Document:

exv10w4

 

Exhibit 10.4

AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

     AGREEMENT, amended and restated as of January 1, 2006, by and between Peabody Energy
Corporation, a Delaware corporation (the “Company”) and Irl F. Engelhardt (the “Executive”).

RECITALS

     The Company and Executive previously entered in to an Employment Agreement made as of May 19,
1998, as amended (the “1998 Employment Agreement”), setting forth the terms and conditions of
Executive’s employment as the Company’s Chief Executive Officer.

     Effective as of the close of business on December 31, 2005, Executive relinquished his duties
and responsibilities as the Company’s Chief Executive Officer and agreed to continue to serve as an
employee of the Company after that date in the position of Chairman of the Board of Directors of
the Company (the “Board”) with expanded responsibilities, as described in Exhibit A hereto.

     In order to induce Executive to continue his employment with the Company and to serve as
Chairman of the Board on and after January 1, 2006, the Company desires to provide Executive with
compensation and other benefits on the terms and conditions set forth in this Agreement.

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

     Accordingly, the 1998 Employment Agreement is amended and restated in its entirety and
superseded in all respects by this Agreement.

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

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     1. Employment.

          1.1 Subject to the terms and conditions of this Agreement, the Company agrees to employ
Executive during the Term hereof as Chairman of the Board, as described in Exhibit A hereto. In
such capacity, Executive shall be directed by the Board, or, where appropriate, by the Company’s
President and Chief Executive Officer (the “CEO”), and shall have the powers, responsibilities and
authorities as set forth in Exhibit A hereto. Executive shall be subject to annual performance
reviews by the Board.

          1.2 Subject to the terms and conditions of this Agreement, Executive hereby accepts employment
in such executive position commencing as of the date hereof (the “Commencement Date”) and agrees,
subject to any period of vacation and sick leave, to devote such time as is necessary to perform
the services, duties and responsibilities in connection therewith. Upon the termination of
Executive’s employment for any reason, Executive shall resign as a member of the Board of the
Company or any Subsidiary of the Company.

          1.3 Nothing in this Agreement shall preclude Executive from engaging in 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 (which approval shall not be unreasonably withheld), as a member of boards 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, or conflict, with the

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performance of his duties hereunder. Notwithstanding anything herein to the contrary,
Executive shall not be restricted from providing services to any third party; provided, however,
that such services do not materially interfere with Executive’s duties hereunder or otherwise cause
Executive to violate any of the restrictive covenants set forth in Section 11; and provided,
further, that the Board receives prior written notification of such services.

     2. Term of Employment. Executive’s term of employment under this Agreement (the “Term
of Employment”) shall commence on the Commencement Date and, subject to termination under the terms
hereunder, shall have a two-year term, which may be extended by mutual agreement of the Company and
Executive.

     3. Compensation.

          3.1 Salary. During the Term of Employment, the Company shall pay Executive a base
salary (“Base Salary”) at an initial rate as set forth on the signature page hereof. Base Salary
shall be payable in accordance with the ordinary payroll practices of the Company. During the Term
of Employment, Executive’s Base Salary shall be reviewed in good faith, at least annually, 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. Notwithstanding anything herein to the contrary, because he is an
executive of the Company, Executive shall not be entitled to any director’s fees or compensation.

          3.2 Annual Bonus. In addition to his Base Salary, Executive shall, commencing with the
2006 fiscal year and continuing each fiscal year thereafter, be eligible to receive an annual cash
bonus (the “Bonus”) during the term of his employment hereunder to be

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developed by the Board, based on achievement of performance targets established by the Board
as soon as practicable at the beginning of the fiscal year for which the performance target
relates. A Bonus award 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.

     4. Employee Benefits.

          4.1 Equity-Based Compensation. Any outstanding stock option or other equity-based
incentive agreements as of the date hereof (the “Ancillary Documents”) shall remain in full force
and effect and shall not be affected by this Agreement.

          4.2 Employee Benefit Programs, Plans and Practices. The Company shall provide
Executive while employed hereunder with coverage under such employee benefit plans (commensurate
with his position in the Company and to the extent permitted under any employee benefit plan) in
accordance with the terms thereof, including the Continuation Benefits (as defined herein), D&O
insurance, which covers claims arising out of actions or inactions occurring during the Term of
Employment, in accordance with the D&O insurance policy, and other employee benefits which the
Company may make available to its senior executives from time to time in its discretion. The
Company shall also provide Executive with perquisites which the Company may make available to its
senior executives from time to time in its discretion.

     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.

     6. Termination of Employment. The Executive may terminate Executive’s Term of
Employment at any time, for any reason or for Good Reason, by written notice at least thirty (30)

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days in advance. The Company may only terminate Executive’s Term of Employment for Cause, as
defined in Section 6.2(b) hereof, Disability, as defined in Section 6.3 hereof, or death.

          6.1 Termination for Good Reason.

               (a) If Executive’s employment is terminated by Executive for Good Reason (as defined in
Section 6.1(b) hereof) during the Term of Employment, the Company, as liquidated damages and in
lieu of an other damages therefor, shall continue to pay Executive’s Base Salary (the “Severance
Payment”) for a period ending on December 31, 2007 (the “Continuation Period”). The Severance
Payment shall be made in a lump sum. For the year of termination, Executive shall receive a
prorated bonus (the “Prorated Bonus”), payable when such bonuses are paid to other senior
executives of the Company, calculated as the Bonus Executive would have received in such year based
on the Company’s actual performance multiplied by a fraction, the numerator of which is the number
of business days during the year of termination that Executive was employed and the denominator of
which is the total number of business days during the year of termination. In addition, the
Company shall continue to provide Executive during the Continuation Period with medical, dental and
vision benefits, defined contribution plans (qualified and non-qualified) benefits, defined benefit
plans (qualified and non-qualified) benefits, life insurance, AD&D insurance, health care
reimbursement account and day care reimbursement account (collectively, the “Continuation
Benefits”) comparable to those provided to other senior executives; provided,
however, that all benefits shall continue to be paid in accordance with plan terms;
provided, further that the Company shall not be obligated to provide any benefits
under tax qualified plans which are not permitted by the terms of such plan or by applicable law or
could jeopardize the plan’s tax status; and provided, further, that any such
coverage shall terminate to the extent that Executive is offered or obtains comparable benefits

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from any other employer during the Continuation Period. Notwithstanding the foregoing, if
Executive breaches any provision of Section 11 hereof, the remaining balance of the Prorated Bonus
and any Continuation Benefits shall be forfeited.

               (b) For purposes of this Agreement, “Good Reason” shall mean (i) a reduction by the Company in
Executive’s Base Salary (in which event the Severance Payment shall be made based upon 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
which affects all executives), (iii) relocation by more than 50 miles from Executive’s workplace,
(iv) any material diminution or material adverse change in Executive’s duties, responsibilities or
reporting relationships, or (v) a material decline in Executive’s Bonus opportunity.
Notwithstanding anything to the contrary in this Agreement or in any other agreement or arrangement
governing Executive’s employment with the Company, Executive explicitly agrees that his entering
into this Agreement shall not constitute “Good Reason” for purposes of the 1998 Employment
Agreement.

               (c) Termination by Executive for Good Reason shall be made by delivery to the Company by
Executive of written notice, given at least 45 days prior to such termination, which sets forth the
conduct believed to constitute Good Reason; provided, however, that the Company
shall have the opportunity to cure the Good Reason during the first 30 days of such notice period
and if the Good Reason is cured within such 30-day period, Executive’s notice of termination shall
be deemed withdrawn. If no notice is given within 90 days of the event giving rise to Good Reason,
the Good Reason shall be deemed waived.

               (d) (i) If Executive becomes entitled to any payment, benefit or distribution (or combination
thereof) by the Company, any affiliated company, or one or more

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trusts established by the Company for the benefit of its employees, whether paid or payable
pursuant to Section 6.1 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 Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”) 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 make 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.

                    (ii) All determinations required to be made under this Section 6.1(d), 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 designated by the Company (the “Accounting Firm”) which shall
provide detailed supporting calculations both to the Company and Executive within ten business days
of the receipt of 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 Gross-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 Gross-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

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residence or place of employment in the calendar year in which any such Gross-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
6.1(d), shall be paid by the Company to Executive (or to the appropriate taxing authority on
Executive’s behalf) when due. If the Accounting Firm determines that no Excise Tax is payable by
Executive, it shall so indicate to 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 Section 4999 of the Code, it is possible that the amount of the Gross-Up Payment determined by
the Accounting Firm to be due to (or on behalf of) Executive was 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 for the benefit of Executive.

                    (iii) 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 Gross-Up Payment.
Such notification shall be given as soon as practicable, but no later than ten 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 on 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 it gives such notice
to the Company (or such shorter period ending on the date that

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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, for any Excise Tax or income tax (including interest and penalties
with respect thereto) imposed as a result of such representation and payment of costs and expenses.
Without limitation on the foregoing provisions of this Section 6.1(d), the Company shall control
all proceedings taken in connection with such contest and, at its sole option, may pursue or forego
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

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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.

                    (iv) If, after the receipt by Executive of an amount paid or advanced by the Company pursuant
to this Section 6.1(d), Executive becomes entitled to receive any refund with respect to a Gross-Up
Payment, Executive shall (subject to the Company’s complying with the requirements of Section
6.1(d)(iii)) 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 Section 6.1(d), 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.

          6.2 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, (ii) by
Executive other than for Good Reason, Disability or death or (iii) by Executive for retirement,
Executive shall only be entitled to receive (A) any Base Salary accrued but unpaid

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prior to such termination and (B) any vacation accrued but unused prior to such termination
and any other benefits provided under the employee benefit programs, plans and practices referred
to in Section 4.2 hereof, in accordance with their terms. After the termination of Executive’s
employment under this Section 6.2, the obligations of the Company under this Agreement to make any
further payments, or provide any benefits specified herein, to Executive, except as provided in the
previous sentence, shall thereupon cease and terminate.

               (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, failure to
perform his duties hereunder, or engaging in action in violation of Section 11 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 shall result in his
imprisonment; provided that with respect to clauses (i), (ii) or (iii) above, any determination of
Cause shall be made by a majority of the Board after providing Executive with the opportunity to be
heard by the Board and following 10 days written notice of the conduct which is the basis for the
potential termination for Cause within which to cure such conduct in order to prevent termination
for Cause by the Company.

          6.3 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 obligation of the Company to make any
further payments under this Agreement shall, except for earned but

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unpaid Base Salary, amounts attributable to accrued but unused vacation days and the Prorated
Bonus cease as of the Disability Commencement Date. 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. Benefits under all other employee benefit
programs, plans and practices shall be paid in accordance with their terms.

          6.4 Death. In the event of Executive’s death during his Term of Employment hereunder
or at any time thereafter while payments are still owing to Executive under the terms of this
Agreement, all obligations of the Company to make any further payments, other than the obligation
to pay any accrued but unpaid Base Salary, amounts attributable to accrued but unused vacation days
and the Prorated Bonus or any remaining payments that were payable to Executive by reason of his
termination of employment under Section 6.1 to which Executive was entitled at the time of his
death, shall terminate upon Executive’s death. Benefits under all other employee benefit programs,
plans and practices shall be paid in accordance with their terms.

          6.5 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 Termination of
Employment under this Agreement, other than amounts specified in this Section 6 and the Ancillary
Documents.

          6.6 Executive’s Duty to Provide Materials. Upon the termination of the Term of
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

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

	 	 	 	 	 
	 	 	To the Company:
	

	 	 	 	Peabody Energy Corporation
	

	 	 	 	701 Market Street, Suite 700
	

	 	 	 	St. Louis, Missouri 63101-1826
	

	 	 	 	attn: Chief Legal Officer
	 
	 	 	 	 
	 	 	with a copy to:
	

	 	 	 	David R. Shevitz, Esq., and
	

	 	 	 	Michel Vanesse, Esq.
	

	 	 	 	Katten Muchin Zavis Rosenman
	

	 	 	 	525 West Monroe Street
	

	 	 	 	Chicago, Illinois 60661
	 
	 	 	 	 

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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     8. Separability. 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.

     9. 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.

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

     11. Nondisclosure of Confidential Information; Non-Competition.

               (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), any secret or confidential information 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,

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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
during the period of his employment hereunder and for a period of twelve (12) months thereafter,
without the prior written consent of the Board, (i) he will not, directly or indirectly, either 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 entity
which is in competition with the business of the Company or its subsidiaries and (ii) 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.

               (c) For purposes of this Section 11, an entity shall be deemed to be in competition with the
Company if it is principally involved in the production, sale or trading of coal in competition
with the Company, within the same geographic area in which the Company effects such production,
sale or trading. Notwithstanding this subsection 11(c) or subsection 11(b), nothing herein shall be
construed so as to preclude Executive from (i) 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, or (ii) providing services to any electric or other
energy company which does not compete with the Company in the production or sale of coal.

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               (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 11 would irreparably
injure the Company. Accordingly, Executive agrees that, in the event a court enjoins Executive from
any activity prohibited by this Section 11, 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 obtain an injunction against Executive from any court having jurisdiction over the
matter restraining any further violation of this Agreement by Executive.

     12. Beneficiaries. 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.

     13. Dispute Resolution. Any dispute or controversy arising under or in connection with
this Agreement (other than an action to enforce the covenants in Section 11 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

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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.

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

     15. Effect on Prior Agreements. This Agreement and the Ancillary Documents contain the
entire understanding between the parties hereto and supersedes 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.

     16. Withholding. The Company shall be entitled to withhold from payment any amount of
withholding required by law.

     17. Survival. Notwithstanding the expiration of the term of this Agreement, the
provisions of Section 11 hereunder shall remain in effect as long as is reasonably necessary to
give effect thereto in accordance with the terms hereof.

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

	 	 	 	 
	

	 	Peabody Energy Corporation
	 
	 	 
	

	 	By  /s/ ROBERT B
KARN                  
	

	 	Name
	

	 	Title:  Chairman of
Compensation Committee
	 
	 	 
	

	 	/s/ IRL F. ENGELHARDT
	

	 	Irl F. Engelhardt
	 
	

	 	2/28/05
	Executive Position:

	 	Chairman of the Board, as set forth in Exhibit A

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	 	hereto
	 
	 	 
	Base Salary:

	 	$350,000 per annum
	 
	 	 
	Annual Incentive Target:

	 	50% of Base Salary

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EXHIBIT A

Position Description

Chairman of the Board

As Chairman of the Board, Executive shall be responsible for coordination of Board activities to
ensure the Board receives proper information and provides appropriate oversight of the Company. The
Chairman will also be available to the CEO for advice, consultation and assistance when deemed
appropriate by the CEO and to assist in transitioning his leadership positions within the coal and
energy industries to the CEO. The Chairman will provide other duties assigned by the Board of
Directors commensurate with his position. The CEO is responsible for running the Company and has
full profit and loss responsibilities.

Chairman’s Board of Director Duties

	•  	Preside at all meetings of the company’s Board of
Directors and the Annual Shareholders Meeting;

	•  	Develop the agenda for and moderate Board executive
sessions other than any executive sessions that
include only independent directors;

	•  	With the CEO, CFO and Corporate Secretary,
coordinate the development and preparation of the
agenda for Board meetings and the schedule for
Board and committee meetings;

	•  	Review the quality, quantity, appropriateness and
timeliness of the flow of materials between
Management and the Board;

	•  	Serve on the Executive Committee and other
committees if deemed appropriate by the Nominating
and Governance Committee; and

	•  	On the request of the Nominating and Governance
Committee, provide input to the Committee’s
recommendation to the Board of memberships of
committees, Board performance, development programs
and revisions to committee charters;

	•  	Provide the Board with advice on the succession
planning process and performance evaluation of the
CEO;

	•  	Be available for assignments as requested by the
CEO, with the concurrence of the Board; and

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	•  	Perform duties as assigned from time to time by the
Board commensurate with his position.

Areas for Chairman Assistance to the new CEO, with Concurrence of the Board

	•  	Assist the CEO and senior executive team with the development of the annual
Strategic Planning update;

	•  	Assist the CEO with major strategic initiatives such as mergers, acquisitions, joint
ventures, resource management, etc.;

	•  	Assist the CEO with benchmarking of the Company performance versus peers and the
preparation of the annual Social Responsibility Report;

	•  	Assist the CEO with trade associations and government relations matters; and

	•  	Perform duties as assigned from time to time by the Board commensurate with his
position.

Other

     The Chairman will be provided an office and an assistant to help with his activities
hereunder.

20EX-10.3

 

Exhibit 10.3

THE LIBERTY CORPORATION

SUPPLEMENTAL EXECUTIVE SAVINGS PLAN

as Amended and Restated

Effective December 31, 2004

     The Liberty Corporation (“Liberty”) and the participating affiliates and subsidiaries of
Liberty identified on Schedule A (the “Affiliates”) hereby adopt The Liberty Corporation
Supplemental Executive Savings Plan as amended and restated (the “Plan”) effective as of December
31, 2004. For periods commencing on or after January 1, 2005, and until the Plan can be formally
amended, the Plan shall be operated and administered in accordance with a good faith interpretation
of new Section 409A of the Internal Revenue Code.

Article 1

     A. Purpose: The primary purpose of the Plan is to provide supplemental retirement
benefits for a select group of Liberty’s management or highly compensated employees, by among other
things, allowing eligible employees to defer a portion of their compensation otherwise payable for
services rendered to Liberty.

     B. Effective Date: This Plan is amended and restated as of Closing Date.

Article 2

Eligibility and Enrollment

     Any employee of Liberty or an Affiliate who is (i) a Highly Compensated Employee as defined in
Section 414(q) of the Internal Revenue Code of 1986, as amended (the “Code”); and (ii) eligible to

participate in The Liberty Corporation Retirement and Savings Plan (the “RSP”), may be nominated
for participation in the Plan. The Chief Executive Officer and the President of Liberty, each in
his or her sole discretion, shall nominate employees for eligibility to participate in the Plan.
The Compensation Committee of the Board of Directors, in its sole discretion, shall designate the
nominated employees who are eligible to enroll in the Plan.

     An eligible employee may enroll as a Participant in the Plan by completing an enrollment form
made available by Liberty. No eligible employee shall be entitled to any benefit or contribution
under the Plan until he or she has completed an enrollment form.

Article 3

     A. Elective Deferral Contributions: An eligible employee may make either or both of the
following elections:

     (i) an eligible employee may elect to defer the receipt of a portion of his
or her income for each calendar year, or for a portion of the calendar year, beginning on
and after the employee’s election date; and

     (ii) an eligible employee may elect to defer the receipt of all or any
portion of salary reduction, after-tax or matching contributions originally contributed on
behalf of the employee to the RSP but which would be distributed to the employee under the
terms of the RSP by reason of the application of (a) the limitation on elective deferrals
under Code section 402(g), (b) the average deferral percentage (“ADP”) test under Code
section 401(k); (c) the actual contribution percentage (“ACP”) test under Code section
401(m); or (d) the limitations on annual additions under Code Section 415.

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     The amount of the deferrals shall be credited to a Deferred Compensation Account in accordance
with Paragraph C hereof.

     Initial elections by employees first eligible to participate in the Plan after the Effective
Date may be made and become effective as of the date the employee first meets the eligibility
requirements set forth in Article 2. Modifications to Participants’ existing deferral elections
must be made prior to January 1 of any year and will become effective as of the next following
January 1. Once an election to defer income under this Plan has become effective, that election
will remain in effect until such further time as the election may be modified in accordance with
the preceding sentence or revoked.

     During the course of any calendar year, a Participant may revoke his or her deferral election
with respect to any future deferrals of his or her income for such year. However, in the event
that a Participant revokes his or her deferral election, that employee will not be eligible to
again defer the receipt of any portion of his or her income under this Plan until the following
calendar year. Except as provided in this section, no other changes to any deferral election shall
be permitted under this Plan.

     Any election to defer amounts described in clause (ii) above must include an assignment to
Liberty of the payment of such amounts to be distributed from the RSP, in accordance with Treas.
Reg. Section 1.401(a)-13(e), and such assignment may be revoked at any time prior to the date such
amounts become distributable. Any such revocation shall apply only to the next following
distribution from the RSP, unless otherwise specified.

     B. Additional Contributions:

     (i) Profit. Sharing Contributions. Each Participant under this Plan shall
receive a credit to his or her Deferred Compensation Account in an amount equal to the
difference, if any, between (a) the allocation the Participant would have received under the
terms of the RSP, if compensation under the RSP was determined without regard to the limit
imposed by Code Section 401(a)(17), provided that in no event shall such compensation exceed
$235,840 or such higher amount as may be established by Liberty from time to time in its
sole discretion prior to the commencement of any calendar year; and (b) the actual
allocation credited to the Participant’s account under the terms of the RSP:

     (ii) Matching Contributions.

     (a) Each Participant whose compensation under the RSP is greater
than the dollar limit applicable under Code Section 401(a)(17) for any calendar year
shall have his or her Deferred Compensation Account credited with a contribution for
each such calendar year equal to the greater of:

     (1) the amount of salary reduction contributions made to this Plan
in accordance with Section 3.A.(i), but the amount shall not exceed 3% of the amount
of the Participant’s compensation (as determined under the RSP) which is greater
than the applicable limit under Code Section 401(a)(17) but less than $235,840 or
such higher amount as may be established by Liberty from time to time in its sole
discretion; or

     (2) 3% of the amount of the Participant’s compensation (as
determined under the RSP) which is greater than the applicable limit under Code
Section 401(a)(17) but less than $235,840 or such higher amount as may be
established by Liberty from time to time in its sole discretion, provided the
Participant has made Employee Before-Tax Contributions (as defined in the RSP) to
the RSP in an amount equal to either (a) the applicable limit under Code Section
402(g) or (b) the limit on such contributions established under the terms of the
RSP.

     (b) Each Participant who (1) forfeits any portion of a matching
contribution under the RSP by reason of the application of the limitations of the
ACP test under Code section 401(m) and (2) has elected to contribute to this Plan
under Section 3.A(ii)(c) the amount which was contributed under the RSP but would be
distributed to him or her because it exceeds the amount allowable under the ACP
test, shall have his or her Deferred Compensation Account credited with an amount
equivalent to the matching contribution which was forfeited under the RSP.

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     (iii) Excess Section 415 Contributions. Each Participant under this Plan
shall have his or her Deferred Compensation Account credited with an amount equal to any
“excess amount’’ (as determined under Section 4.10 of the RSP in any calendar year).
Notwithstanding the foregoing, no amount shall be credited under this Section 3.B.(iii) if
such amount is distributed to the Participant in accordance with Treas. Reg. Section
1.415-6(b)(6)(iv), whether or not such amount is contributed to this Plan pursuant to
Section 3.A.(ii)(d).

     (iv) Other Contributions. Liberty, in its sole discretion, may make
additional contributions on behalf of any Participant in this Plan.

     C. Deferred Compensation Accounts: A separate bookkeeping account shall be
established and maintained for each Participant to reflect all amounts deferred under this Plan.
Each Participant’s account will be credited with earnings, pursuant to Paragraph D hereof, until
distribution of his or her account in accordance with Article 4. Each Participant, shall be 100%
vested in the elective deferrals credited to his or her account. In the event any matching
contribution is credited to a Participant’s Deferred Compensation Account, the Participant’s rights
to such amount and any earnings attributable to such amount shall be subject to the same vesting
schedule as if the matching contribution had been made to the RSP. Similarly, in the event any
profit sharing contribution is credited to a Participant’s Deferred Compensation Account, the
Participant’s rights to such amount and any earnings attributable to such amount shall be subject
to the same vesting schedule as if the profit sharing contribution had been made to the
Participant’s account under the RSP.

     D. Earnings Credit. Each Participant shall be entitled to designate target
investments for amounts credited to his or her Deferred Compensation Account. The purpose of the
target investment is to allocate earnings and losses to a Participant’s account as if his or her
account were actually invested in the selected target investments. Liberty shall designate, in its
sole discretion, the target investment options from which a Participant may chose, the rules for
allocating portions of a Participant’s account among the target investments, and the rules for a
Participant to change the allocation of the Participant’s account among the target investments.
The target investment options and the election rules shall be designated in such employee
communications as Liberty deems appropriate, and Liberty reserves the right at any time to add or
remove any target investment option or change any rule. A Participant’ s designation of a
particular target investment only shall affect the calculation of earnings and losses on the
Participant’s account, and shall not in any manner require Liberty to invest any assets in such
target investment.

Article 4

     A. Benefits: Following a Participant’s termination of employment with Liberty, Liberty
shall pay the Participant the vested balance of his or her deferred compensation account in the
form selected by the Participant in accordance with Paragraph C of this Article.

     B. Death Benefits: If a Participant dies before receiving all payments due under
the Plan, Liberty shall pay the vested balance of the Participant’ s account to the Participant’ s
beneficiary. The designation of a beneficiary shall be made in writing by the Participant and
shall be filed with Liberty prior to the Participant’s death. In the absence of a written
beneficiary designation, or in the event all of an individual’s designated beneficiaries predecease
the Participant without designation of a contingent beneficiary, the Participant’s estate shall be
the beneficiary. This benefit shall be paid to the designated beneficiary in accordance with the
Participant’s election pursuant to Paragraph C of this Article.

     C. Distribution Election: A Participant may elect, in his or her sole discretion,
to have the vested balance of his or her account paid in any form of benefit offered under the RSP
as of the date the Participant makes an election in accordance with this paragraph, except that on
and after January 1, 2002, a Participant may not elect to have his or her vested account balance
paid in the form of an annuity or a combination of a lump sum and annuity. A Participant may elect
to have his or her benefit payments commence at any time following his or her retirement under the
RSP. Notwithstanding the foregoing, benefit payments must commence no later than the April 1
following the calendar year in which the Participant attains age 70 1/2. Distributions paid by
reason of death, disability or termination of employment (other than retirement) shall commence
within one-year following the Participant’s death, disability or termination of employment. Each
Participant must file with Liberty when he or she first begins participation in the Plan an initial
distribution election specifying both the form of benefit distribution and the time for
commencement of retirement

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benefits. A Participant may change his or her election but such change shall not be
effective, unless the employee remains employed with Liberty or its affiliates for at least one
year after the revised election is filed with Liberty. In the absence of a valid election, any
benefit under this Plan shall be paid in a lump-sum.

Article 5

Hardship Withdrawal

     In the event that a Participant suffers an unforeseeable, immediate and heavy financial need
that cannot reasonably be met from other sources, the Participant shall be permitted to withdraw
from his or her Deferred Compensation Account an amount equal to that needed to meet the immediate
and heavy financial need and to pay any income taxes on the withdrawal. The Participant must first
submit a written withdrawal request to Liberty explaining the nature of the hardship and the amount
required to meet the financial need. The Participant will be required to certify that the need
cannot be reasonably met from other sources. The determination of hardship and lack of
availability of funds from other sources will be made by Liberty, in its sole discretion, in
accordance with applicable Internal Revenue Service guidance regarding rules for granting hardship
withdrawals under this type of plan.

Article 6

Funding

     Liberty’s obligations under this Plan shall be general obligations of Liberty and shall not be
secured in any manner. No asset of Liberty shall be placed in trust or in escrow or otherwise
physically or legally segregated for the benefit of any Participant or his or her spouse or
beneficiaries and the eventual payment of benefits under this Plan shall not be secured by the
issuance of any negotiable instrument or other evidence of indebtedness of Liberty. No
Participant, beneficiary or other person shall be deemed to have any property interest, legal or
equitable, in any specific assets of Liberty as a result of the benefits provided by this Plan. To
the extent that any person acquires any right to receive payments under this Plan, that right shall
be no greater than, nor shall it have any preference or priority over, the rights of any unsecured
general creditor of Liberty. In no event shall any of the directors, officers or employees of
Liberty or an Affiliate be liable in their individual capacities to any person for the payment of
benefits under the Plan.

Article 7

Assignment

     No payments, benefits or rights under this Plan shall be subject in any manner to any
attachment, garnishment, levy or other lien or collection or to anticipation, sale, transfer,
assignment, mortgage, pledge, encumbrance, charge or alienation by any Participant, his or her
beneficiary or any other person who could or might possibly receive payments under this Plan. Any
such prohibited attempted attachment, assignment, alienation, encumbrance or transfer shall be
void.

Article 8

Administration

     Liberty shall be responsible for the administration of the Plan and shall have the right, in
its sole discretion, to interpret and construe the terms of the Plan, including without limitation
eligibility for benefits, terms of payment and identity of beneficiary. Liberty may delegate
responsibility for administration of the Plan to one or more individuals as designated by the chief
executive officer.

     In the event that Liberty delegates the responsibility for administration of the Plan to one
or more individuals, Liberty shall indemnify the designated administrators and their agents
against, and agree to hold them harmless from, any and all liabilities and damages (including
reasonable attorneys’ fees and expenses in defending against such liabilities and claims) incurred
by the individuals arising from any action or inaction on their part with respect to the Plan taken
in good faith, unless such liability or expense results from the individual’s gross negligence or
willful acts of commission or omission.

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Article 9

Claims Procedure

     If any benefits become payable under this Plan, the Participant (or the designated
beneficiary, in the case of the Participant’s death) shall file a claim for benefits by notifying
Liberty in writing. If the claim is completely or partially denied, Liberty shall provide a
written notice specifying the reason for the denial, the provisions on which the denial is based
and additional material or information necessary to prove entitlement to benefits, if any. Such
written notice shall indicate the steps to be taken if a review of the denial is desired.

     If a claim is denied and a review is desired, the claimant shall notify Liberty in writing.
In requesting a review, the claimant may review this Plan and any related documents and submit any
written issues and comments he or she feels are appropriate. Liberty shall review the claim and
provide a written decision specifying the bases, for the decision. A claimant shall have no right
to appear in person, with or without an attorney, to make an oral presentation of his or her
initial claim or any subsequent appeal.

Article 10

Amendment and Termination

     This Plan may be amended or terminated at any time and in any respect by Liberty upon written
notice to the Participants and any other party entitled to benefits under the Plan, provided that
Liberty may not unilaterally reduce the balance of any individual’s account determined as of the
date written notice is provided. Upon termination of the Plan, all benefits shall be distributed
as soon as practicable in the form of a lump sum.

     An Affiliate of Liberty may be added as a participating Affiliate only with the consent of
Liberty. An Affiliate’s participation may be terminated by Liberty or by the Affiliate at any
time, and absent the express consent of Liberty, shall be automatically terminated on the date the
controlling ownership or proprietary interest of Liberty in such Affiliate is terminated.

Article 11

     A. Tax Consequences: The Plan is intended to postpone the application of income taxes
on amounts credited to the Deferred Compensation Accounts.. However, notwithstanding anything to
the contrary, Liberty makes no representation regarding the tax consequences of participation in
this Plan. Amounts contributed to or paid from the Plan may be subject to income, payroll or other
taxes, and Liberty may withhold taxes from any payment, as required under federal, state and local
laws.

     B. No Guarantee of Employment: Nothing contained in this Plan shall be construed
as an employment contract between Liberty or an Affiliate and any employee, or as a right of any
employee to continue in the employment of Liberty or an Affiliate, or as a limitation on Liberty’s
or an Affiliate’s right to discharge any employee with or without cause.

     C. Incapacity: Liberty may, in its sole discretion, direct the payment of any
benefit otherwise due to a minor or other legally incompetent person, to any other person who
Liberty determines is an appropriate representative of the intended recipient, including a
custodian under a Uniform Transfers to Minors Act or corresponding legislation, and the receipt by
that representative shall be a valid and complete discharge of all of Liberty’s duties with respect
to that benefit payment and in full satisfaction of all claims under the Plan.

     D. Governing Documents: In the event of a conflict between the Plan and any
administrative forms, employee communications or other documents relating to this Plan, the terms
of this Plan shall control.

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Article 12

Construction

          This Plan shall be construed according to the laws of the State of South Carolina, except as
superseded by Federal law. The invalidity of any portion of this Plan shall not invalidate the
remainder of the Plan, which shall continue in full force and effect.

               IN WITNESS WHEREOF, The Liberty Corporation and the Affiliates have caused this Plan to be
executed by their duly authorized officers effective as of the Closing Date.

	 	 	 	 	 
	 	 	THE LIBERTY CORPORATION
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 
	 
	 	 	 	 
	Attest:
	 	 	 	 
	 
	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 
	 	 	COSMOS BROADCASTING CORPORATION
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 
	 
	 	 	 	 
	Attest:
	 	 	 	 
	 
	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 

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Schedule A

Employers participating in the Supplemental Executive Savings Plan:

     The Liberty Corporation

     Cosmos Broadcasting Corporation

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