Document:

EX-10.4

Exhibit 10.4

SOVEREIGN BANCORP, INC.

NON-EMPLOYEE DIRECTORS BONUS AWARD PROGRAM

(As Amended Effective October 1, 2005)

1. Definitions.

(a) “Bank” means Sovereign Bank.

(b) “Board” means the board of directors of the Corporation.

(c) “Change in Control” has the same meaning as is ascribed to such term, as of the
Effective Date, in the Sovereign Bancorp, Inc. 2001 Stock Incentive Plan.

(d) “Committee” means the Compensation Committee of the Board or such other committee
as may be appointed by the Board to administer this Program. Such term also includes the
whole Board to the extent it takes action with respect to administrative or operational
matters relating to the Program.

(e) “Common Stock” means the common stock (no par value) of the Corporation.

(f) “Corporation” means Sovereign Bancorp, Inc.

(g) “Effective Date” means June 19, 2002.

(h) “Fair Market Value” of a share of Common Stock on any given date means the closing
sale price for such shares on that date as listed on the New York Stock Exchange (or any
national securities exchange or quotation system on which the Common Stock is then listed or
reported). If a closing sale price for the Common Stock for the given date is not listed or
reported, or if there is none, the Fair Market Value shall be equal to the closing sale
price on the nearest trading day preceding such date. Notwithstanding the foregoing, if, in
the Committee’s judgment, there are unusual circumstances or occurrences under which the
otherwise determined Fair Market Value of the Common Stock does not represent the actual
fair value thereof, then the Fair Market Value of such Common Stock shall be determined by
the Committee on the basis of such prices or market quotations as it shall deem appropriate
and fairly reflective of the then fair value of such Common Stock.

(i) “Participant” means a non-employee director of the Corporation who is entitled to
participate in the Program in accordance with the provisions of Sections 2 and 4 and who has
not terminated as a director. Notwithstanding the preceding sentence, a Participant who
terminates as a non-employee director of the Corporation after having earned an award, but
before its payment, shall remain a Participant until payment is made.

(j) “Program” means the Sovereign Bancorp, Inc. Non-Employee Directors Bonus Award
Program.

2. Participation. Each individual who is a non-employee director of the Corporation
on the Effective Date shall become a Participant in the Program on such date. Any individual who
becomes a non-employee director of the Corporation after December 31, 2003, may become a
Participant subject to the provisions of Section 4.

3. Operative Terms of the Program.

(a) In the event the Corporation’s cash earnings, determined on a consolidated and
fully-diluted basis, for 2004 equal or exceed $1.70 per share, each Participant, who remains
as a non-employee director of the Corporation as of December 31, 2004, shall receive a cash
award equal to the Fair Market Value of 5,000 shares of Common Stock.

(b) In the event the Corporation’s cash earnings, determined on a consolidated and
fully-diluted basis, for 2005 equal or exceed $1.95 per share, each Participant, who remains
as a non-employee director of the Corporation as of December 31, 2005, shall receive a cash
award of $112,750.

(c) In the event the Corporation’s cash earnings, determined on a consolidated and
fully-diluted basis, for 2006 equal or exceed a per share amount established by the
Committee prior to January 1, 2006, each Participant, who remains as a non-employee director
of the Corporation as of December 31, 2006, shall receive a cash award of $112,750.

(d) In the event the Corporation’s cash earnings, determined on a consolidated and
fully-diluted basis, for 2007 equal or exceed a per share amount established by the
Committee prior to January 1, 2007, each Participant, who remains as a non-employee director
of the Corporation as of December 31, 2007, shall receive a cash award of $112,750.

(e) In addition to the target earnings per share objectives described above, an award
shall not be considered earned with respect to a relevant year, nor shall it be paid, in the
event the Corporation’s “Tier 1 capital” is less than 5.5% as of the close of such year or
the Bank’s asset quality is worse than the average of the top 25 banks in the United States
(by asset size), which banks have commercial loans making up at least 25% of their total
loan portfolios. Notwithstanding the foregoing, if one or more of the financial objectives
described in this section 3 are not achieved for a relevant year, the Committee may, after
review of all relevant facts and circumstances, determine that an award (or any portion
thereof) with respect to a relevant year is considered earned.

(f) All amounts payable pursuant to the preceding provisions of this section shall be
distributed within 30 days following the filing by the Corporation of its Annual Report on
Form 10-K for the relevant year in which an award is earned.

(g) All financial calculations required in connection with this Program shall be
performed by, or under the supervision of, the Committee; provided, however, that the
calculation of cash earnings shall, in any event, be consistent with any year-end or other
public financial release, describing year-end cash earnings, made by the Corporation with
respect to the relevant year. The determination of the value of the award for 2004 shall be
based upon the Fair Market Value of Common Stock as of December 31, 2004.

(h) Except as otherwise provided herein, no award shall be payable to any Participant
for a relevant year if he or she fails to remain as a director of the Corporation, for any
reason, through the end of such year.

(i) In the event of the occurrence of a stock split, stock dividend, reverse stock
split, or similar event with respect to the Common Stock following the adoption of this
Program and prior to a payment of an award earned with respect to any year, the amount
payable with respect to any earned award shall be appropriately adjusted to take into
account such occurrence.

(j) Notwithstanding the provisions of this section, an award earned hereunder with
respect to a relevant year shall not be paid unless an award with respect to the same year
has been earned under the terms of the Sovereign Bancorp, Inc. Senior Officers Bonus Award
Program.

(k) Notwithstanding the preceding provisions of this section, in the event of the
occurrence of a Change in Control, all potential awards for any current or future fiscal
year shall be deemed earned as of the date of such Change in Control and shall be payable to
the Participants, who are serving as directors of the Corporation immediately prior thereto,
within 30 days after such Change in Control.

(l) Notwithstanding the preceding provisions of this Section 3 and any other provision
contained in this Program to the contrary, no Participant will be eligible to receive a cash
award for 2005, 2006, 2007 or thereafter.

4. Future Participants. In the case of an individual who becomes a non-employee
director of the Corporation following December 31, 2003, the Committee may provide, in its sole
discretion, for his or her participation in the Program. In the event the Committee provides for
the participation of such an individual, it may establish such additional or modified conditions on
his or her participation as it may deem equitable or appropriate under the circumstances.
Notwithstanding the foregoing, no individual is eligible to become a Participant in the Program
after October 1, 2005.

5. Administration. Except as otherwise provided herein, this Program shall be
interpreted and administered by the Committee. In furtherance of such authority, the Committee may
prescribe such rules, regulations, forms, and procedures as it deems necessary or appropriate for
the proper administration of the Program.

6. Amendment. This Program may be amended at any time and from time to time by the
Board; provided, however, that no such amendment may be made which adversely affects the then
rights of a Participant under the Program without his or her consent; and provided further, that no
amendment may be made solely by the Board that requires the additional approval of the
Corporation’s shareholders for tax, securities law, exchange listing requirement, or other
purposes.

7. Termination. This Program shall terminate upon the earliest to occur of the
following: (i) the distribution of earned awards (if any) for the year 2007, (ii) the
determination by the Committee that the specified goals for the year 2007 were not met, or (iii)
the distribution of awards payable by reason of a Change in Control. Notwithstanding anything
contained in this Program to the contrary, the Program will terminate October 1, 2005.

8. Tax Withholding. Distribution of an award shall be subject to satisfaction by the
Participant of any tax withholding requirements that may apply at the relevant time.

9. Number. Words used herein in the singular form shall include the plural form, as
the context requires, and vice versa.

10. Headings. The headings of the several sections of this Program document have been
inserted for convenience of reference only and shall not be used in the construction of the same.

11. Applicable Law. Except to the extent pre-empted by federal law, this Program
document shall be administered, construed and enforced in accordance with the domestic internal law
of the Commonwealth of Pennsylvania.EX-10.1

Exhibit 10.1

INDEMNIFICATION AGREEMENT

This Indemnification Agreement, dated as of July 21, 2005, is made by and between PEABODY
ENERGY CORPORATION, a Delaware corporation (the “Corporation”) and JOHN F. TURNER (the
“Indemnitee”).

RECITALS

A. The Corporation recognizes that competent and experienced persons are increasingly
reluctant to serve or to continue to serve as directors or officers of corporations unless they are
protected by comprehensive liability insurance or indemnification, or both, due to increased
exposure to litigation costs and risks resulting from their service to such corporations, and due
to the fact that the exposure frequently bears no reasonable relationship to the compensation of
such directors and officers;

B. The statutes and judicial decisions regarding the duties of directors and officers are
often difficult to apply, ambiguous, or conflicting, and therefore fail to provide such directors
and officers with adequate, reliable knowledge of legal risks to which they are exposed or
information regarding the proper course of action to take;

C. The Corporation and Indemnitee recognize that plaintiffs often seek damages in such large
amounts and the costs of litigation may be so enormous (whether or not the case is meritorious),
that the defense and/or settlement of such litigation is often beyond the personal resources of
directors and officers;

D. The Corporation believes that it is unfair for its directors and officers to assume the
risk of huge judgments and other expenses which may occur in cases in which the director or officer
received no personal profit and in cases where the director or officer was not culpable;

E. The Corporation, after reasonable investigation, has determined that the liability
insurance coverage presently available to the Corporation may be inadequate in certain
circumstances to cover all possible exposure for which Indemnitee should be protected. The
Corporation believes that the interests of the Corporation and its stockholders would best be
served by a combination of such insurance and the indemnification by the Corporation of the
directors and officers of the Corporation;

F. The Corporation’s Amended and Restated Certificate of Incorporation (the “Certificate of
Incorporation”) and Amended and Restated By-Laws require the Corporation to indemnify its directors
and officers to the fullest extent permitted by the Delaware General Corporation Law (the “DGCL”).
The Certificate of Incorporation expressly provides that the indemnification provisions set forth
therein are not exclusive, and contemplates that contracts may be entered into between the
Corporation and its directors and officers with respect to indemnification;

G. Section 145 of the DGCL (“Section 145”), under which the Corporation is organized, empowers
the Corporation to indemnify its officers, directors, employees and agents by agreement and to
indemnify persons who serve, at the request of the Corporation, as the directors, officers,
employees or agents of other corporations or enterprises, and expressly provides that the
indemnification provided by Section 145 is not exclusive;

H. The Board of Directors has determined that contractual indemnification as set forth herein
is not only reasonable and prudent but also promotes the best interests of the Corporation and its
stockholders;

I. The Corporation desires and has requested Indemnitee to serve or continue to serve as a
director or officer of the Corporation free from undue concern for unwarranted claims for damages
arising out of or related to such services to the Corporation; and

J. Indemnitee is willing to serve, continue to serve or to provide additional service for or
on behalf of the Corporation on the condition that he is furnished the indemnity provided for
herein.

AGREEMENT

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth below, and
other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged,
the parties hereto, intending to be legally bound, hereby agree as follows:

Section 1. Generally.

To the fullest extent permitted by the laws of the State of Delaware:

(a) The Corporation shall indemnify Indemnitee if Indemnitee was or is a party or is
threatened to be made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact that Indemnitee is
or was or has agreed to serve at the request of the Corporation as a director, officer, employee or
agent of the Corporation, or while serving as a director or officer of the Corporation, is or was
serving or has agreed to serve at the request of the Corporation as a director, officer, employee
or agent (which, for purposes hereof, shall include a trustee, partner or manager or similar
capacity) of another corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, or by reason of any action alleged to have been taken or omitted in such capacity.

(b) The indemnification provided by this Section 1 shall be from and against expenses
(including attorneys’ fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with such action, suit or
proceeding and any appeal therefrom, but shall only be provided if Indemnitee acted in good faith
and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action, suit or proceeding, had no reasonable cause
to believe Indemnitee’s conduct was unlawful.

(c) Notwithstanding the foregoing provisions of this Section 1, in the case of any threatened,
pending or completed action or suit by or in the right of the Corporation to procure a judgment in
its favor by reason of the fact that Indemnitee is or was a director, officer, employee or agent of
the Corporation, or while serving as a director or officer of the Corporation, is or was serving or
has agreed to serve at the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise,
no indemnification shall be made in respect of any claim, issue or matter as to which Indemnitee
shall have been adjudged to be liable to the Corporation unless, and only to the extent that, the
Delaware Court of Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all the circumstances
of the case, Indemnitee is fairly and reasonably entitled to indemnity for such expenses which the
Delaware Court of Chancery or such other court shall deem proper.

(d) The termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that Indemnitee did not act in good faith and in a manner which Indemnitee reasonably
believed to be in or not opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that Indemnitee’s conduct was
unlawful.

Section 2. Successful Defense; Partial Indemnification. To the extent that Indemnitee
has been successful on the merits or otherwise in defense of any action, suit or proceeding
referred to in Section 1 hereof or in defense of any claim, issue or matter therein, Indemnitee
shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred
in connection therewith. For purposes of this Agreement and without limiting the foregoing, if
any action, suit or proceeding is disposed of, on the merits or otherwise (including a disposition
without prejudice), without (i) the disposition being adverse to Indemnitee, (ii) an adjudication
that Indemnitee was liable to the Corporation, (iii) a plea of guilty or nolo contendere by
Indemnitee, (iv) an adjudication that Indemnitee did not act in good faith and in a manner
Indemnitee reasonably believed to be in or not opposed to the best interests of the Corporation,
and (v) with respect to any criminal proceeding, an adjudication that Indemnitee had reasonable
cause to believe Indemnitee’s conduct was unlawful, Indemnitee shall be considered for the
purposes hereof to have been wholly successful with respect thereto.

If Indemnitee is entitled under any provision of this Agreement to indemnification by the
Corporation for some or a portion of the expenses (including attorneys’ fees), judgments, fines or
amounts paid in settlement actually and reasonably incurred by Indemnitee or on Indemnitee’s
behalf in connection with any action, suit, proceeding or investigation, or in defense of any
claim, issue or matter therein, and any appeal therefrom but not, however, for the total amount
thereof, the Corporation shall nevertheless indemnify Indemnitee for the portion of such expenses
(including attorneys’ fees), judgments, fines or amounts paid in settlement to which Indemnitee is
entitled.

Section 3. Determination That Indemnification Is Proper. Any indemnification
hereunder shall (unless otherwise ordered by a court) be made by the Corporation unless a
determination is made that indemnification of such person is not proper in the circumstances
because he or she has not met the applicable standard of conduct set forth in Section 1(b) hereof.
Any such determination shall be made (i) by a majority vote of the directors who are not parties
to the action, suit or proceeding in question (“disinterested directors”), even if less than a
quorum, (ii) by a majority vote of a committee of disinterested directors designated by majority
vote of disinterested directors, even if less than a quorum, (iii) by a majority vote of a quorum
of the outstanding shares of stock of all classes entitled to vote on the matter, voting as a
single class, which quorum shall consist of stockholders who are not at that time parties to the
action, suit or proceeding in question, (iv) by independent legal counsel, or (v) by a court of
competent jurisdiction.

Section 4. Advance Payment of Expenses; Notification and Defense of Claim.

(a) Expenses (including attorneys’ fees) incurred by Indemnitee in defending a threatened or
pending civil, criminal, administrative or investigative action, suit or proceeding shall be paid
by the Corporation in advance of the final disposition of such action, suit or proceeding within
twenty (20) days after receipt by the Corporation of (i) a statement or statements from Indemnitee
requesting such advance or advances from time to time, and (ii) an undertaking by or on behalf of
Indemnitee to repay such amount or amounts, only if, and to the extent that, it shall ultimately be
determined that Indemnitee is not entitled to be indemnified by the Corporation as authorized by
this Agreement or otherwise. Such undertaking shall be accepted without reference to the financial
ability of Indemnitee to make such repayment. Advances shall be unsecured and interest-free.

(b) Promptly after receipt by Indemnitee of notice of the commencement of any action, suit or
proceeding, Indemnitee shall, if a claim thereof is to be made against the Corporation hereunder,
notify the Corporation of the commencement thereof. The failure to promptly notify the Corporation
of the commencement of the action, suit or proceeding, or Indemnitee’s request for indemnification,
will not relieve the Corporation from any liability that it may have to Indemnitee hereunder,
except to the extent the Corporation is prejudiced in its defense of such action, suit or
proceeding as a result of such failure.

(c) In the event the Corporation shall be obligated to pay the expenses of Indemnitee with
respect to an action, suit or proceeding, as provided in this Agreement, the Corporation, if
appropriate, shall be entitled to assume the defense of such action, suit or proceeding, with
counsel reasonably acceptable to Indemnitee, upon the delivery to Indemnitee of written notice of
its election to do so. After delivery of such notice, approval of such counsel by Indemnitee and
the retention of such counsel by the Corporation, the Corporation will not be liable to Indemnitee
under this Agreement for any fees of counsel subsequently incurred by Indemnitee with respect to
the same action, suit or proceeding, provided that (1) Indemnitee shall have the right to employ
Indemnitee’s own counsel in such action, suit or proceeding at Indemnitee’s expense and (2) if (i)
the employment of counsel by Indemnitee has been previously authorized in writing by the
Corporation, (ii) counsel to the Corporation or Indemnitee shall have reasonably concluded that
there may be a conflict of interest or position, or reasonably believes that a conflict is likely
to arise, on any significant issue between the Corporation and Indemnitee in the conduct of any
such defense or (iii) the Corporation shall not, in fact, have employed counsel to assume the
defense of such action, suit or proceeding, then the fees and expenses of Indemnitee’s counsel
shall be at the expense of the Corporation, except as otherwise expressly provided by this
Agreement. The Corporation shall not be entitled, without the consent of Indemnitee, to assume the
defense of any claim brought by or in the right of the Corporation or as to which counsel for the
Corporation shall have reasonably made the conclusion provided for in clause (ii) above.

(d) Notwithstanding any other provision of this Agreement to the contrary, to the extent that
Indemnitee is, by reason of Indemnitee’s corporate status with respect to the Corporation or any
corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which
Indemnitee is or was serving or has agreed to serve at the request of the Corporation, a witness or
otherwise participates in any action, suit or proceeding at a time when Indemnitee is not a party
in the action, suit or proceeding, the Corporation shall indemnify Indemnitee against all expenses
(including attorneys’ fees) actually and reasonably incurred by Indemnitee or on Indemnitee’s
behalf in connection therewith.

Section 5. Procedure for Indemnification

(a) To obtain indemnification, Indemnitee shall promptly submit to the Corporation a written
request, including therein or therewith such documentation and information as is reasonably
available to Indemnitee and is reasonably necessary to determine whether and to what extent
Indemnitee is entitled to indemnification. The Corporation shall, promptly upon receipt of such a
request for indemnification, advise the Board of Directors in writing that Indemnitee has requested
indemnification.

(b) The Corporation’s determination whether to grant Indemnitee’s indemnification request
shall be made promptly, and in any event within 60 days following receipt of a request for
indemnification pursuant to Section 5(a). The right to indemnification as granted by Section 1 of
this Agreement shall be enforceable by Indemnitee in any court of competent jurisdiction if the
Corporation denies such request, in whole or in part, or fails to respond within such 60-day
period. It shall be a defense to any such action (other than an action brought to enforce a claim
for the advance of costs, charges and expenses under Section 4 hereof where the required
undertaking, if any, has been received by the Corporation) that Indemnitee has not met the standard
of conduct set forth in Section 1 hereof, but the burden of proving such defense by clear and
convincing evidence shall be on the Corporation. Neither the failure of the Corporation (including
its Board of Directors or one of its committees, its independent legal counsel, and its
stockholders) to have made a determination prior to the commencement of such action that
indemnification of Indemnitee is proper in the circumstances because Indemnitee has met the
applicable standard of conduct set forth in Section 1 hereof, nor the fact that there has been an
actual determination by the Corporation (including its Board of Directors or one of its committees,
its independent legal counsel, and its stockholders) that Indemnitee has not met such applicable
standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has
or has not met the applicable standard of conduct. The Indemnitee’s expenses (including attorneys’
fees) incurred in connection with successfully establishing Indemnitee’s right to indemnification,
in whole or in part, in any such proceeding or otherwise shall also be indemnified by the
Corporation.

(c) The Indemnitee shall be presumed to be entitled to indemnification under this Agreement
upon submission of a request for indemnification pursuant to this Section 5, and the Corporation
shall have the burden of proof in overcoming that presumption in reaching a determination contrary
to that presumption. Such presumption shall be used as a basis for a determination of entitlement
to indemnification unless the Corporation overcomes such presumption by clear and convincing
evidence.

Section 6. Insurance and Subrogation.

(a) The Corporation may purchase and maintain insurance on behalf of Indemnitee who is or was
or has agreed to serve at the request of the Corporation as a director or officer of the
Corporation, or is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise against any liability asserted against, and incurred by, Indemnitee or on
Indemnitee’s behalf in any such capacity, or arising out of Indemnitee’s status as such, whether or
not the Corporation would have the power to indemnify Indemnitee against such liability under the
provisions of this Agreement. If the Corporation has such insurance in effect at the time the
Corporation receives from Indemnitee any notice of the commencement of a proceeding, the
Corporation shall give prompt notice of the commencement of such proceeding to the insurers in
accordance with the procedures set forth in the policy. The Corporation shall thereafter take all
necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all
amounts payable as a result of such proceeding in accordance with the terms of such policy.

(b) In the event of any payment by the Corporation under this Agreement, the Corporation shall
be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee with
respect to any insurance policy, who shall execute all papers required and take all action
necessary to secure such rights, including execution of such documents as are necessary to enable
the Corporation to bring suit to enforce such rights in accordance with the terms of such insurance
policy. The Corporation shall pay or reimburse all expenses actually and reasonably incurred by
Indemnitee in connection with such subrogation.

(c) The Corporation shall not be liable under this Agreement to make any payment of amounts
otherwise indemnifiable hereunder (including, but not limited to, judgments, fines, ERISA excise
taxes or penalties, and amounts paid in settlement) if and to the extent that Indemnitee has
otherwise actually received such payment under this Agreement or any insurance policy, contract,
agreement or otherwise.

Section 7. Certain Definitions. For purposes of this Agreement, the following
definitions shall apply:

(a) The term “action, suit or proceeding” shall be broadly construed and shall include,
without limitation, the investigation, preparation, prosecution, defense, settlement, arbitration
and appeal of, and the giving of testimony in, any threatened, pending or completed claim, action,
suit or proceeding, whether civil, criminal, administrative or investigative.

(b) The term “by reason of the fact that Indemnitee is or was a director, officer, employee or
agent of the Corporation, or while serving as a director or officer of the Corporation, is or was
serving or has agreed to serve at the request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise” shall be broadly construed and shall include, without limitation, any actual or alleged
act or omission to act.

(c) The term “expenses” shall be broadly and reasonably construed and shall include, without
limitation, all direct and indirect costs of any type or nature whatsoever (including, without
limitation, all attorneys’ fees and related disbursements, appeal bonds, other out-of-pocket costs
and reasonable compensation for time spent by Indemnitee for which Indemnitee is not otherwise
compensated by the Corporation or any third party, provided that the rate of compensation and
estimated time involved is approved by the Board, which approval shall not be unreasonably
withheld), actually and reasonably incurred by Indemnitee in connection with either the
investigation, defense or appeal of a proceeding or establishing or enforcing a right to
indemnification under this Agreement, Section 145 of the General Corporation Law of the State of
Delaware or otherwise.

(d) The term “judgments, fines and amounts paid in settlement” shall be broadly construed and
shall include, without limitation, all direct and indirect payments of any type or nature
whatsoever (including, without limitation, all penalties and amounts required to be forfeited or
reimbursed to the Corporation, as well as any penalties or excise taxes assessed on a person with
respect to an employee benefit plan).

(e) The term “Corporation” shall include, without limitation and in addition to the resulting
corporation, any constituent corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that any person who is
or was a director, officer, employee or agent of such constituent corporation, or is or was serving
at the request of such constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, shall
stand in the same position under the provisions of this Agreement with respect to the resulting or
surviving corporation as he or she would have with respect to such constituent corporation if its
separate existence had continued.

(f) The term “other enterprises” shall include, without limitation, employee benefit plans.

(g) The term “serving at the request of the Corporation” shall include, without limitation,
any service as a director, officer, employee or agent of the Corporation which imposes duties on,
or involves services by, such director, officer, employee or agent with respect to an employee
benefit plan, its participants or beneficiaries.

(h) A person who acted in good faith and in a manner such person reasonably believed to be in
the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to
have acted in a manner “not opposed to the best interests of the Corporation” as referred to in
this Agreement.

Section 8. Limitation on Indemnification. Notwithstanding any other provision herein
to the contrary, the Corporation shall not be obligated pursuant to this Agreement:

(a) Claims Initiated by Indemnitee. To indemnify or advance expenses to Indemnitee
with respect to an action, suit or proceeding (or part thereof) initiated by Indemnitee, except
with respect to an action, suit or proceeding brought to establish or enforce a right to
indemnification (which shall be governed by the provisions of Section 8(b) of this Agreement),
unless such action, suit or proceeding (or part thereof) was authorized or consented to by the
Board of Directors of the Corporation.

(b) Action for Indemnification. To indemnify Indemnitee for any expenses incurred by
Indemnitee with respect to any action, suit or proceeding instituted by Indemnitee to enforce or
interpret this Agreement, unless Indemnitee is successful in establishing Indemnitee’s right to
indemnification in such action, suit or proceeding, in whole or in part, or unless and to the
extent that the court in such action, suit or proceeding shall determine that, despite Indemnitee’s
failure to establish their right to indemnification, Indemnitee is entitled to indemnity for such
expenses; provided, however, that nothing in this Section 8(b) is intended to limit the
Corporation’s obligation with respect to the advancement of expenses to Indemnitee in connection
with any such action, suit or proceeding instituted by Indemnitee to enforce or interpret this
Agreement, as provided in Section 4 hereof.

(c) Section 16 Violations. To indemnify Indemnitee on account of any proceeding with
respect to which final judgment is rendered against Indemnitee for payment or an accounting of
profits arising from the purchase or sale by Indemnitee of securities in violation of Section 16(b)
of the Securities Exchange Act of 1934, as amended, or any similar successor statute.

(d) Non-compete and Non-disclosure. To indemnify Indemnitee in connection with
proceedings or claims involving the enforcement of non-compete and/or non-disclosure agreements or
the non-compete and/or non-disclosure provisions of employment, consulting or similar agreements
the Indemnitee may be a party to with the Corporation, or any subsidiary of the Corporation or any
other applicable foreign or domestic corporation, partnership, joint venture, trust or other
enterprise, if any.

Section 9. Certain Settlement Provisions. The Corporation shall have no obligation
to indemnify Indemnitee under this Agreement for amounts paid in settlement of any action, suit or
proceeding without the Corporation’s prior written consent, which shall not be unreasonably
withheld. The Corporation shall not settle any action, suit or proceeding in any manner that would
impose any fine or other obligation on Indemnitee without Indemnitee’s prior written consent, which
shall not be unreasonably withheld.

Section 10. Savings Clause. If any provision or provisions of this Agreement shall be
invalidated on any ground by any court of competent jurisdiction, then the Corporation shall
nevertheless indemnify Indemnitee as to costs, charges and expenses (including attorneys’ fees),
judgments, fines and amounts paid in settlement with respect to any action, suit or proceeding,
whether civil, criminal, administrative or investigative, including an action by or in the right of
the Corporation, to the full extent permitted by any applicable portion of this Agreement that
shall not have been invalidated and to the full extent permitted by applicable law.

Section 11. Contribution. In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for herein is held by a court of competent
jurisdiction to be unavailable to Indemnitee in whole or in part, it is agreed that, in such event,
the Corporation shall, to the fullest extent permitted by law, contribute to the payment of
Indemnitee’s costs, charges and expenses (including attorneys’ fees), judgments, fines and amounts
paid in settlement with respect to any action, suit or proceeding, whether civil, criminal,
administrative or investigative, in an amount that is just and equitable in the circumstances,
taking into account, among other things, contributions by other directors and officers of the
Corporation or others pursuant to indemnification agreements or otherwise; provided, that, without
limiting the generality of the foregoing, such contribution shall not be required where such
holding by the court is due to (i) the failure of Indemnitee to meet the standard of conduct set
forth in Section 1 hereof, or (ii) any limitation on indemnification set forth in Section 6(c), 8
or 9 hereof.

Section 12. Form and Delivery of Communications. Any notice, request or other
communication required or permitted to be given to the parties under this Agreement shall be in
writing and either delivered in person or sent by telecopy, telex, telegram, overnight mail or
courier service, or certified or registered mail, return receipt requested, postage prepaid, to
the parties at the following addresses (or at such other addresses for a party as shall be
specified by like notice):

If to the Corporation:

Peabody Energy Corporation

701 Market Street

St. Louis, MO 63101

Attn: Vice President and General Counsel

Facsimile: (314) 342-3419

If to Indemnitee:

Mr. John F. Turner

Triangle X Ranch

2 Triangle X Ranch Road

Moose, WY 83012

Facsimile: (307) 733-8685

Section 13. Subsequent Legislation. If the General Corporation Law of Delaware is
amended after adoption of this Agreement to expand further the indemnification permitted to
directors or officers, then the Corporation shall indemnify Indemnitee to the fullest extent
permitted by the General Corporation Law of Delaware, as so amended.

Section 14. Nonexclusivity. The provisions for indemnification and advancement of
expenses set forth in this Agreement shall not be deemed exclusive of any other rights which
Indemnitee may have under any provision of law, the Corporation’s Certificate of Incorporation or
By-Laws, in any court in which a proceeding is brought, the vote of the Corporation’s stockholders
or disinterested directors, other agreements or otherwise, and Indemnitee’s rights hereunder shall
continue after Indemnitee has ceased acting as an agent of the Corporation and shall inure to the
benefit of the heirs, executors and administrators of Indemnitee. However, no amendment or
alteration of the Corporation’s Certificate of Incorporation or By-Laws or any other agreement
shall adversely affect the rights provided to Indemnitee under this Agreement

Section 15. Enforcement. The Corporation shall be precluded from asserting in any
judicial proceeding that the procedures and presumptions of this Agreement are not valid, binding
and enforceable. The Corporation agrees that its execution of this Agreement shall constitute a
stipulation by which it shall be irrevocably bound in any court of competent jurisdiction in which
a proceeding by Indemnitee for enforcement of his rights hereunder shall have been commenced,
continued or appealed, that its obligations set forth in this Agreement are unique and special, and
that failure of the Corporation to comply with the provisions of this Agreement will cause
irreparable and irremediable injury to Indemnitee, for which a remedy at law will be inadequate. As
a result, in addition to any other right or remedy Indemnitee may have at law or in equity with
respect to breach of this Agreement, Indemnitee shall be entitled to injunctive or mandatory relief
directing specific performance by the Corporation of its obligations under this Agreement.

Section 16. Interpretation of Agreement. It is understood that the parties hereto
intend this Agreement to be interpreted and enforced so as to provide indemnification to Indemnitee
to the fullest extent now or hereafter permitted by law.

Section 17. Entire Agreement. This Agreement and the documents expressly referred to
herein constitute the entire agreement between the parties hereto with respect to the matters
covered hereby, and any other prior or contemporaneous oral or written understandings or agreements
with respect to the matters covered hereby are expressly superceded by this Agreement.

Section 18. Modification and Waiver. No supplement, modification or amendment of this
Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of
any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other
provision hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

Section 19. Successor and Assigns. All of the terms and provisions of this Agreement
shall be binding upon, shall inure to the benefit of and shall be enforceable by the parties hereto
and their respective successors, assigns, heirs, executors, administrators and legal
representatives. The Corporation shall require and cause any direct or indirect successor (whether
by purchase, merger, consolidation or otherwise) to all or substantially all of the business or
assets of the Corporation, by written agreement in form and substance reasonably satisfactory to
Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the
same extent that the Corporation would be required to perform if no such succession had taken
place.

Section 20. Service of Process and Venue. For purposes of any claims or proceedings
to enforce this agreement, the Corporation consents to the jurisdiction and venue of any federal
or state court of competent jurisdiction in the states of Delaware and Missouri, and waives and
agrees not to raise any defense that any such court is an inconvenient forum or any similar claim.

Section 21. Governing Law. This Agreement shall be governed exclusively by and
construed according to the laws of the State of Delaware, as applied to contracts between Delaware
residents entered into and to be performed entirely within Delaware. If a court of competent
jurisdiction shall make a final determination that the provisions of the law of any state other
than Delaware govern indemnification by the Corporation of its officers and directors, then the
indemnification provided under this Agreement shall in all instances be enforceable to the fullest
extent permitted under such law, notwithstanding any provision of this Agreement to the contrary.

Section 22. Employment Rights. Nothing in this Agreement is intended to create in
Indemnitee any right to employment or continued employment.

Section 23. Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed to be an original and all of which together shall be deemed to be one
and the same instrument, notwithstanding that both parties are not signatories to the original or
same counterpart.

Section 24. Headings. The section and subsection headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.

1

IN WITNESS WHEREOF, this Agreement has been duly executed and delivered to be effective as of
the date first above written.

PEABODY ENERGY CORPORATION

By /s/ JEFFERY L. KLINGER

Jeffery L. Klinger, Vice President and

General Counsel

INDEMNITEE:

By /s/ JOHN F. TURNER

	 	 	 	John F. Turner

2

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