**Exhibit 10.5**

 

Amendment Number 1 toEMPLOYMENT AGREEMENT

 

THIS AMENDMENT, is made effective as of November 1,2005, between Foundation Coal Corporation (the “Company”) and Michael R.Peelish (the “Participant”).

 

RECITALS:

 

WHEREAS, the Company executed an EmploymentAgreement with the Participant dated July 30, 2004 (the “EmploymentAgreement”); and

 

WHEREAS, the Compensation Committee of theBoard of Directors of the Company (“Committee”) has considered the PerformanceTargets contained in the Employment Agreement; and

 

WHEREAS, the Committee established an ad hocsubcommittee of the Board of Directors to review the Actual Cost Per Ton andTarget Cost Per Ton Performance Target and to make a recommendation to theCommittee; and

 

WHEREAS, after consultation with the ad hocsubcommittee, management presented to the Committee an alternative to the costper ton related Performance Target and proposed an “EBITDA/Revenue” Margin; and

 

WHEREAS, the Committee has reviewed theinformation presented and has determined that it would be in the best interestsof the Company and its Stockholders to amend the Employment Agreement toreplace the “cost per ton” Performance Target with an “EBITDA/Revenue Margin”Performance Target;

 

NOW, THEREFORE, in consideration of themutual covenants hereinafter set forth, the parties agree as follows:

 

Exhibit A - (Performance Vesting) shallbe amended as follows:

 

Replace “Cost per ton” with “EBITDA/Revenue Margin.”

 

Schedule II (Performance Targets) shallbe amended as follows:

 

Replace the “Actual Cost Per Ton” paragraph with the followingparagraph:

 

Actual EBITDA/Revenue Margin:  In respect of a fiscal year, the ActualEBITDA divided by the Revenue as reported in the December 31st auditedStatement of

 

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Consolidated Operations and ComprehensiveIncome (Loss) multiplied by 100 to result in a percentage.

 

Replace the “Target Cost Per Ton” paragraph with the followingparagraph:

 

“Target EBITDA/Revenue Margin” means,in respect of any fiscal year, the Target EBITDA divided by the Revenue asreported in the December 31st audited Statement of ConsolidatedOperations and Comprehensive Income (Loss) multiplied by 100 to result in apercentage.  The Margin shall be 20% withrespect of 2004 through 2008; provided that the Board may make suchequitable adjustments to Margin as it reasonably deems to be appropriate inorder to achieve the intention of this Agreement after giving effect tosignificant events including, without limitation, acquisitions, dispositions,mergers, or similar transactions.”

 

Except as otherwise noted in this Amendment Number 1, all other termsand conditions of the Employment Agreement remain as originally written.  In the event of any inconsistency between theterms of this Amendment Number 1 and the terms of the Employment Agreement, theterms of this Amendment Number 1 shall be controlling.

 

IN WITNESS WHEREOF, this Amendment has beenexecuted this 1st day of November 2005 and delivered by the partieshereto.

 

 
|   | Foundation Coal Corporation |
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|   | By:                         |   |   |
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|   | Michael R. Peelish          |

 

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