Document:

exv10w45

Exhibit 10.45

PEABODY ENERGY CORPORATION

Amended and Restated Australian Employee Stock Purchase Plan

SECTION 1 — INTRODUCTION

     1.1 Purpose. The purpose of the Peabody Energy Corporation Australian Employee Stock Purchase
Plan is to provide eligible employees of Participating Subsidiaries, as defined herein, of Peabody
Energy Corporation (the “Company”) the opportunity to acquire a proprietary interest in the Company
and thereby provide employees with an additional incentive to contribute to the long-term
profitability and success of the Company and its Subsidiaries. The Plan is for the exclusive
benefit of eligible employees of Participating Subsidiaries.

     1.2 Stock Purchase Plan. The Plan is a stock purchase plan that is intended to mirror the
provisions of the Company’s U.S. employee stock purchase plan, except that stockholder approval is
not required for adoption of this Plan, in accordance with guidance from the New York Stock
Exchange, and except as otherwise expressly provided herein. The Plan is not intended to qualify
under Section 423 of the Code.

     1.3 Effective Date and Term. The Plan will be effective on January 1, 2008 or such later date
as may be selected by the Committee (the “Effective Date”). The Plan shall continue in effect
until the earlier of the date the Company terminates the Plan or the date all of the shares of
Stock subject to the Plan, as amended from time to time, are purchased.

     1.4 Participating Subsidiaries. The Plan will be deemed to have been adopted by (i) Peabody
Pacific Pty Limited and its Subsidiaries listed on Exhibit A for eligible Employees as of
the Effective Date and (ii) any other Subsidiary designated by the Committee after the Effective
Date for its eligible Employees as of the date of designation.

     1.5 Stock Subject to Plan.

          (a) The Stock subject to purchase under the Plan will be shares of the Company’s authorized
but unissued shares, or previously issued shares of Stock reacquired and held by the Company, or
shares acquired in the market. The aggregate number of shares of Stock that may be purchased under
the Plan shall not exceed one million (1,000,000) shares. All shares of Stock purchased under the
Plan will count against this limitation.

          (b) In case of a reorganization, recapitalization, stock split, reverse stock split, stock
dividend, combination of shares, merger, consolidation, offering of rights or other change in the
capital structure of the Company, the Committee may make such adjustment as it deems appropriate in
the number, kind and purchase price of shares of Stock available for purchase under the Plan,
subject to Section 7.1.

 

 

SECTION 2 — DEFINITIONS

     For purposes of this Plan, the following words and phrases, whether or not capitalized, have
the meanings specified below, unless the context plainly requires a different meaning:

     2.1 “Beneficiary” means a person to whom all or a portion of the cash amounts due to the
Employee under this Plan will be paid if the Employee dies before receiving such cash amounts.

     2.2 “Board” means the Board of Directors of the Company.

     2.3 “Change in Control” means any one of the following:

          (a) any Person (other than a Person holding securities representing 10% or more of the
combined voting power of the Company’s outstanding securities as of the Effective Date, the
Company, any trustee or other fiduciary holding securities under an employee benefit plan of the
Company, or any company owned, directly or indirectly, by the shareholders of the Company in
substantially the same proportions as their ownership of stock of the Company), becomes the
Beneficial Owner, directly or indirectly, of securities of the Company, representing 50% or more of
the combined voting power of the Company’s then- outstanding securities;

          (b) during any period of twenty-four consecutive months (not including any period prior to the
Effective Date), individuals who at the beginning of such period constitute the Board, and any new
director (other than (A) a director nominated by a Person who has entered into an agreement with
the Company to effect a transaction described in clause 2.3(a), (c) or (d) or (B) a director
nominated by any Person (including the Company) who publicly announces an intention to take or to
consider taking actions (including, but not limited to, an actual or threatened proxy contest)
which if consummated would constitute a Change in Control) whose election by the Board or
nomination for election by the Company’s shareholders was approved by a vote of at least
three-fourths (3/4) of the directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election was previously so approved,
cease for any reason to constitute at least a majority thereof;

          (c) the consummation of any merger, consolidation, plan of arrangement, reorganization or
similar transaction or series of transactions in which the Company is involved, other than such a
transaction or series of transactions which would result in the shareholders of the Company
immediately prior thereto continuing to own (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than 50% of the combined voting power of the
securities of the Company or such surviving entity (or the parent, if any) outstanding immediately
after such transaction(s) in substantially the same proportions as their ownership immediately
prior to such transaction(s); or

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

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

     2.4 “Code” means the U.S. Internal Revenue Code of 1986, as amended, and any successor
thereto.

     2.5 “Committee” means the individuals appointed by the Board to administer the Plan.

     2.6 “Company” means Peabody Energy Corporation, and any successor.

     2.7 “Compensation” means wages or base salary (inclusively) paid for services rendered by an
Employee to the Company or any Participating Subsidiary during the applicable period specified in
the Plan, including any such amounts contributed by the Employee to any plan or plans established
by the Company or Participating Subsidiary in accordance with sections 125 or 401(k) of the Code.
Bonuses, incentive compensation, overtime, commissions and shift premiums paid to an Employee shall
not be included in Compensation. Notwithstanding the foregoing, Compensation shall not include any
amount paid to an Employee after he or she incurs a termination of employment with all
Participating Subsidiaries.

     2.8 “Custodian” means the custodian for the Plan, which shall be located in Australia if and
to the extent so required by law, appointed by the Company.

     2.9 “Effective Date” shall have the meaning set forth in Section 1.3.

     2.10 “Employee” means any employee (as defined for purposes of Section 423 of the Code) of a
Participating Subsidiary and may include a Transferred Employee, but does not include any employee
of the Company.

     2.11 “Fair Market Value” means the fair market value of one share of Stock as of a particular
day, which shall be the closing price per share of Stock on the New York Stock Exchange on that
day, or, if such day is not a trading day, the last preceding trading day.

     2.12 “Offering Date” means the first day of the Offering Period.

     2.13 “Offering Period” means any of the following time periods: the Effective Date through
June 30, 2008; and each consecutive six-month period thereafter; or such other period designated by
the Committee in its sole discretion.

     2.14 “Option” means an option to purchase shares of Stock under the Plan, based on the
contributions credited to each Employee’s Option Account.

     2.15 “Option Account” means the account solely maintained and held on trust in an Australian
authorized deposit-taking institution designated by the Committee on behalf of the Employee under
Section 3.4 to which contributions to the Plan are credited and from which amounts are withdrawn to
exercise options on a Termination Date, provided, that such amounts

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shall be converted to U.S. dollars utilizing the $A/$US exchange rate published by the Reserve
Bank of Australia on that date.

     2.16 “Participating Subsidiary” means a Subsidiary which is participating in the Plan in
accordance with Section 1.4.

     2.17 “Plan” means this Peabody Energy Corporation Amended and Restated Australian Employee
Stock Purchase Plan, as described in this document and as amended from time to time.

     2.18 “Stock” means the common stock, $0.01 par value, of the Company.

     2.19 “Subsidiary” means any corporation (other than the Company) in an unbroken chain of
corporations beginning with the Company if each of the corporations, or group of commonly
controlled corporations, other than the last corporation in the unbroken chain owns 50% or more of
the total combined voting power of all classes of stock in one of the other corporations in the
chain.

     2.20 “Termination Date” means the last day of an Offering Period, or if earlier, the date of a
Change in Control that occurs during such Offering Period.

     2.21 “Transferred Employee” means an Employee who (a) was a participant in an employee stock
purchase plan of the Company other than the Plan on the Offering Date of an Offering Period, and
(b) transferred directly to employment with a Participating Subsidiary during such Offering Period.

SECTION 3 — ENROLLMENT AND CONTRIBUTIONS

     3.1 Eligibility for Enrollment.

          (a) An Employee may enroll in the Plan for an Offering Period unless one of the following
applies:

               (i) The customary employment of the Employee on the Offering Date is twenty (20) hours or less
per week; or

               (ii) The customary employment of the Employee on the Offering Date is for not more than five
months in any calendar year; or

               (iii) The Employee is not employed by the Company or a Subsidiary on the Offering Date; or

               (iv) The Employee would, immediately upon enrollment, own directly or indirectly, or hold
options or rights to acquire, an aggregate of five percent (5%) or more of the total combined
voting power or value of all outstanding shares of all classes of the Company or any Subsidiary,
with ownership determined in accordance with the rules of Section 424(d) of

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the Code and treating stock which the Employee may purchase under outstanding options as owned
by the Employee; or

               (v) The Employee is eligible to participate in and continue to make contributions to an
employee stock purchase plan of the Company other than the Plan; or

               (vi) The primary place where the Employee provides services is not in Australia, unless
otherwise determined by the Committee, which may be on a case-by-case or general basis or
otherwise, in the Committee’s discretion.

          (b) The Committee or its designee will notify an Employee that the Employee is first eligible
to enroll in the Plan and make available to each eligible Employee the necessary enrollment forms
before the Offering Date.

     3.2 Enrollment Procedure.

          (a) To enroll in the Plan for an Offering Period, an Employee must file an enrollment form
with the Company and elect to make contributions under the Plan in accordance with Section 3.3.
The enrollment form must be received by the Company at least fifteen (15) calendar days prior to
the Offering Date and must state the contribution rate elected by the Employee for the Offering
Period. An Employee who does not enroll in the Plan for an Offering Period will receive no shares
of Stock under the Plan for such Offering Period. Notwithstanding the foregoing, any Transferred
Employee shall be automatically enrolled in the Plan at the contribution rate in effect for the
other employee stock purchase plan of the Company in which he or she participated, subject to such
Transferred Employee’s right to increase, decrease or discontinue contributions under Section
3.3(d).

          (b) An Employee whose enrollment in, and contributions under, the Plan continue throughout an
Offering Period will automatically be enrolled in the Plan for the next Offering Period unless (i)
the Employee files a written notice of discontinuance of contributions with the Company before the
Offering Date for the next Offering Period in accordance with Section 5.1(a)(i), or (ii) on the
Offering Date for such Offering Period the Employee is described in Section 3.1(a). The
contribution rate for an Employee who is automatically enrolled for an Offering Period pursuant to
this Section will be the contribution rate in effect for the immediately preceding Offering Period,
unless the Employee files an amended enrollment form with the Company at least fifteen (15)
calendar days prior to the next subsequent Offering Period designating a different contribution
rate.

     3.3 Contributions.

          (a) To enroll for the first time in the Plan for an Offering Period, an Employee must elect to
make a contribution under the Plan, subject to the terms and conditions prescribed below, by means
of payroll deduction for each payroll period within the Offering Period. Notwithstanding the
foregoing, in the case of any Transferred Employee who is automatically enrolled in the Plan
pursuant to Section 3.2(a), contributions to the Plan for such Transferred Employee’s initial
Offering Period shall be made by means of payroll deduction only for payroll periods within such
Offering Period that began after he or she was automatically enrolled in the Plan.

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          (b) An Employee may elect to make payroll deduction contributions in amounts not less than one
percent (1%) of Compensation per payroll period and not more than the lesser of (i) fifteen percent
(15%) of Compensation per Offering Period (or such other amount as the Committee may establish from
time to time and communicate to Employees before the Offering Date) or (ii) a percentage of
Compensation for each payroll period that ensures that the limit on the purchase of shares of Stock
specified in Section 4.1 is not exceeded for the Offering Period. Such payroll deduction
contributions shall be made on a pre-tax or post-tax basis as established by the Committee from
time to time.

          (c) Payroll deductions will commence with the first payroll period that begins during the
Offering Period and will be made in conformity with the Company’s payroll deduction schedule and
practices.

          (d) Except as provided in Section 5.1, an Employee may elect to increase, decrease or
discontinue contributions once each Offering Period as of the first day of the first payroll period
beginning in the Offering Period by giving written notice to the Committee at least fifteen (15)
calendar days before such date. Notwithstanding the foregoing, any Transferred Employee who is
automatically enrolled in the Plan pursuant to Section 3.2(a) shall have one opportunity to
increase, decrease or discontinue contributions at any time on or before fifteen (15) days before
the end of the Offering Period in which such automatic enrollment occurred.

     3.4 Option Accounts. All contributions made by an Employee under the Plan will be credited to
an Option Account maintained by the Company or the Custodian and held on trust on behalf of the
Employee. The Company will make the credit as soon as practicable after the contributions are
withheld from the Employee’s Compensation.

     3.5 Withdrawal of Contributions. An Employee may elect to withdraw contributions made during
an Offering Period by giving written notice to the Committee at least fifteen (15) calendar days
before the end of such Offering Period, in which case the cash credited to the Employee’s Option
Account will be refunded to the Employee without interest as soon as administratively feasible
after the Committee receives such notice, and the Employee may not re-enroll in the Plan until the
next Offering Period.

     3.6 No Funding of Accounts. No cash shall be set aside with respect to an Option Account
until it is credited thereto.

SECTION 4 — GRANT AND EXERCISE OF OPTION

     4.1 Grant of Options; Terms. Enrollment in the Plan with respect to any Offering Period will
constitute the grant by the Company of an Option to purchase shares of Stock under the Plan during
such Offering Period. All Employees granted Options shall have the same rights and privileges as
required by section 423(b)(5) of the Code. Each Option will be subject to the following terms:

          (a) The exercise price will be as specified in Section 4.2.

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          (b) Except as limited in (e) below, the number of shares of Stock subject to the option will
equal the number of shares of Stock that can be purchased at the exercise price specified in
Section 4.2 with the aggregate amount credited to the Employee’s Option Account as of the
Termination Date.

          (c) The Option with respect to an Offering Period will be exercised on the Termination Date of
such Offering Period.

          (d) The payment by an Employee for the shares of Stock purchased upon exercise of an option
will be made only through payroll deduction, all in accordance with Section 3.3.

          (e) No Employee shall be granted an option to the extent the number of shares of Stock that
may be purchased for such Employee (when taken together with all other options exercisable by such
Employee under any other stock purchase plan of the Company or a Subsidiary that is qualified under
Section 423 of the Code) in the aggregate during a calendar year exceeds the lesser of (i)
twenty-five thousand U.S. dollars (U.S. $25,000) in Fair Market Value of such shares of Stock
determined on the Offering Date for the Offering Period with respect to which the purchase is made
or (ii) twenty-five thousand Australian dollars (A $25,000) in Fair Market Value of such shares of
Stock determined on the Offering Date for the Offering Period with respect to which the purchase is
made.

     4.2 Exercise of Option; Exercise Price.

          (a) As soon as practicable after the Termination Date of each Offering Period, the Company or
Custodian will apply to the purchase of the number of shares of Stock the exercise price of which
is covered by the amounts credited to each Employee’s Option Account as of such Termination Date.
In the event the aggregate amount credited to the Employees’ Option Accounts as of such Termination
Date exceeds the exercise price of the shares available for purchase as of such date under this
Plan, the Company or Custodian shall purchase for each Employee his or her proportional share of
the shares available for purchase, based on the percentage that the cash allocated to his or her
Option Account represents of the total cash allocated to the Option Accounts of all Employees for
the Offering Period ending on such date, and the excess of the amount so credited shall be rolled
over to the next Offering Period (except insofar as such excess, together with amounts otherwise
contributed by an Employee for such Offering Period, shall exceed the amount specified in Section
4.1(e)(i) above, in which case such excess shall be returned to the Employee without interest).
The Stock so purchased shall be allocated to the Option Account for the Employee. The Stock shall
be held by the Custodian on behalf of the Employee and registered in the name of a nominee.

          (b) The exercise price of each share of Stock purchased with respect to any Offering Period
shall be the lower of:

               (i) Eighty five percent (85%) of the Fair Market Value of the Stock on the Offering Date for
such Offering Period, or

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               (ii) Eighty five percent (85%) of the Fair Market Value of the Stock on the Termination Date
for such Offering Period.

     4.3 Option Accounts.

          (a) All shares of Stock purchased on behalf of an Employee as of a Termination Date shall be
credited to such Employee’s Option Account as of such date. Dividends payable with respect to
shares of Stock credited to the Employee’s Option Account will be credited to the Employee’s Option
Account and used by the Custodian to purchase additional shares of Stock on the open market as soon
as administratively feasible following receipt of the dividend payment by the Custodian.

          (b) The Committee may determine whether cash in an amount representing the price of a
fractional share shall be carried over to the next Offering Period, or applied to the purchase of a
fractional share at the end of an Offering Period; provided that such determination shall apply
uniformly to all Employees for each Offering Period.

     4.4 No Interest on Account Balances. No interest or other earnings will be credited to any
Option Account with respect to (a) amounts credited thereto during an Offering Period or (b)
amounts to be returned to the Employee. Neither the Committee nor the Company shall have any
obligation to invest or otherwise manage amounts credited to an Option Account, other than to apply
such amounts to the purchase of Stock in accordance with the terms of this Plan.

SECTION 5 — TERMINATION OF ENROLLMENT

     5.1 Termination of Enrollment.

          (a) An Employee’s enrollment in the Plan will terminate under the following circumstances:

               (i) as of the beginning of the Offering Period that is at least fifteen (15) calendar days
after the Employee files with the Company a written notice of discontinuance of contributions;

               (ii) unless otherwise provided in Section 5.1(c), following the termination of employment with
all Participating Subsidiaries;

               (iii) as of the date on which the Employee would own directly or indirectly, or hold options
or rights to acquire, an aggregate of five percent (5%) or more of the total combined voting power
or value of all outstanding shares of all classes of the Company or any Subsidiary, determined in
accordance with Section 424(d) of the Code;

               (iv) upon termination of the Plan or as of the date the relevant Participating Subsidiary
ceases to be a Subsidiary; and

               (v) immediately upon the circumstances described in Section 3.1(a)(v) or (vi).

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          (b) An Employee whose enrollment in the Plan terminates under this Section, other than by
reason of termination of the Plan, may again enroll in the Plan as of any subsequent Offering Date
if the Employee satisfies the eligibility conditions of Section 3.1 as of such date.

          (c) Notwithstanding Section 5.1(a)(ii), any Employee who is enrolled in the Plan during an
Offering Period in which the Employee incurs a termination of employment with any Participating
Subsidiary and transfers directly to employment with the Company or a Subsidiary that is not a
Participating Subsidiary shall be permitted to remain enrolled in the Plan through the earliest of
(x) the Termination Date of such Offering Period or (y) the termination of such Employee’s
employment with the Company or such Subsidiary.

     5.2 Distributions to Employee.

          (a) Subject to the three year holding period prescribed in subsection 5.2(c), as soon as
administratively feasible after an Employee’s enrollment in the Plan terminates under Section 5.1:

               (i) The Company will pay to the Employee all cash credited to the Employee’s Option Account as
of the date of termination without interest; and

               (ii) The Committee will direct the Custodian to distribute to the Employee shares of Stock
then credited to the Employee’s Option Account that have been credited to the Employee’s Option
Account for at least three years in the form of certificates representing whole shares of Stock
(and cash equal to the Fair Market Value of any fractional share), or a nominee account, as
requested by the Employee or former Employee.

          (b) If an Employee’s enrollment terminates as a result of death, or if the Employee’s death
occurs before the Employee receives a distribution under this Section, all cash amounts payable
under this Section to the Employee will be paid to the Employee’s Beneficiary; and shares of Stock
credited to the Option Account of a deceased Employee may be distributed to the personal
representative of the deceased employee without regard to the three year holding period prescribed
in subsection 5.2(c).

          (c) An Employee or former Employee may, from time to time, request distribution of shares of
Stock then credited to the Employee’s Option Account that have been credited to the Employee’s
Option Account for at least three years. Notwithstanding the above, in the event of a Change in
Control an Employee or former Employee may request distribution of shares of Stock then credited to
the Employee’s Option Account. Distribution may be made as soon as administratively practicable in
the form of a stock certificates representing whole shares of Stock (and cash equal to the Fair
Market Value of any fractional share), or a nominee account, as requested by the Employee or former
Employee.

     5.3 Beneficiaries.

          (a) An Employee may designate a Beneficiary. Any such designation must be made on a form
provided by the Company for this purpose, will be effective on the date received by the Company and
may be revoked by the Employee at any time.

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          (b) If the Employee fails to designate a Beneficiary or if no designated beneficiary survives
the Employee, then any cash amounts shall be made to the Employee’s estate.

SECTION 6 — PLAN ADMINISTRATION

     6.1 Committee. The Plan will be administered by the Committee.

     6.2 Committee Powers.

          (a) The Committee will have all powers appropriate to administer the Plan including, but not
limited to, the following:

               (i) To determine all questions that may arise under the Plan, including the power to determine
the rights or eligibility of Employees or their Beneficiaries;

               (ii) To construe the terms of the Plan and to remedy ambiguities, inconsistencies or
omissions;

               (iii) To adopt such rules of procedure and prescribe such forms as it considers appropriate
for the proper administration of the Plan and are consistent with the Plan;

               (iv) To enforce the Plan provisions and the rules of procedure which it adopts;

               (v) To employ agents, attorneys, accountants, actuaries or other persons, and to allocate or
delegate to them such powers, rights and duties as it considers appropriate for the proper
administration of the Plan.

          (b) The Committee will have such further powers and duties as may be elsewhere specified in
the Plan.

     6.3 Committee Actions. The actions of the Committee may be taken at a meeting by a majority
of its members, in writing without a meeting if a majority of its members sign such writing or by
the use of a conference telephone or other communications equipment by means of which all persons
participating in the meeting can hear each other and participation in such a meeting in this manner
shall constitute attendance and presence in person at the meeting of the person or persons so
participating for all purposes. In taking action:

          (a) The Committee may allocate authority to a specific member(s) of the Committee to carry out
such duties as the Committee may assign;

          (b) A member of the Committee may by writing delegate any or all of such member’s rights,
powers, duties and discretions to any other member of the Committee, with the consent of the
latter;

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          (c) The Committee may delegate to any agents such duties and powers as it deems appropriate,
by an instrument in writing which specifies which duties are so delegated and to whom each such
duty is so delegated; and

          (d) When there is an even division of opinion among the members of the Committee as to a
matter, the Board of Directors of the Company will decide the matter, provided, however, that no
member of the Board of Directors may vote on such a matter if it concerns such member’s individual
rights, privileges or obligations under the Plan.

     6.4 Member Who is Participant. If a member of the Committee is an Employee, such member may
not decide any matter relating to the member’s participation or Option Account or how the Option
Account is to be paid to the member that the member would not have the right to decide in the
absence of membership on the Committee, and no Employee will receive any compensation for services
as a member of the Committee.

     6.5 Information Required from Company. The Company will furnish the Committee with such data
and information as the Committee deems appropriate to administer the Plan. The records of the
Company as to an Employee’s Compensation will be conclusive on all persons unless determined by the
Committee to be clearly incorrect.

     6.6 Information Required from Employees. Each person entitled to benefits under the Plan must
furnish the Company from time to time in writing such person’s mailing address, each change of
mailing address and such other data and information as the Committee deems appropriate to
administer the Plan. Any communication, statement or notice mailed with postage prepaid to any
person at the last mailing address filed with the Company will be binding upon such person for all
purposes of the Plan.

     6.7 Uniform Rules and Administration. Except as provided in Section 3.1(a)(vi), the Committee
will administer the Plan on a nondiscriminatory basis and will apply uniform rules to all persons
similarly situated.

SECTION 7 — AMENDMENT AND TERMINATION

     7.1 Amendment.

          (a) The Company reserves the right to amend the Plan from time to time subject to the
following limitations:

               (i) To the extent necessary to comply with or get an exemption from any provision of the Code,
including regulations thereunder, or of the Securities Exchange Act of 1934, as amended, no
amendment will be made without the prior approval of the stockholders of the Company if the
amendment will (1) increase the number of shares of Stock reserved for purchase under the Plan, or
(2) materially reduce the eligibility conditions or materially increase the benefits available
under the Plan.

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               (ii) No amendment will make any change in a previously granted and outstanding Option that
adversely affects the rights of an Employee with respect to such option.

               (iii) No amendment will reduce the amount of an Employee’s Option Account balance.

          (b) The Company may delegate to the Committee or its officers the power to amend the Plan as
the Company deems appropriate, subject to the limitations of this Section.

     7.2 Termination. The Plan is entirely voluntary on the part of the Company and the
continuance of the Plan should not be construed as a contractual obligation of the Company.
Accordingly, the Company reserves the right to terminate the Plan at any time. Unless sooner
terminated by the Company, the Plan shall terminate on the date all of the shares of Stock
specified in Section 1.5(a) are purchased unless additional shares of Stock are authorized for the
Plan by the stockholders of the Company. No Option may be granted under the Plan after the Plan is
terminated.

     7.3 Rights Upon Termination.

          (a) If the Plan terminates, the Committee may elect to terminate all outstanding Options
either immediately or upon completion of the purchase of shares of Stock on the next following
Termination Date.

          (b) If the Committee terminates an Option prior to the expiration of the Option, all amounts
contributed to the Plan which remain in an Employee’s Option Account will be returned to the
Employee as soon as reasonably practicable.

SECTION 8 — GENERAL PROVISIONS

     8.1 No Transfer or Assignment. The rights of an Employee under the Plan may not be sold,
pledged, assigned or transferred, voluntarily or involuntarily, in any manner other than by will or
the laws of descent and distribution. Any such attempted sale, pledge, assignment or transfer
shall be without effect. An Employee’s rights and all Options granted under the Plan shall only be
exercisable during his or her lifetime by such Employee.

     Furthermore, except as provided in Section 5.2(b), shares purchased for an Employee as of a
Termination Date may not be sold, exchanged, assigned, transferred, pledged, or otherwise disposed
of in any way by the Employee, other than by will or the laws of descent and distribution, until
after three years after such Termination Date. The Company may place controls on the Account of
the participant to which such shares are credited as necessary or appropriate to enforce such
restrictions. Any such attempted assignment, transfer, pledge or other disposition shall be
without effect.

     8.2 Rights as Stockholder. The grant of an Option to purchase shares of Stock under the Plan
will not confer upon an Employee any rights as a stockholder of the Company with respect to shares
of Stock subject to the Option. An Employee will become a stockholder with respect to shares of
Stock subject to an Option under the Plan only when the purchase of such shares of Stock is
completed as of a Termination Date.

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     8.3 Rights as Employee. The Plan is not a contract of employment, and the grant of an option
to purchase shares of Stock under the Plan will not confer upon any Employee the right to be
retained in the employ of the Company or any Subsidiary.

     8.4 Costs. All costs and expenses incurred in the administration of the Plan will be paid by
the Company and its Subsidiaries. Any brokerage fees for the sale of shares of Stock by an
Employee will be borne by the Employee.

     8.5 Application of Funds. All proceeds received by the Company from the sale of Stock under
the Plan will be used for general corporate purposes.

     8.6 Reports. The Company will provide or cause to be provided to each Employee an annual
report of the Employee’s contributions under the Plan for each Plan Year and the shares of Stock
purchased with such contributions.

     8.7 Actions by Company. Any action taken by the Company with respect to the Plan will be by
resolution of its Board of Directors or by a person or persons authorized by resolution of its
Board of Directors.

     8.8 Governmental Approval. The Plan and any offering or sale made to Employees under the Plan
is subject to any governmental approvals or consents that are or may become applicable in
connection herewith.

     8.9 Applicable Law. The Plan will be governed by the laws of the State of Delaware, without
regard to the law of conflicts of such state, to the extent that federal law does not preempt such
laws.

     8.10 Gender and Number. When the context permits, words in the Plan used in the masculine
gender include the feminine gender, words in the singular include the plural and words in the
plural include the singular.

     8.11 Headings. All headings in the Plan are included solely for ease of reference and do not
bear on the interpretation of the text.

     The undersigned hereby certifies that this Plan was duly adopted by the Board on October 23,
2008.

	 	 	 	 	 
	 	 	 
	 	     /s/ Sharon D. Fiehler
 	 
	 	Sharon D. Fiehler, Executive Vice President and Chief Administrative Officer 	 
	 	 	 

13

 

	 	 	 	 	 

Exhibit A

List of Additional Participating Subsidiaries1

Peabody Energy Australia Coal Pty Ltd (100%)

Peabody (Wilkie Creek) Pty Ltd (100%)

North Goonyella Mine Management Pty Ltd (100%)

North Goonyella Coal Mines Pty Ltd (100%)

Millennium Coal Pty Ltd (84.62%)

Wambo Coal Pty Ltd (75%)

North Wambo Pty Ltd (75%)

Helensburgh Coal Pty Ltd (100%)

Lakecoal Pty Ltd (100%)

 

			
	1	 	In addition to Peabody Pacific Pty Limited.

14exv10w59

Exhibit 10.59

RESTATED EMPLOYMENT AGREEMENT

     This AGREEMENT (the “Agreement”) is entered into as of December 31, 2008 (the “Commencement
Date”) by and between Peabody Energy Corporation, a Delaware corporation (the “Company”), and
Alexander C. Schoch (“Executive”). This Agreement is a continuation, in the form of a complete
restatement to incorporate updated provisions and new legal requirements, of the most recent
employment agreement between the Company and Executive dated October 16, 2006 (the “Prior
Agreement”).

RECITALS

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

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

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

     1. Employment.

          1.1 Subject to the terms and conditions of this Agreement, the Company agrees to continue to
employ Executive during the term hereof as Executive Vice President Law and Chief Legal Officer.
In such capacity, Executive shall report to the Chairman and Chief Executive Officer of the Company
(the “Chairman and CEO”) and shall have the customary powers, responsibilities and authority of
executives holding such positions in corporations of the size, type and nature of the Company, as
it exists from time to time, and as are assigned by the Chairman and CEO.

          1.2 Subject to the terms and conditions of this Agreement, Executive hereby accepts continued
employment as Executive Vice President Law and Chief Legal Officer, measured from the date of the
Prior Agreement, and agrees, subject to any period of vacation or other approved leave, to continue
to devote his or her full business time and efforts to the performance of services, duties and
responsibilities in connection therewith, subject at all times to review and control of the
Chairman and CEO.

          1.3 Subject to Executive’s compliance with all of the provisions of the Company’s code of
conduct and other policies, 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 her or his or her
immediate family with respect to which Executive 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 may exceed five

 

 

percent (5%) of the equity of any entity without the prior written approval of the Chairman
and CEO) or from serving, subject to the prior written approval of the Chairman and CEO, 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 with the performance of his
or her duties hereunder. For purposes of the preceding sentence, any approval by the Chairman and
CEO required therein shall not be unreasonably withheld.

     2. Term of Employment. Executive’s term of employment (the “Term of Employment”)
commenced on the date of the Prior Agreement and, subject to termination as provided herein, has a
one (1)-year term. On a daily basis, the Term of Employment shall be automatically extended by one
additional day unless Executive’s employment hereunder has terminated under Section 6.

     3. Compensation.

          3.1 Salary. During the Term of Employment, the Company shall pay Executive a base
salary (“Base Salary”) at the initial rate of $380,000. Such Base Salary shall be payable in
accordance with the ordinary payroll practices of the Company. During the Term of Employment, the
Compensation Committee of the Board (the “Compensation Committee”) and/or the Chairman and CEO
shall review Executive’s Base Salary in good faith, at least annually, in accordance with the
Company’s customary procedures and practices regarding the salaries of senior executives, and may
increase Executive’s Base Salary following such review. “Base Salary” for all purposes herein
shall be deemed to be a reference to the Base Salary in effect as of any date that requires the
determination of Executive’s Base Salary hereunder.

          3.2 Annual Bonus.

     (a) In addition to Base Salary, Executive shall be eligible to receive an annual cash
bonus (the “Bonus”) in accordance with a program developed by the Board, based on
achievement of performance targets established by the Compensation Committee and/or the
Chairman and CEO as soon as practicable at or after the beginning of the calendar year to
which the performance targets relate. Executive’s Bonus opportunity for the 2008 fiscal
year is 80% of his or her Base Salary. Executive’s maximum Bonus opportunity for the 2008
fiscal year is 160% of his Base Salary. The Compensation Committee and/or the Chairman and
CEO shall review Executive’s Bonus opportunity in good faith from time to time in accordance
with the Company’s customary procedures and practices regarding the bonus opportunities of
senior executives, and may adjust Executive’s Bonus opportunity following such review.
“Bonus” for all purposes herein, except as otherwise specifically stated, shall be deemed to
be a reference to the Bonus opportunity in effect as of any date that requires the
determination of Executive’s Bonus hereunder.

     (b) A Bonus award for any calendar year shall be payable to Executive at the time
bonuses are paid to executive officers for such calendar year in accordance with the
Company’s policies and practices, but in no event later than March 15 of the calendar year
following the later of (i) the calendar year in which the Bonus is earned or (ii) the
calendar year in which the Bonus is no longer subject to a substantial risk of forfeiture

2

 

within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended
(the “Code”), and the Treasury regulations and other guidance in effect thereunder
(collectively, “Section 409A”).

          3.3 Equity-Based Compensation. Any outstanding stock option or other equity-based
incentive agreements as of the date hereof shall remain in full force and effect and shall not be
affected by this Agreement. Executive shall be eligible to receive, from time to time during the
Term of Employment, equity-based compensation awards under the Company’s equity incentive plan(s)
(the “Long-Term Incentive Awards”). Any such Long-Term Incentive Awards shall be governed by
separate grant agreements. The grant date value for Executive’s Long-Term Incentive Awards for the
2008 fiscal year is 150% of his or her Base Salary, with a maximum potential payout level for
Performance Units to be determined in accordance with the performance matrix set forth in the 2008
Performance Units Agreement. The Compensation Committee and/or the Chairman and CEO shall review
the grant date value of Executive’s Long-Term Incentive Awards in good faith from time to time in
accordance with the Company’s customary procedures and practices regarding the long-term incentive
awards of senior executives, and may adjust the grant date value of future Long-Term Incentive
Awards to Executive following such review. “Long-Term Incentive Award” for all purposes herein,
except as otherwise specifically stated, shall be deemed to be a reference to the grant date
Long-Term Incentive Award value in effect as of any date that requires the determination of
Executive’s Long-Term Incentive Award value hereunder or under any grant agreement.

     4. Employee Benefits.

          4.1 Employee Benefit Programs, Plans and Practices; Perquisites. The Company shall
provide Executive with employee benefits and perquisites at a level (a) commensurate with his or
her position in the Company and (b) at least as favorable to Executive as the arrangements the
Company provides to its other senior executives that are in effect and open to new participants on
the Commencement Date, including retirement benefits, health and welfare benefits, the Continuation
Benefits (as defined in Section 6.2(b)(ii)(B)(II)), directors and officers insurance and/or an
indemnification agreement that covers claims arising out of actions or inactions occurring during
the Term of Employment, and other employee benefits and perquisites which the Company may make
available to its senior executives from time to time in its discretion on and after the
Commencement Date. Executive’s rights under any employee benefit plans or programs of the Company
as of the Commencement Date shall continue in accordance with plan or program terms as in effect at
any given time.

          4.2 Vacation. Executive shall be entitled to the number of business days paid
vacation in each calendar year as determined in accordance with the Company’s applicable vacation
policies, which shall be taken at such times as are consistent with Executive’s responsibilities
hereunder.

     5. Expenses. Subject to prevailing Company policy or guidelines, the Company will
reimburse Executive for all reasonable expenses incurred by Executive in carrying out his or her
duties on behalf of the Company, provided that payment or reimbursement of expenses shall be made
promptly and in no event later than December 31 of the year following the year in which such
expenses were incurred, the amount of such expenses eligible for payment or

3

 

reimbursement in any year shall not affect the amount of such expenses eligible for payment or
reimbursement in any other year and no such right to payment or reimbursement shall be subject to
liquidation or exchange for another benefit.

     6. Termination of Employment.

          6.1 Termination of Employment for Any Reason. Except as otherwise specifically
provided in this Agreement, the Company or Executive may terminate Executive’s Term of Employment
at any time for any reason by written notice to the other party at least thirty (30) days in
advance of the date of termination of Executive’s employment. In the event of a termination of
Executive’s employment for any reason during the Term of Employment, the Company shall pay to
Executive:

     (a) within five (5) business days following the date of termination of Executive’s
employment, a lump sum that includes: (i) Executive’s Base Salary earned on or prior to the
date of such termination but not yet paid to Executive in accordance with the Company’s
customary procedures and practices for the payment of executive salaries; (ii) any business
expenses incurred by Executive and properly submitted for reimbursement, but not yet
reimbursed by the Company under Section 5 above as of the date of such termination; and
(iii) any vacation time accrued but unused as of the date of such termination;

     (b) any benefits accrued and vested under any of the Company’s employee benefit
programs, plans and practices on or prior to the date of termination of Executive’s
employment; and

     (c) if Executive’s employment terminates due to retirement (as defined for the
applicable plan):

     (i) if the employment termination date precedes the payment date for the Bonus
earned during the calendar year immediately prior to the calendar year of employment
termination, the Bonus Executive earned during the calendar year immediately prior
to the calendar year of employment termination; and

     (ii) a prorated bonus for the calendar year of termination of Executive’s
employment, calculated as the Bonus Executive would have received in such year based
on actual performance multiplied by a fraction, the numerator of which is the number
of business days that Executive was employed during the calendar year of termination
and the denominator of which is the total number of business days during the
calendar year of termination.

Any bonus due under paragraph (i) or (ii) above shall be payable when annual bonuses are
paid to other senior executives of the Company, but in no event later than March 15 of the
calendar year following the later of (A) the calendar year in which the bonus is earned or
(B) the calendar year in which the bonus is no longer subject to a substantial risk of
forfeiture within the meaning of Section 409A.

4

 

The amounts described in (a) and (b) above are collectively referred to herein as the “Accrued
Obligations” and shall be paid in accordance with the terms of such Company programs, plans and
practices. The Accrued Obligations shall be paid in addition to any amounts payable under any
other provision of this Section 6 due to the termination of Executive’s employment. Any business
expenses incurred by Executive before his or her employment termination date and properly submitted
for reimbursement before or within ninety (90) days after the employment termination date shall be
processed and paid in accordance with Section 5.

          6.2 Termination by the Company without Cause or Termination by Executive for Good
Reason.

          (a) Notice Requirements.

     (i) General. Except as otherwise provided in paragraph (ii) below with
respect to a Good Reason termination, the Company or Executive may terminate
Executive’s Term of Employment at any time for any reason by written notice to the
other party at least thirty (30) days in advance of the date of termination of
Executive’s employment.

     (ii) Good Reason Notice Requirements and Cure Period. If Executive
terminates his or her employment during the Term of Employment for Good Reason (as
defined in Section 6.2(d) hereof), Executive shall provide written notice to the
Company at least forty-five (45) days in advance of the date of termination, such
notice shall describe the conduct Executive believes to constitute Good Reason and
the Company shall have the opportunity to cure the Good Reason within thirty (30)
days after receiving such notice. If the Company cures the conduct that is the
basis for the potential termination for Good Reason within such thirty (30)-day
period, Executive’s notice of termination shall be deemed withdrawn. If Executive
does not give notice to the Company as described in this Section 6.2(a)(ii) within
ninety (90) days after an event giving rise to Good Reason, Executive’s right to
claim Good Reason termination on the basis of such event shall be deemed waived.

          (b) Severance Benefits.

     (i) Severance Payment. If Executive’s employment is terminated:

     (A) by the Company for a reason other than Cause (as defined in Section
6.3(b) hereof), Disability (as defined in Section 6.4 hereof) or death, or

     (B) by Executive for Good Reason (as defined in Section 6.2(d) hereof),

5

 

and such termination constitutes a Separation from Service (as defined in Section
6.2(c) hereof), the Company, as severance, shall pay to Executive an amount (the
“Severance Payment”) equal to the total of:

     (I) one (1) times Executive’s Base Salary; plus

     (II) an additional amount equal to one (1) times the annual
average of the actual Bonus awards paid to Executive by the Company
for the three (3) calendar years preceding the date of Executive’s
employment termination (or, if Executive has not been employed by the
Company for three (3) full calendar years as of the date his or her
employment is terminated, for the two (2) calendar years or one (1)
calendar year, as applicable, for which he or she has been so
employed and eligible to receive a Bonus); plus

     (III) six percent (6%) of Executive’s Base Salary (to compensate
Executive for Company contributions he or she otherwise might have
received under the Company’s retirement plan).

The Company shall pay to Executive (x) one-half (1/2) of such Severance Payment in a
lump sum payment on the earlier to occur of Executive’s death or the first business
day immediately following the six (6)-month anniversary of Executive’s Separation
from Service and (y) the remaining one-half (1/2) of the Severance Payment in six (6)
substantially equal monthly payments beginning on the first day of the month next
following the initial lump sum payment.

     (ii) Unpaid Bonus, Prorated Bonus and Continuation Benefits. In
addition, if Executive’s employment is terminated:

     (A) by the Company for a reason other than Cause (as defined in Section
6.3(b) hereof), Disability (as defined in Section 6.4 hereof) or death, or

     (B) by Executive for Good Reason (as defined in Section 6.2(d) hereof),

and such termination constitutes a Separation from Service, the following provisions
shall apply:

     (I) Unpaid Bonus and Prorated Bonus. The Company shall
pay to Executive (aa) any unpaid Bonus earned by Executive with
respect to the year immediately preceding the year of termination, if
any, and (bb) a prorated bonus (the “Prorated Bonus”) for the
calendar year of termination of Executive’s employment, calculated as
the Bonus Executive would have

6

 

received in such year based on actual performance multiplied by
a fraction, the numerator of which is the number of business days
during the calendar year of termination that Executive was employed
and the denominator of which is the total number of business days
during the calendar year of termination. The unpaid Bonus and the
Prorated Bonus shall be payable when annual bonuses are paid to other
senior executives of the Company, but in no event later than March 15
of the calendar year following the later of (1) the calendar year in
which the Bonus is earned or (2) the calendar year in which the Bonus
is no longer subject to a substantial risk of forfeiture within the
meaning of Section 409A.

     (II) Continuation Benefits. Executive shall be entitled
to continuation of life insurance, group health coverage (including
medical, dental, and vision benefits), accidental death &
dismemberment coverage, and the health care flexible spending account
(to the extent required to comply with COBRA continuation coverage
requirements) (collectively, the “Continuation Benefits”) in
accordance with the applicable plan terms for a period of one (1)
year following the date of Executive’s Separation from Service (the
“Benefit Continuation Period”); provided, however,
that Executive pays the full cost of his or her coverage under such
plans, except that Executive shall pay only the required
contributions for any health care continuation coverage required to
be provided to or on behalf of Executive under the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), on
the same basis as any other plan participant electing similar COBRA
continuation coverage under the Company health plan; and
provided, further, that any such coverage shall
terminate to the extent that Executive is offered or obtains
comparable benefits from any other employer during the Benefit
Continuation Period. Executive shall be reimbursed by the Company,
on an after-tax basis, for his or her cost of the Continuation
Benefits (except that the reimbursement for his or her required
contributions for COBRA health care continuation coverage shall be
reduced by an amount equal to the cost paid by an active employee for
similar coverage under the Company health plan). The amount of
expenses eligible for reimbursement or Continuation Benefits provided
during one calendar year shall not affect the expenses eligible for
reimbursement or amount of Continuation Benefits provided during a
subsequent calendar year (except with respect to health plan maximums
imposed on the reimbursement of expenses referred to in Code Section
105(b)), the right to reimbursement or Continuation Benefits may not
be exchanged or substituted for other forms of compensation to
Executive, and any reimbursement

7

 

or payment under the Continuation Benefits arrangements will be
paid in accordance with applicable plan terms and no later than the
last day of the calendar year following the calendar year in which
Executive incurred the expense giving rise to such reimbursement or
payment.

     (iii) Forfeiture. Notwithstanding the foregoing, if Executive breaches
any provision of Section 13 hereof, the remaining balances of the Severance Payment,
the Prorated Bonus, and any Continuation Benefits shall be forfeited.

     (c) “Separation from Service.” For purposes of this Agreement, the term
“Separation from Service” means a “separation from service” as such term is defined under
Section 409A. The terms “terminate,” “termination,” “termination of employment,” and
variations thereof, when used in this Agreement in connection with Executive’s employment,
are intended to mean a termination of employment that constitutes a Separation from Service.
For purposes of the determination of whether Executive has had a “separation from service”
as described under Section 409A, the terms “Company,” “employer” and “service recipient”
mean Peabody Energy Corporation and any affiliate with which Peabody Energy Corporation
would be considered a single employer under Code Section 414(b) or (c), provided that, in
applying Code Section 1563(a)(1), (2), and (3) for purposes of determining a controlled
group of corporations under Code Section 414(b), the language “at least 50 percent” is used
instead of “at least 80 percent” each place it appears in Code Section 1563(a)(1), (2), and
(3), and in applying Treasury Regulation Section 1.414(c)-2 for purposes of determining
trades or businesses (whether or not incorporated) that are under common control for
purposes of Code Section 414(c), “at least 50 percent” is used instead of “at least 80
percent” each place it appears in Treasury Regulation Section 1.414(c)-2. In addition,
where the use of a definition of “Company,” “employer” or “service recipient” for purposes
of determining a “separation from service” is based upon legitimate business criteria, in
applying Code Section 1563(a)(1), (2), and (3) for purposes of determining a controlled
group of corporations under Code Section 414(b), the language “at least 20 percent” is used
instead of “at least 80 percent” each place it appears in Code Section 1563(a)(1), (2), and
(3), and in applying Treasury Regulation Section 1.414(c)-2 for purposes of determining
trades or businesses (whether or not incorporated) that are under common control for
purposes of Code Section 414(c), the language “at least 20 percent” is used instead of “at
least 80 percent” each place it appears in Treasury Regulation Section 1.414(c)-2.

     (d) “Good Reason.” For purposes of this Agreement, the term “Good Reason”
means:

     (i) a reduction by the Company in Executive’s Base Salary from that in effect
immediately prior to the reduction (in which event the Severance Payment shall be
calculated based on Executive’s Base Salary in effect immediately prior to any such
reduction);

8

 

     (ii) a material reduction in Executive’s Bonus opportunity, maximum Bonus
opportunity and Long-Term Incentive Award grant date value (including the maximum
potential payout level for Performance Units to be determined in accordance with the
performance matrix set forth in the Performance Units Agreement) used to establish
Bonus or Long-Term Incentive Awards, respectively, from time to time, from those in
effect immediately prior to any such reduction (in which event any portion of the
Severance Payment that relates to Bonus or Long-Term Incentive Awards shall be
calculated based on the Bonus or Long-Term Incentive Award grant date value, as
applicable, in effect immediately prior to any such reduction);

     (iii) a material reduction in the aggregate program of employee benefits and
perquisites to which Executive is entitled (other than a reduction that generally
affects all executives);

     (iv) relocation of Executive’s primary office by more than 50 miles from the
location of Executive’s primary office as of the date of this Agreement;

     (v) any material diminution or material adverse change in Executive’s duties,
responsibilities or reporting relationships;

     (vi) a breach by the Company of a material provision of this Agreement; or

     (vii) a failure on the part of the Company to obtain a written assumption of
its obligations under this Agreement by a successor owner of substantially all of
the Company’s assets in connection with a merger, consolidation, asset sale,
liquidation, combination or other similar transaction.

Any amounts due to Executive in connection with a termination of employment shall be
computed without giving effect to any changes that give rise to Good Reason.

          6.3 Voluntary Termination by Executive; Discharge for Cause.

     (a) In the event that Executive’s employment is terminated (i) by the Company for
Cause, as hereinafter defined, in which event no advance written notice is required, or (ii)
by Executive for a reason other than Good Reason, Disability or death, the Company shall pay
to Executive only the Accrued Obligations.

     (b) As used herein, the term “Cause” shall be limited to:

     (i) any material and uncorrected breach by Executive of the terms of this
Agreement, including, but not limited to, engaging in action in violation of Section
13 hereof;

     (ii) any willful fraud or dishonesty of Executive involving the property or
business of the Company;

9

 

     (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 results in his or her imprisonment;

provided that with respect to clause (i), (ii) or (iii) above, Executive shall have
ten (10) days following written notice of the conduct which is the basis for the potential
termination for Cause within which to cure such conduct to prevent termination for Cause by
the Company. If Executive cures the conduct that is the basis for the potential termination
for Cause within such ten (10)-day period, the Company’s notice of termination shall be
deemed withdrawn. Except for violations of Section 13 hereof or termination under Section
6.3(b)(iv) above, only actions, conduct and events occurring during the Term of Employment
with the Company shall be the subject of a termination for Cause. In the event that
Executive is terminated for failure to meet performance goals, such termination shall be
considered a termination without Cause for purposes of his or her right to receive the
Severance Payment, the Prorated Bonus and the Continuation Benefits.

          6.4 Disability.

     (a) In the event of the Disability (as defined in (b) below) of Executive during the
Term of Employment, the Company may terminate Executive’s Term of Employment upon written
notice to Executive (or Executive’s personal representative, if applicable) effective upon
the date of receipt thereof (the “Disability Commencement Date”). The Company shall pay to
Executive (i) the Accrued Obligations as provided in Section 6.1 hereof and (ii) any unpaid
Bonus earned by the Executive with respect to the year immediately preceding the year of
termination and the Prorated Bonus, with such bonuses to be paid when annual bonuses are
paid to other senior executives of the Company, but in no event later than March 15 of the
calendar year following the calendar year in which Executive’s employment terminated.

     (b) The term “Disability,” for purposes of this Agreement, generally 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 long-term disability plan
that Executive is disabled and entitled to long-term disability benefits as a result of
incapacity due to physical or mental illness that lasts, or is reasonably expected to last,
for at least six (6) months.

          6.5 Death. In the event of Executive’s death during the Term of Employment or at any
time thereafter while payments are still owing to Executive under the terms of this Agreement, the
Company shall pay to Executive’s beneficiary(ies) (to the extent so designated by Executive) or his
or her estate (to the extent that no such beneficiary has been designated) (a) the Accrued
Obligations as provided in Section 6.1 hereof and (b) any unpaid Bonus earned by the Executive with
respect to the year immediately preceding the year of termination and the

10

 

Prorated Bonus, with such bonuses to be paid when annual bonuses are paid to other senior
executives of the Company, but in no event later than March 15 of the calendar year following the
calendar year in which Executive’s employment terminated.

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

          6.7 Executive’s Duty to Provide Materials. Upon the termination of Executive’s
employment for any reason, Executive or his or her estate shall surrender to the Company all
correspondence, letters, files, contracts, mailing lists, customer lists, advertising materials,
ledgers, supplies, equipment, checks, and all other materials and records of any kind that are the
property of the Company or any of its subsidiaries or affiliates, that may be in Executive’s
possession or under his or her control, including, without limitation, any “soft” copies or
computerized or electronic versions thereof.

     7. Tax Gross-Up Payments.

          7.1 Gross-Up of Excise Tax. If Executive becomes entitled to any payment, benefit or
distribution (or combination thereof) by the Company, any affiliated company, or one or more trusts
established by the Company for the benefit of its employees, whether paid or payable pursuant to
Section 7 of this Agreement or any other plan, arrangement, or agreement with the Company or any
affiliated company (the “Payments”), which are or become subject to the excise tax imposed by Code
Section 4999 or any interest or penalties are incurred by Executive during his or her lifetime with
respect to such excise tax (such excise tax, together with any such interest and penalties,
hereinafter collectively referred to as the “Excise Tax”), the Company shall pay to Executive an
additional payment (the “Gross-Up Payment”) in an amount such that after payment by Executive of
all taxes (including any interest or penalties imposed with respect to such taxes), including,
without limitation, any income taxes (and any interest and penalties imposed with respect thereto)
and the Excise Tax imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payments.

          7.2 Determination of Gross-Up Payment.

     (a) All determinations required to be made under this Section 7, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determination, shall be made by a nationally
recognized certified public accounting firm as may be designated by the Company (the
“Accounting Firm”), which shall provide detailed supporting calculations to both the Company
and Executive within ten (10) business days after 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

11

 

effective rates applicable to individuals in the state or locality of Executive’s
residence or place of employment in the calendar year in which any such 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.

     (b) Any Gross-Up Payment, as determined pursuant to this Section 7, shall be paid by
the Company to Executive (or to the appropriate taxing authority on Executive’s behalf) when
due in accordance with paragraph (a) above; provided, however, that such
payment shall be made no later than (i) with respect to taxes, the end of Executive’s
taxable year following the taxable year in which Executive remits such taxes to the
applicable taxing authority, and (ii) with respect to interest and penalties incurred by
Executive with respect to such taxes, the end of Executive’s taxable year following the
taxable year in which Executive incurs such interest and/or penalties, as applicable. The
amount of interest and penalties reimbursed by the Company during one calendar year shall
not affect the amount of interest and penalties reimbursable by the Company during a
subsequent calendar year, and the right to such reimbursement may not be exchanged or
substituted for other forms of compensation to Executive.

     (c) If the Accounting Firm determines that no Excise Tax is payable by Executive, it
shall so indicate to the Company and Executive in writing. Any determination by the
Accounting Firm shall be binding upon the Company and Executive. As a result of the
uncertainty in the application of Code Section 4999, it is possible that the amount of the
Gross-Up Payment determined by the Accounting Firm to be due to (or on behalf of) Executive
may be lower than the amount actually required to be paid by Executive to the applicable
taxing authority (“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;
provided, however, that such Underpayment shall be paid no later than the end of Executive’s
taxable year following the taxable year in which Executive remits the Excise Tax to the
applicable taxing authority.

     7.3 Disputed Taxes.

     (a) Executive shall notify the Company in writing of any claim by the Internal Revenue
Service or other relevant taxing authority 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 (10) 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. If such claim is due to a tax audit or litigation
addressing the existence or amount of tax liability, whether federal, state or local (a
“Reimbursable Claim”), then Executive shall not pay such claim prior to the expiration of
the thirty (30)-day period following the date on which it gives such notice to the Company
(or such shorter period ending on the date that any payment of taxes with

12

 

respect to such Reimbursable Claim is due). If the Company notifies Executive in
writing prior to the expiration of such period that it desires to contest such Reimbursable
Claim, Executive shall (i) give the Company any information reasonably requested by the
Company relating to such Reimbursable Claim, (ii) take such action in connection with
contesting such Reimbursable Claim as the Company shall reasonably request in writing from
time to time, including, without limitation, accepting legal representation with respect to
such Reimbursable Claim by an attorney reasonably selected by the Company, (iii) cooperate
with the Company in good faith in order to effectively contest such Reimbursable Claim, and
(iv) permit the Company to participate in any proceedings relating to such Reimbursable
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.

     (b) Without limiting the foregoing provisions of this Section 7.3, 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 Reimbursable Claim and may, at its sole option,
either direct Executive to pay the tax claimed and sue for a refund or contest the
Reimbursable 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 that
if the Company directs Executive to pay such Reimbursable Claim and sue for a refund, the
Company shall advance the amount of such payment to Executive, on an interest-free basis,
and shall indemnify and hold Executive harmless, on an after-tax basis, from any Excise Tax
or income tax (including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
provided, further, that if Executive is required to extend the statute of
limitations to enable the Company to contest such Reimbursable 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. In no event shall payments
for or reimbursements to Executive for Reimbursable Claims be made later than the end of
Executive’s taxable year following the taxable year in which the taxes that are the subject
to the Reimbursable Claim are remitted to the taxing authority, or if as a result of such
audit or litigation no taxes are remitted, the end of Executive’s taxable year following the
taxable year in which the audit is completed or there is a final nonappealable settlement or
other resolution of the litigation.

          7.4 Refunds of Gross-Up Payments. If, after the receipt by Executive of an amount
paid or advanced by the Company pursuant to this Section 7, Executive becomes entitled to receive
any refund with respect to a Gross-Up Payment, Executive shall (subject to the

13

 

Company’s complying with the requirements of Section 7.3) promptly pay to the Company the
amount of such refund received (together with any interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by Executive of an amount advanced by the Company
pursuant to this Section 7, a determination is made that Executive shall not be entitled to any
refund with respect to such claim and the Company does not notify Executive in writing of its
intent to contest such denial of refund prior to the expiration of thirty (30) days after such
determination, then such advance shall be forgiven and shall not be required to be repaid and the
amount of such advance shall offset, to the extent thereof, the amount of the Gross-Up Payment
required to be paid.

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

To the Company:

Chairman and Chief Executive Officer

Peabody Energy Corporation

701 Market Street, Suite 900

St. Louis, Missouri 63101-1826

To Executive at the most recent address set forth in the Company’s personnel
records.

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.

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

     10. Assignment. 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, in writing, to any successor (whether by merger, purchase, spin-off or otherwise) to all
or substantially all of the stock, assets or businesses of the Company. This Agreement shall be
binding upon, inure to the benefit of and be enforceable by the heirs and representatives of
Executive and the permitted assigns and successors of the Company.

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

     12. Code Section 409A Compliance.

     (a) This Agreement is intended to comply with Section 409A and shall, to the extent
practicable, be construed in accordance therewith. Accordingly, notwithstanding anything in
this Agreement to the contrary, if the Company determines that Executive is a

14

 

“specified employee” (as defined in Code Section 409A(a)(2)(B)(i)) at the time of his
or her Separation from Service and any amount payable to Executive under this Agreement is a
deferral of compensation subject to the additional tax described in Code Section
409A(a)(1)(B) and would be considered a payment upon Executive’s Separation from Service,
then such amount shall not be paid before the date that is the earlier of (i) six (6) months
and one (1) day after Executive’s Separation from Service or (ii) Executive’s death (the
“Delay Period”). Upon the expiration of the Delay Period, the initial payment following the
Delay Period shall include a lump sum payment equal to those payments that otherwise would
have been paid if the delay had not applied, and any remaining payments due shall be payable
in accordance with their original payment schedule.

     (b) If either party to this Agreement reasonably determines that any amount payable
pursuant to this Agreement would result in adverse tax consequences under Section 409A
(including, but not limited to, the additional tax described in Code Section 409A(a)(1)(B)),
then such party shall deliver written notice of such determination to the other party, and
the parties hereby agree to work in good faith to amend this Agreement so it (i) is exempt
from, or compliant with, the requirements of Section 409A and (ii) preserves as nearly as
possible the original intent and economic effect of the affected provisions.

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

     (a) Executive, during the Term of Employment and thereafter, will not, directly or
indirectly, use for himself or herself 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, sketches, plans or other documents (including, without
limitation, any “soft” copies or computerized or electronic versions thereof) 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 Term of Employment and (i) for a period of one (1) year thereafter,
without the prior written consent of the Chairman and CEO, he or she will not, directly or
indirectly, as principal, manager, agent, consultant, officer, stockholder, partner,
investor, lender or employee or in any other capacity, carry on, be engaged in or have any
financial interest in, any entity which is in competition with the business of the Company
or its subsidiaries and (ii) for a period of two (2) years thereafter, without the prior
written consent of the Chairman and CEO, he or she shall not, on his or her own

15

 

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

     (d) Executive agrees that the covenant not to compete and the covenant not to solicit
are reasonable under the circumstances and will not interfere with his or her ability to
earn a living or otherwise to meet his or her 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 which appear unreasonable and
to enforce the remainder of the covenant as so amended. Executive agrees that any breach of
the covenants contained in this Section 13 would irreparably injure the Company.
Accordingly, Executive agrees that, in the event that a court enjoins Executive from any
activity prohibited by this Section 13, 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.

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

     15. Dispute Resolution. Any dispute or controversy arising under or in connection
with this Agreement (other than an action to enforce the covenants in Section 13 hereof) or any
ancillary documents shall be resolved by arbitration in St. Louis, Missouri. Three arbitrators
shall be selected, and arbitration shall be conducted, in accordance with the rules of the American
Arbitration Association. The arbitrators shall have the discretion to award the cost of
arbitration, arbitrators’ fees and the respective attorneys’ fees of each party between the parties

16

 

as they see fit. Notwithstanding anything in this Section 15 to the contrary, payments made
under this Section 15 that are provided during one calendar year shall not affect the amount of
such payments provided during a subsequent calendar year, payments under this Section 15 may not be
exchanged or substituted for other forms of compensation to Executive, and any such payment will be
paid within sixty (60) days after Executive prevails, but in no event later than the last day of
Executive’s taxable year following the taxable year in which he or she incurred the expense giving
rise to such payment.

     16. 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.

     17. Effect on Prior Agreements. This Agreement and any ancillary documents contain
the entire understanding between the parties hereto. This Agreement is a continuation, in the form
of a complete restatement to incorporate updated provisions and new legal requirements, of the
Prior Agreement between the Company and Executive and, except as provided herein or in an ancillary
document, supersedes in all respects the Prior Agreement and any other agreement or understanding,
written or oral, between the Company, any affiliate of the Company or any predecessor of the
Company or affiliate of the Company and Executive.

     18. Withholding. The Company shall be entitled to withhold from payments to or on
behalf of Executive any amount of tax withholding required by law.

     19. Currency. All dollar amounts or references contained in this Agreement and any
ancillary document refer to the United States dollar.

     20. Survival. Notwithstanding the expiration of the term of this Agreement, the
applicable provisions of this Agreement (such as Sections 5 through 21) shall remain in effect as
long as is reasonably necessary to give effect thereto in accordance with the terms hereof.

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

[SIGNATURE PAGE FOLLOWS]

17

 

	 	 	 	 	 
	 	PEABODY ENERGY CORPORATION

 	 
	 	By  	/s/ Sharon D. Fiehler
 	 
	 	 	Sharon D. Fiehler 	 
	 	 	Executive Vice President and Chief Administrative
Officer 	 
	 
	 	EXECUTIVE

 	 
	 	/s/ Alexander C. Schoch
 	 
	 	Alexander C. Schoch 	 
	 	 	 
	 

18

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