Document:

exv10w1

 

Exhibit 10.1

[PEABODY ENERGY CORPORATION LETTERHEAD]

March 1, 2005

PERSONAL AND CONFIDENTIAL

Gregory H. Boyce

11012 Clayton Road

St. Louis, MO 63131

Dear Greg:

This letter agreement (the “Letter Agreement”) will summarize the basic terms which Peabody Energy
Corporation (the “Company”) believes would be appropriate to govern a continued employment
relationship between you and the Company. As you know, the Company has elected you as its new
President and Chief Executive Officer, to be effective January 1, 2006 (the “Effective Date”).
However, the Company believes that a gradual transfer of the duties and responsibilities of the
Company’s current Chief Executive Officer to you over the balance of 2005 is an essential step to
ensure a smooth transition in connection with the succession of the Company’s current Chief
Executive Officer.

Accordingly, the actual transfer of duties and responsibilities from the Company’s current Chief
Executive Officer to you would occur from time to time from the announcement until the close of
business on December 31, 2005. The title of President and Chief Executive Officer and any and all
duties and responsibilities associated therewith would be fully transferred to you effective as of
the Effective Date. As a result, until the end of calendar year 2005, you would continue to be
employed by the Company as its President and Chief Operating Officer under the terms and conditions
of that certain Employment Agreement made as of October 1, 2003, between you and the Company, as
previously amended (the “Existing Employment Agreement”). You agree that the assumption of these
additional duties and responsibilities during the balance of 2005, would not constitute Good Reason
for purposes of the Existing Employment Agreement or any other relevant agreement between you and
the Company.

In order to induce you to continue to serve the Company in your current position while working in
close collaboration with the Company’s current Chief Executive Officer until December 31, 2005, and
in an effort to secure your continued services as the Company’s new President and Chief Executive
Officer on and after the Effective Date, the Company agrees to enter into an Amended and Restated
Employment Agreement effective on the Effective Date, in the form attached hereto as Exhibit A and
incorporated herein by reference.

 

 

Gregory H. Boyce

March 1, 2005

Page 2

Please confirm your agreement with the foregoing (including, but not limited to, the terms and
conditions of the Amended and Restated Employment Agreement attached hereto as Exhibit A and
incorporated herein by reference) by signing and dating the enclosed duplicate copy of this Letter
Agreement and returning that copy to me, or contact me with any questions or comments you may have.

	 	 	 	 	 
	 	 	Very truly yours,
	

	 	 	 	 
	 	 	PEABODY ENERGY CORPORATION
	

	 	 	 	 
	

	 	By:
	 	/s/ ROBERT B KARN
	

	 	 	 	 
	

	 	Its:
	 	Chairman
of Compensation Committee

AGREED AND ACCEPTED:

	 	 
	/s/
GREGORY H BOYCE
	Signature

	 

	February 28, 2005
	Dateexv10w2

 

Exhibit 10.2

[PEABODY ENERGY CORPORATION LETTERHEAD]

March 1, 2005

PERSONAL AND CONFIDENTIAL

Irl F. Engelhardt

901 Kent Road

St. Louis, MO 63124

Dear Irl:

This letter agreement (the “Letter Agreement”) will summarize the basic terms which Peabody Energy
Corporation (the “Company”) believes would be appropriate to govern a continued employment
relationship between you and the Company until such time as you would relinquish your duties and
responsibilities as the Company’s Chief Executive Officer and continue as the Company’s Chairman of
the Board with expanded responsibilities as set forth in the attached Amended and Restated
Employment Agreement (as further described in this Letter Agreement) and thereafter.

As you know, the Company has elected its new President and Chief Executive Officer, to become
effective January 1, 2006 (the “Effective Date”). The Company believes that a gradual transfer of
your duties and responsibilities as the Company’s Chief Executive Officer to your successor over
several calendar months is an essential step to ensure a smooth transition in connection with your
succession. Therefore, the Company would greatly appreciate it if, throughout the balance of this
calendar year 2005, you would agree to acquaint your successor with the duties and responsibilities
associated with the Chief Executive Officer position with the Company and perform such transition
duties as shall be approved by the Company’s Board of Directors (the “Board”) to ensure a seamless
transfer of your duties and responsibilities as the Company’s Chief Executive Officer to your
successor.

As a result, until the end of calendar year 2005, you would continue to be employed by the Company
as its Chief Executive Officer and Chairman of the Board under the terms and conditions of the
Employment Agreement made as of May 19, 1998, between you and the Company, as previously amended
(the “Existing Employment Agreement”). The gradual transfer of duties and responsibilities between
you and your successor and any Board-approved organizational modifications relating thereto, as
described in this Letter Agreement, would be deemed not to constitute Good Reason for purposes of
the Existing Employment Agreement or any other relevant agreement between you and the Company.

In order to secure your continued services as a senior executive officer of the Company and as
Chairman of the Board on and after the Effective Date, the Company agrees to

 

 

Irl F. Engelhardt

March 1,2005

Page 2

enter into an Amended and Restated Employment Agreement for a two-year term beginning on the
Effective Date and ending on December 31, 2007, with possible renewal periods, if mutually agreed
upon, in the form attached hereto as Exhibit A and incorporated herein by reference.

Please confirm your agreement with the foregoing (including, but not limited to, the terms and
conditions of the Amended and Restated Employment Agreement attached hereto as Exhibit A and
incorporated herein by reference) by signing and dating the enclosed duplicate copy of this Letter
Agreement and returning that copy to me, or contact me with any questions or comments you may have.
If you terminate your employment with the Company at any time before the Effective Date after
having executed this Letter Agreement, the Amended and Restated Employment Agreement attached
hereto as Exhibit A would not be applicable.

	 	 	 	 	 
	 	 	Very truly yours,
	 
	 	 	 	 
	 	 	PEABODY ENERGY CORPORATION
	 
	 	 	 	 
	

	 	By:
	 	/s/
ROBERT B KARN
	

	 	Its:
	 	Chairman
of Compensation Committee

AGREED AND ACCEPTED:

	 	 
	/s/
IRL F. ENGELHARDT
	Signature

	 

	2/28/05
	Dateexv10w3

 

Exhibit 10.3

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 Gregory H. Boyce (the “Executive”).

RECITALS

     The Company and Executive previously entered in to an Employment Agreement made as of October
1, 2003, as amended (the “2003 Employment Agreement”), setting forth the terms and conditions of
Executive’s employment as the Company’s President and Chief Operating Officer.

     Effective as of the date hereof (the “Commencement Date”), Executive agrees to serve after
that date in the executive team position set forth on the signature page hereof.

     In order to induce Executive to serve in the executive team position set forth on the
signature page hereof, 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 2003 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:

     1. Employment.

     1.1 Subject to the terms and conditions of this Agreement, the Company agrees to employ
Executive during the Term hereof in the executive team position set forth on the

 

 

signature page hereof. In such capacity, Executive shall report to the Board, and shall have
the customary powers, responsibilities and authorities 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 Board of Directors of the Company (the “Board”).

     1.2 Subject to the terms and conditions of this Agreement, Executive hereby accepts employment
in the executive team position set forth on the signature page hereof commencing as of the date
hereof (the “Commencement Date”) and agrees, subject to any period of vacation and sick leave, to
devote his 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 Board.

     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, 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 duties hereunder. For purposes of the preceding sentence, any approval by the
Board required therein shall not be unreasonably withheld.

     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 by the terms
hereunder, shall have an initial term of three years (the “Initial Term”),

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which, beginning on the first anniversary of the Commencement Date, shall extend thereafter on
a day-to-day basis for an “evergreen” three-year term.

     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, the Board shall, in good faith, review, at least annually, Executive’s Base Salary
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.

     3.2 Annual Bonus. In addition to his Base Salary, Executive shall be eligible to
receive an annual cash bonus (the “Bonus”) during the term of his employment hereunder to be
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 targets relate.
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 in consultation with
Executive.

     3.3 Additional Lump-sum Payment. In the event Executive (a) remains in the Company’s
employ until Executive attains age fifty-five (55), (b) terminates employment under section 6.1 on
or after age fifty-two, or (c) dies or becomes disabled, the Company shall pay Executive (or, in
the event of Executive’s death, Executive’s estate) $800,000 in a lump sum as

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soon as administratively feasible following the termination of Executive’s employment with the
Company.

     3.4 Signing Bonus and Deferred Compensation Account. (a) As of October 1, 2003 (the
“Grant Date”), the Company granted Executive, as a signing bonus (the “Signing Bonus”), an amount
equal to the fair market value of 20,000 shares of the Company’s common stock (based on the average
closing price for the Company’s common stock as reported on the New York Stock Exchange during the
30-day period immediately preceding the Grant Date), to be reflected on the Company’s accounting
records as deferred compensation payable to Executive in a lump sum (with any earnings thereon, as
described below) as soon as administratively feasible following the termination of Executive’s
employment with the Company. Notwithstanding the foregoing, the Signing Bonus (and any earnings
thereon) initially shall constitute unvested and forfeitable deferred compensation and shall become
vested and nonforfeitable on the date on which Executive attains age 55 or, if earlier, on the
fifth anniversary of the date on which Executive becomes the Company’s chief executive officer;
provided, however, that in the event Executive’s employment with the Company is terminated before
the Signing Bonus (and any earnings thereon) becomes vested and nonforfeitable pursuant to the
immediately preceding clause, the Signing Bonus (and any earnings thereon) shall be subject to the
following:

(1) In the event Executive’s employment with the Company is terminated (i) by
Executive for Good Reason, (ii) by the Company without Cause, or (iii) as a result
of Executive’s death or Disability, the Signing Bonus (and any earnings thereon)
shall become vested and nonforfeitable as of the date of such termination; and

(2) In the event Executive’s employment with the Company is terminated for any other
reason, the Signing Bonus (and any earnings thereon) shall be immediately forfeited.

4

 

            (b) In the event Executive’s employment with the Company is terminated before Executive
reaches age 55, the amount payable by the Company under this Section 3.4 (unless the Signing Bonus
is otherwise forfeited pursuant to Section 3.4(a) hereof) shall be equal to the greater of (i) the
value of the Signing Bonus as of the Commencement Date, as determined under Section 3.4(a) hereof,
plus interest thereon, which shall accrue annually, during the period beginning on the Grant Date
and ending on the date of payment (if any) of the Signing Bonus, at a rate equal to twelve month
LIBOR plus 2, as adjusted on each anniversary date of the Commencement Date, and (ii) an amount
equal to the fair market value of 20,000 shares of the Company’s common stock as of the date of
termination of Executive’s employment with the Company (based on the average closing price for the
Company’s common stock as reported on the New York Stock Exchange during the 30-day period
immediately preceding the date of such termination).

            (c) In the event Executive’s employment with the Company is terminated after Executive reaches
age 55 but before Executive reaches age 62, the amount payable by the Company under this Section
3.4 (unless the Signing Bonus is otherwise forfeited pursuant to Section 3.4(a) hereof) shall be
equal to the greater of (i) the amount to which Executive would have been entitled under Section
3.4(b) with interest accruing to the date of termination, without any forfeiture, (ii) an amount
equal to $1,600,000 reduced .by .333% for each month that the termination date occurs before
reaching age 62, or (iii) an amount equal to the fair market value of 20,000 shares of the
Company’s common stock as of the date of termination of Executive’s employment with the Company
(based on the average closing price for the Company’s common stock as reported on the New York
Stock Exchange during the 30-day period immediately preceding the date of such termination).

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            (d) In the event Executive’s employment with the Company is terminated after Executive age 62,
the provisions of the immediately preceding paragraph shall apply; provided, however, that the
amount described in Section 3.4(c)(ii) hereof shall be equal to $1,600,000.

            (e) Notwithstanding anything herein to the contrary, Executive shall not be deemed to have any
beneficial ownership interest in any reserve, account, fund or other asset of the Company and shall
be an unsecured general creditor of the Company for purposes of this Section 3.4. For purposes of
valuing any shares under this section 3.4, an adjustment shall be made to account for the new
number or new kind of shares of the Company or other securities of the Company due to a merger,
consolidation, recapitalization event, reclassification, stock split, stock dividend, combination
of shares, or otherwise.

     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; Perquisites. 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), Directors and Officers (“D&O”) insurance policy, 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

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Executive with perquisites which the Company may make available to its senior executives from
time to time in its discretion. In addition to the foregoing, the provisions set forth in Exhibit
A to this Agreement shall apply to the benefits provided to Executive in accordance with this
Section 4.2.

     4.3 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 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.

     6.1 Termination Not for Cause or for Good Reason. (a) The Company or Executive may
terminate Executive’s Term of Employment at any time for any reason by written notice at least
thirty (30) days in advance. If the Executive’s employment is terminated (i) by the Company other
than for Cause (as defined in Section 6.2(b) hereof), Disability (as defined in Section 6.3 hereof)
or death or (ii) by Executive for Good Reason (as defined in Section 6.1(b) hereof), then:

(1) the Company, as liquidated damages and in lieu of any other damages therefor,
shall (A) continue to pay to Executive Base Salary for a period ending on the third
anniversary date of such termination (the “Continuation Period”), with such payments
to be made in accordance with the terms of Section 3.1 and (B) pay to Executive an
additional amount equal to three (3) times the higher of (x) Executive’s target
Bonus for the year of termination (as established by the Board under Section 3.2
hereof), or (y) the annualized average of the actual Bonus awards paid to Executive
in the three-year period prior to such termination (or the total period of
Executive’s employment with the Company, if less than three years) (the “Severance
Payments”). The Severance Payments shall be made

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in substantially equal installments over the Continuation Period in accordance with
Company payroll practices, unless the Board approves payment in a lump sum;

(2) the Company shall pay to Executive (i) any unpaid Bonus earned by Executive with
respect to the year immediately preceding the year of termination, if any, and (ii)
a prorated bonus (the “Prorated Bonus”) for the year of termination, 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;

(3) the Company shall also continue to provide Executive during the Continuation
Period with qualified and nonqualified defined contribution pension, life insurance,
medical and other benefits set forth on the signature page hereof (collectively, the
“Continuation Benefits”); provided, however, 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; 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 Continuation Period; and

(4) Executive’s equity-based compensation (including any options and restricted
stock) shall be governed by applicable terms and conditions of the relevant
Ancillary Documents.

(5) Reimbursable expenses incurred by Executive prior to the termination of his
employment with the Company and not previously reimbursed by the Company shall be
reimbursed pursuant to Section 5 hereof.

Notwithstanding the foregoing, if Executive breaches any provision of Section 11 hereof, the
remaining balance of the Severance Payments, 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 Severance Payments 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

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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 annual and long-term bonuses opportunity.

            (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 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

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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 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

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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 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

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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 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

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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 prior to such
termination, (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, and (C) pursuant to Section 5 hereof, reimbursable expenses
incurred by Executive prior to the termination of his employment with the Company and not
previously reimbursed by the Company. 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, engaging in
action in violation of Section 11 hereof, (ii) any willful fraud or dishonesty of

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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, Executive shall have 10 days following
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. Except for
violations of Section 11 hereof or terminations under Section 6.2(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.

     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 unpaid Base Salary, any unpaid
Bonus earned by the Executive with respect to the year immediately preceding the year of
termination, amounts attributable to accrued but unused vacation days, vested benefits under other
Company provided benefit plans 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 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

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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, any unpaid Bonus earned by the Executive with respect to
the year immediately preceding the year of termination, amounts attributable to accrued but unused
vacation days, vested Benefits under other Company provided benefit plans 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
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.

15

 

     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 Executive Officer

with a copy to:

David R. Shevitz, Esq., and

Michel Vanesse, Esq.

Katten Muchin Zavis Rosenman

525 West Monroe Street

Chicago, Illinois 60661

To Executive at the address set forth on the signature page hereof.

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.

     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

16

 

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, 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 one year 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

17

 

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 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 subsection 11(c) or subsection 11(b),
nothing herein shall be construed so as to preclude Executive from 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.

            (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 that a court enjoins
Executive from any activity prohibited by this Section 11, the Company may, in addition

18

 

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; 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 incompetence, reference in this Agreement to Executive
shall be deemed, where appropriate, to refer to his beneficiary, estate or other legal
representative. Any reference to the masculine gender in this Agreement shall include, where
appropriate, the feminine.

     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 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
as they see fit.

     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.

19

 

     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.

20

 

     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:  Robert B Karn
	

	 	 	 	Title:  Chairman of
Compensation Committee

	 	 	 	 
	Signature of Executive:

	 	/s/ GREGORY H BOYCE
	 
	 	 
	Address of Executive:

	 	1102 Clayton Road
	 
	 	 
	

	 	St. Louis, MO 63131
	 
	 	 
	Executive Team Position:

	 	President and Chief Executive Officer
	 
	 	 
	Base Salary:

	 	$800,000 per annum
	 
	 	 
	Annual Incentive Target:

	 	100% of Base Salary
	 
	 	 
	Long-Term Incentive Target:

	 	225% of Base Salary
	 
	 	 
	Continuation Benefits:

	 	1. Medical, dental and vision benefits;
	 
	 	 
	

	 	2. Defined contribution plans (qualified
and non-qualified);
	 
	 	 
	

	 	3. Life insurance;
	 
	 	 
	

	 	4. AD&D;
	 
	 	 
	

	 	5. Health care reimbursement account; and
	 
	 	 
	

	 	6. Day care reimbursement account.

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Exhibit A

Additional Provisions Relating To Benefits

	1.  	No pre-existing limitation provisions for medical, dental and vision benefit plans will
apply.

	2.  	The years of service requirements for all benefit plans will be waived unless Federal law
precludes such waiver.

	3.  	Executive will be provided with life insurance coverage equal to one-times base salary
without any pre-existing exclusions or having to provide evidence of good health. However,
Executive may have to provide evidence of good health to purchase any additional life
insurance. Also, the 10-year service requirement at retirement in order to maintain the
applicable retiree life insurance coverage will be deemed met upon the date of hire.

	4.  	The five-year of service requirement for benefits at the 100% level for the short-term
disability (“STD”) plan will be waived.

	5.  	The long-term disability (“LTD”) plan will waive any pre-existing condition limitations.

22

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