exv10w4



 





Exhibit 10.4




AMENDMENT TO THE

1998 STOCK PURCHASE AND OPTION PLAN FOR KEY EMPLOYEES OF

P&L COAL HOLDINGS CORPORATION




     WHEREAS, Peabody Energy Corporation (the “Company”) maintains the 1998 Stock Purchase and
Option Plan for Key Employees of P&L Coal Holdings Corporation (the “Plan”);



     WHEREAS, pursuant to Section 10 of the Plan, (i) the Board of Directors of the Company (the
“Board”) has the right to amend the Plan and (ii) the Compensation Committee of the Company may
amend the terms and conditions of outstanding grants under the Plan if such amendment does not
adversely affect the participant’s rights without his or her consent; and



     WHEREAS, the Company contemplates spinning off a portion of its business during 2007 to
Patriot Coal Corporation (“Patriot”), resulting in the transfer of several Company employees to
employment with Patriot and constituting a Termination of Employment for such employees within the
meaning of outstanding grants;



     WHEREAS, many of the Company employees who are expected to transfer to Patriot hold unvested
stock options under the Plan and the Company would like to permit continued vesting of some of
those stock options after such spin-off;



     WHEREAS, the Company deems it appropriate to amend the Plan to permit such continued vesting;
and



     WHEREAS, the Company desires to amend the Plan to comply with Section 409A.



     NOW, THEREFORE, the Plan is hereby amended effective on October 31, 2007, the effective date
of such spin-off (the “Effective Date”), as follows:



     1. Section 2(k) of the Plan is amended in its entirety to read as follows:




     “Fair Market Value” means, as of any applicable date, (a) the closing sales price for
one Share on such date as reported on the New York Stock Exchange or, if the foregoing does
not apply, on such other stock exchange on which the Company’s Common Stock is then listed
or admitted to trading, or on the last previous day on which a sale was reported if no sale
of a Share was reported on such date, or (b) if the foregoing subsection (a) does not apply,
the fair market value of a Share as reasonably determined in good faith by the Board in
accordance with Code Section 409A. For purposes of subsection (b), the determination of
such Fair Market Value by the Board will be made no less frequently than every twelve (12)
months and will either (x) use one of the safe harbor methodologies permitted under Treasury
Regulation Section 1.409-1(b)(iv)(B)(2) or (y) include, as applicable, the value of tangible
and intangible assets of the Company, the present value of future cash flows of the Company,
the market value of stock or other equity interests in similar corporations and other
entities engaged in trades or businesses substantially similar to those engaged in by the
Company, the value of which can be



 









 







readily determined through objective means (such as through trading prices or an
established securities market or an amount paid in an arms’ length private transaction), and
other relevant factors such as control premiums or discounts for lack of marketability and
whether the valuation method is used for other purposes that have a material economic effect
on the Company, its stockholders or its creditors.



     2. Section 5(a)(ii) of the Plan is hereby amended by adding the following at the end thereof:




     Notwithstanding the foregoing, no Option may be granted under this Plan with an
exercise price that is less than the Fair Market Value of a share of Common Stock on the
date of Grant.




     Notwithstanding anything in the Plan or the applicable Grant Agreement to the contrary,
employment with Patriot Coal Corporation or a subsidiary thereof (“Patriot”) or with any
successor (whether by merger, purchase or otherwise) to all or substantially all of the
stock, assets or businesses of Patriot Coal Corporation (a “Successor”) shall be treated as
employment with the Company for the following purposes under the Plan:




     (a) Continued vesting and exercisability of any Non-Qualified Stock Option held
by a Patriot Employee (as defined below) that, immediately prior to such Patriot
Employee’s transfer to Patriot, is outstanding and unvested;




     (b) Continued vesting and exercisability of any Non-Qualified Stock Option held
by a Patriot Senior Management Employee (as defined below) that was granted before
2006 and is scheduled to vest by January 3, 2008; and




     (c) Determining the number of years of service required for a “Retirement” for
purposes of the vesting and determining the exercise period of Non-Qualified Stock
Options held by any Patriot Employee and any Patriot Senior Management Employee
under the provisions of any Grant Agreement between such Employee and the Company.




     Notwithstanding the foregoing, any Non-Qualified Stock Option held by a Patriot Senior
Management Employee that was granted before 2006 and is scheduled to vest by January 3, 2008
shall cease to be exercisable and expire on July 3, 2008, if not forfeited prior to such
date. For purposes of the accelerated vesting provisions in the Non-Qualified Stock Option
agreements held by a Patriot Employee or a Patriot Senior Management Employee, the terms
“Change of Control” and “Recapitalization Event” (if applicable) shall continue to have the
meanings set forth in the Plan and shall apply only to the Company.




     Notwithstanding anything in the Plan or Non-Qualified Stock Option agreement to the
contrary, a Non-Qualified Stock Option award held by a Patriot Employee shall become fully
vested upon a Patriot Change in Control (as such term is defined below).



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     Notwithstanding anything in the Plan or any Grant Agreement to the contrary, each
Accelerated Option (as defined below) shall vest and be deemed to be exercised on the
effective date of the spin-off of Patriot (“Spin-Off Date”). The exercise price and tax
withholding with respect to such exercise shall be paid by the withholding by the Company of
such number of Shares acquired by the Participant upon such exercise of an aggregate Fair
Market Value equal to the exercise price plus the amount of any such tax withholding.




     For purposes of this Plan, the term “Accelerated Option” means a Non-Qualified Stock
Option held by a Patriot Senior Management Employee that was granted prior to 2006 and is
scheduled to vest after January 3, 2008.




     For purposes of this Plan, a “Patriot Change in Control” means:




     (i) any Person (other than Patriot, any trustee or other fiduciary
holding securities under an employee benefit plan of Patriot, or any
corporation owned, directly or indirectly, by the shareholders of Patriot in
substantially the same proportions as their ownership of stock of Patriot),
becomes the beneficial owner, directly or indirectly, of securities of
Patriot, representing 50% or more of the combined voting power of Patriot’s
then-outstanding securities;




     (ii) during any period of twenty-four consecutive months (not including
any period prior to November 1, 2007), individuals who at the beginning of
such period constitute the Board of Patriot, and any new director (other
than (A) a director nominated by a Person who has entered into an agreement
with Patriot to effect a transaction described in clause (i), (iii) or (iv)
or (B) a director nominated by any Person (including Patriot) who publicly
announces an intention to take or to consider taking actions (including, but
not limited to, an actual or threatened proxy contest) which if consummated
would constitute a Patriot Change in Control) whose election by the Patriot
Board or nomination for election by Patriot’s shareholders was approved by a
vote of at least three-fourths (3/4) of the directors then still in office who
either were directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute at least a majority thereof;




     (iii) the consummation of any merger, consolidation, plan of
arrangement, reorganization or similar transaction or series of transactions
in which Patriot is involved, other than such a transaction or series of
transactions which would result in the shareholders of Patriot immediately
prior thereto continuing to own (either by remaining outstanding or by being
converted into voting securities of the surviving entity) more than 50% of
the combined voting power of the securities of Patriot or such



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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




     (iv) the shareholders of Patriot approve a plan of complete liquidation
of Patriot or the sale or disposition by Patriot of all or substantially all
of Patriot’s assets, other than a liquidation of Patriot into a wholly owned
subsidiary.




     As used in this definition of Patriot Change in Control, “Person” (including a
“group”), has the meaning as such term is used for purposes of Section 13(d) or
14(d) of the Securities Exchange Act of 1934, as amended (or any successor section
thereto).




     For purposes of this Plan, “Patriot Employee” means a Participant who transfers, within
one (1) year of the Spin-Off Date, from employment with the Company directly to employment
with Patriot and who is not a Patriot Senior Management Employee.




     For purposes of this Plan, “Patriot Senior Management Employee” means a Participant who
is a member of the Patriot senior executive team designated by the Company, who transfers,
within one (1) year of the Spin-Off Date, from employment with the Company directly to
employment with Patriot and who is party to a transition letter agreement with the Company
in connection with such transfer; provided, however that the Chairman of the Board and
Executive Advisor of Patriot shall not be considered to be Patriot Senior Management
Employee.



3. A new Section 14 is added to the Plan to read as follows:





     14. Section 409A.




     To the extent applicable and notwithstanding any other provision of this Plan, this
Plan and Grants hereunder shall be administered, operated and interpreted in accordance with
Code Section 409A and Department of Treasury regulations and other interpretive guidance
issued thereunder, including without limitation any such regulations or other guidance that
may be issued after the date on which the Board approves the Plan; provided, however, in the
event that the Committee determines that any amounts payable hereunder may be taxable to a
Participant under Code Section 409A and related Department of Treasury guidance prior to the
payment and/or delivery to such Participant of such amount, the Company may (i) adopt such
amendments to the Plan and related Grant, and appropriate policies and procedures, including
amendments and policies with retroactive effect, that the Committee determines necessary or
appropriate to preserve the intended tax treatment of the benefits provided by the Plan and
Grants hereunder and/or (ii) take such other actions as the Committee determines necessary
or appropriate to comply with or exempt the Plan and/or Grants from the requirements of Code
Section 409A and related Department of Treasury guidance, including such Department of
Treasury guidance and other interpretive materials as may be issued after the date on



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which the Board approves the Plan. The Company makes no guarantees to any Participant
regarding the tax treatment of Grants or payments made under the Plan, and, notwithstanding
the above provisions and any agreement or understanding to the contrary, if any Grant,
payments or other amounts due to a Participant (or his or her beneficiaries, as applicable)
results in, or causes in any manner, the application of an accelerated or additional tax,
fine or penalty under Code Section 409A or otherwise to be imposed, then the Participant (or
his or her beneficiaries, as applicable) shall be solely liable for the payment of, and the
Company and its subsidiaries shall have no obligation or liability to pay or reimburse
(either directly or otherwise) the Participant (or his or her beneficiaries, as applicable)
for, any such additional taxes, fines or penalties.



     4. In all other respects, the Plan shall remain unchanged and in full force and effect.



	 	 	 	 	 
	 	 	PEABODY ENERGY CORPORATION
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Date:	 	 
	 

	 	 	 	 






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