the
Effective Date

 

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Richard M. Whiting

May 4, 2007

Page 4

 

 

to the Gemini health care flexible spending account plan on your behalf and
shall thereafter be administered in accordance with the terms of the Gemini
health care flexible spending account plan.

 

 

11.

Continuity of Medical Benefits. Peabody agrees that, to the extent you
participate, the Peabody plans will be responsible for covered medical costs
that you incur up to the Effective Date. Gemini is to establish its own medical
plan, effective as of the Effective Date, which will, to the extent you
participate, be responsible for covered medical costs that you incur on and
after the Effective Date so you will not have any interruption in coverage.

 

If the Gemini spin-off does not occur, the New Employment Agreement will not
become effective and, unless otherwise agreed by you and Peabody, you will
remain employed with Peabody, subject to the terms and conditions of your
Existing Employment Agreement, in a position that is equivalent in level to the
position you hold on the date of this Letter Agreement, including compensation,
benefits and perquisites.

 

Nothing herein shall prevent you from terminating your employment with Peabody
and not executing the New Employment Agreement. If the spin-off occurs and you
decide not to execute the New Employment Agreement, the terms and conditions of
your Existing Employment Agreement with Peabody shall control.

 

 

By signing this Letter Agreement, you agree to the following:

 

 

•

During the period beginning on the date of this Letter Agreement and ending on
the earliest to occur of (i) the Effective Date, (ii) the date Peabody announces
the spin-off will not occur, or (iii) December 31, 2007, you will not, on your
own behalf or on behalf of any person, firm or company, directly or indirectly
solicit, offer employment to or hire any person who is employed by Peabody or
its subsidiaries unless otherwise agreed in writing by the CEO of Peabody and
the CEO of Gemini. Beginning on the Effective Date, the non-solicitation
provisions of your New Employment Agreement will govern.

 

•

During the period beginning on the date of this Letter Agreement and ending on
the earliest to occur of (i) the Effective Date, (ii) the date Peabody announces
the spin-off will not occur, or (iii) December 31, 2007, you will not, on your
own behalf or on behalf of any person, firm or company, directly or indirectly
hold or conduct any investigations, discussions or negotiations, or otherwise
evaluate or indicate interest in, any other person or company in connection with
the potential acquisition of all or any portion of the assets or equity of
Gemini or Peabody unless otherwise agreed in writing by the CEO of Peabody.

 

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Richard M. Whiting

May 4, 2007

Page 5

 

 

You will notice several references to Section 409A of the Internal Revenue Code
(“Section 409A”) in your New Employment Agreement. Section 409A generally
governs plans, contracts and arrangements, including many individual employment
contracts, which have the effect of deferring federal income taxation. A failure
to comply with Section 409A could result in the imposition on you of an
additional 20% tax, interest payments and acceleration of taxation on payments
made to you under the terms of the New Employment Agreement, so the agreement is
designed to satisfy the Section 409A requirements. For example, Section 409A
requires a six-month delay in payments to key public company employees of
amounts that become payable upon a separation from service, so the New
Employment Agreement contains a six-month delay for certain payments.
Additionally, Section 409A provides an exemption for payments that are made no
later than March 15 of the calendar year following the calendar year in which
rights to such payments are earned and vested, so several provisions of the New
Employment Agreement incorporate this concept.

 

The rules governing Section 409A have just been finalized and the final
regulations are under review to determine whether they affect the provisions in
your New Employment Agreement. Accordingly, the New Employment Agreement may
require modification to comply with the final regulations before they become
effective at the end of this year. The New Employment Agreement states that you
and Gemini will work together in good faith to amend the agreement, if
necessary, to comply with Section 409A and preserve as nearly as possible the
original intentions of the affected provisions. In addition, you and Peabody
hereby agree to work together in good faith to amend the Peabody plans, programs
and arrangements, if necessary, to comply with Section 409A and preserve as
nearly as possible the original intentions of those arrangements.

 

Please confirm your agreement with the arrangements described in this Letter
Agreement (including the terms and conditions of the New Employment Agreement
attached hereto) by signing and dating the enclosed duplicate copy of this
Letter Agreement and the enclosed duplicate signature page of the New Employment
Agreement and returning those documents to me. Please contact me with any
questions or comments you may have.

 

 

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Richard M. Whiting

May 4, 2007

Page 6

 

 

 

 

Very truly yours,

 

 

 

 

PEABODY ENERGY CORPORATION

 

 

 

 

By:

/s/ Sharon Fiehler

 

 

 

 

Its:

EVP-HR & Admin

 

 

 

 

 

 

 

 

 

AGREED AND ACCEPTED:

 

 

 

 

 

/s/ Richard M. Whiting

 

 

Signature

 

 

 

 

 

May 14, 2007

 

 

Date

 

 

Enclosures

 

 

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EMPLOYMENT AGREEMENT

This AGREEMENT is entered into as of the date set forth on the signature page
hereof, by and between [Gemini] Corporation, a Delaware corporation (the
“Company”), and Richard M. Whiting (the “Executive”).

RECITALS

To induce Executive to serve as the Company’s President and Chief Executive
Officer, the Company desires to provide Executive with compensation and other
benefits on the terms and subject to the conditions set forth in this Agreement.

Executive is willing to accept such employment and perform services for the
Company, on the terms and subject to the conditions hereinafter set forth.

It is therefore hereby agreed by and between the parties as follows:

 

1.

Employment.

1.1.         Subject to the terms and conditions of this Agreement, the Company
agrees to employ Executive during the term hereof as the Company’s President and
Chief Executive Officer. In such capacity, Executive shall report to the Board
of Directors of the Company (the “Board”) and shall have the customary powers,
responsibilities and authorities of executives holding such positions in
publicly held corporations of the size, type and nature of the Company, as it
exists from time to time.

1.2.         Subject to the terms and conditions of this Agreement, Executive
hereby accepts employment as the Company’s President and Chief Executive Officer
commencing as of the date hereof (the “Commencement Date”) and agrees, subject
to any period of vacation or sick leave, to devote his full business time and
efforts to the performance of services, duties and responsibilities in
connection therewith.

1.3.         Nothing in this Agreement shall preclude Executive from engaging in
trade association activities, charitable work and community affairs, from
delivering lectures, fulfilling speaking engagements or teaching at educational
institutions, from managing any investment made by him or his immediate family
with respect to which Executive or such family member is not substantially
involved with the management or operation of the entity in which Executive has
invested (provided that no such investment in publicly traded equity securities
or other property may exceed 5% of the equity of any entity, without the prior
approval of the Board) or from serving, subject to the prior approval of the
Board, as a member of the board of directors or as a trustee of any other
corporation, association or entity, to the extent that any of the above
activities do not materially interfere with the performance of his duties
hereunder. For the avoidance of doubt, Executive shall be permitted to continue
to serve as a member or director in any organization of which he was a member or
director as of the date hereof (including, without limitation, as director of
the Society of Mining Engineers Foundation) without

 

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obtaining Board approval. For purposes of this Section 1.3, any approval by the
Board required herein shall not be unreasonably withheld.

2.            Term of Employment. Executive’s term of employment under this
Agreement (the “Term of Employment”) shall commence on the Commencement Date and
shall continue until terminated as provided in this Agreement.

 

3.

Compensation.

3.1.         Salary. During the Term of Employment, the Company shall pay
Executive a base salary (“Base Salary”), which shall be payable in accordance
with the ordinary payroll practices of the Company. Executive’s initial Base
Salary shall be $700,000 per annum. During the Term of Employment, the Board
shall review in good faith, at least annually, Executive’s Base Salary in
accordance with the Company’s customary procedures and practices regarding the
salaries of senior executives and may, if determined by the Board to be
appropriate, increase Executive’s Base Salary following such review. “Base
Salary” for all purposes herein shall be deemed to be a reference to any such
increased amount.

3.2.        Annual Bonus. In addition to his Base Salary, Executive shall,
commencing with the 2007 calendar year and continuing each calendar year
thereafter during the Term of Employment, be eligible to receive an annual cash
bonus (the “Bonus”) in accordance with a program to be developed by the Board,
based on achievement of performance targets established by the Board as soon as
practicable at or after the beginning of the calendar year to which the
performance targets relate. For each calendar year, Executive’s target Bonus
shall be at least 100% of Base Salary, and his maximum bonus shall be at least
175% of Base Salary, as in effect at the end of such calendar year. The Bonus
shall be payable to Executive at the time bonuses are paid to executive officers
in accordance with the Company’s policies and practices as set by the Board, but
in no event later than March 15 of the calendar year following the calendar year
in which the Bonus is earned and vested.

 

4.

Employee Benefits .

 

4.1.

Equity and Stock Options.

(a)          Executive shall receive an extended long-term incentive award (the
“Extended Long Term Incentive Award”) with a value that is at least equal to
850% of Executive’s initial Base Salary as set forth in Section 3.1. Such award
shall consist of stock options and restricted stock units, which will be granted
on or about [_______], 2007. The stock options will be granted with an exercise
price per share equal to the closing market price of a share of Company common
stock on the grant date. The restricted stock units will be granted with a value
per unit equal to the closing market price of a share of Company common stock on
the grant date.

(b)          With respect to each calendar year commencing with the 2008
calendar year, Executive shall receive equity-based compensation awards under

 

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the Company’s equity incentive plans (the “Annual Long Term Incentive Awards”
and, together with the Extended Long Term Incentive Award, the “Long Term
Incentive Awards”) with a value at least equal to 250% of Executive’s Base
Salary as in effect on the date of such award. The Annual Long Term Incentive
Award with respect to the 2008 calendar year shall be made in the form of
restricted stock on or about [_______], 2007, with a value per share that equals
the closing market price of a share of Company common stock on the grant date.
The Annual Long Term Incentive Award with respect to each calendar year after
2008 shall be made effective on the first business day of such calendar year.

(c)          As of the date of termination of Executive’s employment due to
Executive’s Disability (as hereinafter defined) or death, or upon the occurrence
of a change in control (as defined in the applicable equity-based plan or award)
all outstanding Long Term Incentive Awards and any other equity-based awards
granted to the Executive by the Company shall become immediately and fully
vested; provided, however, that any performance units granted to Executive shall
not become fully vested upon a change in control unless otherwise provided in
the applicable plan or award agreement. In the case of termination of
Executive’s employment due to Executive’s Disability (as hereinafter defined) or
death, any options held by Executive as of such date shall remain exercisable
until at least the earlier of (i) the date that is one (1) year after the date
of termination of Executive’s employment or (ii) the date on which the option
would have expired solely by reason of the passage of time if Executive’s
employment had not been terminated, provided that no option shall remain
outstanding longer than the maximum time permitted by Section 409A of the
Internal Revenue Code of 1986, as amended (the “Code”).

(d)          The Long Term Incentive Awards shall be governed by separate grant
agreements (together with any other agreement approved by the Board and
designated by the Board as an “Ancillary Document” for purposes of this
Agreement, the “Ancillary Documents”). In the event of any conflict between an
Ancillary Document and the terms of this Agreement, the terms of this Agreement
shall govern.

(e)          All Long Term Incentive Awards and any other equity-based awards
granted to the Executive by the Company shall be approved by a committee of the
Board comprised of individuals who are both disinterested directors (within the
meaning of Section 16 of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”)) and independent directors (within the meaning of applicable
stock exchange rules) and shall be exempt from Section 16(b) of the Exchange Act
by reason of Rule 16b- 3 under the Exchange Act.

4.2.        Employee Benefit Programs. Plans and Practices: Perquisites. During
the Term of Employment, the Company shall provide Executive with employee
benefits and perquisites at a level (a) commensurate with his position in the
Company and (b) at least as favorable to the Executive as the Company provides
to its other senior executives, including retirement benefits, health and
welfare benefits (both active and retiree), the

 

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Continuation Benefits (as defined herein), and other employee benefits and
perquisites which the Company may make available to its senior executives from
time to time. Executive’s service with Peabody Energy Corporation and its
affiliates shall be taken into account for purposes of determining eligibility,
vesting, level of benefits and benefit accruals under the Company’s benefit
plans (except to the extent that such service credit would result in a
duplication of benefits).

4.3.        Vacation. Executive shall be entitled to the number of business days
paid vacation in each calendar year, as determined in accordance with the
Company’s applicable vacation policies, but in no event less than twenty (20)
business days, which shall be taken at such times as are reasonably consistent
with Executive’s responsibilities hereunder.

5.            Expenses. Subject to prevailing Company policy or such guidelines
as may be established by the Board, the Company will reimburse Executive for all
reasonable expenses incurred by Executive in carrying out his duties on behalf
of the Company.

 

6.

Termination of Employment.

6.1.        Termination of Employment for Any Reason. In the event of a
termination of the Executive’s employment for any reason, the Company shall pay
to the Executive (a) within five (5) business days following the date of
termination of the Executive’s employment, a lump sum equal to (i) Executive’s
Base Salary earned on or prior to the date of such termination, (ii) any
business expenses incurred by Executive and not yet reimbursed by the Company as
of the date of such termination, (Hi) any vacation time accrued but unused on or
prior to the date of such termination and (iv) any Bonus earned but not yet paid
for any calendar year prior to the date of such termination, and (b) any
benefits accrued and vested under any of the Company’s employee benefit
programs, plans and practices on or prior to the date of termination of
Executive’s employment (the “Accrued Obligations”) in accordance with the terms
of such programs, plans and practices.

6.2.        Termination Not for Cause or for Good Reason. (a) The Company or
Executive may terminate Executive’s Term of Employment at any time for any
reason by providing written notice to the other party at least thirty (30) days
(or such other number of days specified in this Agreement) in advance of the
date of termination of Executive’s employment. If Executive terminates his
employment for Good Reason, such notice shall describe the conduct Executive
believes to constitute Good Reason and the Company shall have the opportunity to
cure the Good Reason within 30 days of receiving such notice. If the Company
cures the conduct that is the basis for the potential termination for Good
Reason within such 30-day period, Executive’s notice of termination shall be
deemed withdrawn.

If Executive’s employment is terminated (i) by the Company other than for Cause
(as defined in Section 6.3(b) hereof), Disability (as defined in Section 6.4
hereof) or death or (ii) by Executive for Good Reason (as defined in Section
6.2(b) hereof), the Company, as severance, shall pay to Executive an amount (the
“Severance Payment”) equal to the total of:

 

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(A)

three (3) times Executive’s Base Salary, plus

(B)         an additional amount equal three (3) times the greater of (x)
Executive’s target Bonus for the calendar year of termination of Executive’s
employment or (y) the annual average of the actual Bonus awards paid to
Executive by the Company during the three calendar years preceding the date of
termination of Executive’s employment (or, if Executive has not yet been
employed by the Company pursuant to this Agreement for three full calendar years
as of the date his employment is terminated, during the two-year or one-year
period, as applicable, for which he has been so employed and received a Bonus).

The amounts described in (A) and (B) above are collectively referred to herein
as the “Severance Payment.” The Company shall pay to the Executive (I) one-third
(1/3) of such amount in twelve (12) equal monthly installments commencing on the
date of termination of Executive’s employment and (II) the remainder of such
amount in a lump sum on the first anniversary of the date of such termination of
employment.

In addition, the Company shall pay to Executive a prorated bonus (the “Prorated
Bonus”) for the calendar year of termination of Executive’s employment,
calculated as the Bonus Executive would have received in such year based on
actual performance multiplied by a fraction, the numerator of which is the
number of business days during the calendar year of termination that Executive
was employed and the denominator of which is the total number of business days
during the calendar year of termination. The Prorated Bonus shall be payable
when annual bonuses are paid to other senior executives of the Company, but in
no event later than March 15 of the calendar year following the calendar year in
which the Prorated Bonus was earned and vested.

The Company shall also continue to provide Executive as though he remained
actively employed, for a period of three (3) years following the date of
termination of Executive’s employment (the “Benefit Continuation Period”), life
insurance, health coverage, retirement and other benefits identified on the
signature page hereof (collectively, the “Continuation Benefits”), provided,
however, that the Company shall not be obligated to provide any benefits under
any tax-qualified plan that is not permitted by the terms of such plan or by
applicable law or that could jeopardize the plan’s tax status; provided,
further, that any such coverage shall terminate to the extent that Executive is
offered or obtains comparable benefits from any other employer during the
Benefit Continuation Period. Notwithstanding the foregoing, if Executive
breaches any provision of Section 13 hereof, the remaining balances of the
Severance Payment, the Prorated Bonus and any Continuation Benefits shall be
forfeited.

(b)          For purposes of this Agreement, the term “Good Reason” means: (i) a
reduction by the Company in Executive’s Base Salary (in which event the
Severance Payment shall be calculated based on Executive’s Base Salary in effect
prior to any such reduction); (ii) a material reduction in the aggregate program
of employee benefits and perquisites to which Executive is entitled (other than
a reduction that generally affects all executives); (iii) a material decline in
Executive’s Bonus or Long Term Incentive Award opportunities; (iv) relocation of
Executive’s primary office by more than 50 miles from the location of
Executive’s primary

 

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office in Saint Louis, Missouri; or (v) any material diminution or material
adverse change in Executive’s title, duties, responsibilities or reporting
relationships. Any amounts due to the Executive in connection with a termination
of employment shall be computed without giving effect to any changes that give
rise to Good Reason. If Executive does not give notice to the Company as
described in Section 6.2(a) hereof within ninety (90) days after an event giving
rise to Good Reason, the Executive’s right to claim Good Reason termination on
the basis of such event shall be deemed waived.

6.3.        Voluntary Termination by Executive; Discharge for Cause. (a) In the
event that Executive’s employment is terminated (i) by the Company for Cause, as
hereinafter defined, or (ii) by Executive other than for Good Reason, Disability
or death, the Company shall pay to Executive the Accrued Obligations.

(b)          As used herein, the term “Cause” shall be limited to (i) any
material and uncorrected breach by Executive of the terms of this Agreement,
including, but not limited to, a violation of Section 13 hereof, (ii) any
willful fraud or dishonesty of Executive involving the property or business of
the Company, (iii) a deliberate or willful refusal or failure of Executive to
comply with any major corporate policy of the Company which is communicated to
Executive in writing, or (iv) Executive’s conviction of, or plea of nolo
contendere to, any felony if such conviction or plea results in his
imprisonment; provided that, with respect to clauses (i), (ii) and (iii) above,
Executive shall have thirty (30) days following his receipt of written notice of
the conduct that is the basis for the potential termination for Cause within
which to cure such conduct to prevent termination for Cause by the Company. If
the Executive cures the conduct that is the basis for the potential termination
for Cause within such 30-day period, the Company’s notice of termination shall
be deemed withdrawn. In the event that Executive is terminated for failure to
meet performance goals, as determined by the Board, such termination shall be
considered a termination for Cause for all purposes relating to his equity-based
compensation awards, but it shall be considered a termination without Cause for
purposes of his right to receive the Severance Payment, the Prorated Bonus and
the Continuation Benefits.

6.4.        Disability. In the event of the Disability (as defined below) of
Executive during the Term of Employment, the Company may terminate Executive’s
Term of Employment upon written notice to Executive (or Executive’s personal
representative, if applicable) effective upon the date of receipt thereof (the
“Disability Commencement Date”). The Company shall pay to the Executive the
Accrued Obligations as provided in Section 6.1, and the Prorated Bonus when such
bonuses are paid to other senior executives of the Company, but in no event
later than March 15 of the calendar year following the calendar year in which
the Executive’s employment was terminated. The term “Disability,” for purposes
of this Agreement, shall mean Executive’s absence from the full-time performance
of Executive’s duties pursuant to a reasonable determination made in accordance
with the Company’s disability plan that Executive is disabled as a result of
incapacity due to physical or mental illness that lasts, or is reasonably
expected to last, for at least six months.

 

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6.5.        Death. In the event of Executive’s death during his Term of
Employment or at any time thereafter while payments are still owing to Executive
under the terms of this Agreement, the Company shall pay to the Executive’s
beneficiary(ies) (to the extent so designated by the Executive) or his estate
(to the extent that no such beneficiary has been designated) the Accrued
Obligations as provided in Section 6.1, the Prorated Bonus when such bonuses are
paid to other senior executives of the Company, but in no event later than March
15 of the calendar year following the calendar year in which Executive’s
employment was terminated, and any remaining payments that were payable to
Executive by reason of his termination of employment under Section 6.2 to which
Executive was entitled at the time of his death in accordance with the terms of
Section 6.2.

6.6.         No Further Notice or Compensation or Damages. Executive understands
and agrees that he shall not be entitled to any further notice, compensation or
damages upon a termination of his employment under this Agreement, other than
amounts specified in Sections 4 and 6 hereof, the Ancillary Documents, and any
plan, program or arrangement of the Company.

6.7.        Executive’s Duty to Deliver Materials. Upon the termination of
Executive’s employment for any reason, Executive or his estate shall surrender
to the Company all correspondence, letters, files, contracts, mailing lists,
customer lists, advertising materials, ledgers, supplies, equipment, checks, and
all other materials and records of any kind that are the property of the Company
or any of its subsidiaries or affiliates, that may be in Executive’s possession
or under his control, including all copies of any of the foregoing.

 

7.

Tax Gross-Up Payments.

(a)          If Executive becomes entitled to any payment, benefit or
distribution (or combination thereof) by the Company, any affiliated company, or
one or more trusts established by the Company for the benefit of its employees,
whether paid or payable pursuant to Section 6.2 of this Agreement or any other
plan, arrangement, or agreement with the Company or any affiliated company (the
“Payments”), which are or become subject to the excise tax imposed by Code
Section 4999, or any interest or penalties are incurred by Executive with
respect to such excise tax (such excise tax, together with” any such interest
and penalties, hereinafter collectively referred to as the “Excise Tax”), the
Company shall pay to Executive an additional payment (the “Gross-Up Payment”) in
an amount such that after payment by Executive of all taxes (including any
interest or penalties imposed with respect to such taxes), including, without
limitation, any income taxes (and any interest and penalties imposed with
respect thereto) and the Excise Tax imposed upon the Gross-Up Payment, Executive
retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon
the Payments.

(b)         All determinations required to be made under this Section 7,
including whether and when a Gross-Up Payment is required and the amount of such
Gross-Up Payment and the assumptions to be utilized in arriving at such
determination, shall be made by a nationally recognized certified public
accounting firm as may be mutually agreed by the Company and the Executive (the
“Accounting Firm”), which shall provide detailed supporting calculations to both
the Company and Executive within ten business days after the receipt of

 

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notice from Executive that Payments were made, or such earlier time as is
required by the Company; provided that, for purposes of determining the amount
of any Grass-Up Payment, Executive shall be deemed to pay federal income tax at
the highest marginal rates applicable to individuals in the calendar year in
which any such Grass-Up Payment is to be made and deemed to pay state and local
income taxes at the highest effective rates applicable to individuals in the
state or locality of Executive’s residence or place of employment in the
calendar year in which any such Grass-Up Payment is to be made, net of the
maximum reduction in federal income taxes that can be obtained from deduction of
such state and local taxes, taking into account limitations applicable to
individuals subject to federal income tax at the highest marginal rates. All
fees and expenses of the Accounting Firm shall be borne solely by the Company.
Any Gross-Up Payment, as determined pursuant to this Section 7, shall be paid by
the Company to Executive (or to the appropriate taxing authority an Executive’s
behalf) no later than March 15 of the calendar year following the calendar year
in which the Accounting Firm determines that Executive is entitled to a Gross-Up
Payment. If the Accounting Firm determines that no Excise Tax is payable by
Executive, it shall so indicate to the Company and Executive in writing. Any
determination by the Accounting Firm shall be binding upon the Company and
Executive. As a result of the uncertainty in the application of Code Section
4999, it is possible that the amount of the Gross-Up Payment determined by the
Accounting Firm to be due to (or an behalf of) Executive may be lower than the
amount actually due (“Underpayment”). In the event that the Company exhausts its
remedies hereunder and Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or far the benefit of Executive; provided, however, that such
Underpayment shall be paid to Executive no later than March 15 of the calendar
year following the calendar year in which it is determined that the Executive is
entitled to an Underpayment.

(c)          Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Company of any Grass-Up Payment. Such notification shall be given as soon as
practicable, but no later than fifteen business days after Executive is informed
in writing of such claim and shall apprise the Company of the nature of such
claim and the date in which such claim is requested to be paid. Executive shall
not pay such claim prior to the expiration of the thirty-day period following
the date on which he gives such notice to the Company (or such shorter period
ending on the date that any payment of taxes with respect to such claim is due).
If the Company notifies Executive in writing prior to the expiration of such
period that it desires to contest such claim, Executive shall (i) give the
Company any information reasonably requested by the Company relating to such
claim, (ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company, (iii) cooperate with the Company
in good faith in order to effectively contest such claim and (iv) permit the
Company to participate in any proceedings relating to such claim; provided,
however, that the Company shall bear and pay directly all costs and expenses
(including additional interest and penalties) incurred in connection with such
contest and shall indemnify and hold Executive harmless, on an after-tax basis,
far any Excise Tax or income tax (including interest and penalties with respect
thereto) imposed as a result such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of this Section 7, the
Company shall control all proceedings taken in connection with such contest and,
at its sole option, may pursue or forego

 

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any and all administrative appeals, proceedings, hearings and conferences with
the taxing authority in respect of such claim and may, at its sole option,
either direct Executive to pay the tax claimed and sue for a refund or contest
the claim in any permissible manner, and Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, further, that if the Company directs Executive to pay such
claim and sue for a refund, the Company shall advance the amount of such payment
to Executive, on an interest-free basis, and shall indemnify and hold Executive
harmless, on an after-tax basis, from any Excise Tax or income tax (including
interest or penalties with respect thereto) imposed with respect to such advance
or with respect to any imputed income with respect to such advance; provided,
further, that if Executive is required to extend the statute of limitations to
enable the Company to contest such claim, Executive may limit this extension
solely to such contested amount. The Company’s control of the contest shall be
limited to issues with respect to which a Gross-Up Payment would be payable
hereunder and Executive shall be entitled to settle or contest, as the case may
be, any other issue raised by the Internal Revenue Service or any other taxing
authority.

(d)        If, after the receipt by Executive of an amount paid or advanced by
the Company pursuant to this Section 7, Executive becomes entitled to receive
any refund with respect to a Gross-Up Payment, Executive shall (subject to the
Company’s compliance with the requirements of Section 7(c)) promptly pay to the
Company the amount of such refund received (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by
Executive of an amount advanced by the Company pursuant to this Section 7, a
determination is made that Executive shall not be entitled to any refund with
respect to such claim and the Company does not notify Executive in writing of
its intent to contest such denial of refund prior to the expiration of thirty
days after such determination, then such advance shall be forgiven and shall not
be required to be repaid and the amount of such advance shall. offset, to the•
extent thereof, the amount of the Gross-Up Payment required to be paid.

8.            Notices. All notices or communications hereunder shall be in
writing, addressed as follows:

To the Company:

[Gemini]

attn: Board of Directors

with a copy to:

[insert]

To Executive at the address set forth on the signature page hereof.

Any such notice or communication shall be delivered by hand or by courier or
sent certified or registered mail, return receipt requested, postage prepaid,
addressed as above (or to such other address as such party may designate in a
notice duly delivered as described above), and the third business day after the
actual date of sending shall constitute the time at which notice was given.

 

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9.            Severability. If any provision of this Agreement shall be declared
to be invalid or unenforceable, in whole or in part, such invalidity or
unenforceability shall not affect the remaining provisions hereof which shall
remain in full force and effect.

10.          Assignment. This Agreement shall be binding upon, inure to the
benefit of and be enforceable by the heirs and representatives of Executive and
the assigns and successors of the Company, but neither this Agreement nor any
rights or obligations hereunder shall be assignable or otherwise subject to
hypothecation by Executive (except by will or by operation of the laws of
intestate succession) or by the Company, except that the Company may assign this
Agreement to any successor (whether by merger, purchase or otherwise) to all or
substantially all of the stock, assets or businesses of the Company.

11.          Amendment. This Agreement may be amended only by written agreement
of the parties hereto.

12.          Amendment to Comply with Code Section 409A. If either party to this
Agreement reasonably determines that any amount payable pursuant to this
Agreement would result in adverse tax consequences under Code Section 409A
(including, but not limited to, the additional tax described in Code Section
409A(a)(1)(B), 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 is exempt from, or compliant with, the
requirements of Code Section 409A and preserves as nearly as possible the
original intentions of the affected provisions. If any payment due to the
Executive is required to be delayed by reason of Code Section 409A, such payment
shall be paid in one lump-sum payment as soon as administratively feasible on or
after the date such payment is permitted to be made under Code Section 409A,
subject to standard payroll deductions and withholdings.

 

13.

Nondisclosure of Confidential Information; Non-Competition; Non-Solicitation.

(a)          Executive, both during the term hereof and thereafter, will not,
directly or indirectly, use for himself or use for, or disclose to, any party
other than the Company, or any subsidiary of the Company (other than in the
ordinary course of Executive’s duties for the benefit of the Company or any
subsidiary of the Company or to the extent required by applicable law), any
secret or confidential information that is not publicly available regarding the
business or property of the Company or its subsidiaries or regarding any secret
or confidential apparatus, process, system, or other method at any time used,
developed, acquired, discovered or investigated by or for the Company or its
subsidiaries, whether or not developed, acquired, discovered or investigated by
Executive. At the termination of Executive’s employment or at any other time the
Company or any of its subsidiaries may request, Executive shall promptly deliver
to the Company all memoranda, notes, records, plats, sketches, plans or other
documents made by, compiled by, delivered to, or otherwise acquired by Executive
concerning the business or properties of the Company or its subsidiaries or any
secret or confidential product, apparatus or process used developed, acquired or
investigated by the Company or its subsidiaries.

(b)          In consideration of the Company’s obligations under this Agreement,
Executive agrees that: (i) during the period of his employment hereunder and for
a period of one year thereafter, without the prior written consent of the Board,
he will not, directly or indirectly, as principal, manager, agent, consultant,
officer, stockholder, partner, investor, lender or employee or in any other
capacity, carry on, be engaged in or have any financial interest in, any
activities which are in competition with the business of the Company or its
subsidiaries; (ii)

 

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during the period of his employment hereunder and for a period of one year
thereafter, without the prior written consent of the Board, he shall not, on his
own behalf or on behalf of any person, firm or company, directly or indirectly
solicit or offer employment to any person who is or has been employed by the
Company or its subsidiaries at any time during the twelve (12) months
immediately preceding such solicitation; and (iii) during the first year that
this Agreement is in effect, he shall not, on his own behalf or on behalf of any
person, firm or company, directly or indirectly solicit, offer employment to or
hire any person who is employed by Peabody Energy Corporation or its
subsidiaries, except to the extent agreed upon in writing by Peabody Energy
Corporation.

(c)         For purposes of this Section 13, an entity shall be deemed to be in
competition with the Company if it is principally involved in the purchase, sale
or other dealing in any property or the rendering of any service purchased,
sold, dealt in or rendered by the Company as a part of the business of the
Company within the same geographic area in which the Company effects such sales
or dealings or renders such services. Notwithstanding this subsection 13(c) or
subsection 13(b), nothing herein shall be construed so as to preclude Executive
from investing in any publicly or privately held company, provided Executive’s
beneficial ownership of any class of such company’s securities does not exceed
5% of the outstanding securities of such class.

(d)          Executive agrees that this covenant not to compete is reasonable
under the circumstances and will not interfere with his ability to earn a living
or to otherwise meet his financial obligations. Executive and the Company agree
that if in the opinion of any court of competent jurisdiction such restraint is
not reasonable in any respect, such court shall have the right, power and
authority to excise or modify such provision or provisions of this covenant as
to the court shall appear not reasonable and to enforce the remainder of the
covenant as so amended. Executive agrees that any breach of the covenants
contained in this Section 13 would irreparably injure the Company. Accordingly,
Executive agrees that, in the event of such a breach of this Section 13 by the
Executive, the Company may, in addition to pursuing any other remedies it may
have in law or in equity, cease making any payments otherwise required by this
Agreement and seek to obtain an injunction against Executive from any court
having jurisdiction over the matter to restrain any further violation of this
Section 13 by Executive.

14.          Beneficiaries: References. Executive shall be entitled to select
(and change, to the extent permitted under any applicable law) a beneficiary or
beneficiaries to receive any compensation or benefit payable hereunder following
Executive’s death, and may change such election, in either case by giving the
Company written notice thereof. In the event of Executive’s death or a judicial
determination of his incompetence, reference in this Agreement to Executive
shall be deemed, where appropriate, to refer to his beneficiary, estate or other
legal representative. Any reference to the masculine gender in this Agreement
shall include, where appropriate, the feminine.

15.          Dispute Resolution. Any dispute or controversy arising under or in
connection with this Agreement (other than an action to enforce the covenants in
Section 13 hereof) or the Ancillary Documents shall be resolved by arbitration.
Arbitrators shall be selected, and arbitration shall be conducted, in accordance
with the rules of the American Arbitration Association. The Company shall pay
any legal fees in connection with such arbitration in the event that Executive
prevails on a material element of his claim or defense.

 

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16.

Legal Fees; Indemnification; Directors’ & Officers’ Liability Insurance.

(a)         The Company shall reimburse Executive for reasonable legal fees and
expenses incurred by Executive in connection with negotiating and preparing this
Agreement.

(b)         The Company shall indemnify the Executive during and after the Term
of Employment to the maximum extent permitted by applicable law for any
liability incurred by the Executive by reason of his service as an officer or
director of the Company or any of its subsidiaries or affiliates or by reason of
his service as a fiduciary of any employee benefit plan of the Company or any of
its subsidiaries or affiliates.

(c)          During the Term of Employment and for so long as Executive may have
any liability by reason of serving as an officer or director of the Company or
any of its subsidiaries or affiliates, the Executive shall be entitled to the
same directors’ and officers’ liability insurance coverage that the Company
provides generally to its other directors and officers, as may be amended from
time to time for such directors and officers. During the Term of Employment and
for so long as Executive may have any liability by reason of serving as a
fiduciary of any employee benefit plan of the Company or any of its subsidiaries
or affiliates, the Executive shall be entitled to the same fiduciary liability
insurance coverage that the Company provides generally to its other directors.
and officers, as may be amended from time to time for such directors and
officers.

17.          Governing Law. This Agreement shall be construed, interpreted and
governed in accordance with the laws of the State of New York, without reference
to rules relating to conflicts of law.

18.          Effect on Prior Agreements. This Agreement, the transition letter
agreement entered into by Peabody Energy Corporation and Executive in connection
with Executive’s transfer to the Company, and the Ancillary Documents contain
the entire understanding between the parties hereto and supersede in all
respects any prior or other agreement or understanding, both written and oral,
between the Company, any affiliate of the Company or any predecessor of the
Company or affiliate of the Company and Executive.

19.          Withholding. The Company shall be entitled to withhold from
payments to Executive any amount of withholding required by law.

20.          Survival. Notwithstanding the expiration of the term of this
Agreement, the provisions of Sections 4, 13 and 16 hereunder shall remain in
effect as long as is reasonably necessary to give effect thereto in accordance
with the terms hereof.

21.          Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original.

 

[SIGNATURE PAGE FOLLOWS]

 

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[GEMINI] CORPORATION

 

By: _______________________________

 

Name:_________________________

 

Title:__________________________

EXECUTIVE

Richard M. Whiting

 

Agreement Commencement Date:

 

Name of Executive:

Richard M. Whiting

Address of Executive:

c/o Peabody Energy
701 Market Street
St. Louis, MO 63101

Executive Team Position:

President and Chief Executive Officer

Base Salary:

$700,000 per annum

Annual Bonus Target:

100% of Base Salary (with maximum no less than 175% of Base Salary)

Long-Term Incentive Award:

250% of Base Salary

Extended Long-Term Incentive Award:

850% of Base Salary

Continuation Benefits:

1.    Medical, dental and vision benefits

2.    Life insurance

3.    AD&D

4.     Health care flexible spending account (to extent required to comply with
COBRA continuation coverage requirements)

5.    Qualified and non-qualified defined contribution plan benefits

6.    Qualified and non-qualified defined benefit plan benefits

 

 

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